Buying a business? Your new employees are your first priority

NEW YORK -- You've just bought a small business. Maybe you're a sole proprietor and this is the first time you're running a company. Or maybe you've bought a firm to merge with one you already own. Either way, your first priority is likely to be your new employees.

"Often, when you're buying a small company, you're buying the human assets ... you're acquiring talent," said Edward Lawler, a management professor at the University of Southern California's School of Business Administration.

New owners need to address employee concerns immediately, Lawler said.

When there's a change in a company's ownership, employees will be anxious B no one knows what to expect from the new boss. The uncertainty can make it hard for them to get their work done, and they might think about quitting in favor of jobs that feel more secure -- leaving a new owner without key people to keep the business growing.

It might be helpful to put yourself in an employee's place. He or she will be full of questions: Is the new boss going to replace me? If not, what will happen to the promises the old boss made to me? Will my favorite co-worker be fired, and if so, will I have to do his work and mine? Will my assignment change? What's going to happen to my health benefits and 401(k)?

Kimberly Scott, a management and human resource consultant with Hewitt Associates, says these questions must be answered with honesty and openness if a new owner is going to create an atmosphere of trust and retain workers.

"If you mess up from the get-go, it will be awfully hard to get it back down the road," she said.

What if you don't know the answers yet? Scott said it's best to be upfront and tell workers, "I don't know."

"Don't make up a message. Don't make promises you can't keep," she said.

Wendy Handler, an assistant professor of management at Babson College, suggests that before making any changes, a new owner should "sit down with the previous owner and talk about what they've done for their employees so you can be aware of it and then go from there."

Moreover, "you really may want to sit down with a couple of key employees and ask them what they like about working there," Handler said.

It's possible that a new owner might find he or she can't make some hoped-for changes because of employee needs, Handler said. "You have to think beyond what you want. You have to think about what has been," she said.

Everything in an employee's work experience should be under consideration, not just salaries and benefits. Lawler, the USC professor, noted that autonomy may be very important to an employee.

In Buying and Selling a Business, author Robert F. Klueger writes that many employees feel territorial about the work they do, and so it's important for a new owner to be aware of not just the job descriptions of each worker, but also the idiosyncrasies he or she might have.

"Your seller may have granted one employee the job of making the weekly run to the bank. It's a job that requires no special skill, but the fellow who does it considers it a badge of privilege," Klueger said. Other employees may have their own pet projects. "Remove those perquisites and you have a hostile staff on your hands," Klueger said.

A new owner may find that incentives such as bonuses can ease a transition and also guarantee that workers won't flee.

"Some organizations go the route of some sort of stay-on bonus or compensation package," said Scott, the Hewitt consultant. "It may be for the critical employees or all, to say to them, `we really want you to stay here.'"

Lawler said owners can also give workers guarantees that there won't be any reductions in salary, benefits and work conditions for six months, or even a year.

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