Selling Your Business: Effects on Employees

Show/Hide Info

When Selling a Business, as near as I can tell, owners and experts disagree about the wisdom of informing staff that the company is on the selling block.  Some believe that honesty really is the best policy, while others feel that knowledge of an impending sale can have a detrimental effect on both employees and the sale itself.

When employees hear that the business may be sold, they often go into panic mode and fear drives them to look for exits. Loyalists may stay, but often go into “wait and see” mode that can have a direct effect on productivity, resulting in a fall-off in earnings at a critical time. Worse case scenario is this “fear-speak” by employees, enables competitor exploitation and hence, the business sometimes un-saleable. This said, with proper planning and careful consideration of your staff, the damaging effects can be realistically minimized to have often positive outcomes.

Let’s look at the realistic effects on employees if you decide to Inform Your Employees of this Decision to Sell ahead of time:

Insecurity: Provide enough information for them to feel secure but not so much that it overwhelms them. It is helpful to begin by explaining your reasons for selling and enroll them in the general outcomes you hope to achieve through the sale – make them feel a part of this success.

Fear of Loosing a Job: Try to allay anxiety and fears around the possibility of job loss or the fear of working for a different owner. Selling the company to a buyer who plans to retain the current staff will go a long way toward easing their fears. If not, reassure employees that the new owner will make his own staff decisions and successful performance during the sale period will be an incentive for the new owner to retain current employees. This strategy will help, too, with any potential loss in productivity. Although the first concern of an employee may be “I’m about to lose my job”, this typically does not occur.  Explain that smart buyers are aware that immediate or sweeping changes to a healthy business are often the worst thing new owners can do.  Buyers will want the same people who helped build a successful business to stay on and continue doing a good job.  As a general rule, employee’s jobs are secure in a small business sale.

Expectations: Manage expectations about the length of time it may take to sell (so you are not constantly providing individual updates) and encourage employees to ignore rumours. This will help to discourage confusion and maintain focus on operations from the group. An open door policy will generate a comfort zone – note of caution here: provide facts but not all the details.

What About the effects should you Decide Not to Inform Your Employees of Your Decision To Sell until later?

All the same effects apply except that you will be dealing with them after the deal has closed with the additional effect that the employees may have felt deceived. Again, honesty being the best policy, let them know that keeping the knowledge of the sale confidential was for the welfare and protection of the employees, the biggest asset of the firm. You may not receive a standing ovation but by providing adequate explanation and sensitivity to the knowledge that while change is sometimes hard to accept, it brings with it the greatest opportunities for growth. This is a good time to unveil a new plan that describes the growth potential and incorporates the team and garners the support of the entire staff.

Bottom line is, in their jobs, employees are looking for (in no particular order) money, certainty, challenges, appreciation, purpose, growth, opportunities, relationships and rhythm (certain predictability to living). Selling a business can have an effect on all these qualities of life.   The culture of a company is not static – lots of moving parts and it changes over time, especially if it is growing. The only way to really know if the culture will be better or worse is to stick around for the experience!