Archive for M&A

Culture Matters in M&A

ROIEvery company has their own culture – basically, the manner in which employees behave, follow common norms and interact with each other – this includes values, behaviours, assumptions, and the understanding of a common mission. The culture makes up a company’s ‘personality’. Within that, you will find teams and departments that have their own slightly different culture from the overall company culture, ‘mini’ cultures of a sort.

Typically there are many similarities between the two, although it is possible for companies with a highly competitive culture contain mini cultures of collaboration and entrepreneurial kinship. For example; where the operations are somewhat cut-throat yet the development team isolate into a unified and solid group of collaborators.

Most companies have a pretty good unwritten understanding of their own culture and with just a few questions are able to define the existing culture fairly well and then work with us to identify areas of needed growth or change. It is when companies merge or an acquisition has been made that culture becomes a significantly different conversation. Sadly, few mergers and acquisition (M&A) pre-work evaluates the differing cultures to identify risks associated with the merger or acquisition.

The greatest risks associated with bringing two companies together often lay within the strongest reasons why two companies want to join forces in the first place:

Financial – M&A selection is vital to understanding the financial benefits and possibilities due to a complimentary, formerly competitive or growth opportunity into play.

Brand Association – There are some great benefits to leveraging a solid and well-loved brand to create a stronger and more powerful company offering to the customer.

Knowledge – Picking up or combining forces to obtain or grow the technical or industry knowledge for a company, add technical competency or expand an offering based on an additional functionality desired.

All the above sounds pretty great, but what’s great on paper is not always deemed so great by the people being asked to live the change. In fact, the people with the greatest power to make or break a merger or acquisition can be middle management through to front lines and yet those areas are the most often ignored within the M&A transition plan.

Understanding cultural risk, cultural collision and people strategy are vital in making certain that large investments such as M&A actually realize their return on investment.

Transitional planning is needed right from the beginning of a merger, preparing for culture clash or shock, planning around every small change that affects the manner in which people from both organizations do their everyday work, creating a change plan that involves a solid communication strategy, all of these are vital in an M&A program.

Based on research, where does a good transitional plan begin?

  1. Organizational Culture Assessment: a system of shared assumptions, values and beliefs which govern how people behave in organizations. Evaluate each company and determine any commonalities.
  2. Evaluate the 8 Organizational Cultural Characteristics: evaluate the priority that the company values would assign to each of the following organizational characteristics.
    • Innovation – risk orientation – evaluate priority high, moderate, or low.
    • Attention to Detail – precision orientation – high, moderate, or low value?
    • Emphasis on Outcome – achievement orientation- high, moderate, or low?
    • Emphasis on People – fairness orientation – high, moderate, or low?
    • Teamwork – cohesiveness orientation – high, moderate, or low?
    • Aggressiveness – competitive orientation – high, moderate, or low?
    • Stability – maintenance orientation – high, moderate, or low?
    • Agility – change orientation – high, moderate, or low?
  3. Develop a transitional plan based on a comparison of both companies developing action items that address commonalities and friction points.

These are steps for the beginning while the purchasing company is assessing financial risk. Companies putting out money to purchase or merge with another company should understand the cultural risks of the deal. Comparing the two organizations is vital in knowing just where to begin with a transition plan.

Do you have examples of organizations that have merged and failed to do the cultural assessments and develop a solid work it into a solid transition plan?

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Patti Blackstaffe works with people and organizations in implementing sustainable change in a rapid changing world. Her key areas of focus are change management solutions both at the project level and the organizational level. She has over 10 years of experience in change management, has worked on projects that impact 50-30,000 people in both large and small organizations. Patti brings experiential design thinking into all her projects ensuring solutions are relevant, simplified and the implementation makes sense.

You can reach Patti at 1-855-968-5323

Contact us here to work with us.

___________________________________________

(Note: 8 Organizational Culture Characteristics from Professor Roger N. Nagel at Lehigh University – our assessments and research utilizes these characteristics in addition to other organizational research.)

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Why Buy-in Isn’t Enough With Change

readiness-123rf-16527177_sIn a nicely written post titled, “Resistance is Not Futile” by Jon Tveten about managing resistance, he indicates the C-level suite is often surprized by the resistance to change. To quote Jon;

How could people not be falling in love with their brilliant new strategy? How could they fail to see the benefits to be wrought by this wonderful change?”

And Jon’s post goes on to discuss the importance of listening as a selling tool of the change.

