Entity transition

In January 2022, Amethyst Operations partnered with a compliance firm to assess their operations needs, prepare the twenty-year-old business for an ownership transition, and then guide the organization through the operational aspects of that transition. Specifically, the organization had several operations staff personnel who had been with the organization for some time; however, business operations were not running efficiently and staff were not being supported. During the assessment period, it became clear that there were a variety of challenges ahead for the existing organization. Immediate priorities included addressing worker classification issues, inconsistent hiring, and onboarding and offboarding processes, as well as diagnosing transition-related challenges, like preparing for new benefit acquisition, researching and replacing technology and service platforms, and transitioning employees and clients from one entity to another.

The necessary preparations needed for an efficient and thorough HR and operational transition from the old entity to the new entity were complex, diverse, and unique to this specific organization. Part of the diagnostic process included getting to know the existing organization and understanding what improvements the new owner wanted to invest in and what the existing staff had identified as specifically problematic based on their experiences working for the company.

The final wrinkle of the project was related to the timing of the entity transition. Due to ongoing negotiations between the existing ownership and new ownership, it was not clear when the transition would happen, but that once official, the transition would happen very quickly. Amethyst worked alongside a fractional CFO, financial advisor and a legal team to support both the new and existing ownership in this entity transition.

The preparation process for this transition took 12 months. There were several phases in that year-long preparation, which are described in detail below.

Assessment

In the first couple of months in the partnership, Amethyst focused on assessing the urgent, short-term and long-term needs of the existing organization. This was done by meeting on a regular and consistent cadence with the Vice President of the organization, who would eventually become the new owner. Primarily, Amethyst conducted observational interviews and asked a wide range of diagnostic questions to get a nuanced understanding of the existing operations and enumerate what was successful and what was not.

Secondarily, Amethyst met with a variety of other staff members, from the associate level to the director level. In order to assess work and task distribution, Amethyst recommended that at least the operations staff complete RR&Es, or Roles, Responsibilities & Expectations assessments. This portion of the assessment was considered an immediate need by the leaders of the organization and was one of the first steps taken by Amethyst in an effort to better understand the roles within the organization.

Other immediate needs were also identified, such as gathering information on existing benefits, starting a hiring sprint for a director-level role and assessing the roles and responsibilities of 1099 contractors as compared to W-2 employees. Less immediate needs included standardizing titles and compensation, assessing payroll and other budgetary cadences, and exploring and diagnosing organizational insurance and compliance structures.

Ultimately the assessment period for this organization took on three main categories or phases:

• Leadership observation
• Staff interviews
• Execution of urgent and immediate needs

Diagnostic

The second phase of the preparation period included a wider variety of actionable items and diagnostic measures than the first. While more traditional assessment periods tend to focus on observation and information gathering, delaying was not an option for this organization due to more urgent and immediate needs along with a moving deadline for the entity transition. Therefore, this diagnostic period was implemented with a split focus – taking immediate actions for the existing organization while integrating with other partners and diagnosing future changes and priorities for the new entity.

Within the first six months of the partnership between Amethyst and the existing organization, Amethyst led a hiring sprint for a director-level position within the organization, led a hiring sprint for an office manager role, collaborated with the legal and financial operations vendors for the organization, integrated with staff, and facilitated two complex separations. Additional projects included assessing the existing employee handbook and other employee-facing resources related to health and retirement benefits, collaborating with the current owner and future owner to assess historical practices, and creating a “wishlist” for future projects. This collaboration with both existing owner and new owner was an investment that Amethyst was determined to make in order to ensure that the employee experience during the transition was as smooth and transparent as possible.

