Maximizing return on investment (ROI) is crucial after acquiring a portfolio company. The stakes are high, and the pressure is on to ensure the acquisition not only boosts the portfolio but also delivers long-term value. However, it’s important to take the time to understand what you’ve bought and review each part of the business so you can make deliberate, well-thought-out changes.
During this review, it’s essential not to overlook the HR component. The portfolio company must have the right people, processes, and systems in place to enhance talent management and deliver a strong ROI. Partnering with a professional employer organization (PEO) experienced in company acquisitions can help you achieve this outcome as you consider the following changes:
1. Introduce New Management
While it isn’t always necessary to change members of the senior team after an acquisition, it is quite common. According to AlixPartners, as many as 75% of portfolio company CEOs leave after a PE acquisition. Besides finding a new CEO, you might also need to hire for other key roles, such as CFO. In some instances, existing employees may be ready to step up and fill these positions.
Updating the succession plan will also help maintain a steady supply of senior leaders. By evaluating leaders’ readiness for larger roles, you can identify the need for development programs to prepare them for these positions.
2. Restructure
Changing the makeup of teams and departments is sometimes unavoidable after a portfolio company acquisition. Whether you need to pursue layoffs, permanent job eliminations, or the realignment of entire departments, restructuring can be an effective way to reduce costs and improve efficiency.
Beyond layoffs, job rotations can be advantageous as they enable employees to develop new skills and potentially improve their productivity. Additionally, by reviewing individual job descriptions, you may discover that making changes at a granular level can help ensure each employee is optimally positioned for future success.
3. Embark on a Culture Shift
To align the portfolio company with its new strategic direction post-acquisition, a culture change may be necessary. This could involve reassessing and potentially changing the company’s core values and ways of working. A trusted PEO can provide the HR guidance needed for an effective culture change, including strategies for hiring individuals who fit the desired new culture.
As you evaluate the company’s culture and consider possible changes, be sure to assess the following:
- Decision-making processes
- Company policies and HR practices
- Team dynamics and interactions
- Communication channels and overall transparency
4. Optimize Total Rewards Programs
Amid potential layoffs, restructuring, and revamping the leadership team, it’s also a good idea to evaluate compensation and benefit plans to ensure they properly motivate employees and align with new strategic goals. This review could lead to the following changes:
- Revising salary structures to ensure market competitiveness
- Updating promotion criteria and performance evaluation methods
- Adjusting performance-based bonus and stock option programs
- Implementing flexible benefit options to address employees’ diverse needs
Benefits are a critical component of total rewards. In fact, an Aflac study found that 53% of employees would accept a job offer with slightly lower pay in exchange for better benefits. By upgrading the portfolio company’s benefits program, you can potentially reduce expenses while enhancing your ability to attract and retain talent. A PEO partner can be invaluable here, as it possesses the expertise and negotiation power to help you design an affordable benefits program that employees truly value.
5. Upgrade HR Systems and Processes
To effectively hire, pay, and manage a workforce, you need robust infrastructure and systems that support employees and keep the company in compliance with evolving labor laws. Even if a new portfolio company already has some HR technology, it’s wise to evaluate its effectiveness and identify any gaps. Additionally, you might find opportunities to integrate the company’s existing HR technology with the systems you already have in place across your portfolio. These may include:
- Applicant tracking system (ATS) for recruitment
- Payroll system
- Employee onboarding platform
- Benefits enrollment and employee self-service portal
- Online training system
There are several HR systems to choose from, but you don’t have to be an expert. A PEO can be instrumental in evaluating your current HR tech stack and ensuring the portfolio company has the best HR systems and support to manage every HR activity, from hiring to offboarding.
Maximize Portfolio ROI Through Strategic HR Improvements
Implementing strategic HR adjustments after acquiring a portfolio company is essential for its long-term success. By building the right team, fostering a positive culture, and optimizing HR processes, you can strengthen your portfolio and maintain high levels of employee engagement and performance. Aspen HR provides the expertise and resources to help you get it done, affordably and with exceptional quality. Contact us to learn how we can help enhance HR operations in your portfolio companies.
For more insights on the HR factors to consider in your roll-up strategy, get your copy of The New CEO’s Guide to HR.
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