Oh, no! IPO? Part 1 – Changes in the landscape

Money money money money, MONEY

Money money money money, MONEY

Money money money money, MONEY

Money money money money, MONEY

Money money money money – The O’Jays

IPOs are complex and multi-faceted. To that end, we will be exploring the human capital impacts of IPO in three parts over the next few installments of the newsletter:

Part 1 - We will focus on the fundamental and overachieving impacts of an IPO and the most pressing people considerations

Part 2 - Will be focused on how HR gets itself organized to successfully partner with the business and drive success by being the human capital experts and thought partners the business needs

Part 3 - We will explore the role culture, change management and communications plays to successfully guide employees through the impacts of an IPO

“Just the facts.” – Sgt. Joe Friday of Dragnet

Let’s be honest, IPOs are driven by money. Of course, that money can mean and do many things for an organization. But, first and foremost it is typically ALL about the Benjamin’s. OK, now that we have established that, we can explore IPOs further and the human capital implications that come with it.

“Ya make money on your 9 to 5. To earn your livin’ so you survive.” – Coolio

There are many motivations beyond the monetary windfall of an IPO. And there are a number of human capital implications that come along with IPO decisions. Candidly, many of these decisions can have significant impacts on the people. And another candid fact, the “shot callers,” at the top, are not traditionally focused on the people issues. That is where HR must lead.

The truth is the motivations for IPO are much more fundamental than the pragmatic rationale that likely motivates most individuals in their career. As an individual, when you are involved in a potential IPO, you are likely thinking about a few things: a huge cash windfall that allows you financial freedom to, retirement or a potential career change, add to your nest egg, cover a family member’s college or allow you to get that shiny red car your spouse has been saying NO to for years. Money for an individual or family can certainly be freeing. For the organization about to do an IPO, the motivations are a little more narrowly focused. The most common motivations for an organization to go IPO include:

1.??????Generation of cash

2.??????Accelerating a business transformation

3.??????Financing future investments or expansion

4.??????Reducing the risk profile (this one is for all those CFOs out there!)

5.??????Increasing public awareness

6.??????Elevating the brand

7.??????For a select few, making barrels of life-changing money and skip off into the sunset

Most of you are likely not surprised by the above list. After all, it is perfectly rationale for an organization to prioritize. And, while some of the above may positively impact the remainder of employees, job security, pride in the organization and culture plays a significant role in why people stay with an organization. An IPO means that there new priorities and requirements that must be considered.

"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."?— Paul Samuelson

To me, this quote means for the average person (and sometimes the organization) an IPO will require some patience. And, of course, when an IPO doesn’t meet the company or the markets expectations it can be disastrous. Market data indicates that more than 20% of IPOs will delist in the first few years. That is a sobering statistic. That means many organizations fail to meet market expectations and retreat with their tale between their legs. And, if that isn’t sobering enough, over 80% of IPOs do not meet their stated goals in the first few years. The take-away is that most IPO are not a “quick money” scheme.

Additionally, an IPO means the end of autonomy. Lots of business “things” change once a company goes public. Things like:

1.??????Ownership PE looking to exit and recoup their investment

2.??????Increased regulatory scrutiny

3.??????More internal controls

4.??????Addiiotnal people looking over your shoulder

5.????? Focused on the stock price

6.??????Changes to internal governance

7.??????Changes to the leadership team and expertise

8.??????Organizational growth (people, products, positioning...)

It’s not that the added scrutiny is inherently bad, but it does impact the organization and people. As you can surmise, IPOs can have significant human capital implications. A few examples include:

1.??????Some folks aren’t motivated to work for a publically traded company

2.??????Some roles are likely to change significantly due to increased oversight

3.??????Senior leadership will likely lose some of their autonomy

Sounds great so far, right? As human capital practitioners this sounds like a nightmare and a series of events that can destabilize a workforce. And, that is a fair assessment. People are funny little creatures and can be very unpredictable. But you already know this.

“The whole cap came off. Must’ve been a recap.” – Dale Earnhardt

So, let's recap with a few thought starters to opine upon.

Opportunities

·????????Increased visibility and prestige; ability to attract and retain talent

·????????Meaningful financial opportunities for employees

·????????Compelling engagement opportunity can shore-up some flight risks

Risks

·????????Ineffective and/or delayed communication can result in disatisfaction

·????????Distracting talent from focusing on “business as usual”

·????????Change in the employee value proposition ?– “Not what I signed up for”

·????????Retention of employees who perceive they won't benefit financially

So, I will leave you with a few parting words until the next installment.

“Money changes everything.” – Cyndi Lauper

?

Until next week - Stay strong, stay focused, stay sane and stay the course…