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Rasmussen’s fourth top tip – Get the right people on the bus

Monday, 14 May 2012
By Print 21 Online Article
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Few would argue that getting the right people employed in a business is not one of, or the most fundamental component/s to an operation’s success. Ascent Partners principal, Richard Rasmussen believes one of the major heartaches in running a business is managing the people component.

When you’re in the twilight years of running a business, it’s even more important to plan your people strategy. Most printers have got a number of loyal long standing employees – some maybe also your friends. What’s the best strategy for them in the twilight zone (0-4 years before your exit)?

Let me preface the discussion by stating that I strongly believe that a key management objective or guiding principle, at all times should be to “get the right people on the bus”. I’d like to claim this quote as my own, but need to give the credit to Jim Collins, author of Good to Great. He researched great companies and found those that those who “ignited the transformation from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus), and then figured out where to drive it”. Have a look at today’s successful print businesses – they all have great people.

I believe getting the right people on the bus, and the wrong people off the bus, is even more important in the twilight years for the following reasons:

Management buyouts

The first thing to ask, when planning to exit a business is, “are any of my existing people capable, or have a desire, to take over the business?” I think this is one of the most overlooked strategies in developing an exit plan. Proprietors too often look outside first, when inside people may be the best option.

Part of the reason to consider this option, is that often internal staff believe the business has higher value than outsiders – this is because they know the business well and perceive less risk in taking over a business they are working in, rather than looking outside to purchase a business. They know the clients, the employees, the equipment and the processes. They know (or think they know), what the shortfalls of the business are, and how they can fix them.

It’s a good strategy for the vendor too, if they plan far enough ahead, because they can work with the employee to train them up, and seek input into key decisions as the time to exit approaches. Obviously, when they employee/s know they are to take over the business, their commitment rises, and the business moves forward with new vigour.  That commitment rises if they have equity.

The problem often cited by proprietors is that the best of the employees will struggle to get the cash. And frequently that is a problem; however correctly planned with the right employee/s, and with a long enough period, they can buy the business over the years. Share holdings can be built over time, gifted, or offered at reduced rates, and perhaps tied into performance. There is a multitude of ways this can work. Even when the vendor leaves, maybe they still hold a share, and get paid for that over time.

You can canvas staff relatively easily by conducting job appraisals. You might be surprised at the answers given. If no one surfaces, then consider finding a new employee that will. Maybe a young sales person or someone who can bring expertise to the business – consider hiring someone who expresses interest in running their own show one day. The ad might read “General Manager wanted, equity available over time”.

There are many ways to skin the cat, but forward planning is vital. You need to think about the available options well before exit date.

Outside help is available, especially where the successor may be a family member. Often the vendor has a biased view on their ability to successfully take on the business, and some objective outside help is required.

Staff members in the twilight period

Apart from thinking about who could take over your business from within, you should also consider options for your existing staff. How should you handle them? Should you downsize by natural attrition? Are they the right people to have on your “bus”?

Bear in mind that the most common way of increasing the business value is to increase the profits. Smarter, more efficient ways to work, or perhaps changing the business model, should be considered. This often means changing job functions, or perhaps getting new staff on the bus.

Again, staff appraisals are a good way to get started.  And from there you can start to plan the way forward.

Employee entitlements

When you sell your business, you need to consider that it is usually the vendor that bears the costs of staff entitlements – these entitlements can be substantial, so a good idea is to find out what costs are involved, how much notice needs to be given, what redundancy payouts are.

So in the twilight period you need to consider ways to reduce this liability. This could be in a whole range of ways such as getting leave days owing down to reasonable level and getting staff to take long service leave.

It may be that when someone leaves the company, you think of other ways to get their work done. These include outsourcing this component or contracting in labour.

Should you tell your staff about your exit plans?

Many people agonize over whether or not to tell the staff that they are selling the business – the fear is that if they are told they will look elsewhere for employment or tell others of the pending sale.

I think there is another good case for starting the exit process early and advising staff. I don’t think telling key staff, say four years out from sale, that you plan to exist will come as any real shock to them. Another major benefit of advising them is that you can start to flesh out what their intentions are.

Telling people closer to the actual sell date is harder, as they are not prepared. Maybe they think, “the business is on the market, it will sell, I might be out of a job, I better start looking elsewhere”. So telling and involving key staff members early, I think is generally a good thing.

In most instances the best position to aim to be in is where the key staff are “in the know”, and where you are not an integral part of the day to day running of the business. I’ll talk more about this next week, because making the company run on auto pilot is generally one of the keys ways to obtain maximum business value.

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