In an ideal world, all business deals would be successful. But a quick scan of current business news will tell you that’s not the case. Large and small companies alike too often find themselves on the failing side of a deal. Even with best efforts to clearly articulate strategic objectives, successfully conduct due diligence and procure the best talent, the success of a deal is impacted by whether or not the company is built to withstand such activity.
A successful deal is not just about increasing revenue, minimizing costs, taking a stronger competitive position or improving market penetration. For a company to survive a deal, it needs to have the right talent and culture, along with a human capital strategy built to handle the complexities of an equity deal.
The foundational priority for building a company that can survive is alignment. It is imperative that there is clarity and agreement within the business about the goals for the deal, its business objectives, and long-term strategy. In addition, there also needs to be alignment between the company strategy and the human capital strategy. Success beyond the deal comes when the right people are in the right roles doing the right activities. Misalignment in the organization leads to ineffective key performance indicators, misallocation of capital and, ultimately, business inefficiencies that hinder the growth and profitability of the company.
The Right Culture
As a company grows and moves from one stage of the business life cycle to the next, it is faced with new challenges and obstacles. All stages of the deal will look different as the needs of the business change. In order to ensure that companies manage through a deal successfully, the strength of a company’s culture is critical. If your company’s culture is a “flavor of the month” model, employees will quickly lose sight of the organization’s core values and priorities. This causes your talent to fail, which will impact productivity and company success.
A strong company culture—one that enables a company to succeed after the deal—is employee-centric and built on strong values, and it embraces innovation. This creates empowered employees who are allowed to think strategically, which increases the productivity and profitability of the business.
Developing Talent Beyond the Deal
The last area where companies need to adjust to survive beyond the deal is maximizing their human capital strategy. It is critical that the business strategy is integrated with the human capital strategy. The company must map the short-term and long-term needs of the business and then create development plans for employees. If this process is neglected, the power of human capital to become a force multiplier in the business will be lost, and the company will outpace its leadership team.
A comprehensive human capital strategy built and executed will help to develop leaders with the skills and competencies necessary to run a successful post-deal company.
This story originally appeared in the May/June print edition of Middle Market Growth magazine. Read the full issue in the archive.
Mike Ross is manager, innovation and development, at Insperity. He has a background in corporate finance and strategy and is responsible for M&A activity at Insperity. To learn more, visit insperity.com/acg.