This brought the word ‘dialog’ to mind. With information coming at us 24/7, high-speed technical advances, doing far more work with far less resources, being inundated with the pressures of shareholders and a highly competitive landscape, it seems we have failed at knowing how to maintain honest and transparent dialog.

The industry uses words like “stakeholder impact analysis” and “process evaluation” to describe a couple of change techniques, and yet we as consultants often hear the words – “Just get them to buy-in” from leadership we also hear; “We were never asked our opinion” from the front lines.

Getting Buy-in

Buy-in sounds great, but what does it really mean? Basically, it tells you that others have agreed to go along with a decision. GREAT! But, is it enough they have agreed to go along? We don’t think so.

Truth is, this isn’t necessarily as great as it sounds. Consider this scenario;

Marcella, the CEO, and Dean, the VP of technology, make a decision to transition the global team to a new HR management system. This involves a complete shift in how the organization manages staff in 8 different countries. The reason for the change is that the VP of technology pays for the cost of the software out of his budget. At present the annual enterprise costs for this system require a yearly investment, a maintenance and service contract, and the company is beyond initial warranty so they also pay for each upgrade. By all intents and purposes, Dean looks to save $15,000.00 a year on his budget by putting in a new system. The numbers were crunched, the spreadsheets shared and Dean made a very compelling case for change based on a budgetary bottom-line.

In the yearly strategy session, Marcella makes the announcement to the other VPs and director-level staff that this change will be made in the New Year, deferring to Dean for explanation. The project will be a 6 month effort and they will bring in the consultants from the new HR management system software company to help implement the solution. It is assumed that everything will transition smoothly.

What’s right about this?

Sounds familiar and straightforward, right? Fiduciary responsibility is what these folks are hired for.

  • Business is business, the deal is that a company needs to generate more income than output in order to continue at the very least and grow at the best.
  • The C-Suite is where these decisions need to be made, and the final call should be theirs.
  • The VP of Technology likely did his homework in doing a technical comparison of the two pieces of software and believes he made a great selection that weighs both price and functionality.

What might be wrong about this?

Stakeholders! This is where the word ‘dialog” comes in and below are the questions rarely asked upfront – prior to decision making. This is a big part of readiness for change.

  • Was this decision made without Rob, the VP of Human Resources? This decision impacts and affects his entire department and every individual who works for him.
  • Was a use-case study of how the current software is being used by the HR team done prior to making the decision and is the new software a major improvement or is it at par?
  • Was an end-user impact analysis done to understand how this HR management system affects every employee’s access to their benefits and employment information completed?
  • Will any current, highly utilized functionality be lost or are there tightly linked 3rd party or custom applications highly dependent on the current system? (Sometimes only front-line staff can answer this).

The readiness piece is missing in this fictional scenario, but it doesn’t sound foreign to many people who have been through similar change. While the compelling case in numbers makes sense, there are a myriad of hidden costs associated with a change such as this. “What will break?” Answering that question can identify much of the dollars, then there are the costs of the transition such as training, etc. Without a solid change strategy prior to decision making, companies are time-and-again finding themselves with over-run project costs, delayed implementation schedules, stronger than expected resistance and a very frustrated staff-base and implementation team. Brining in a change team to ‘manage’ the roll-out is too late – failing to hand the change team the ability to gather data prior to decision-making is where most companies cripple their change initiatives.

Open Dialog

Making decisions in large companies is a complex dance that is not taken lightly by the C-level leadership. Every decision weighs heavily on them and the pressure to perform is constant and ongoing. Many leaders hesitate to strike fear of change into their employees by even hinting about upcoming change. The fear that the larger collective will ‘get-wind’ of something they don’t like and a campaign against a change will start before a solution can be found can break down transparency and dialog. Let’s face it – as Jon says in his article – people don’t like to change their habits.

Companies who invest in up-front use-case and impact work on an on-going basis as part of their readiness and decision making process is far ahead of those who don’t. The C-level decision makers count on the teams to provide the right data, too often there are many numbers left out in the analysis of bottom line costs associate.

Leaders who fall into the trap of believing they have all the answers will miss some very valuable solutions. Continual evaluation of what and how technology is being used, or ongoing reviews of process and policy with all stakeholders makes for good business.

Readiness is more than a line on a piece of paper, readiness is about being Poised for Change™ and is best applied when built into the way companies do business every day. Creating a solid platform for preparing for ongoing change on a continual basis means they have better information for decision making. As my colleague and friend Jeffrey Summers of Summer’s Hospitality Group said recently, “Companies need to adapt, innovate or embrace change in order to remain relevant.”

