Onboarding Mistakes to Avoid
There's no one playbook for onboarding an acquired company, but those who have done it point out some mistakes to avoid:
- Don't tell people things won't change, because they will. “Even what we think is insignificant are big changes to the company that's being acquired, to their employees and to the customers,” says Iconic IT’s Mike Fowler. For instance, adjusting payment terms is a “huge change” for a customer.
- Make sure the seller understands tax and legal ramifications. “Most IT business owners in my experience do not fully understand how an accounting true-up works in an acquisition,” Snap Tech IT’s Karl Bickmore says. “Because of that, we've had some significant issues with … people having surprise tax bills that we tried to point out to them during the negotiation process.”
- Don’t rush consolidations and migrations. “When I first started doing this, we budgeted some really tight timelines in terms of staff reduction, or changes or [finding] synergies,” says Aldridge’s Patrick Wiley. “Our newest models really stretch that out.” Instead of a three-year ROI, Aldridge now expects a five-year one, and while he acknowledges that is more costly, it helps with customer retention. Ditto for customer migration, he says.
- Plan to lose 10% to 15% of your acquired customers. Despite your best efforts, some customers won’t like the change, so make sure your financial and planning models take that into account, Fowler advises.
Should They Stay or Should They Go?
Retaining employees—the ones you want, at least—is a key part of the onboarding process.
Taylor Business Group’s Michael France recommends having the seller identify the “star players” prior to closing and nailing down employment contracts with them ahead of time.
For Iconic IT, which is focused on growth, “we need every person we can find,” the firm’s Mike Fowler says. “We've gone into every acquisition with the expectation that we're keeping people and that there's productive roles for everyone.”
Snap Tech’s Karl Bickmore says his firm spends a lot of due diligence focusing on cultural fit, so his intention is to keep every employee as well. “We may redirect some or change the responsibilities … but in the grand scheme of things, we want to keep employees.” He makes an effort to spend time with the acquired employees to build trust. Often, he says, they’re excited about working for a bigger company with more opportunity.
Sometimes there’s not a role for everyone, Aldridge’s Patrick Wiley acknowledges. “We’ve bought a couple of companies that had nearly double the amount of staff the numbers say they should have. Those are trickier situations.” Wiley says Aldridge tries to address downsizing quickly, “provided that we're not impacting client relationships.”
Finally, there are situations when an employee you initially want to retain doesn’t work out, Bickmore says, and that needs to be addressed promptly but respectfully. “You're working with someone’s livelihood. We’ve offered to give them letters of recommendation or refer them to other IT providers.”
Employee issues are sensitive, but it's important to get the team right, France says, to fully benefit from "how great the combination" of these companies can be.