Operational change is vital for any business that wants to stay relevant, especially in times of economic uncertainty. It is equally important in the realm of Private Equity, where acquisitions and accelerated organisational change go hand in hand. Competitive industries demand continuous innovation and changing market forces cannot serve as an excuse to delay necessary transformation.
However, managing the need to make changes alongside rapidly evolving market conditions is easier said than done. This is especially true today, as businesses face additional regulatory uncertainty linked to the UK leaving the European Union and multiple other market drivers.
Touch points and narrative
Employees form the building blocks of any successful business and need to be engaged during periods of operational change. This is especially important in periods of economic uncertainty and following an acquisition, when rumours, hearsay and other rumblings can negatively affect morale and productivity. Employees need to know they are one of the driving forces behind any successful transformation.
Providing clear, honest and accurate information will help create and maintain trust with employees, suppliers and stakeholders. Research has shown that employees respond positively to information sharing and that systematic communication can increase job satisfaction levels during periods of organisational change. A lack of information typically creates a fertile breeding ground for speculation that is seldom positive.
In the context of acquisitions, Private Equity firms have been increasingly open to working with existing management teams. This practice ensures both their support and knowledge – two essential ingredients for driving accelerated operational change. A welcome and fruitful development, given the previous practice of indiscriminate and wholesale management change.
It is generally wise to apply a similarly open approach with suppliers, especially key suppliers. While uncertainty is rarely the basis for a strong relationship, if managed correctly, going through change together can lead to stronger relationships. Information sharing can also result in supplier led innovation and subsequent mutual gains.
Overcoming resistance to change
It is human nature to object to change. Whereas engagement and transparency will help many come to grasp with the need for transformation, it is likely there will be some resistance. It is here that conversations, particularly around the benefits of the changes will pay dividends. A caring, two-way approach to communication will work much better than simply cascading information.
Formal and informal means of communication are complimentary. Headline information often leads to more questions and individual managers need to be on hand to answer them. Effective communication can help employees understand the need for change, but also the opportunities that might arise as a result.
At 4C Associates, we have found that the companies, which transition most successfully, are those which educate their staff each step of the way. Those which do not, are often hit with high staff turnover, particularly relating to the highest performers. As a result, the process can be drawn out and leave the company having to rebuild once the transition is complete.
A shared journey
Organisational change can be a difficult time for everyone involved, including employees, stakeholders and suppliers. This is further magnified when it takes place during periods of economic uncertainty or acquisition activity. The key to successfully managing any transition is ensuring everyone is pulling in the same direction.
In this context, withholding information leads to distrust, anxiety and a drop in productivity. Senior management needs to provide the information and tools for employees to take part, while answering their questions. The process can be more complicated when dealing with supplier relationships, however, broadly speaking transparent communication is vital to pain free transitions.
4C Associates are a proud sponsor of the Operating Partners Forum Europe 2018 on 8th-9th May at The Waldorf Hilton in London.
The Operating Partners Forum Europe 2018 is the only event bringing together European private professionals focused on value creation to meet with their peers, exchange ideas and keep up to date with the latest developments in the market.
As the only event for operating partners in the industry, this is the meeting place to discuss best practices, examine new models and explore the many challenges you face in today’s competitive market. The Forum provides a unique opportunity to hear from experienced operating partners and C-level executives on how they deliver value creation strategies, create top-line growth and drive EBITDA improvement in their portfolio.
To see the full agenda and book your ticket please visit the event website.