Merger Problems

January 23, 2015

M&A or Merger and Acquisition text on blockNumerous studies have found over 50% of mergers and acquisitions fall short of expected results, primarily due to the failure of the cultures to integrate well. Why, then are CEOs so cheerful when they head into one of these major restructuring activities?

 

In my book, Trust in Transition: Navigating Organizational Change, I discuss 30 different systemic problems with making mergers work and give antidotes to each of them. In this brief article I will describe what I believe are the five most serious problems and suggest ways to mitigate them.

1. Relying too much on the mechanical process

When MBA students learn about M&As, the content usually is focused on the financial and legal details of setting up a combined entity from two unique groups.

Topics covered include asset valuation, due diligence, negotiation, legal aspects, management structure, and numerous other organizational things that must be considered. Few programs give equal attention to the cultural part of the equation.

Students are left to assume that the culture simply “sorts out” by itself over time. That oversight is huge because cultural issues are usually the root cause of merger problems.

For example, the Daimler-Chrysler merger in 1998 was a classic debacle that cost Daimler nearly $36 billion over a decade. The magnitude of a loss that large, was almost $10 million per day for 10 years! The major reason for the breakup was the failure of the two cultures to integrate.

To improve the M&A process, it would be helpful to give the cultural integration equal footing with the legal and financial aspects of the activities from the start.

2. Loss of objectivity leads to inadequate planning

Top leaders can easily see the benefits, and they look seductively attractive. The costs and hassles seem to be manageable, so not much energy is spent on internal culture issues or potential external problems for customers.

The upside of the deal is championed, while challenges are pushed aside. Objectivity gives way to passion for the deal.

Anyone who questions the validity of an assumption or brings up a potential problem is labeled as “not a team player,” so reasonable dissent is extinguished.

Here are three antidotes for this situation:

1) have a trusted Devil’s Advocate on the senior team who will prevent myopic optimism,

2) explore potential problem areas and design solutions that mitigate risk, and

3) calculate the ROI based on the best guess of the benefits, but inflate estimated costs and problems, because real costs will surface later and often be larger than anticipated.

3. Lack of adequate training

Leadership training is crucial during any kind of reorganization. Many organizations back off on training for leaders because there is so much chaos during the integration that most leaders are “too busy to sit in the classroom.”

Antidote: Bring the classroom to the chaos. What better time is there to do leadership development than right there in the middle of the crucible? Skilled L&D professionals can leverage the urgent need for solutions into pragmatic problem solving and motivational skills.

Supervisors are also in urgent need of leadership training during a reorganization. Reason: they form the critical trust link between the management layers and the workers. Changes faced by each supervisor are stressful personally, yet this individual is vital in creating order for the other people.

Weak or bully supervisors often come unglued due to the pressures of a merger. They need training and assistance in order to perform their function when it matters most.

4. “We Versus They” Thinking

From day one, the leaders must not only preach the avoidance of “we versus they” thinking, they must model it and insist on it.

I often hear language that indicates lack of full integration years after a merger has been supposedly completed. It is essential to replace parochial thinking with “us” type language and actions.

One way to help speed the integration is to co-locate the groups. That is often impossible in the short term, so transplanting some key resources from one group to the other is another way to make it harder to tell who “we” are and who “they” are.

5. Loss of Trust

In the anticipation of a merger or acquisition, adrenaline drives expectations of what the merged entity can accomplish. It is easy to assume the individual needs will be resolved and team cohesion will somehow settle in quickly.

That is usually not the case, and often bitter feelings linger on, hurting the integrated organization for years.

Candid and frequent communication is needed to keep people informed and allow top managers to feel the angst of workers. It is in these interfaces that trust is either maintained or destroyed by the behaviors, words, and body language of senior leaders.

Ten Best Practices

Anticipate a bumpy ride, and expect that significant psychological calming is going to be needed at times. Here are some additional ideas that may be helpful:

1. Be clear and transparent throughout the process.

2. Create design teams early to help people connect with the future more quickly.

3. Include the customer in every decision, especially during the chaos phase.

4. Assume the risk of setbacks willingly, and do not let unexpected issues spoil the overall process.

5. Invest in some Emotional Intelligence training for people in the organization, especially management.

6. Celebrate positive movement in an integrated way to model the spirit of the merged culture.

7. Bring in a grief counselor to help people cope with the loss and the transition.

8. Train leaders to model the integrated behaviors, and do not tolerate silo thinking.

9. Consider cross-locating or co-locating people, where possible.

10. Prune redundant resources delicately with a sharp scalpel rather than a long line of guillotines.

There can be times of joy and accomplishment during any merger or acquisition. It is possible to maintain trust, even amidst the chaos. After all, the vision for the whole activity is a brighter future.

