Steve Sapletal and John Nicol featured on Life Science Leader
By Steve Sapletal, director, and John Nicol, senior consultant, West Monroe Partners

Carve-out transactions are no walk in the park. Forming an entirely new entity is extremely difficult, especially when you consider the many moving parts that have to be managed all at one time. While technical and financial aspects are usually at the top of executives’ carve-out checklists, there is another crucial element that should be made a priority — the organization’s people.

We all know that a company’s culture is extremely important to the success of the business. Culture affects employee morale, performance, and ultimately how the company operates each day. But culture is especially important in the healthcare, pharmaceutical, and medical device industries where companies can have widely different attitudes towards R&D, quality, and compliance. That’s why you should take culture into account before starting the carve-out process.

Here are six questions to ask yourself when undergoing a carve-out:

WHAT WAS THE COMPANY CULTURE LIKE BEFORE THE CARVE-OUT?

Clearly understanding the company’s current culture is critical before you can even begin to define the culture of the new company. It’s also important to understand that there are controllable, as well as organic, factors that impact a company’s culture. For instance, leadership is able to control how employees communicate within the organization, but they can’t directly control individual attitudes or team behavior.

WHAT’S THE NEW COMPANY’S VISION AND MISSION STATEMENT?

Employees should have a clear understanding of the new company’s vision and how they fit into that vision. To do this, leadership needs to be as transparent as possible about any cultural differences and expectations for how the new company will operate. Recognizing and pointing out the cultural similarities and differences right away paint a more accurate picture for employees and better define expectations.

HOW SHOULD WE COMMUNICATE WITH EMPLOYEES?

Having open communication during a carve-out is simply a must, and developing a detailed communications plan in advance will allow executives to maintain consistency and fluidity when communicating with employees of both the new and parent organization. In addition to the plan, you should create a team dedicated to the internal and external communications of the cultural program. Conducting reoccurring check-ins through employee engagement surveys or small group discussions is helpful in gauging how employees are adapting to the new culture, and what’s working and what needs improvement.

WHAT INCENTIVES ARE IN PLACE THAT PROMOTE HIGH EMPLOYEE PERFORMANCE?

Before determining what incentives to offer employees, first understand the types of employees who work for you and what motivates them. For instance, do your people like celebrating small victories as a team? Are they driven by monetary incentives? Behaviors and expectations will vary among various roles and levels, so using a behavior road map will help differentiate preferences and identify appropriate solutions.

WHAT DO EMPLOYEES THINK ABOUT THE TRANSACTION?

One of employees’ biggest concerns during a carve-out is the impact it will have on their job. Questions like “Will my responsibilities change?”, “Will I even have a job when this is all over?”, and “How will this affect my benefits package?” are sure to emerge at some point during the carve-out. To ensure employees remain on board and productive, executives need to address these concerns right away.

WHAT CHANGES WILL THE NEW OWNER BRING?

With a new company comes a new owner and many more adjustments. Oftentimes, new owners will bring their own set of expectations, employees, and processes that will potentially impact the cultural development of the new organization. The expectations of the agreement between the new owner and stand-alone company are key in shaping and aligning the direction of the new company.

Carve-outs are complex and require much thought, especially when it comes to merging corporate cultures. Knowing ahead of time what to expect and how to tackle the cultural shift will make the transition smoother and much more successful.

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