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M&A Success – and the Systems Harmonization Challenge

I’ll steal a bit of the title of an article I’m going to be referencing from Clayton Christensen et al – “The Big Idea: The New M&A Playbook” You’ll note that this article is from March 2011 – and sitting on this side of the decade, I can tell you that the failure rate of M&A’s is still unacceptably high – and for much of the same reasons as the authors quote.

While I’ve spoken and written quite a bit about cultures and mindsets, I’ve also done the same on costs – especially opportunity costs, foundations of change, process and making better use of the technology platforms available (get to the cloud!). So much so in fact, I created an entire personality & compatibility assessment & report that has raised interest in PE firms looking to drive M&A activity and board member selection – an unintended use but a happy surprise for the utility they’ve received from it.

Let’s go back to a key point in the article:

“…the acquirer uses the target’s business model as a platform for growth. Because the business models with the most transformative potential are often disruptive, they can be difficult to evaluate, and CEOs often believe that such acquisitions are overpriced. In fact, however, those are the ones that can pay off spectacularly.”

What that should tell you and me is that there is a fundamental benefit to M&As, they just tend to fall apart for one reason – the effort to truly integrate – culture, process, technology – all of it – isn’t being executed on.

Let’s unpack another great quote:

“A company can’t, however, routinely plug other elements of an acquisition’s business model into its own, or vice versa. Profit formulas and processes don’t exist apart from the organization, and they rarely survive its dissolution.”

And this is where we see many M&A’s start to breakdown. Beyond the technology & process harmonization, there’s the underlying condition of creating a new, harmonious system that is greater than the sum of its, formerly, two separate parts. And, as experience has shown us, technology and process – much less culture – are very much an artefact of their cultures. Too, the national culture very much leaves its fingerprints on the company culture, and it’s choice of technology & process stack.

Here’s a couple real world examples, but the caveat is that you will still find significantly differentiated examples. Company A, based out of Asia, transacting business throughout the entirety of the Pacific Basin and Europe. There is high power distance, and a very high level of formality within and across business units. Hierarchy is very much observed and not disrupted. Processes however are extremely loose and undocumented, and technology is largely open source with some cloud deployment to national cloud providers. Company B, based out of the United States, transacting business throughout North & South America, with some market penetration in Western Europe. Power distance is medium and there is a fair amount of informality & autonomy, however, hierarchies are still largely respected even if they’re not strictly observed. Process is evolving steadily and is mostly in ITIL Level 3. Technology has some one-of installations but the enterprise stack is otherwise standardized on a road map to be 20% hybrid & 80% cloud deployed within 4 years.

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Those two firms merged, many meetings were successfully held until there was a growing sense of unease that information flowing from A to B was coming up incomplete. Yet the entire reason for the merger was that A had much greater margins (22% on $12B revenue) on their business (as compared to B (8% on $40B revenue) and – you guessed it – the desire was to get B to run A’s processes and achieve similar margins!

Great idea. Yet already there were concerns on process & technology harmonization before communications became an issue. Dissecting those conversations would have shown that cultural tone-deafness, on both sides of the equation, was leading to increasing error-rates on communication back and forth – and it was starting to spin more and more out of control. Ideally, the merger plans would have included team building and culture change in both organizations towards something that was workable (at first) for both with the intent of understanding what was behind the greater margins and how to translate those between the two companies.

Yes, I’ve intended to end right back on the same topics that are central to our work – communication, and culture. Technology & Process are the easy parts – once you have transparent communication & a new emerging culture. When those components aren’t tended to, you’re going to have an increasingly harder time trying to harmonize systems. There are plenty of smart folks that built those system – and the harmonization challenge isn’t technology or process based. It’s having that same team environment that was there when these systems were built, tested & deployed – something that is distinctly not in place in the case of an M&A unless it is specifically planned for.

If you’re considering or are part of an M&A – think about team and company culture differentiations & differentiators – and what culture you want to create that’s a combination. Don’t go it alone. Make sure leadership and teams are involved in those very intentional, planned conversations. You want to focus on building rapport, establishing clarity in intent, actions & goals – and from there, trust will come about – trust, which is central to any type of relationship.

