S2-E4 | Managing the Executive Team and Employees

Transcript

SPEAKER_00 0:02

Hi, everybody. Welcome to our podcast, The Technical Founder, Advanced Concepts in MA and Investment Banking. We are currently in the fourth episode of our Power Alignment and Communication series. And in this episode, we're talking about managing the executive team and employees. I am joined here with our co-host, Ricardo Oberlander. How are you today, Ricardo? Sunny Shining. Thank you very much, Joshua. And you? I'm the same, feeling good. We've got uh spring coming around the corner here. And it's a good day to record a podcast. So I'd like to be here with you. Uh, Ricardo, when we think about management of executive team and employees, and particularly for founders and shareholders that are now kind of nearing, we'll assume it's the last 50% of the MA process. People always ask us as the investment banker what they should tell or should not tell their employees. Our advice to them is to always tell them as little as possible because inevitably the sellers that we work with tend to misread situations and think things in the deal are further along than they actually are. And then sometimes they can just misset timing expectations with their employees or their management team. They may say the deal is closing imminently when in fact the deal is another month or two months to go. What are the major thought areas that technical founders need to think about when talking to their executive team and employees?

SPEAKER_01 1:42

Joshua, this is one of the most sensitive areas in any MA process. And pacing is absolutely critical in this case when it comes to communication. Because while the deal may look strategic at the top, inside the company it often feels very personal. And people ask themselves very human questions. What happens to my role? Will I still matter? Will the company change? Should I stay or prepare to leave? If those questions are managed in a way that's not careful enough, uncertainty becomes a business risk and a business risk for the deal.

SPEAKER_00 2:23

What kind of business risks do you think technical founders gloss over or fail to accurately recognize in thinking about what to talk to their employees about? And and my my thoughts on this is founders and sellers are often very optimistic, right? And that and that makes sense, right? When you're talking to employees and executives, you don't want to give them all of the worst case scenarios because it's not motivating and there's a risk that you know they could leave the company, et cetera. And when I think about the things that the founders need to communicate intentionally, is how roles will change and kind of how that dry, mundane part of the job will change from being dry and mundane in one way to dry and mundane in another way. It helps people visualize what's really happening that day after MA. What do you think about that?

SPEAKER_01 3:23

I tend to agree with you. And also the whole thing starts in a way with the executive team. Because they are at the same time part of the value being sold and part of the machinery required to complete the deal and probably to take the company forward. Buyers are not only buying financial performance, they are assessing whether the people who created that performance can sustain it. And that means the executive team must do several things at once. They need to keep running the business, support the business, maintain morale, and often they need to do all of this while not knowing exactly what their own future will be, let alone the impact on others who report to them. So that's a very difficult emotional and professional position. In a transaction, not everyone can know everything at the same time. Confidentiality matters, leakage can damage the deal. So information, to your point, is deliberately controlled. It must be. And that creates a symmetry. Few people know a lot, some know a little, must know nothing. And human beings, I mean, inevitably, fill gaps with assumptions. If there is silence, people create their own story. Gossips is starting to emerge. And often that story is worse than reality. This is why discipline, communication, and pacing are essential. Not everyone needs full information, but people do need enough clarity to remain focused and stable.

SPEAKER_00 5:03

If I think about this from our audience's perspective, I'm sitting here, I'm listening to this, I'm maybe getting close to the end of an MA or getting ready to launch my own MA process. And I'm like, okay, guys, I got it. I understand how the importance of my employees, how you know that we, that's how we got here, executives and employees. So I'm comfortable in my ability to manage executives and employees. But I think we can help our audience get some really powerful summary information. And I'd like to challenge you with this, Ricardo, to think about what are the worst things a technical founder can do and what are the best things that a technical founder can do in managing their executive team and employees. I think the worst thing that a founder can do, or one of the worst things, is oversharing. I think I see a lot of this is that inevitably founders and executives are close with other executives and employees, and they've developed personal relationships and they've known each other for decades. It's sometimes feels natural to overshare little tidbits of the transaction that they may feel are not going well, but in fact can do a lot to negatively influence the perception of the executive or the employee who's expected to stay on the transaction post close. I think it's really important that you withhold information that really they don't need to know because it's not going to be interpreted the correct way. I think that's one of the worst things that that can be done. And I think the best thing is really communicating what life looks like after day one, after day zero. The deal is closed, there's new ownership, there's new objectives, there's a new strategy. What does that look like? And I think helping the employees and the executives visualizing what those days after the close looks like is the best way to help keep them motivated and the best way to keep them focused on the grand prize. What do you think about best and worst things, Ricardo?

