People-Centric Divestiture: Achieving a Higher-Value Transaction With People

There are primarily two forms of divestitures: 1) a spinoff of part of a business in which another company buys the business, and 2) a spinoff of part of a business that will exist as a stand-alone company with its own culture and environment. When the divestiture is handled carefully, you create space in your remaining organization for new norms to form and for the culture to evolve. But while divestitures can ultimately drive profitability, the workforce disruption they cause can create negative ripple effects in the years that immediately follow. These effects can bring a need to align employees around a changed vision and value proposition. In our research, 61 percent of organizations cite employee buy-in at all levels of the organization as a challenge in recent transformation initiatives such as divestitures. Lack of buy-in can lead to job uncertainty, friction, and resistance.

Divestitures also force organizations to reevaluate their operating model, structure, and supporting business processes. They often test organizational cultures by introducing new allegiances for employees who are being divested and affecting organizational measures like turnover, brand, and partner perception. When not effectively orchestrated, divestitures create an environment that can inhibit high-performing teams, damage business performance, and eat away at profitability.