Here’s the TL;DR version:

If you’re in an M&A situation (regardless of role or work load), focus on these 3 things first:

  1. Build rapport by creating clear intentions, actions and goals
  2. Gradually establish transparent, candid, safe conversations – this will be the step where taking cultural differences will be critical
  3. Actively build trust by creating team building exercises – if your teams are virtual and remote this is important, and it can be done, it simply requires more effort

Finally consider this quote from Benjamin Franklin:

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“We must all hang together, or, most assuredly, we shall all hang separately.”

 

 

 

PS: We’ve done this a few times, drop us a note.

The Great Reset (not The Great Resignation)

Resignation – the word itself conjures images of giving up and walking away – which is why I think we’ve all got this wrong.

How about we look at this is an opportunity – we can make it one – and sure, in some cases, you’re still going to want to – and in fact – should quit.

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A lot of this comes down to culture, communication & workspace.

People leave bad leaders (and to that I’ll add work cultures) – it’s an amorphism everyone states – but what are we actually doing about it!?

Ratchet goals, inspection & monitoring, poor communication, whipsaw directives, unbalanced work/life, recrimination, stack ranking, exhaustion as accomplishment, employee surveys with no tangible outcomes – it’s a long, damning, list that we could each add to. But let’s use those as lessons!

People are leaving and don’t want to spend 1/3 of their lives in those cultures, anymore. Maybe it’s the pandemic, maybe it’s the younger, more aware generations that have grown up in a mutable, flexible, diverse world where terms such as equity, quantum, AI and metaverse have really expanded their awareness as to the art of the possible. And it’s infectious! Of course they’re not going to stand for the antiquated antics of antediluvian anicients. I’m damn near one of them and I’ve never stood for that kind of ossified thinking.

Think about how IT, perhaps the biggest source of this movement, is managed overall, and how 95% of the time its culture is incongruous with the overall corporate culture – because no one took the time to integrate those cultures and maybe refresh how the business operates. Consider the example of how hard it is to implement Agile in older shops, but how it works exceedingly well when it is implemented! Consider how many times you’ve seen an ERP or CRM engagement become 95% customization! What is it about your specific processes that are so effective – or is it just because that’s how they’ve always been done. Be honest. Tie them to financial performance before we have this conversation.

I get change is hard. That’s precisely why change is necessary – you know what happens when you stay in your comfort zone?

I got into IT leadership exactly because I wanted to wield IT like it was a swiss army knife. I wanted to tie business goals to IT results. I wanted to inject financial awareness as to the cost impact or the revenue benefit of IT decisions! Business operates on cash flow – how can I not speak their language and expect them to speak mine?

And here’s the truth – even when one of teams I was running was turning in top results and driving highly profitable growth for a division from $60M to $100M – I STILL locked horns with a CIO who would die on the Stack Rank hill and push one more mandatory RIFF head count to my team because there was that ONE person who disagreed with their technical design decision and was RIGHT to do so. I offered to RIFF myself if he was so insistent!

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These counters and deal sweeteners are temporary and will only last so long when faced with these broken cultures.

Here’s another story. About a month ago I talked with a business exec who was considering just transitioning everything IT overseas – IT to IBM, development to Eastern Europe & call center to the Philippines.

We made 3 calls and 60 minutes later and armed with real world war stories, this is what he said: “You know, I REALLY hate it when you’re right!”. But he still wasn’t getting the message – and you know, that’s on me.

You can’t make those moves if you have broken processes, leadership and cultures. Fix those first, then, yes, absolutely scale up when you need to. Guess what? You might be surprised at how infrequently you have to do that when your system is operating much smoother!

There is a hidden cost to the inefficiencies of bad leadership, broken cultures and poor communication. We track it, we fix it, and we show the benefits on the other side.

Don’t just nod along – do something about it!

Unless & until companies are willing to address their cultural, communication and leadership debt, this problem is going to linger and employees are going to vote with their feet.

That’s why I’ve been calling it the Great Reset and not The Great Resignation

This is a golden opportunity for leaders. It’s in our hands what we do with this.

