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The impact on people when a company is bought out, merged, downsized or rapidly expanded

EVIDENCE OF CHANGE

1. The company has officially been purchase.
2. New owners have established their presence.
3. The composition of the senior team has changed.
4. The new owners are American. There is a financial and cultural impace.

RESPONSE OF THE SENIOR TEAM

• Any single loss or addition means a completely new team is forming.
• The team finds itself redefining roles, reorganizing and getting its act together.
• Often they are racing to stand still and experiencing high levels of associated stress.
• There is a natural period of uncertainty and an automatic hesitancy to speak about it

RESPONSE OF NEW OWNERS

They have expectations of the president, the senior team and the company’s ability to perform.
They know about the products, the financial picture and the focus of the senior team. They may not know much about the culture of the company and the impact that the culture has on the ability of the company to perform.. As a result they consistently and in a number of ways ask how/ what? Who? Why? Where? and How much?

RESPONSE OF EMPLOYEES

They have been noticing change among senior team and their accompanying silence. When conversations are guarded employees automatically assume something is being hidden. They then create a story about what they see happening. What we focus on expands. Therefore when they focus on what is not said they begin to escalate their worry. A negative environment results that contributes to less than 100% in areas of productivity, innovation and quality. Profit is impacted negatively.

Why implement a structured, planned change process after a buy-out?

With any major company change such as a buy-out, downsizing, reorganizing, a merger or even rapid expansion, there is an accompanying loss of efficiency and productivity among its people. With a company of 350 employees, for example, this loss could cost a company several million dollars in low productivity alone. This cost lost is particularly evident in the absence of a planned or structured change process.

There are strong human factors that contribute to this financial picture. For example, people need to know they are accepted and respected. They also need to feel a sense of safety and security and to know they are making a contribution or a difference in their lives and the lives of others. These needs are particularly important in the work environment. Any major change in a company, such as those mentioned above temporarily undermines the ability of a company to provide these needs for its people. Employees perception about loss, accurate or not, results in low morale, apathy, a sense of being overworked and a preoccupation with what is fair and what is not fair. The resulting drop in personal and professional efficiency creates a major financial drain. A few contributing factors include:

• Company leaders react to employee attitudes without full awareness of the financial impacts of the leader employees level of efficiency and productivity
• The leader may then accelerate the need to follow standard procedures.
• More emails are sent to employees about the current situation.
• An assumption is that the growing perception of concern among employees is a temporary one and so leaders decide to do nothing and let the situation settle itself.

These responses have limited impact in terms of creating a positive environment. Problems that could disappear with a team intervention are forced to go underground. They then reappear in another form that once again erodes quality and efficiency.

A shift in perception is required at all levels at one time. Employees need to be told directly about change and to be invited into the overall change process. When this happens, perceptions and attitudes begin to improve. The preoccupation and concern about safety and fairness begins to disappear. People commit and buy-in to new goals. A shift in behaviour follows. Planned Change is about managing the meaning of whatever major change has happened. It results in satisfied employees and a positive work environment. Increased efficiency, productivity and profit accompany this shift.

Some expected results when using a structured planned change process.

• Clear shared goals are established. A prioritized list of steps and actions accompanies them.
• Employees and management become more open with each other about how to improve quality, service and productivity.
• A positive shift in attitude, morale, motivation and enthusiasm results in commitment to goals.
• With people at all levels working together efficiency improves and the financial drain ceases.

There are always up-front costs with a planned change program. However, managing change in the absence of a shared vision between management and staff is very costly. With a planned change process and subsequent monitoring, employees learn to manage change with much less concern about their security. “Without compassion, the ability to – fear grows. Without our people (employees) we have only a shell of a company. How can quality and productivity grow from this?” hear and respond to the work related needs of our people, we loose them to preoccupation with security needs. They commit to their work and the company goals. The company and its employees benefit from rising levels of efficiency.

The Financial Impact of Change*

$ IMPACT @ SENIOR EXECUTIVE LEVELS

Average Compensation = $150,000 (8 executives)
– cost of 20% efficiency = $240,000.
– cost of 30% efficiency loss = #360,000.

$ IMPACT @ ENGINEER LEVEL

Average Compensation = $75,000. (50 engineers)
– cost of 20% efficiency loss = $750,000.
– cost of 30% efficiency loss = $1,125,000.
– cost of 40% efficiency loss = $1,500,000.