The wise leader will recognize that changes of this magnitude require extraordinary effort and patience to achieve the anticipated result.

By focusing the same level of effort on establishing the right kind of culture as they do on the financial and legal aspects of reorganization, leaders can ensure they meet or exceed their goals.


The Virality of Trust

January 17, 2015

SynapseI wrote an article a while ago about whether trust can scale. My conclusion was that trust does scale because it is measurable and has properties where it can grow or shrink.

The ensuing discussions between two of my good friends brought out an important nuance. Both Bob Vanourek and Fred Dewey came back with the concept that while trust can expand and contract based on what is going on, it is not linear at all.

A small increase in trust due to an action will tend to grow exponentially as the news spreads through cyberspace. Actions that build trust will become more powerful as a result of the viral nature of information.

Of course, the same phenomenon happens on the negative side. If a leader does something that has a damping effect on trust, that negative impact will become more hurtful as the information spreads virally.

So while the nature of trust is that it does scale, we need to be constantly aware of a “hockey-stick” situation, where one small misstep magnifies in time and in space.

I think this observation has always been true, but as we trend toward a greater percentage of information being conveyed virtually, the leverage increases.

There is an opportunity to intervene that may be helpful. When something unfortunate is done, and it is picked up on the social networks, the person who committed the sin is usually aware of the bad press. It is a kind of moment of truth where the damage is either made much worse or can be muted somewhat. This public relations problem can make or break a person’s reputation.

Let’s take a case as an example and dissect the likely outcomes. Suppose a CEO puts out a note to the senior managers that refers to some problem (unnamed) employees as “knuckleheads.”

One of the managers gets a chuckle out of the wording and elects to pass it along to a couple underlings as a joke. One of the underlings is familiar with a person who has been under scrutiny for some attendance problems. He writes a note to that person attaching the CEO’s message and asks “Wonder if you are one of the knuckleheads?”

That individual sends it out to everybody in his group, and the cascade is on. Within an hour, the entire organization knows the CEO considers some of the employees to be “knuckleheads.”

The CEO will quickly become aware, through feedback, that his note is out all over the plant. Let’s look at a few possible approaches for the CEO:

1. He can call a quick meeting with his senior managers to try to find out who leaked the information. That “Witch hunt” reaction is unfortunately pretty common, when the real witch was actually the CEO.

2. He can ignore the situation and let people calm down over time. That “head in the sand” approach is also a common ploy that only feeds the rumors of clueless leaders.

3. A better approach might be a humble apology where he admits to what is already obvious and indicates that his choice of words was inappropriate. Rather than try to justify what is already known (like… “we are under extreme pressure right now”), he indicates sincere regret and a desire to not repeat it.

You be the judge of the outcomes under these scenarios. Perhaps you can think of other methods of handling the situation.

Undoubtedly the best cure would be prevention where the CEO would not send a note like that in the first place.

Even more important, would be to have a CEO who does not even think in terms where he or she has to guard his wording so the spin comes out right. If your private thoughts show the proper level of respect and trust, then you do not have to scrub your communications. You are free to be authentic.

Of course this example was a small situation that was contained within one specific organization. Many times people get into trouble when they communicate inappropriate things about people outside the organization, like customers, insurance companies, the government, law enforcement, or any number of other situations.

These lapses can lead to embarrassment, loss of one’s job, jail time, or worse. When people compromise trust in any type of communication, there is no telling how much damage will ensue.

With the growing percentage of communication happening in the online environment, it is time to redouble efforts to phrase things correctly at the start and avoid embarrassing slips. It is also important to check our personal self talk to ensure our attitudes reflect a trustworthy rather than duplicitous person.


I’m OK – You’re not OK

January 10, 2015

two doctors discussingThis is a reissue of a popular article I wrote five years ago with some edits.

I have made an observation after listening to people vent about problem individuals at work or at home.

It seems most people have a rather long list of things that other individuals must do to improve but a rather short list of things they need to change in their own behavior.

I guess it is human nature to excuse or rationalize one’s own shortcomings while focusing on the obvious improvement needs of others. Since nearly everyone practices this little deception, the world must be rife with almost perfect people who wish the other people around them would shape up. Hmmm – something is wrong with this picture?

Here are a dozen tips that can change the pattern for you. Print them out and post them at work. Feel free to add more concepts of your own.

Tip #1 – Reverse the Roles.

The other day a student was venting about a particular individual who was a major challenge at work. The student described in gory detail several behavioral things the other person constantly did that drove him up the wall.

I asked him to write an analysis about himself from the perspective of that other person. In other words, what would the other person tell me about him if he had the chance. That brought the student up short, and he admitted it would be a rather humbling exercise to do.

Tip #2 – Don’t Sweat the Small Stuff.