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Riding the Tiger

Riding the tiger is, ostensibly, as all good sayings are, an ancient Chinese proverb. It indicates an action that once taken is dangerous to stop. You could equate this to taking a known risk, or even sunk cost.

We see this so often in our work rescuing technology programs that have been going sideways. Everyone is afraid to stop. A little more effort, work harder, bring in some high priced consultants, part the Red Sea.

How about stop, drop & roll? Or even just slow your roll. A crisis is often when organizations fly into high gear – and proceed to spin their wheels fruitlessly.

Instead what we do, what we’ve done and what we teach our clients to do is a very fast, very accurate assessment of root cause & remediation steps to tamp the fires, realign and refocus out of crisis mode. We bring our unique IP to bear. And yes we still focus on culture & mindset, so you can face the next crisis with elastic resiliency and thrive – not just survive – through it.

After all, what’s the point of us helping you get off that tiger, if you’re just going to jump on another one?

Leadership Challenge

Yesterday our Founder & CEO posted about seeing more “skill cards” from leaders. Today he wanted to speak more to that. We agree – and we’re not just saying that because he pays us!

Skill accomplishment posting are fantastic – and those getting those achievements should be proud of the hard work & dedication they’ve demonstrated – their accomplishments will go a long way in their careers and professional journeys. We like seeing those pop up in our feed on LinkedIn.

But what about our leaders? Granted it’s a tougher to measure in the same way as technical skills, which is interesting because it’s obvious, to all of us, what the difference is between a great leader, a good leader and a leader who needs some more time baking the oven. No, not literally, gosh, more coaching or mentorship.

We’re convinced that classes (example from a MBA) and books (some listed below) are all great ways to start. We’re also equally convinced that for leaders to be successful, coaching & mentorship are equally, if not more, critical – and often missing in the professional work.

We’ve heard “that person was great at their task work, but gosh, they’re a horrible leader, how did they ever get promoted?” so often. Because they became great at their task work and got thrown into the deep end of the leadership pool with no support. Expecting them to do more than wade in place is a Greek tragedy waiting to happen.

So – how about a leadership challenge. Brag about your leaders, call out what they’re doing to help, what they could do to help. Leaders, listen. It may be uncomfortable, but it will go a long way to creating an empowered culture of trust, empathy & resilience.

Any takers?

Cultures & Software Engineering!?

Let’s talk about cultures & software engineering!

Uh … What?

Hear us out. Every company has its unique culture, even if there’s cultural similarities between companies in the same domain or vertical. They’ve developed and evolve over time.

Just like most mergers or acquisitions fail because culture differences are not tended to, most software engineering projects carry that higher risk, or cost, or longer time-to-value, because software engineering has its own culture and if it’s not tended to – or if it is expected to operate under the same culture as the organization – you’re going to run into significant challenges.

Almost every time we’re called into a software project at risk, we see cultural clashes that aren’t being tended to which are leading to process, communication, productivity and efficiency breakdowns. The antidote – work harder, work more – is counterproductive and harmful.

We address those issues and we also address the cultural differentiation at the root of those challenges. If we don’t, those issues are going to keep coming up and future software projects will be at risk. We’ve shown, first hand, it’s necessary and indeed possible to do so.

If your company is struggling with their own software development projects – please! – call us. We’re happy to spend an hour on the phone with you, getting to know you, your project and sharing pertinent tips to get you started in the right direction.

A Waterfall to Agile Story – In Increments!

We’re huge fans of doing things in measurable increments to achieve lasting results – especially when it comes to change.

In our Incrementalism series, we’re sharing a client story today. Our client, regional, worth about $10B, had kicked off a waterfall to agile transformation for their IT & Software teams. Being a big, stable, capable company they had made some really smart hiring decisions in selecting their Agile SMEs. Being a big, stable, capable company they were also, inherently, slow to change. With Agile they expected to see big results, quickly.

Their change efforts were floundering for six months when we got the call to jump in. What the struggle came down to was attempting to change everything over to Agile in one fell swoop. Tools, Processes and People, most importantly, in IT and their business clients were dealing with brand new concepts and methods to transaction business between IT service delivery and stakeholders.

