Key Communications Strategies for Spinoffs

Marketing Viewpoint by Ruth Winett

On November 9, 2021, GE announced that it was combining GE Power, GE Renewable Energy and GE Digital groups into one company and spinning off its healthcare business. Three days later, Johnson and Johnson announced that it would keep its pharmaceutical and medical devices divisions, but split off its popular consumer products division. Toshiba and Macy’s soon announced spinoffs, as well. Spinoffs often thrive. However, to succeed, the new entity must have effective communications strategies.

We asked Rachel Lamont, a director at a cyber security company, about the benefits of spinoffs as well as how effective communications can counteract some of the associated challenges.

An undervalued—or underperforming--division can thrive on its own when given the right resources and management’s full attention. Often a new strategy will energize staff. Additionally, the new company may invest more in Research & Development, and this will lead to more product innovation. If the new company partners with other companies, new programs may also unfold.

However, spinoffs are very disruptive:

Chaos reigns at first as employees, customers, and shareholders seek information and direction.
Inevitably the company’s internal systems will change. During the transition to a new company, employees may have an old email address and a new email address operating simultaneously. Moreover, if the new company has a new owner, it may have to integrate with the new owner’s systems.
The new company may need to implement new back office systems, including customer relationship management (CRM) software and human resources tools, including payroll and employee benefits systems.
Rebranding is complicated and potentially expensive. The company needs a new name, new logo, new stationery, business cards, signs, and vehicle signs. The company must decide “Who are we?”
Designing and launching a new website is time-consuming and expensive, but essential.
Spinoffs may trigger a response from competitors that want to benefit from the apparent chaos.

To minimize the disruption, Ms. Lamont recommends:

Develop effective internal communications early on. Reassure employees as they will want to know "Will l still have a job?" "Will my job responsibilities change?" Inform managers about changes in goals and strategies, reorganizations, and changes in management and other staff.
Carefully craft external communications. Reassure customers that your products and services will still be available, and maintenance and support services will continue.
Publicize a timeline for planned changes.
Provide accurate, up-to-date information to shareholders and the market concerning the spinoff if the company is publicly held. Of particular concern, "Who is the new executive management team, and what is the new company’s mission?"

A spinoff is more of a process than an event. Completing the separation can take up to a year or more. During spinoffs companies must communicate early and often and provide reliable information to offset the confusion and uncertainty stakeholders are bound to experience. Of course, the newly created company must have enough resources to thrive.

Best Wishes for a Happy and Healthy New Year

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