Remember ‘Buy-In’?

Just because the strategy session ended with everyone saying they will “go along with” a decision does not mean they agreed with it. Dialog and well-managed readiness, inclusion, transparency and consideration of the stakeholders up-front prior to making decisions will move the organization much farther ahead in making great decisions and reducing resistance to change. Facilitated efforts and the right kind of dialog will give your organization leverage for doing what Jeffrey Summers says; “…adapt, innovate and embrace change to remain relevant”.

Are you new to our blog? We'd love to have you stay, sign up for our newsletter HERE.

___________________________________________

Patti Blackstaffe works with people and organizations in implementing sustainable change in a rapid changing world. Her key areas of focus are change management solutions both at the project level and the organizational level. She has over 10 years of experience in change management, has worked on projects that impact 50-30,000 people in both large and small organizations. Patti brings experiential design thinking into all her projects ensuring solutions are relevant, simplified and the implementation makes sense.

You can reach Patti at 1-855-968-5323

Contact us here to work with us.

___________________________________________

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Business IS of the Heart

…When Cultures Collide in Mergers and Acquisitions

Business consultants tell entrepreneurs to know their exit plan, and many focus on a merger or acquisition market as they build their businesses. This is especially true in the technology or engineering space, where valuations are done of a technology which may be attractive to larger firms looking to grow their offering.

When a valuation is being performed on a company prior to merging or acquiring it, that valuation is usually based solely on the financial side of the business. A careful calculation of the assets and liabilities, the varied business market, the intangible assets like trademarks or patents, financial reporting and more. A company does their homework before any merger or acquisition, and typically if a sale goes through, they feel confident they’ve made the right move.

But there is one thing that is rarely done… and that is a careful study of the differences between the company cultures. Culture is about shared attitudes, values, goals and practices that make up the “personality” of a given company. Personalities are important. Imagine, if you will, two people discussing getting married and they both have children and homes.

Of course ‘marriage is of the heart and this is business’, you say?

Well, two companies coming together needs to be treated like a marriage. If you were considering marrying someone, you do need to consider your partner’s financial health and see if it matches yours, but is that all you would look at? I would think you should see if there is compatibility of the values, attitudes and practices. How you raise your children and how they raise theirs may be so far removed from one another, you could be creating Armageddon rather than a loving, caring blended family. It could be that you are sending a child or two on a run-away spree, or will be forever burdened by being the nasty, horrible and wicked step-parent no matter how hard you try.

image courtesy of Presentation-Process.com

This little analogy is very apropos for M&A (Mergers and Acquisitions) and cultural evaluations are starting to make headway in some M and A analysis of companies. Why?

Because after you buy the company and by the time you ask a consultant to come in and help with the messy change management of the two cultures, it can be too late.

It is imperative the company buying takes a careful look at the culture of the company being purchased and consider this in their valuation. A company purchasing a heavily creative and innovative group whose mandate it has been to focus on the customer may find their new family clashing with a process driven conglomerate whose focus is global spread and, trust me, that can be disastrous. In fact, in technology, the key component to a wise purchase is in determining how to retain the knowledge held by the employees. Your software is only as good as the people writing it, and you want them to stay.

I am not saying it cannot be done or to avoid the purchase, what I am saying is, you better already have a great plan in place for merging not only the technology or the company, but the cultures too. Doing your homework needs to be holistic, not finance specific, know what pitfalls and roadblocks you will suffer if culture is left out of the equation, or that beautiful valuation sheet may very well be worth far less once the knowledge has walked out the door.

There are things you can do to prepare in advance:

  • bring someone in who understands how to evaluate cultures and
  • work at building a plan of action toward a healthy merger or acquisition, upfront.

It behoves you to do so, because business is of the heart, and shouldn’t be about wasting money or losing talent.

 

Patti Blackstaffe works with people and organizations to develop

Happy Workplaces world-wide guiding them toward mastery and leadership

through consulting, advising, coaching, speaking, and delivering training.

You can reach Patti at 1-855-968-5323 | contact her here | book her to speak


 

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When cultures collide, does the CEO take charge?

 

Cultures Collide

Image provided by Sias van Schalkwyk, South Africa

If you’ve ever belonged to a company that’s been taken over through a merger or acquisition by another company, rest assured, your original Executive will change camps.

Companies typically buy other companies for how the product leverages its portfolio or market share, not because it’s filled with rocking collaborators.

