NEW YORK — Offers of training and stock in their new employer weren’t enough to keep four out of his five staffers when Dennis Chow sold his information technology firm in 2016.
Chow and the buyers learned one of the hard lessons of a business sale — despite their best efforts, some employees will leave. People departed from both companies when SCIS Security acquired Chow’s Houston-based Xtec Systems, most of them workers who didn’t like their new assignments.
“We lost maybe 25 percent of the overall workforce,” Chow says.
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As the number of small business sales keeps rising, staff retention is a priority — especially since low unemployment makes it easy for many workers to find new jobs. Transactions tallied by online marketplace BizBuySell.com show more than 2,700 small businesses changed hands during the second quarter, the most since the count began in 2007. The trend is being driven in large part by retiring baby boomer owners.
One big problem can be a culture clash — staffers whose company is sold may be uncomfortable with their new bosses and how the business is now being run. A new owner may be more rigid about schedules or more of a micromanager. Staffers who worked with just a handful of people before might find themselves with dozens of co-workers, and miss the old camaraderie.
Bosses should focus on the quality of employees’ work life, says Mike Astringer, owner of Human Capital Consultants, a human resources provider. Money, whether it’s in the form or a raise or a bonus, may not work in the long run.
“The new acquirer and the seller need to really collaborate in the transition to make sure the culture not going to change, that the reason people work there is going to continue,” he says. Critical to keeping staffers is not springing the ownership change on them at the last minute. That will only anger them and add to their anxiety and temptation to flee, Astringer says.
A new boss should acknowledge and validate staffers’ feelings, and not try pep talks to ease anxiety, says John Proctor, CEO of Ottawa, Ontario-based Martello Technologies. The information and communications technology company has made two acquisitions in recent years, giving Proctor experience with persuading reluctant staffers to stay.
“People aren’t praying at the altar of Martello. It doesn’t work like that,” he says.
Proctor’s approach is to meet with staffers individually or in small groups, spell out his ideas for the company’s direction and ask employees about the roles they see themselves playing. He recommends listening rather than dictating.
“You’re giving them a sense of ownership instead of, ‘You’re going to be doing this, and you’re going to be doing that,'” he says.
Still, Proctor warns owners to expect some friction. “You also need to be realistic that there will be issues and disputes and you must deal with those with an open and frank dialogue with all involved,” he says.
It can be more difficult to retain staffers in some industries than others. David Crais, chief executive of CMG Carelytics a health technology development company that has done several acquisitions, has found software engineers reluctant to be part of a company that’s growing by buying others.
“Many times, they’re driven by wanting to be part of a building process,” says Crais,
The more an owner can align a staffer’s needs with the company’s culture, the greater the chances of retaining employees, Crais says. He considers an acquisition a success if 70 percent to 75 percent of the staff is still there 18 months later.
John Ahlberg, whose technology support and management company has made several acquisitions in recent years, has been able to retain about a third of the staffers who joined his firm, Chicago-based Waident Technology Solutions. Those who left tended to be uncomfortable with the culture at their new company; for example, they were used to working on their own and had a hard time adapting to team work.
“With each person, we sit down and talk to them, and ask, ‘What are you doing now, and what skills do you have?'” Ahlberg says. “But most of the conversation revolves around, ‘What are your hopes and dreams. What do you want to be doing?'”
Those conversations must be ongoing, Ahlberg says: “We sit with everyone regularly to make sure they are heard, we discuss the company expectations and define what is expected of them. We try to leave nothing vague.”
Sometimes there isn’t much an owner can do. Steve Sargent hoped for an easy transition when he bought an automotive repair shop in Cary, North Carolina, in March and turned it into a Mr. Transmission/Milex franchise. He told the three staffers they could keep their jobs, but changes he made, including new technology to handle transactions and accounting, were troubling for the shop manager. Sargent provided training and tried to talk to the man, but couldn’t get him to open up about his frustration.
“He always said he wasn’t going to leave,” Sargent says. But nearly three months after Sargent arrived, “he called me and said, I can’t do this anymore,” Sargent recalls.
Sargent advises other owners to keep communicating, but be ready for people to quit.
“Not everyone will make it through the transition, so be proactive about looking for replacements before a person leaves,” he says.