Jeff Margolis knows his place. As the CEO of a public company, he learned that leaders belong below employees, customers and shareholders on the totem pole.
So his priorities were already aligned when he took The TriZetto Group Inc. private it was just more of the same philosophy.
“You’ve got to put yourself last,” says Margolis, who founded the health care IT solutions provider in 1997 and has served as chairman and CEO ever since. “You have to put your shareholders’, your employees’ and your customers’ needs ahead of your own.”
Ironically, putting constituents’ needs ahead of yours means getting out in front of them.
“When you’re going through change, you need to have a very strong vision of the company that gets communicated [and the] ability to express that in the context each of your different constituencies will understand,” he says.
For TriZetto, that vision was to optimize benefits and care for consumers by providing integrated health care management solutions. Although the half-billion-dollar company was doing well, the board decided in light of the economic climate to consider unsolicited bids.
Ultimately, that led to Apax Partners’ acquisition of TriZetto in August 2008. And that meant that Margolis had to keep communicating what the vision meant and how the company was progressing toward it.
He created a master work plan to guide every aspect of that communication, including what messages needed to be delivered to whom, by whom, how and when. He had to develop relevant messages for each constituency and make sure they were rolled out. To maintain consistency, every key message was vetted through Margolis, his head of human capital management and his chief legal officer.
“What we then did was continuously communicated that messaging to our customers on a business-as-normal basis,” he says. “It’s important not to deviate from a business-as-usual basis when you’re undergoing a change of control.
“Basically, you are doing almost all the same things you’re doing when you’re running the business as usual, except you’re better at pointing out what business as usual means,” Margolis says. “Ironically, it becomes more important in times of change to emphasize what is normal and what’s going on on a regular basis.”
Here’s how Margolis broke down his message to maintain business as usual during a change.Keep employees focused
After the acquisition was announced in April 2008, Margolis and his leaders toured TriZetto locations across the country to share the vision with the company’s 2,000 employees. They gave presentations about the strategies and initiatives that would carry the company toward its goals.
“It’s important for the employees to see that we’re not waiting around till some magical day when the transaction closes to get on with life,” Margolis says. “It is business as usual, and for the average employee, things aren’t going to change much.”
Of course, the employees’ first reaction is to worry that things will change. Give them opportunities to share concerns and ask questions.
After each presentation, TriZetto’s human capital management team distributed surveys to gather additional questions and concerns that didn’t come out in the forum. They posted those questions, along with the answers, on the intranet as part of an online publication devoted to the transition.
“Interestingly, a lot of the questions in these situations tend to be about employee benefits: What’s going to happen to my salary, to my health care, to our 401(k)?” Margolis says. “So it’s natural for the human resource area of the company to manage this employee communications link.”
To move past employees’ “me” issues, Margolis appeases their fears by focusing them on the task at hand.
“It’s important to create a robust enough agenda of things that have to be done so that people don’t really have time for excess nervousness or excess energy,” Margolis says.
He did that by laying out clear goals as precisely as possible down to the dollars of new software that employees had to sell, the number of deals they had to close and how much they had to improve customer service.
These goals were nothing new to them.
“I’m helping them understand that the same things that would make us successful when we’re not changing ownership are the same things that will make us successful when we are,” Margolis says. “If they keep promoting our business and promoting our offerings to these customers, then that’s the pathway to the least amount of disruption. If they spend a lot of energy thinking about things that they can’t control, then that raises the probability that we’re going to mess up with our customers.”
From dealing with new owners to adjusting to a new governance structure, chances are you’ll see more day-to-day changes than the employees will. Margolis found that by reminding employees of his busy schedule, he put the big picture into perspective and kept them focused on their duties.
“When you let them know a little bit about what’s going on in your life as a leader, it helps because they’re going, ‘OK, we’ll do our job. You do yours,’” he says.
Beyond sharing what you’re doing, you should also share what you’re seeing from your position. Be honest about smooth stretches ahead as well as obstacles.
“You have to balance your confident expression about what the company can accomplish with the realities of whatever might be going on in the marketplace,” Margolis says.
For him, that balance is in the details. More specifically, it’s in the words he chooses when he crafts messages. If you want to build trust, you shouldn’t promise more than you can deliver.
“You have to be careful not to speak in absolutes that nobody believes anyway, using words like always and never or promising people that you’ll be here forever,” says Margolis, who is conscious of keeping his credibility intact. “But you can say, ‘It is my genuine desire to be part of the company going forward. It is my expectation that you will join me on this journey.’”
TriZetto’s transaction closed near the onset of the recession. With such a tumultuous backdrop, being blunt about possibilities is crucial. Margolis was frank about what might happen if employees didn’t meet goals during the transition. So he presented a backup plan lowering the company’s expense structure in tandem with their goals.