Our plan was to change in smaller increments, one cross-functional team, even one feature team if necessary, at a time, with discrete, measurable goals – and then iterate and build on it.

After overcoming understandable resistance born from six months of no progress, we got traction and got things rolling – showing and doing alongside the teams, then doing in parrallel, then expanding the scope, each time with the same incremental, measurable approach. Folks caught on quick we were using Agile to transform the teams SDLC to Agile too.

We taught the teachers, created internal advocates and won over stakeholders. Six months on, momentum showed the org was on a great track to continue on their own – and to this day, they’re happily plugging along with Agile and looking at how they can use the same methods to transform some of their business processes.

Keep shooting for the moon, but get there in increments.

We would love to hear your change transformation stories – good, bad & ugly!

Incremental Moonshots

Moonshots – great big lofty goals are awesome. We love them.

But you’re not going to get there swinging for the fences every single time.

In all the work that we’ve done, with technology with process with people and with mindsets, one constant has been the need for change.

Change is justifiably scary for most of us. Very few of us thrive on change. Even fewer successfully execute on making the changes necessary.

And that’s because we’re always swinging for the fences. If you’re not speaking for the fences, you’re not really working are you?

Let’s change that mindset a little bit. Realize that change comes and sticks in small increments and with constant commitment, not one huge swings that stand a higher chance of missing.

Start by redefining your goals. Take those BIG changes & decompose them down into smaller, incremental changes that build. Work on one at a time. Commit to it. Remember it takes 21 days to make a habit change, and 90 days to get it to stick. So be patient. Understand if you falter, be gentle with yourself, learn from the experience, then recommit to it.

Hail Marys are awesome for spectating, but they’re not repeatable.

Start small and build on each success. Pretty soon you’re standing on that moon you were shooting for. More importantly you got there without burning yourself out and with a newly developed mindset that’s elastic, resilient and able to face inevitable # disruptions.

Try it. Reach out if you want advice. We would love to hear your experiences.

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Managing Upwards – Do’s & Don’ts!

In this video series we’re talking about 3 things any organization can do today to increase resiliency in their work space through better communication, starting with the power of 1-on-1’s. The next step from 1-on-1’s is managing upwards. It’s rarely done because it can be incredibly uncomfortable for both leaders and contributors! Done correctly, it’s incredibly liberating for both parties and further enables psychologically safe workspaces that you can have those brutally candid conversations in.

We just posted our final video in this series on this topic.

First, keep in mind that managing up doesn’t mean you’re actually managing your leader. No, what you’re doing is managing expectations, communicating proactively and focusing on information that matters. Much like you expect to be lead – with candor & transparency, managing up is your opportunity to do the same. This is why it’s important to focus on solutions, not problems. As we previously mentioned, it’s completely ok to say “I don’t know,” just make sure to add “and here’s what I’ve done to figure it out …”

Second, you always want to be factual. Certainly provide your first had observations and guesses, but be mindful that you’re not idly complaining or repeating here say. It’s easy for us as humans to focus on the negative – on danger. Our hindbrains are still very much in survival mode still. But there’s no tiger in the bushes waiting to leap out. You have time to stop, breath and reframe your mindset and your thoughts to focus on the possible.

Finally – always lead with candor and transparency. It’s tough especially when you first start on this path of managing upwards, but believe us, stick to it and it will work. Doing so eliminates so much uncertainty and really goes towards adding to that trust bank.

Done consistently, managing upwards is part of the effort in building those critical connections of trust. That trust leads to clearer communication, which reinforces those relationships. When the next crisis hits, the focus will be on coming together and persevering in a way that is mutually beneficial and accountable. This is when, we say, fires end up putting themselves out because they don’t get a chance to consume the tinder and oxygen and grow.

Start managing up if you’re doing 1-on-1’s, and if you’re not doing 1-on-1’s, start already! Take a look at our video, chime in below or drop us a note and let us know about your experiences managing up!

Managing Upwards – News, Not Gossip!

