What price, empowerment?

Unless certain pitfalls are considered and avoided, embarking on a black economic empowerment initiative can be like a hastily arranged marriage between two totally unsuited individuals. However, says BRYAN HAITINGH, CEO of risk management and executive solutions group Cycan, there is much you can do to smooth the path.

Black Economic Empowerment (BEE) came to South Africa in less than ideal circumstances; there was much to catch up in a short time. But many opportunist companies and individuals jumped on the wagon. It was enough, in the early days; for some companies simply that enough black people attended board meetings or were on the payroll.

There were many companies that supported BEE in more than just the word, but as many formed expedient partnerships on paper and established shell-type companies to create the right impression.

BEE has come a long way since then, but still the opportunity exists for its misuse along the lines of a hastily arranged marriage of convenience.

For example, the acquiring company maybe motivated by no more than the minimum compliance to government's demands so that it can have access to the benefits that come with a well connected black partner.

The company that is being acquired needs to be on the lookout for this. It needs to check the acquiring company out thoroughly - and this means more than simply looking at the figures. Does it have a clear direction and strategy? What is the nature of leadership?

At the same time, the acquiring company must reassure itself that the business it is investing in can live up to its claims. Does the leadership have the contacts needed to drive the business forward?

Why fail?

Globally, 60 percent to 70 percent of mergers fail. More than 80 percent of these failures are due to cultural components and leadership problems, rather than financial factors. How much more likely is the venture to fail if it is embarked on hastily and for expedient reasons? Only after fault lines begin to appear in the hastily built edifice - such as staff attrition and a drop in productivity - will the true damage become evident.

The venture is more at risk because it has not been made because of synergies and shared values, but out of necessity. There has not been time to court and get to know your partner. These failed relationships can be seen in the casualties that litter the BEE landscape in South Africa.

If you are considering BEE, you need to first address your motivation? What contingencies can put in place so to protect the business? What are the elements needed to make the merger sustainable?

Strategies

If, for example, retaining the essence of the company’s culture - what makes it vital to you? Powerful research and analysis tools are available to perform a due diligence test on human capital, on leadership, brands and values; to do climate and change studies, establish a competency model and blueprint the existing culture. These can be addressed with management and staff.

But bare in mind - if the disparities are too great, it may be prudent not to continue with the merger or acquisition. Bringing in a trusted professional player - someone who has been in business but understands the softer issues around people - could be the move that prevents disaster. If these problems begin to surface post-merger, they will sap the organisation's creative energy.

For example, you may feel losing 10percent of your staff is a small price to pay for the venture. But when it is your top 10percent and you are left with the deadwood, things look different Few employers can afford this in a market where skilled and loyal staff are hard - and expensive - to find.

A trusted third party can help you during the merger with communication to staff. My suggestion is, be real up-front it is better to be honest and break the bad news than to lie and lose credibility and your staffs approbation. Being honest increases staff trust - an essential ingredient for a successful and competitive business. After the transaction has been completed, there is much to be done to assist staff to settle into the new scheme of things. Again, a trusted and knowledgeable third party can take this onerous charge off the hands of management, leaving it free to work on strategy.

It is exciting to embark on a whole new future, and to take staff through the process of change. Post-merger is an excellent timere-energise the business. Clarifying strategy and aligning leadership with the roles that energise them can achieve this.

In this way you create new energy, instilling pride and passion - resulting in greater retention and optimisation of your human capital. £1



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