Why communication with employees changes when a company goes public

Ahead of an IPO, HR teams have to put careful thought into how they communicate with employees, taking into consideration how that strategy will shift when their company goes public, per experts that have led employees through such transformations.

In conversations with HR Brew, chief people officers, analysts, and consultants agreed that it’s important for employers to keep a direct line of communication with its workforce about the status of the company’s IPO as it prepares to go public.

But they also noted that internal communications might need to change post-IPO, due to considerations around risks like insider trading. Forecasting what that shift will look like with employees may prove important, as well.

How communications shift amid an IPO. Kim Seals, a senior partner for consulting firm West Monroe who advises companies on change management, recently worked with a privately held company that got acquired by a public company.

“The biggest cultural impact to the employees was the lack of communication,” Seals told HR Brew. As a private company, employees were accustomed to a culture of “full transparency” where they regularly heard from the CEO about the inner workings of the business in fireside chat forums. Once they were acquired by a publicly traded company, though, “the flow of information became different.”

One of the major reasons public company leaders communicate differently with the workforce is to avoid sharing information that could lead to insider trading, Seals said. If a public firm is about to announce an acquisition that could affect its stock price, for example, “you’ve got to really keep that confidential because you don’t want it to get out.”

Such considerations can affect the way company leaders celebrate employees’ achievements, too, Lauren Tropeano, chief people officer for Docebo, an AI-enabled learning management system, said.

Tropeano, who served as VP of talent management for DraftKings when it went public in 2020, said certain sales teams might be accustomed to receiving a public congratulations from the CEO after closing a big deal. But if that deal was material to the business, a public company leader would refrain from sharing it on social media.

As a result, “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.

Preparing for change. HR leaders can lean into internal communications in order to prepare employees for an IPO, while recognizing that this event will change how leaders relay information to the workforce going forward.

Pre-IPO, employees will want to be informed, Gregory Kopp, a managing director of KPMG US’s people strategy practice who helps organizations plan for IPOs, said.

“It’s a great opportunity to explain to employees, why is the company going public? What’s the rationale for that? What’s the timing, and then…what’s the impact to the employees?” he said. HR teams can take the time to go over how workers’ roles might change, and how elements of the company’s rewards program—notably equity—will affect their compensation.

Even amid the typically hush-hush process of preparing for an IPO, HR leaders can find opportunities to communicate strategically with employees. As Life360, the maker of a family safety app, was preparing to list on the US stock market in 2024, the leadership team reached out to a select group of long-tenured employees and asked them to record themselves celebrating the forthcoming listing. Those recordings were played onscreen at the Nasdaq stock exchange when the IPO happened.

The team made clear the news was “highly confidential” when reaching out to these employees, Chief People Officer Heather Houston said. “We debated that because we were sort of opening up the list of people who were in the know about this sooner than we would have.” Ultimately, the team decided that “when you put your trust and confidence in people, they tend to repay it well.”

Level setting with workers. As a company prepares to IPO, company leaders should receive education on “what it means to lead in a publicly traded environment,” Seals said. Such training may focus not only how leaders should communicate with employees post-IPO, but also how to navigate shareholder scrutiny and determine what information gets shared with the public.

People leaders “really need to think about setting expectations,” Tropeano advised. “If transparency is a value or communications are a value, then they need to sort of reorient people around what that might look like in a public company world.”

“A lot of companies make a mistake of not setting that expectation and then having to go back and say, oh you know, mea culpa,” she added.