SPEAKER_01 7:03

Best behavior, in my opinion, is directly related to maturity. It's a time where grown-ups have to show their responsibility, their ability to lead through difficult moments, critical moments, let's say, because change of control is always complex in many ways. And then that requires actually uh an adult behavior and a responsible behavior, not only to the organization, to the employees, uh to stakeholders and shareholders and investors and regulators, as we talk later in other episodes. But that requires a lot, that requires gravitas, that requires leadership. And worse behavior, to your point as well, I mean, has to do with lack of mood management, let's put it this way. It's not about being over excited or over depressed. I mean, uh reacting uh to the everyday uh situation of the deal, because actually that doesn't help help at all uh the situation.

SPEAKER_00 8:19

I think that's a very excellent point. So I took some notes while you were talking. Bad or poor mood management is one of the worst things you can do, and then one of the best things is showing gravitas and emotional maturity. Yeah, yeah, yeah. I think that's really I think that's important.

SPEAKER_01 8:43

No, I agree, I agree. I mean, because it's it's a it's a moment that uh you don't realize, uh or many people don't realize, but a lot of people are looking at you, a lot of people depend on you. Yeah, I mean, on both sides, I mean, on the buyer side, on the seller side, on the employee side, and it's it's far complex uh for people actually to manage in a non-responsible way.

SPEAKER_00 9:13

Yeah, mood management. I think that should be maybe a subject of a future episode because uh reminds me of those 1990s mood rings. Do you ever see those? Ring your bell. Right, they turn to color based on what mood you were in.

SPEAKER_01 9:29

So um it never worked with me, but anyway, I tried.

SPEAKER_00 9:34

Buy mood rings for all of your employees and then they were the precursor of aura rings, probably. Yeah, I think you're right. Yeah. Um takeaways. So the key takeaways that I see for our technical founder audience and other executives is really that limited piece of oversharing because founders inevitably end up getting frustrated with MA processes at some point because they are unfamiliar with these processes. It's very different from closing a customer, hiring a new employee, expanding into a new market, et cetera. And it's very natural for them to communicate that frustration to their other coworkers, and those coworkers don't have the full picture. And so they have to be very tight-lipped. I think you described it as gravitas and mood management, but just very thoughtful uh with what you're sharing because these deals are complex and there are drivers that people have, you know, on both sides that won't always be clear to both sides. What do you think about takeaways, Ricardo?

SPEAKER_01 10:38

I would add from my perspective, I mean, the role of the executive team, because they are both a value driver and a risk point, and they have to exert cabinet responsibility. That's a critical concept. Buyers evaluate the quality, stability, and credibility of leadership, whether some of them stay or leave the company. The other point is about uncertainty that must be managed before it becomes behavior. The focus has to be on the energy, on decision making, on analysis. I mean, and trying to actually conduct the process as rational as possible. And don't let emotions actually run wild when you're carrying out this particular process. Third point is about retention, is not only financial. People will stay when incentives, rule clarity, trust are aligned, and prospect for growth. And for those who leave, it's absolutely critical for the company to treat them with respect.

SPEAKER_00 11:43

Thank you everybody for listening to our podcast, Managing the Executive Team and Employees. We will see you on our next episode where we talk about communication with shareholders and regulators. Have a good day.