In short, the diagnostic period for this organization had distinct action categories:

• Reflect on assessment period and prioritize action items (what can we do now, what needs to change for new entity success, what needs to wait)
• Execute short-term projects and changes before transition (hiring and onboarding process)
• Fully integrate with existing ownership and future ownership with the goal of a smooth transition experience for all employees
• Integrate with IT team, legal team, financial advisor and fractional CFO

Planning

As the organization moved into Q3 2022, the entity transition moved into focus with a specific transition target date of December 31, 2022. At this point in the preparations, Amethyst began documenting actionable items that would be necessary for a smooth transition. This included actionable items for existing owner, new owner, Amethyst, the legal, IT, financial advisor and fraction CFO teams, along with a timeline for when certain sets of actions should be completed. Action items for Amethyst included creating a new employee handbook, developing a non-employee code of conduct, reviewing and acquiring new systems, drafting new job descriptions and org structure, and more. Actionable items identified for other teams included securing a new line of credit, drafting new client agreements and rates, consideration of new invoicing and time tracking softwares, reviewing the existing lease and sublease agreements, building the new organizational budget, domain acquisition, branding development, and more. Ultimately, Amethyst was the project manager for this transition and owned identifying existing and potential transition hurdles for the current and new owners. Amethyst also owned the order of events for transition preparations, meaning that certain actionable items needed to be purposefully sequenced for maximum efficiency.

With the transition date solidified, Amethyst also focused their portion of the transition planning on reducing the turbulence for employees by drafting internal communications that worked for new and existing owners, determining the HRIS/PEO that would suit the employees best, and many other business-related considerations that would impact the employee’s experience of the transition. For example, the new owner determined that all existing employees would be extended an offer, and a variety of contractors would be offered full-time employment. Amethyst prepared for this shift by considering how this would impact the division of labor, along with the internal practices and procedures that would be impacted by the increase in full-time staff. Amethyst also considered the business-related costs of increasing the number of full-time staff, such as benefit costs increases, IT and technology changes, and the salary band/compensation philosophy impacts.

The planning period was made up of three major groups of tasks and preparations:

• Continue supporting the existing organization’s staff with day-to-day people needs
• Prepare the transition to-do list with assignments on who will execute each task and the timeline for execution (existing leadership, new leadership, CFO, financial advisor, legal, Amethyst; Phase 1, 2, 3 and 4)
• Special considerations for reducing transition turbulence for employees and staff

Execution

In Q4 2022, with the midterm election looming, the organization began ramping for two major events – delivering election-related compliance services and preparing for the entity transition. This created a capacity vacuum for the new owner, who was still part of the leadership team at the existing organization. With that capacity vacuum in mind, Amethyst took the lead on ensuring that all preparations could be completed ahead of time and dug into coordinating with the new entity legal, finance and IT teams to make sure no balls were dropped while the existing staff was focused on delivering client services.

This required an “all hands on deck” approach that was time-intensive and required fast turnaround times in the face of many unexpected hurdles. This included the rollout of the entity transition to the majority of the existing employees who were not aware of the plans until after the election in November 2022. This also included benefits acquisition and transitioning benefits brokers, standing up a new HRIS and transitioning to a full-service PEO, finalizing the new employee handbook and implementing new policies in the HRIS/PEO, drafting and sending offer letters, negotiating with existing staff on compensation, ensuring state compliance for the existing and new organizations was completed, creating a plan for 2022 W-2s and 1099s for the existing organization in the context of a shutdown, and more.

Because many tasks were planned, delegated, and completed ahead of time, this execution phase was not as chaotic as it could have been, however it was still very time intensive. There were two major action categories for the execution phase:

• The “how” of an entity transition – doing all of the employee-facing support services that allow an owner/leader to focus on other aspects of the transition
• The clean-up associated with shutting down an organization that has existed for twenty or more years – such as planning non-legal and non-accounting aspects of the transition for the existing organization

Given the capacity vacuum toward the end of the year, Amethyst was able to coordinate and facilitate a relatively smooth transition by creating a long-term plan that included incorporating with the existing organization, building in time for observations and assessments, creating a dynamic and detailed plan with multiple stakeholders and partners and executing the plan with a specific end date in mind. By working ahead and actively engaging with the other vendors supporting the existing client and new entity, we created and project-managed a custom entity transition plan based on the needs of the existing organization and focused on reducing the negative impact of the transition on the employees and staff.

Over the course of the following year, we continued to work with the new entity and their staff on a variety of supports that constituted a fractional Chief People Officer role, including managing recruiting and hiring from top to bottom, continuing benefits support alongside the PEO, performance review strategy and implementation, compensation philosophy and salary band adjustments, communication and advising with urgent and unpredictable personnel needs, conceptualize, draft and execute company-wide communications on behalf of the new owner and long-term thinking, planning and strategy regarding operational success of the company.