3 Steps to Selling Your Business Without Sacrificing Its Soul
Amazon's purchase of Whole Foods Market has a lot of people wondering what the acquisition means for the upscale grocery chain. Some fear that the $13.4 billion deal signals a future in which friendly grocery clerks will be replaced by sterile robots. While it's worth pondering how the potential robotification of Whole Foods would affect the organic grocery-buying experience, there is a more pressing near-term concern: What will the acquisition mean for Whole Foods's culture?
Corporate culture rests on a delicate balance. And playing a role in the health of the resulting ecosystem are leadership philosophy, employee interactions and the tone of the company's customer engagement. So, when a shift in power occurs, the environment becomes unstable.
Even under the best circumstances, stakeholders who depend on that ecosystem will be forced to adapt.
Whether Amazon will uphold Whole Foods's traditions, such as free bakery samples for customers and above-market compensation for workers, remains to be seen. But the cultural uncertainty the deal has created serves as a teachable moment for other companies considering an acquisition.
Honoring culture in the midst of change
Change is constant -- and vital -- for businesses. Companies cannot stay relevant if they're unwilling to hear new ideas or take risks. But organizational change inevitably alters the culture. When Michael Eisner became CEO of Disney, the now-former leader implemented an aggressive acquisition and expansion strategy. During his tenure, the company purchased properties such as Miramax Studios and ABC, launched global theme park initiatives and enjoyed a golden era of producing hit movies.
However, his ambitious approach alienated many colleagues who were uncomfortable with the rapidly changing organization. Despite Eisner's early successes, Disney struggled during his later years at the helm. Fortunately, the brand was strong enough to weather the turmoil, and Bob Iger, who succeeded Eisner as CEO, has since tripled Disney's profits by returning the company to its cultural roots.
Most companies, of course, don't have the clout of Disney, and a poorly managed transition can be disastrous for less stalwart organizations. Although buyers and sellers tout the virtues of an acquisition deal, it's very rare that the move benefits them equally. Unless all parties share the same core values and vision for the future, even the most positive and innovative cultures can be quashed.
So, how does a company avoid derailing its beneficial existing culture while taking advantage of new opportunities? The following steps will guide leaders toward making the right choices for their companies when presented with an acquisition offer:
1. Take a holistic view of the deal.
Put all your cards on the table about how your company operates, what its values are and how its cultural atmosphere contributes to its success. Then, ask the buying company what it hopes to gain from the deal and how it will manage the organization. Just as you wouldn't sell a 1963 Corvette to a 17-year-old first-time driver, don't hand over your company to someone who doesn't appreciate the culture you and your team have created.
Resist the urge to jump at big offers, as well. Yahoo! offered Mark Zuckerberg $1 billion for Facebook, but he turned down the deal because he knew the company would be worth far more once he unveiled its News Feed feature.
Most companies will never become as big as Facebook, and Zuckerberg's fortitude should provide inspiration for others contemplating deals that are lucrative but not quite right. Holding out for a buyer that understands your company and shares your drive to see it succeed ensures your culture will remain intact as it evolves.
2. Keep employees in the loop.
People become fearful when change looms -- more so if they don't understand how it will affect them. While some might abandon ship rather than adapt, many team members will stand by your company if you communicate what's happening -- in fact, that's key to success. Your employees are what defines your culture. The ecosystem cannot survive without them, so be transparent about what the acquisition means for their positions, compensation and day-to-day operations.
A lack of communication could also lead to friction among employees, even when changes are well-intentioned. Hewlett-Packard discovered this after its 2002 acquisition of Compaq. A senior manager from Compaq began requiring weekly reports from HP employees on his team. They bristled at the perceived micromanagement, but he intended only to foster open communication. This dust-up could have been avoided with a little more candor and transparency.
In addition to open dialogue about change, having a few constants during the transition will make people feel less like they're out at sea. After my company was acquired, I kept a regular schedule and adhered to our casual-work attire policy, as I always had. Maintaining consistency in my interactions with my employees helped smooth the waters as we adjusted to a new structure.
3. Stick around -- at least for a while.
AT&T's CEO, Randall Stephenson, recently denied reports that he will become executive chairman after his company acquires Time Warner this year, saying he plans to continue as chief executive of the new entity. Although speculation remains about how the combined company will be structured, Stephenson's response indicates he will see the organization through the transition rather than leave questions for his predecessors to answer.
Staying with your company allows you to ensure your vision is being fulfilled and provides stability for your employees. Even if you plan to exit the company after a year or two, your presence will serve as a steadying force in terms of culture and morale.
My company's acquisition stipulated that I would continue running the business for at least two years. I was happy to stay -- I wouldn't have been able to stomach it if the business had floundered while I ran off with the proceeds. But there was also more I wanted to do with the company. As I told my investors, very few NFL players make it to the Super Bowl, and fewer do it repeatedly. I wanted to be the repeat winning quarterback, and I believed that we still had many wins in our future.
Acquisitions can present great opportunities for corporate growth and fulfill your vision for affecting the world. But culture is a part of what makes your organization effective, so think carefully before introducing change that will reshape the way your business operates.