Preparing for an IPO? Make Sure Transformation Includes Setting a People Strategy

Preparing for an IPO? Make Sure Transformation Includes Setting a People Strategy

Amid the many demands of preparing for and undertaking an initial public offering (IPO), don’t forget your people.

Organisations contemplating a state of public company readiness must undergo a complex transformation process that impacts all business functions. Upgrading technology, improving financial reporting processes, and implementing governance, risk and compliance capabilities are all critical to this journey, of course. But so, too, is developing a people strategy for creating a well-integrated and engaged workforce that will help the company thrive long after its IPO.

Having a people strategy may be a relatively new concept for some businesses. It became a greater priority issue for senior executives and boards in August 2020, when the U.S. Securities and Exchange Commission (SEC) introduced new disclosure requirements around “human capital,” so that stakeholders could have a clear idea of how many people the company employs, what the business does to attract, develop, engage and retain its talent, and more.

Regardless of the SEC’s requirements, a people strategy creates value for a pre-IPO company and furthers its transformation efforts by helping its leadership to:

  • Set a “North Star” vision for a collaborative and people-centric, post-IPO corporate culture.
  • Determine if the business has enough high-caliber talent positioned across all key business functions, including finance, accounting, marketing, operations and sales, to go public successfully and hit the ground running afterward.
  • Design a performance management and total rewards program that engages the workforce and helps the company become a magnet for top talent.

The people strategy should also shape and drive diversity, equity and inclusion (DEI) initiatives and help guide the business toward achieving other environmental, social and governance (ESG) goals. For example, the people strategy can help bring focus to DEI efforts, such as assembling a post-IPO board that is diverse in its composition or recruiting more women for technology roles.

The People Leader Drives the Strategy — But Not in a Vacuum

Developing a people strategy requires the company to assess its existing human resources (HR) or people function and be prepared to take it to a more strategic or more complex stage than the pre-IPO level, if necessary, to meet the requirements of a publicly held organization. This sophisticated, strategic business function has a seat at the company’s executive table and must be led by a designated people leader who works in close collaboration with executive leadership and the heads of the various business functions to design and execute the organization’s people strategy.

A mature people function expands well beyond traditional HR roles. Some emerging companies on the IPO path may have to consider enhancing the traditional HR roles in addition to thinking about a comprehensive people strategy.

The people leader and people function, supported by a unified business leadership team, are dedicated to overseeing the execution and evolution of the people strategy before, during and after the company goes public. The people/HR function needs to be both operationally efficient and strategic in nature. Being operationally efficient requires compensating people, providing benefits, and addressing employees’ questions in an effective and efficient manner so that the focus can move to more strategic issues. From a strategic view, the people function should focus on how to realize the full value of their biggest asset —their people — by considering the following:

  • Do we have the right talent and skills to meet our business objectives pre- and post-IPO? For the next year? For the next five years? If not, how do we acquire or grow the talent and skills needed to meet our business goals?
  • How do we make the best use of the talent we currently have?
  • Are our people working together effectively? What are the roadblocks to efficient collaboration?
  • How do we currently source new talent? Is there a better approach?
  • How do we use technology in our recruiting, hiring, onboarding and other talent-related processes and to support our employees from an HR perspective?
  • What are we doing to identify and develop our company’s future leaders?
  • What are our DEI KPIs and hiring priorities, including for leadership roles?
  • Do we maintain a company culture that encourages high-performing talent to stay?

The people leader ensures that executive leadership and the heads of the company’s various business functions all understand why the people strategy is vital to the business and develops this strategy with input from the business leaders. This understanding, in turn, creates alignment on priorities. Without that alignment, the organization will struggle to execute that strategy and build a people-centric culture.

Evaluate the Company’s True Peers and Market

It’s important for companies to understand that a people strategy, like a business strategy, is about setting a course for a journey that may take a few years and change over time. A skilled people team, in collaboration with business leadership, will develop the road map for that journey. A starting point is to conduct an evaluation of the organization’s people and skills by answering the questions outlined above. Armed with this information, the people team can prioritize the activities to drive the implementation of the people strategy.

Next, evaluate how the company compares its workforce composition and its talent acquisition, development and retention practices to those of its peers.

When undertaking this exercise, companies need to thoughtfully determine the companies they consider peers and ensure they are truly comparing themselves with relevant organizations. If there’s a business in the same industry that looks similar in size but operates very differently, is it really a peer? If a company is a financial services or retail company, is it also a technology company, and therefore, should it compare itself against other tech firms? Which businesses do analysts benchmark the company against?

Serious evaluation of the company’s true peers and the market can help the business confirm that it has an appropriate people strategy in place.

Keep Investing in People Beyond the IPO

For business leaders who may question the value of creating a people strategy amid all the complexity and intense pressure of public company transformation, consider this: Without the support of an integrated and engaged workforce, how will the company meet its business goals?

Also, creating and carrying out the people strategy is a transformative process. While the strategies companies design will be different, based on the current composition of their workforce, their mission, their corporate culture challenges, and more, the people strategy will provide a clear road map for how the organization grows and realizes the full value of its talent — from the learning and advancement opportunities it provides to what technology it uses to support employees from “hire to retire.”

Developing a people strategy should be high on the transformation agenda of any pre-IPO company. And after the IPO, the company should prioritize further investment in building and maintaining a highly skilled workforce that is diverse and inclusive in all aspects, from the top down. No public company can succeed today without demonstrating to analysts, regulators, stakeholders and others, especially its employees, that it has a clear strategy to achieve its DEI initiatives and other ESG goals.