I have yet to see a merger or acquisition result in anything less than a collision of cultures.

The difference in the success or failure after the purchase or merging of these cultures can be described in how the collision takes place. It can be anywhere from a bump of the shoulders and eventual turn toward the same goal to a total a write-off like a car left in a twisted wreck.

The change-management of such a significant alteration in the ‘flow’ of an organization takes time and effort, and it begins at the CEO level. Acceptance of good decisions in the purchase or merger with another company almost always is adopted by the executive first. Let’s face the fact, it behoves them to do so. The higher in the organization you are, the more you must adopt the direction set forth before you if you are to remain and still play nice in the sandbox and reach success.

If little or no change-management or clarity of direction is offered the employees, they’ll feel like they’ve been betrayed as they witness their executive ‘going over’ to the other side.

People like their current work-flow (good or bad) and significant change shakes up the apple cart – this requires guidance and leadership. Guidance begins, (and must be followed through), at the CEO level. The CEO who rolls up the sleeves, gets involved in the change-management and helps the organization evolve is better equipped to retain its best talent, industry expertise and product knowledge.

Choose to leave it to others, and those others will follow your lead, leaving it to others all the way down the chain until the mass exodus out the door begins at the front line levels and works its way back up. What are you risking by ignoring the obvious?

Are you new to our blog? We'd love to have you stay, sign up for our newsletter HERE.

___________________________________________

Patti Blackstaffe works with people and organizations in implementing sustainable change in a rapid changing world. Her key areas of focus are change management solutions both at the project level and the organizational level. She has over 10 years of experience in change management, has worked on projects that impact 50-30,000 people in both large and small organizations. Patti brings experiential design thinking into all her projects ensuring solutions are relevant, simplified and the implementation makes sense.

You can reach Patti at 1-855-968-5323

Contact us here to work with us.

___________________________________________

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Human Capital and Culture

Mergers and Acquisitions (M&A) are an enormous effort for the companies involved. Not only are you busy putting process and financials together between two companies, every single level of the organization must take on a ‘change role’ as they begin to integrate.

There are several ways we see this managed by the companies involved:

  1. Push: The larger acquiring company pushes it’s systems down to the acquired company and defines a “This is how we do things here” stance.
  2. Handshake: The two companies take the time to evaluate the systems and processes in order to determine which ones will work best for the newly forming organization.
  3. Separation: The companies are tied at the highest level, but the two companies work and function with autonomy from each other with exception to the reporting levels.
  4. Pull: This happens when a very small company is purchased by a larger organization, often you will see the small company become a department or branch of its own, taken under the wing of the parent company.

Many of us have been through one or many M&As in our working lifetimes and we all have an opinion as to how it was handled, how smooth the integration and how effective the changes were. In many cases the changes are seen as negative experiences and there is a reason for that.

M&As occur for a variety of rationale, a company wishes to partner with another company who has a compatible product – a marriage of sorts. A company will need to improve their portfolio based on a particular direction they wish to head or a company may wish to corner a market and cannot do it alone, but needs the product or strength of another company to accomplish that task.

One of the actions that can be abandoned in this process is the due diligence of evaluating a mix of varied cultures and the effect bringing those cultures together may have on the organization. Cultural compatibility is necessary for ensuring that the very expensive investment made in the new company will be realized with an appropriate ROI (return on investment) for the product being purchased.

If any of you have older teens who have dated someone with a completely different family background than yours, you know what I am talking about when I say marrying cultures. You can see the differences pretty clearly, but those teens are rather blind to what the issues may be. If they carry forward into marriage, there will always be some serious road-blocks as they work their way through those differences.

In the beginning, the excitement of what “could be” doesn’t take very long to turn into “uh oh” as the two organizations begin to define their “show stoppers” and “must haves”. Understanding the risk you take in cultural incompatibility is vital in managing that integration.

Change is always hard, it is our human nature to avoid it at all costs and instead rest in our comfortable way of doing things. The last thing any company wants is to pay 8-50 million dollars only to see the product knowledge walk out the door and risk the product and the investment all together. Your ROI includes the people involved, M&As are best accomplished with a people approach.

Patti is a strategic advisor in Leadership Development, Customer Service and Culture through Mergers and Acquisition. You can book her to speak at her Speakers Page.

Need Strategic Sense for your business? – hire us for Leadership Development of individuals & teams, group training and company strategy. Happy Workplaces Succeed, take the path to get there. 403-201-8512

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