Corporate separations, including spin-offs, divestitures, and carveouts, have gained significant traction as a means to unlock value. However, the surge in popularity does not guarantee success for all parties involved. This article explores the critical practices that enhance the likelihood of creating value for both the remaining and newly separated entities. Key areas of focus include leadership alignment, operating model optimization, talent management, and cultural transformation. By integrating these elements into a comprehensive separation strategy, organizations can better navigate the complexities of such transactions and achieve their strategic objectives.

Optimizing Operating Models for Enhanced Competitiveness

The foundation of a successful separation lies in developing an operating model that strengthens both the existing and new businesses. Leaders must strategically consider the people and culture at the core of this model. Addressing key questions related to structure, processes, workforce size, talent, and performance management is crucial. For instance, determining the appropriate organizational setup and streamlining back-office functions can significantly reduce complexity and improve efficiency. Companies that fail to address these factors risk becoming less competitive post-separation.

To illustrate, a diversified oil and gas conglomerate successfully spun off one of its upstream businesses by adopting a leaner regional structure and back-office support system. This move not only decreased operational burden but also allowed for increased investments in digital and sustainability capabilities, aligning with the new entity's vision for future growth. By carefully planning the operating model, companies can ensure that both the remaining and new entities are well-positioned to thrive independently. The emphasis should be on creating a tailored, world-class operating model rather than a mere replica of the parent organization.

Building Talent and Culture for Sustainable Growth

Talent allocation and cultural transformation are pivotal in ensuring the success of corporate separations. Research indicates that talent management is the second-most critical challenge after transitional service agreements. Leaders must act swiftly to identify key roles, increase visibility, and appoint change agents who can support the transition. Effective talent strategies involve selecting the right individuals, retaining critical employees, and seamlessly transferring personnel between businesses. Additionally, reassessing and closing any gaps in talent allocation ensures alignment with the new operating model.

Culture plays a vital role in driving high performance. Leaders of high-performing organizations consistently communicate values and mission, model positive behaviors, and engage influencers within the company. A separation provides an opportunity to redefine the culture of the new entity, emphasizing agility and consumer focus. For example, a healthcare divestiture led to a newly separated consumer health organization that embraced a more agile and customer-centric approach. Leaders explained the new values and ways of working, implemented faster approval timelines, and attracted fresh talent aligned with the new culture. Regular performance conversations and capability-building initiatives further supported employee growth and productivity. Ultimately, inspiring employees with a compelling vision for change can lead to a smoother transition and greater success for the new organization.