So you’ve decided to follow the Tao of Bezos and buy that company you’ve been obsessing over. The financials are solid, the operations are good, and you’ve got a good feeling that the corporate culture aligns with your own. That’s good for you, but what about the individual employees, the people who can really make or break your new adventure? It’s time to learn how to evaluate employees.
I’ll spare you the platitudes about lost nails and weakest links, but here’s the thing: unless you build a team that shares your vision and has the technical skills to make it happen, you’re doomed. And trust me, there will be regret—just not the kind you’d anticipated.
Face It—You Might Not Be All That
Nobody ever accused VCs and most entrepreneurs of having small egos, so they’re generally shocked that a legacy startup team doesn’t want anything to do with the new company. According to research by an MIT Sloan School doctoral candidate, 33% of an acquired team quit within a year. That stacks up against a 12% attrition of external hires with similar experience and skills. Moreover, during the first three years after a buyout, retained employees were 15% more likely to bail than their counterparts.
How can you avoid a talent hemorrhage as you figure out how to evaluate employees? According to MIT, it helps if your company holds patents; firms that value innovation are more likely to keep employees, even as the company grows out of its go-go startup phase. Another bonus to holding patents is that the people who do leave aren’t the creative geniuses responsible for those patents and aren’t as apt to open up a competing shop.
I talked about understanding the culture of an acquisition earlier. But I intentionally left out one primary component: does the company have a startup culture? Is it a free-form, unstructured, entrepreneurial environment, and do you want to replace it with org charts and chains of command? Some people thrive on that loose startup vibe long after the IPO (Google is a pretty good example) and will jump ship if they think your culture is too corporate. However, these people are risk-takers, and starting over is way more of a thrill than not.
Know How to Evaluate Employees and Retain the Right People
You might be tempted to bring in your own executive team to get the new guys on track. Don’t. You’re setting your best up to fail.
Why? Because you’re sending them into a hostile environment with a mandate to improve production, increase sales, and all the other things the previous owner failed to do. Chances are pretty good this poor person also has to rah-rah their way through a shifting corporate culture, and here’s the bad news: post-acquisition executives have about a 20% bail rate after two years, and that rate stays above average for up to nine.
So whether you’re bringing your own team in or trying to retain the existing one, don’t forget that it’s an uphill climb at best. So you need to make damn sure you handle the post-buyout hiring and firing with an extremely deft touch. You need those key leaders to be in place for a long time, or you’ll join the ash heap of failed acquisitions.
I’d recommend paying close attention to performance reviews, personal interviews, and good old social media stalking to figure out who to retain, retrain, or throw onto the tracks.
Due Diligence Should Extend to Legacy Staff
During your due diligence research, you should also be assessing the legacy staff. Start with their leadership team, and work your way down. Get a feel for their takes on the acquisition. Gauge the general hostility levels. See if they’ll fit into your corporate culture.
Understand that leadership may not want any part of your new and improved vision, but you’ll need that institutional experience for a few months, at least. I wouldn’t recommend running around with a notepad or a tape recorder when you’re talking to people. But you can get some accurate feedback if you do it right—meaning use a scalpel, not a sledgehammer.
Catch the Learning Curve
Existing employees can be the best reality check you can imagine. Sure, the numbers look great—but what if the key tech guru is getting ready to jump ship? If the owner knows that some of the staff is leaving to start a competing company, they’re under no obligation to tell you that; they just want out. So, talk with the employees. Ask if they’re happy with how things are working now, what improvements they’d like to see, and if they plan to stay. Also, find out what attracted them in the first place.
How to Evaluate Employees: Step Into the Matrix
What are a company’s most important assets? The employees. When buying a company, you’ve got to evaluate at least the leadership and management to decide if each person is an asset or a liability. Entrepreneur.com has come up with a tidy little tool for how to evaluate employees they call the “Willing and Able” matrix to help you figure it all out. So sketch out a little cross and fill in the four squares with the applicable names.
Start with simple definitions of the two components.
- Ability: The person has the competence and skills to do the job.
- Willingness: They’ve bought into the corporate culture and are enthusiastic about their place in the company.
Who’s Willing and Able?
In a perfect world, all your employees are willing and able to do their jobs; they’d all be like the Seven Dwarves singing their way into the mines every day. But life isn’t a fairy tale, and these unicorns are few and far between. So do everything in your power to keep them on board.
Able But Unwilling
The flip side here is the worst—able but unwilling. They’re perfectly capable of doing the job, but they’re just not super invested in it and mostly phone it in. They’re not excited about the job or the company.
The good news here is that you can turn this employee around. Find out why the job isn’t a priority—better offer, personal problems, just not into it, etc.—and figure out if you can overcome the underlying issue and correct it. If you can correct course, these guys are totally worth keeping.
Willing But Unable
Here’s a secret in the VC and entrepreneurs world: they don’t always have the best hiring practices. It’s part of the nature of the startup beast; you can’t always get what you want, so you get what you need. And when the company outgrows that person’s skill set, it’s hard to let them go. After all, they were with the founder when it was just a great idea, and that bond is hard to break.
These people could be absolutely into all the changes you want to make and be your biggest cheerleader. But they’re just not competent. This part of the matrix is the hardest to manage because you’ve got to figure out whether it’s training, a new position, or a pink slip that works best. Approach this person with a “how do we close the gap between expectation and reality” perspective, and go from there. Don’t waste time if it’s hopeless; you’ll know from the get-go if that’s the case, and you can go ahead and let that person go.
The Unwilling and Unable
This isn’t actually the worst part of the matrix for one reason: it’s pretty damn easy to fire someone who’s got a bad attitude about a job they’re incapable of doing. So get rid of the dead wood and bring in your own team. Those are the people who buy into your corporate vision and have the skills to get the job done.
After You Decide How to Evaluate Employees on the Surface: Establish Core Competencies
Once you’ve figured out where to slot legacy employees, it’s time to figure out each person’s core competencies. This is a deeper dive than simply assessing if they can do the job; it’s sussing out strengths and weaknesses and finding the real expertise they bring to the table. Take home past reviews for a little light reading. This will give you a fairly unvarnished idea of how each employee fills their role in the company. Then ask yourself these questions about every person.
- Do they know their role and why it matters?
- Do they see how they fit into the corporate mission?
- How are their problem-solving, creative, and critical thinking skills?
- How can they improve their performance?
After you’ve had the chance to read these reviews, go back to the matrix. Someone you pegged as unwilling and unable may have gotten a promotion or lateral move that they hate, so they need a different position to really shine. Alternately, a team member you thought was a total Happy has been shining you on and will turn on you like a yard dog if they’re challenged in any way.
Cyberstalk Social Media
I mean, not in a weird way. But poke around on LinkedIn, Facebook, Instagram, and whatever the site du jour is to find out what your new employees really think. If someone’s got a private and locked-down profile, be thankful that at least they’re discreet. I wouldn’t use social media for the bulk of my due diligence portion of how to evaluate employees. But it’s a good way to round out the person.
The people who work for you are your greatest assets, and it’s on you to maximize those assets as quickly as possible. The sooner you do your due diligence and decide how to evaluate employees, the sooner you can get the company moving towards your vision—and your success. No regrets.