“Make sure you talk to the employees like adults, not like children. Don’t sugarcoat the potential things that could happen,” he says. “[Have a] very adult, business conversation, as opposed to doing something like, ‘Well, if we all believe and if we all have faith, then I’m sure everything’s going to be all right.”Walk in your customers’ shoes
Margolis realized that TriZetto only existed because of its customers in the first place. So there was no question about how much attention to give them during the change.
His focus on customers started behind the scenes, a s he used customer needs as a mantra to keep employees motivated during the transition. He also used employees to vet customer messaging.
“When it comes to customers, you have to be, first and foremost, honest about any changes that could impact them,” Margolis says. “You need to think about what their biggest fears or concerns might be.”
To help him think through those concerns, Margolis brought his management team and key customer-facing employees together. After they expressed their personal concerns about the transaction, he immediately pulled them into the customers’ shoes.
“You say, ‘Now, let’s focus on what’s really important: our customers,’” he says. “‘Let’s think about how they’re going to react to the news of a change of control. Let’s go through product line by product line, offer by offer.’”
That focused approach gets the team thinking about the different types of customers you serve and the varying reactions they might have.
Of course, the real feedback comes directly from the customers instead of being channeled through employees. Hopefully, those channels can predict questions that will pop up, but you can’t avoid an active approach to customer communication.
Margolis brought in a few key customers for focus groups, but those have to be planned and timed carefully during an acquisition that takes the company private. Obviously, you have to follow the laws that restrict who you can talk to and what you can share. Margolis, for example, had to squeeze his focus groups into a weekend prior to the public announcement.
The same questions you ask in the focus groups should carry on after the announcement. Margolis assigned executives to key customers. Within the first two days after the announcement, the executives called their customers to take temperatures and garner feedback.
“Once the announcement was made publicly, then we worked with customers on the messaging further, saying, ‘What are your concerns? What do you want to know?’” says Margolis, who also encouraged customers to point out gaps in TriZetto’s communication.
Next, equip employees to do the same kind of outreach with the rest of your customer base. Margolis used online webinars to train his sales team, emphasizing points that employees should cover and including frequently asked questions to help them prepare their message. Plus, they can hop back onto the intranet whenever they need additional instruction.
Because you probably won’t think of everything, encourage employees to add new questions to that database as they talk with customers.
To gauge customers from a different perspective, you may also want to employ a third party. TriZetto hired independent surveyors to call customers before and after the transaction to see how loyalty scores were impacted.
While a lot of time and effort goes into customer communication, you don’t want to overdo it. Staying in touch frequently through your employees as well as a third party should help you gauge whether customers are feeling overwhelmed with information.
“You don’t want to make too big a deal of it,” Margolis says. “If we were to announce that we were discontinuing a major software product, that would be a much more profound impact on a customer than announcing that we were going private. They would actually have to do something different in their business going forward, whereas the change of control, you’re really notifying them and helping them understand the value thesis of this new ownership regime.”Explain your reasoning
When someone purchases all of the shares in your company, your shareholders are really the ones at stake. You’re working on their behalf, so it’s your responsibility to not only derive the best deal for them but also to keep them apprised of the entire process.
“They had a completely different concern, which is: Was the value of the company and the process we were undertaking being maximized?” Margolis says. “We had to make sure that we were talking about and highlighting the value of the company. … You have to be very honest and straightforward about how the company is performing, about the market conditions you’re facing and about the actual process to create value for shareholders.”
First, shareholders are going to wonder why why are you being acquired, why did you choose the private equity firm that you did, and, above all, why now?
Be prepared to share the thought processes, discussions and research that went into the decision. Margolis explained that the board began looking into unsolicited bids. Then, after brainstorming what potential acquirers might look like, the board went through both bankers and personal contacts to vet a mix of financial and strategic buyers.
He also told shareholders about the value presentations management made to interested bidders after the fact, of course, because those happened unbeknownst to investors, employees or customers.
Shareholders will also wonder if they got a fair deal in the transaction. TriZetto’s investors received $22 per share, which represented a 29 percent premium over the 30 calendar day average of the closing stock price. The board worked with an investment banker to derive the maximum value. But in order to prove that you sealed a good deal, just explain the whole process that led up to it. It should speak for itself.
“What you need to explain to the shareholders then is how is this process conducted, about how many organizations did you talk to, why did we think now was a good time to entertain these offers, why did we think that $22 a share is a fair value for the company,” Margolis says.
Unlike your other constituencies, many shareholders will say goodbye after the transaction. So the best you can do is end on good terms. Margolis and his vice president of investor relations wrote personal letters to major shareholders and analysts after the deal closed.
“I thanked them for their support over the years,” he says. “I let them know that I looked forward to encountering them again in the marketplace, perhaps at some future time, and hoped that they were very satisfied with the outstanding outcome in terms of the value we created for them as shareholders.”
How to reach: The TriZetto Group Inc., (800) 569-1222 or www.trizetto.com