M&A – Don’t Forget About the Other Talent Pool

Carrie Rodriguez

December 20, 2018

CORTAC Director Carie Rodriguez shares her M&A perspective on the importance of including all resources in a talent evaluation. With her years of M&A implementation experience, with major software companies in the Seattle area, have recognized a gap in many processes.  CORTAC’s experience has reduced risk by asking some key questions early in the process. Carie’s experience in her own words:

In any acquisition, a well-known risk is employee attrition and talent drain. Often, we find stakeholders omit a key talent pool – the acquired company’s contractor/consultant workforce.

Talent Evaluation Includes Everybody:

It’s important to conduct a holistic workforce evaluation during organizational planning. Identifying critical talent in the evaluation process will ensure knowledge remains during integration. Stakeholders often focus on ensuring the talented employee base remains engaged. Contractors must be treated a little different, however.

Often, we see contractors evaluated separately and after the employee knowledge/talent assessment. The acquired company’s contractors are often key technical resources.

An experienced contractor may be more critical to business when faced with retaining a limited headcount.  Conversely, the evaluation could recommend transitioning the work to a lower cost employee. Either opportunity could be missed if evaluating contractors after organizational planning decisions have been finalized.

Making an Offer:

In many instances, these resources are viewed as “part of the family” – especially for contractors with extensive tenure. While that feels like a benefit, many pitfalls arise during an acquisition. One risk is the acquired company leadership may view a contractor as essential due to their technical knowledge. This can lead to unnecessary deal costs as they transition higher-cost contractors to employee status.

Before making the offer, consider that the contractor may not want to convert. Many contractors have chosen this employment model for a reason. Some desire more flexibility or compensation than an employee status. As part of the personnel evaluation, leadership should consider contractor interest.

To further complicate the stakeholder lists, many contractors work through a firm. Not all firms are staff augmentation firms – they may wish to keep their good employees for other clients. Considering their needs is key to maintain strong and long term relationships with the contractor’s company.

Relationships and Policies:

Many companies have policies that differentiate employee and contractors. Some of our clients have rules detailing how long a contractor must leave before earning a new assignment – no matter the reason they left. Policies and relationships should be considered.

 

To help prevent attrition of key talent, a holistic organizational planning effort is required. Early identification of key personnel allows more time to create options they (and the company) find desirable. Upfront diligence will better identify skilled contractors to retain, and possibly convert to employees – so don’t forget about the contractors!