The first 90 days and change management | Private Capital 101

Investing in change management is crucial for companies who have recently received private equity (PE) investment. The injection of capital and the introduction of new ownership often brings significant shifts in an organisation’s structure, strategy, and culture. Effective change management guides external and internal stakeholders through these shifts to ensure a smooth transition that will maximise the potential benefits of the investment.

It is vital that a company adopts a proactive approach to change management in the first 90 days of receiving PE investment. This will give the organisation the optimal opportunity to align employees with the new vision, facilitate any cultural shifts and enhance overall performance before change resistance or disillusionment occurs. By proactively addressing the challenges associated with change, companies can move comfortably through the change and focusing on assembling as a team to seize opportunities, drive growth, and ultimately achieve the sustainable and rapid growth desired by PE investors.

Change resistance and the loss of talent

Leaders in the organisation must win the hearts and minds of their people – the organisation’s greatest asset. An organisation’s ability to continue to create and grow value is heavily dependent on human capital. The loss of key talent can pose a significant risk to their stability and growth potential.

This risk is further exacerbated by potential disruptions in operations and decreased productivity - if employees are disengaged, there will be a decline in innovation and a loss of valuable knowledge which may take years to rebuild.

Another risk is turnover contagion, whereby the departure of key individuals triggers a ripple effect, causing more employees to leave. This negative spiral can significantly affect morale and overall performance within the organisation.

The importance of change management in ensuring a successful transition

Change management uses data-driven methods to anticipate impacts and focus efforts on pockets of potential resistance, bringing forward proactive and innovative resolutions to change resistance or uncertainty. By fostering acceptance, engagement, and adoption, change management empowers individuals to adjust to, and excel in, the new environment.

Following PE investment, organisations who invest in change management will benefit from:

  1. Understanding the impact of change: Conducting a stakeholder change impact assessment helps an organisation comprehend the size and effect of the change on people, systems, and ways of working.
  2. Defining a change management strategy: By developing a comprehensive strategy and plan, leaders can win the hearts and minds of their employees and mitigate people-related risks, such as the loss of key talent.
  3. Executing change interventions: Implementing change interventions connects our stakeholders to the purpose of the change, creates a change coalition, reduces resistance, builds capabilities and resilience, and minimises disruption to business-as-usual operations.

By investing in change management and prioritising leadership alignment, you can optimise the impact of your private equity investment, both during the initial 90 days and beyond, throughout the entire investment lifecycle.

How best to invest in change management?

When investing in change, there is an enate readiness to invest in technologies and operating models during PE transitions and the specialists required to deliver these, but often investment in our people is missed. Organisations often hesitate to invest in change managers to actively guide their people through the change process. It's crucial to recognise the significance of change management investment, particularly in these three essential areas:

1.    Define and communicate a common purpose and 'why'

Setting and defining a collective objective will play a crucial role in uniting team members and enable them to recognise their individual contribution towards the organisation’s wider goals. It's necessary to effectively communicate the motivations behind the PE investment and the desired results of both the leadership and the investors. Not only will this cultivate a sense of solidarity, but it also enhances individuals' likelihood to embrace forthcoming changes.

An undefined or misunderstood common purpose and why in your organisation may sound like “Why are we spending money on a new system? There are other areas in the organisation that need attention.”

2.    Align leadership and people managers

It’s important to foster and prioritise alignment amongst leaders and team managers to ensure a mutual understanding of the path forward. When leaders and managers are aligned, it ensures consistent messaging, clear direction, and cohesive support for employees, fostering a smoother transition and increasing the likelihood of successful change adoption.

A misalignment between leadership and people managers in your organisation may sound like “You may have received an email about a new system from leadership… you can ignore that, our team will just continue processing requests through phone calls.”

3.    Set up two-way communication channels

Change can be unsettling, and open communication is vital to address concerns and maintain employee engagement. Establishing clear and accessible communication channels allows you to share updates, provide relevant information, and address questions or feedback from employees. This proactive approach helps alleviate fears, build trust, and make employees feel valued and involved in the change process.

An ability for your people to connect with the change may sound like “I have already told someone that I have accessibility needs that may be impacted by the office move and no one has contacted me. I’m really concerned.”

Key takeaways

Organisations that prioritise the effective implementation of change management, particularly in the first 90 days of receiving PE investment, will benefit in both the short- and long-term as they build strong foundations for success.

Defining and effectively communicating a common purpose, aligning leadership and people managers, and establishing open communication channels, will all contribute to a smoother transition and helps ensure a people-focused organisation.

BDO’s change management experts can help your organisation:

  • Drive more successful investment outcomes
  • Implement key business decisions and changes
  • Anticipate and address potential impacts and areas of resistance​
  • Help drive acceptance, engagement and adoption ​
  • Guide and inform the implementation process.

Questions? Contact us.

BDO’s change management experts recognise the unique beliefs, values, and motivations of individuals, allowing us to design targeted strategies that drive impactful and successful change. Contact us to understand how BDO can assist you in navigating the intricacies of change management following PE investment.