In this video series we’re talking about 3 things any organization can do today to increase resiliency in their work space through better communication, starting with the power of 1-on-1’s. The next step from 1-on-1’s is managing upwards. It’s rarely done because it can be incredibly uncomfortable for both leaders and contributors! Done correctly, it’s incredibly liberating for both parties and further enables psychologically safe workspaces that you can have those brutally candid conversations in.

We covered the importance of knowing yourself & your leader and now we’re going to discuss the importance of focusing on news – not gossip and we cover it in this video.

Workplaces aren’t reality shows – much like it might feel like it some days. Unless you’re at an Initech or a Dunder Mifflin. In which case you’re definitely on set. Most places though a simple rule can really help cut down the drama – and the laugh track.

Focus on news, not gossip. 1-on-1’s are about HOW you’re doing and feeling yes, but managing up is where the WHAT comes into play. Focus on results, on outcomes and if you have bad news, make sure it travels fast and you keep your leader informed. Surprises are always a bad thing. It’s ok to work the issue but fire that flare and make sure you bring tangible information. If you don’t know the full details, it’s ok to say you don’t know – but always make sure to follow-up with what you’re doing about it.

In a fluid situation, keeping your leader in the loop is important to continuing to build that trust -and trust is at the center of resiliency and healthy relationships. It’s what moves firms away from inspection and monitoring to celebrating results.

It’ honestly funny when mangers and contributors understand just how easy and straight forward managing up means. We’re not managing managers, not at all. We’re ensuring clear, concise, consistent communications that have value, that have facts. We’re showing a focus on results, and when we just don’t know, we can be honest and say so, because we know it’s a safe environment.

Done consistently, managing upwards is part of the effort in building those critical connections of trust. That trust leads to clearer communication, which reinforces those relationships. When the next crisis hits, the focus will be on coming together and persevering in a way that is mutually beneficial and accountable. This is when, we say, fires end up putting themselves out because they don’t get a chance to consume the tinder and oxygen and grow.

Start managing up if you’re doing 1-on-1’s, and if you’re not doing 1-on-1’s, start already! Take a look at our video, chime in below or drop us a note and let us know about your experiences managing up!

Managing Upwards – Knowing Yourself & Your Leader

In our prior posts we talked about 3 things any organization can do today to increase resiliency in their work space through better communication, starting with the power of 1-on-1’s.

We posted a video on the next step from 1-on-1’s – it’s managing upwards. It’s rarely done because it can be incredibly uncomfortable for both leaders and contributors! Done correctly, it’s incredibly liberating for both parties and further enables psychologically safe workspaces that you can have those brutally candid conversations in.

Let’s start with focusing on the importance of knowing yourself & your leader.

Leverage those 1-on-1’s to understand your leader’s work styles, habits and values, while they’re understanding yours. Understand which communication style works for them, and be clear on what works for you as well. Communication is tough in the best of circumstances. When you speak the same language, you’ll both be find a new concise clarity with each other. By communicating in a style and at a level that is mutually amenable, you reduce the natural friction that arises when any two parties are having a conversation. As an added bonus, you’ll continue to add to the trust bank of your professional relationship.

It’s also important for each of you to understand your goals for yourselves and at the organization. Understand how you can help each other achieve those goals. Working towards them together creates a strong, supportive rapport. This is one way you can create strong bonds through better communications from a place of authenticity & vulnerability. It’s wonderful to see goals align and leaders, contributors and teams work together to everyone’s mutual benefit.

Few things enhance happiness (and productivity!) and job satisfaction than when organizations shift from toxic competitiveness to cooperative effort, replacing fears of recrimination (oh shit!) with a culture that encourages and propels (you got this!)

Done consistently, managing upwards is part of the effort in building those critical connections of trust. That trust leads to clearer communication, which reinforces those relationships. When the next crisis hits, the focus will be on coming together and persevering in a way that is mutually beneficial and accountable. This is when, we say, fires end up putting themselves out because they don’t get a chance to consume the tinder and oxygen and grow.

Take a look at our new video and start managing up if you’re doing 1-on-1’s, and if you’re not doing 1-on-1’s, start already! Chime in below or drop us a note and let us know about your experiences managing up!