$ IMPACT @ TOTAL EMPLOYEE LEVEL

Average Salary = $40,000
– cost of 20% efficiency loss = $2,400,000.
– cost of 30% efficiency loss = $3,600,000.
– cost of 40% efficiency loss = $4,800,000.

* The result of low morale, apathy and overwork is a preoccupation and concern about job security. This contributes to rising levels of fear and sarcasm which in turn contributes to a work environment of less than 100% efficiency on all levels. The combined categories of engineers and total employees at a 30% loss of personal/professional efficiency would be $4,725,000. And a 40% loss would be $6,300,000. This is a costly matter. A planned Change process is the antidote.

Keeping Employees Involved and Committed During Major Changes.

Highly satisfied and highly motivated employees result in higher productivity and higher profit. (see cost lost statement p.3) It’s financially wise to use the following guidelines to keep your people highly involved and committed to the company direction and their own growth during any major company changes. This includes a buy-out, downsizing, reorganizing or rapid expansion.

1. Acknowledge the frustration. It took time to get to the current level of frustration and it will take time to reverse it. Pay attention to what is happening with your employees. Notice what works for them and what doesn’t. Stay in touch, listen to them and above all do not push the process of change.
2. Call for an outside objective viewpoint from day one. A system cannot see itself (W. Edwards Deming). Combine the use of internal experts who know the culture and external experts who know the process to help you deal with change. Make sure you find someone who is skilled in understanding people and can hear the real issues. Issues begin to disappear when employees feel safe enough to tell the real situation in the presence of those who can make a difference.
3. Learn about the real situation directly from your employees. They know what is going on. The changes the company has experienced and the management team is responding to is discussed regularly by every level of employee. The job of the management team is to encourage the perceptions about the situation to be discussed openly. Managing change requires creating a work environment where employees can tell the truth and know they will not be punished for doing so.
4. Stop focusing on what a planned change process will cost. The cost of inefficiency that results from any major change is far greater than the cost of moving forward and making corrections.
5. Find new ways to measure employee satisfaction, involvement and efficiency. Use all levels of employees to define new measures for success and use both qualitative and quantitative measurements.
6. Notice early signs of dissatisfaction such as complaining, sarcasm, rising sick days and quality problems. Examine the causes on the spot. Make corrections using the assistance of your employees. Don’t be afraid to ask employees for their ideas. They know what needs to happen.
7. Notice tiny changes daily. Begin to reap the rewards by celebration each success.
8. Create a plan to keep employees involved directly with management and with each other over the long haul.

Leaders commitment to support change and development

1. What senior team changes have happened?
   • The VP of operations was fired by the owner because he did not sign his contract on time
   • there is another story behind this.
   • VP then went to new owner in U.S. and told about self serving and corruption
   • VP was bought out ++++ and angry and accusatory with everyone at the new company.
2. What is response of employees to this?
   • two senior engineers subsequently left
   • employees at all levels especially in engineering got nickers twisted
   • employees @ pub with president confronted him and asked for reinstatement . . . told truth
   • president listened, acknowledged where he had gone wrong especially with a few highly controlling senior people but flatly refused their request
3. How have employees been involved in the change process? Company e-mail and other formal company communication methods, about events of the sale were used. Senior executives including president, head of HR, president’s assistant, have been available by phone over extended hours and on weekends to answer any questions.
4. What is the president’s commitment to the following?
   1. future layoffs – none planned; will happen only for gross incompetence
   2. team development: president pleased with two new members on senior team especially one
      that replace VP; he described employee initiatives happening under this new senior
      member and pleased with this
   3. stopping the bleeding – we discussed the financial drain that is occurring without a planned change process and without involving all employees at the same time.
   4. quality of service $ production – there are three chimneys of service, namely, manufacturing outsourcing services, flight safety, shipboard communication and technical renewal. With the previous VP there was some disagreement among engineers about the ranking and significant importance of these areas. Anyone in the company with a defense background might also have an accompanying mentality of government rigidity. This risk here is that there would be a lack of shared vision and direction about which chimney to focus on.
   5. developing a new culture

* The result of low morale, apathy and overwork is a preoccupation with what is unfair. A negative attitude develops that contributes to less than 100% efficiency on all levels. Planned Change counteracts this.

——

Janice Calnan of CALNAN GROUP, Ottawa Ontario, Canada, executive coach, author, specialist in organizational change. Her book SHIFT: Secrets of Positive Change for Organizations and Their Leaders can be obtained through www.janicecalnan.com . Reach Janice at (613) 721-5900 or info@janicecalnan.com .

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