The 3 items on a chief people officer’s checklist ahead of an IPO

SpaceX. OpenAI. Anthropic.

The next few years are set to be blockbuster ones for the IPO market, as these big-name companies go public. Before and after an IPO, the public is typically interested in finances. What’s the company’s stock price listed at? How much does it pop post-IPO? And how does the market cap compare to the company’s valuation pre-IPO?

But for employees of these companies, an IPO could also represent a profound shift in how their employer operates, experts told us. When firms go public, their leaders can’t communicate with employees as openly as they did when they were private. Compensation, culture, and internal communications all stand to change. As workers’ incentives shift, so too does the firm’s employee value proposition.

HR Brew spoke to chief people officers, analysts, and consultants with experience taking companies public about some of the biggest agenda items on HR leaders’ lists before, during, and after an IPO.

Compensation. Many pre-IPO companies offer employees equity compensation as a promise that they’ll reap benefits from the firm’s future success. The idea behind offering these grants is to “ensure the buy-in of employees towards the company objectives,” Suhas Joshi, a financial advisor at Prospero Wealth who previously worked at tech firms including Stripe, said. “Since employees are compensated with equity, they are owners. They act as owners. They’re acting towards the interests of the company.”

As their employer prepares to IPO, employees might wonder what this equity means for their overall wealth. They’re likely to have questions about taxation, liquidity, and the risks versus the upsides of cashing on these shares once the company’s public, Joshi said.

HR can help employees navigate these questions. DraftKings ran educational sessions focused on equity compensation as it prepared to go public in 2020, Lauren Tropeano, its former VP of talent management, recalled. In partnership with outside counsel, the sessions focused on what happens when a stock option converts into a restricted stock unit (RSU), for example, or “if you’ve exercised stock options, what does that look like from a taxation perspective?” For financial advice, her team directed employees to partners like Morgan Stanley or Fidelity.

Post-IPO, HR teams may need to rethink how their compensation programs work as a public company. Employers could give employees additional equity just before going public, so that workers are motivated to stay with the company until those grants vest—something that one of Tropeano’s former companies did.

After going public, companies could also open up their equity compensation programs to additional employees, Gregory Kopp, a managing director for KPMG US’s people strategy practice, said. “So it may be somewhat more limited in the private company, but in the public company they will expand the equity plan participation, so more employees will become eligible.”

Communications. At a private company, employees might be accustomed to being among the first to know when their employer makes a big move, such as a merger or acquisition. But when a company goes public, concerns around insider trading limit corporate leaders’ ability to share such news internally before they share it with shareholders. Public firms typically mandate “quiet periods” where they limit information flow ahead of quarterly earnings.

As a result, “communications really do seem to change post IPO,” Theresa Welbourne, a professor at the University of Alabama’s Culverhouse College of Business who studies HR and fast-growth companies, said.

If transparency is core to a company’s culture, then HR leaders “need to sort of reorient people around what that might look like in a public company world” ahead of an IPO, Tropeano said. If a sales team closes a big deal that’s considered “material” to the business, then the CEO might not be able to share that news publicly, for example, Tropeano explained.

“That recognition culture might feel a little bit different because it’s not able to be celebrated in the same way or communicated about in the same way,” she said.

The consulting firm West Monroe sometimes holds 101 sessions with leaders transitioning from a private to public companies to help them understand “how you lead your people and what information you can share,” Kim Seals, a senior partner with the firm’s people and change practice, said.

“You’ve got to prepare your leaders…not only in that communication with the employees, but shareholder scrutiny, what becomes public information,” she added.

Talent strategy. There are certain key hires an HR team might be tasked with making as its company seeks to IPO, such as a director of SEC reporting or head of investor relations.

As a result, “we see some companies expand their talent acquisition team to support the growth mode of the organization,” Kopp said.

Some companies don’t even have a CHRO or chief people officer in place when they begin the process of preparing to IPO, Kopp and other sources noted. “A lot of companies literally are afraid of HR. They’re afraid that they’re going to be too bureaucratic. They’re going to slow things down,” Welbourne, who co-published a paper looking at the 20-year survival rates of firms that went public in 1996, said.

Wherever a company lands on the structure of its HR team going into an IPO, retaining top talent will likely become a big focus for people leaders post-IPO. If an IPO goes well and employees come into a great amount of wealth as a result, their motivations to stay with a company might change.

“Retention post-IPO is a real challenge,” Nadia Alaee, senior director for HR business partners and people programs with Deel, an HR tech platform that hopes to go public, said. Alaee said her team is currently working on identifying who Deel’s key players are, and how losing this talent would affect the business. The goal is to be “able to build long-term programs to retain those people, and really be critical about that,” she said.