Sharing: Cultural Factor (after the merger, after acquisition), Private Equity Professionals

We have recently purchased a loss-making food and beverage business in Europe. Our plan was to rebuild this company. In terms of the revenue, they have Euro 5 - 20MN p.a. (deliberately vague, but for those in the know, you know what kind of challenges you would face with a company this small). Their brand is relatively well-established and well-known, but their filed isn't a growing area. When we buy a company, we would like to bring in new management.

We are having a massive problem with changing the culture of this company. Ideally, I want to completely sweep them (fire them all and hire new staff, but this isn't possible). They have this small country and small town mentality and start work just after 9am and finish at 4:30pm. Half of the time, they spend talking to each other and, as with all those people, they are suspicious of us, "the new management," everything we do. In short, no one wants to make money.

In Wall Street, we take for granted that everyone wants to make money, but if you have to work with people who don't want to make money, who just want to do the least and get paid their wage (which is nothing as far as I am concerned), you struggle.

You might think why not implement a new incentive structure to reward the right behavior and correct the existing employees. Well, to be honest, we are terrified of introducing a new incentive structure because it's like giving monkeys a laptop. They might eventually be able to use it, but for the foreseeable future, they will end up using the new tool as a weapon when they fight. What we need is to use those monkeys and turn the company around.

Let me explain a bit more. Some companies have rigid organizational structure and people are hired to perform a set of certain duties. This means that people are replaceable. Some companies have loose organizational structure and people have a set of job descriptions, but are expected to do so much more, be creative and contribute (most private equity, hedge funds and revenue-generating functions are structured this way). The company we bought follows a loose organizational structure, but we only have incompetent employees (so the company appears such a mess).

Now we have those monkeys who only come out to eat and don't know what they are supposed to do. What makes them worse is that those monkeys think they are at the top of their game (as I said, the brand is relatively well-known). We paid for top-management consultants to come in and do a bit of work as well, they also found it very hard to work with those people.

What this case reminded me of is that the company starts with people. We have to be really careful who we hire.