Will you be able to keep your most valuable talent through the toughest times?

It's no secret that talent is at a premium right now, for a variety of reasons: 

  1. The pandemic lockdowns caused an economic earthquake that led to panicked companies shedding worthy employees. 
  2. Then the mainstreaming of remote work opened up new opportunities to all kinds of talent at almost every level. 
  3. Now the pressures of rising inflation mean that most skilled people are incentivized to go wherever they want, usually for the most money.

I'd say it's time to throw out the rules and do whatever it takes to retain your best resources.

But we've been here before. For most companies, this scenario plays out at least a couple times in its lifecycle, regardless of external economic factors. In fact, you have only to look at one good-problem-to-have to see how this nasty problem manifests itself. 

And how it gets solved.

"They're All Going to Leave"

Last week, I got a question from a startup CEO who had made the decision to take an acquisition offer rather than try to raise a large and necessary follow-on funding round. The offer was solid, if not life-changing, and would give his company the runway it needed to fulfill its mission. 

Provided, that is, he hung on to the 10 or so extremely gifted and passionate people who had gotten his company this far.

The CEO had been through acquisitions before, and was no stranger to the fact that they never quite work out the way either side intends. Usually, the employees of the acquired startup are the ones who feel the most pain. And as you might expect, they often don't hang around for long.

This mission-driven startup CEO was at a crossroads. This was his best, maybe only option to continue forging the path they had all been on for years, but if the cost of maintaining that momentum was the loss of his team, it would be all for nothing. 

There are no guarantees, I told him, but I knew what not to do.

In Times of Seismic Change, a CEO Has One Job

About four years ago, I helped another fortunate CEO work her way through a similar acquisition. While this was her first exit, she too knew that managing an acquisition transition is like navigating a minefield, and each time you step on a mine, someone important quits.

Now, I've been through several acquisitions - as an employee, as an executive, as a founder, and as an adviser. And what I learned was that there was a single thread across all of them that resulted in a choice the leader of the acquired startup needed to make as to what their role would be over the following 12 months:

  1. Manage the transition, or
  2. hit their new numbers.

You would be shocked at how many times the leader chose the latter. You might not be shocked at how many times this blew up in their face.

The examples I used were similar, if not exact.

Company A was run by a friend of mine, and when it got acquired, my friend spent all his time making sure he excelled at his new role and hit his new goals. While he locked in on those new numbers, his team disintegrated under him. He was shocked (shocked, I tell you!) each time someone left. And when they did, his progress toward his own goals deteriorated as well.

Company B was run by someone I had worked with in the past, and faced an external threat that basically cut his revenue by almost three quarters, almost overnight. But he was a cagey vet, and had been in this position before. Instead of freaking out about the losses, he focused on keeping his team from freaking out about the losses, and kept them on track to navigate through the crisis. It took them an extra year on top of the crisis year to recover, but they got there, without losing a single person. 

When It Hits the Fan, Manage People, Not Dollars

So the strategy we chose was for her to:

  • Clearly communicate the new goals for the first 12 months and
  • put someone else from her team in charge of hitting those goals
  • while she focused solely on navigating the acquisition minefield.

It worked like a charm. At the end of the first year, the two companies had successfully merged and were working together as a whole greater than the sum of the parts. Two years after that, she was given the CEO role of the merged company. And very deservedly so. 

I believe right now she's got her eye on another startup to acquire.