Woe befalls any employer who attempts to use their business equity by inviting in private equity firms. The negative image attached to private equity firms is such that even the most reasoned arguments will not do. The workers and trade unionists will be utterly convinced that the sole purpose of the private equity firm is to take away their jobs and micro-manage them into extinction.
On the other hand the private equity firms will also have their suspicions about the employees within the organization they are trying to deal with. The first issue to be resolved is the identification of the real reasons why the company in question has problems at that particular point in time. Logic would suggest that employee incompetence has a role to play. Naturally the private equity firms will be anxious to remove any employees who they feel are not up to the job. It is to be expected that those employees who are about to be removed will resent this action and will do their best to hinder the work of the private equity firm.
Cost savings are another area that is ripe with tension between employees and private equity firms. If an organization is not making enough profit in any given period , the one way to keep afloat is to reduce the costs of production or to get rid of those areas of production that do not yield high revenue levels from sales. This raises the thorny question of compulsory redundancies.
How can the situation be diffused?
The first weapon of choice in any situation where you are dealing with disgruntled employees is information. People have a natural need to be consulted. They need to feel that they belong to the organization and that decisions are not taken over and above them for the purpose of making someone else a huge profit. Valuing people is the first port of call for a private equity executive tasked with rescuing a failing company.
Honesty is the best policy when trying to overcome deep routed prejudices against private equity firms. The firm should define what exactly they are trying to do and how it will affect existing employees in the firm. There should be as much information as possible that is made available to members of staff as part of the process of restructuring.
The worst possible thing that could happen in a private equity firm venture is for employees to be kept in the dark only to realize at the last minute that their jobs are not safe and that the organization they work for has been complicit in practicing a most appalling deceit on them. If there is one sure where of causing industrial strife and sabotage, this is it. Unfortunately too often those at the very top of business organizations forget that without the workers’ co-operation, production is severely hampered.
There is a traditional hostility between private equity firms and the workers belonging to the organization that they are attempting to restructure. The best way of dealing with this tension is to ensure proper communication and consultation.