Organic growth versus acquisitions and employee retention at KGW Health

¶ … exercises and lessons have gone on, the topics covered include staff diversity, internal candidate search, training needs assessment, assessing leadership, breakeven analysis and accountability, just to name a few. The author of this report will touch upon all of the lessons to be learned but there were some that were more prescient and pressing than others. Among those that were more prominent included building vs. buying, beating back grade inflation when it comes to performance reviews and the cost of retaining employees versus having to find new ones. While there are multiple ways for a business to survive or even thrive, there are some methods and tactics that are more effective and efficient than others.

Analysis

One of the primary lessons to learn when it comes to KGW and its operations is the difference between buying and building. Meaning, the two main ways that a business grows is through acquiring other firms (inorganic growth) and through expanding from within and based on one\'s own resources and lines of business (organic growth). Both can be useful but organic growth is much better overall, and for a few reasons. First, acquiring businesses almost necessarily means that there will be some level of redundancy between the acquired firm and the firm doing the acquiring. This means reorganization and other things so as to make sure that the newly formed and combined business is not full of wasted motion and overspending. Second, the two firms in question will surely be different in terms of corporate culture and management style. Once a business is acquired, the people in that acquired that remain will surely have to be coached and taught what is new and different about the firm that acquired them and thus will have to be done differently now that ownership has changed hands. The one main reason why buying and acquiring firms, however, is attractive is that it makes it much easier to enter or expand within a market. Often times, it can be very hard to enter market that is already full of established competitors. Buying one of those competitors outright is a way to overcome this barrier to entry. In short, organic should be the goal whenever possible but there are times and situations where an acquisition is probably the better move. It all depends on the context and the situation at hand.

The next major thing that KGW and firms like it need to understand is that retaining and keeping good employees (or employees in general, for that matter) is much cheaper than recruiting, onboarding and training new people. As such, it is less than wise for firms like KGW to treat their existing employees as if they do not matter or in a way that indicates that KGW feels that they can easily be replaced. Even for front-line jobs that are fairly basic in nature, the cost of training new people can be high. If a certain job has a very high turnover rate, it needs to be ascertained why that is. Whether it be low pay, poor benefits, ineffectual management, or something like that, there has to be a reason if turnover is very high. It may or may not be something that is preventable or addressable given the societal, cultural and business realities in play. However, there is a strong chance that KGW or the other relevant firm can do something to lower their costs when it comes to hiring and training employees. Even if there is a \"cost of doing business\" due to salary, benefits and other things, there has be a balance struck between sticking to the norms of the industry and keeping costs low.

A slight drill-down of what was just mentioned is figuring out why exactly people terminate employment. Obviously, the ones that are terminated against their will are generally removed for a reason. However, for those that choose to walk away, there should be at least some review of why they leave. It could very well be that the person is a \"flake\" and just wasn\'t going to responsible. However, responsible hiring practices that weed out people that job-hop or are otherwise less than committed should weed out a lot of such people. Tenured people in particular that terminate should be queried about why they left. Honestly should be encouraged with the implicit understanding that the business truly wants to know if there is a problem that is unknown or unaddressed by KGW or whatever firm is in question.

A final major issue that came up with the work on KGW was how to do a reduction in force. There are several key ways and tactics to use to engage in a reduction in force. However, even some of the common solutions are not the best and/or are not enough to accomplish what is needed. There are hard and difficult decisions to make when revenues are done and thus the headcount has to be reduced to restore the business to solvency. One thing in particular that was revealed from the reduction in force assignment is that the fitrm does not have a lot of tenured and experienced people, at least not to the extent that buyouts and early retirement were an option. This is a good and a bad thing all at the same time. It makes things a little easier to deal with if there are more tenured people and thus they might want to get out while they can get a good buyout. Even so, the general lack of tenure and the lack of knowledge that can be bestowed on the less tenured and younger workers can be a loss for the company, in the long run.

Overall, the primary findings related to KGW are that they should grow organicially rather than through acquisitions whenever possible, they should raise employee retention so as to lower costs overall due to the higher cost of acquiring new employees, they should make sure that performance reviews are not rubber stamps whereby people are getting the same performance review and/or raise for differing levels of performance and so forth. KGW needs to look introspectively and make sure that employees are not leaving for preventable reasons, that they are growing the business in a strong fashion through organic growth and that they are not accepting deficient performance or rewarding mediocre performance.