In a recent business article entitled, “When Bigger Isn’t Always Better” by McKinsey & Company, the trend of spin-off announcements / divestitures continues to explode in the corporate environment. As businesses mature, corporate leaders continually review their core businesses against their corporate strategy, financials, growth opportunities, and market penetration. Leaders must assess which businesses to invest in and which businesses no longer align to their strategic plans. Divestitures are not new and will likely continue for some time. It’s a tale as old as time.
There are fundamental reasons why larger companies are pursuing spin-offs at record levels. These “companies acknowledge that they are simply no longer the best owner of the asset”. Reasons for pursuing spin-offs often fall into 3 main categories:
- Operating model
- Management focus and strategy
- Capital management
Having spent the better part of 20 years working with clients to effectively manage their commercial transactions, I would propose a fourth category worthy of consideration: impact to its people, a company’s greatest asset. To ensure the ultimate success of the new spin-off company, let’s consider the following “people” aspects.
Employee Value Proposition
Firstly, define the new company’s Employee Value Proposition (EVP) upfront and include in the spin-off’s transformation plan. For instance:
- How is the EVP articulated in the new company?
- How are employee talents, skills, and expertise applied to ensure the new company’s success?
- How can business needs be balanced with employee needs, such as learning and development, work-life balance, and rewards and recognition?
- What are the pros and cons of a divestiture from a people perspective?
- How can the most positive impacts to people be leveraged in the new company for maximum benefit to all?
- How can any people risk to the business can be minimized or eliminated altogether?
- Why would employees want to work for the spin-off? What’s in it for them?
- Have leaders in all business areas provided input for a more holistic perspective?
In the current age of the Great Resignation, leaders in spin-off companies cannot assume employees will be happy to “have a job”. Leaders should be considering quantitative and qualitative retention strategies to ensure the necessary labor and thought capital remain available to move the new business forward.
Impact of Change on People
Secondly, as every change practitioner knows, employees experience a cycle of change when any major corporate change occurs. These stages include:
- Stage 1: Shock/Denial
- Stage 2: Anger/Fear
- Stage 3: Acceptance
- Stage 4: Commitment
The goal is not to avoid certain stages of change but rather help leaders and employees navigate change in a managed way. Spin-offs are no different. For example, consider the following:
- Create a change plan that acknowledges employee concerns and fears. Address these concerns both from an employee care perspective as well as a business disruption point of view.
- Be mindful of “glocalization”. For global companies, determine where change strategies can be developed at a global, enterprise level and what specific change strategies may be required at a country specific level due to culture, unions, work councils, or language.
- Establish a team of change agents identified to help the business, teams, employees, subcontractors, and supply chain partners move though the change cycle in a structured and efficient way.
Communication Is Essential
Lastly, communication must be planned and implemented throughout the process. Create a separate communication plan that:
- identifies what message s to be communicated
- defines when to communicate what message and in what sequencing
- uses the best delivery medium for each message by audience
- defines the owner of each communication activity
- determines who approves the communication item and how to gain that approval
- rigorously manages to the plan
Additionally, review communication channels already established that serve employees well (media), how employees prefer to receive communication (culture), and how frequently to communicate (not too much, too little, and just in time).
And finally, ensure stakeholders are briefed well and often throughout the entire divestiture process to ensure alignment and consistency in messaging.
In conclusion, divestiture planning should proactively include the people aspects of the new company and implement specific measures to ensure a “win-win” scenario for its employees and the new company.
Holly Young is a Partner at PeopleResults. You can reach her at firstname.lastname@example.org or on LinkedIn.