It is a well known fact that most married couples fight over the little things that become habitual annoyances on a daily basis. The position of the toilet seat is a great example. How come I can never get my wife to leave the toilet seat up? (smile)

It is not the 401K account that most couples argue about daily, it is who gets the remote control, or why the toothpaste tube is always topless.

So, if we can just remember that the small stuff is really just that, then maybe we can relax a bit.

Tip #3 – Live and Let Live.

If a cubicle mate hums when she is happy, it is no reason to have a coronary over it. This is her outlet and way to be cheerful. Even though it curdles your skin when it goes on and on, why burst her balloon by pointing out her “problem”?

If it is an unconscious habit, she will never be able to control it anyway. Simply buy a pair of noise canceling head phones and play the kind of music you like.

Let a happy person be happy or a miserable person be miserable. Focus your energy on creating your own sphere of cheerfulness rather than trying to change the rest of the world.

Tip #4 – Distract Yourself from Your Frustration

Find some way to get away from the petty squabbles before they bring you to the snapping point. If you cannot actually leave without penalty, it does not stop you from mentally checking out. Just go for a little vacation in your mind.

Actually imagine smelling the giant pines if you love to hike. Feel the frost on your cheeks if you like to ski. Taste the chocolate chip cookie if you like to eat, or how about a relaxing hot tub while sitting at your desk?

Imagining happier places has kept many POWs alive for years; the same technique can keep you sane until 5 o’clock.

Tip #5 – Share a Treat

Just because someone drives you nuts by clipping his nails in the morning is no reason to hate him all day long. Find some symbolic olive branch and waive it around.

Go get two chocolate bars and give him one. Bring him in a bag of his favorite flavor of coffee. By extending kindness, we get kindness in return. Usually people know what they do that drives us crazy.

If we change our body language rather than keep festering about “their problem” and learn to accentuate the positive, then the other person will likely respond in kind.

Tip #6 – Extend Trust

The reciprocal nature of trust says that you can improve another person’s trust in you by extending more trust to him or her.

When we build up a higher account balance of trust, the petty issues seem to melt away because we are focused on what is good about the other person rather than idiosyncrasies that drive us bonkers.

The best way to increase trust is to reinforce people who are candid with us about our own shortcomings. That takes emotional intelligence to do, but it works wonders at improving relationships.

Tip #7 – Don’t Complain About Others Behind their Back

Speak well of other people as much as possible. The old adage “if you cannot say something nice about someone don’t say anything” is really good advice.

When we gripe about others when they are not present, a little of the venom always leaks out to the other person, either directly or indirectly. Never make a joke about another person at his or her expense. A wise old pastor taught me that rule 40 years ago, and it is a great rule.

If a person is doing something that really bothers you, simply tell him or her in as kind a way as possible why you find the action irritating.

Tip #8 – Stop Acting Like a Child

The lengths people go to in order to strike back at others for annoying them often takes on the air of a food fight in grade school.

Escalating e-mail notes is a great example of this phenomenon. I call them e-grenade battles. It is easy to avoid these squabbles if we simply do not take the bait.

When you find yourself going back and forth with another person more than three times, it is time to change the mode of communication. Pick up the phone or walk down the hall for a chat.

Tip #9 – Care About the Other Person

If we really do care enough to not get bent out of shape over little things, then we can tolerate inconveniences a lot better. What we get back from others is really a reflection of the vibes we put out ourselves.

If we are feeling prickly and negative reactions from others, we need to check our attitude toward them. While it is convenient to blame them, often we are the cause of the negativity: they are simply a mirror.

Tip #10 – Picture the other person as the most important person in your life

If all else fails, try to remember that life is short and to expend energy bickering and griping about others really wastes your most precious resource – your time.

How much better it is to go through life laughing and loving than griping and hating. We do have a choice when it comes to the attitudes we show other people. Make sure your choice enriches others as well as yourself.

Tip#11 – Have your Own Personal Development Plan

Start out each day with a few minutes of meditation on how you want to present yourself better to your co-workers. Have a list of areas you are trying to improve on.

This mindset crowds out some of the rotten attitudes that can lead you to undermine other’s actions all day. Create a list of your personal improvement areas and work on them daily.

Tip #12 – Follow the Golden Rule

Finally, the famous Golden Rule is the most positive way to prevent petty issues from becoming relationship destroyers.

By simply taking the time to figure out how you would like to be treated if the roles were reversed, you will usually make the right choice for building and preserving great relationships.


Smart is Dumb

January 3, 2015

Dud ManagerIn his famous program, “Effective Negotiating,” Chester A. Karrass, makes the observation that, in negotiations, often appearing dumb is a great strategy.

The idea is that acting naïve causes the other party to fill in some blanks with information that may ultimately be helpful to you in the negotiation.

Conversely, acting as if you know everything is usually a bad strategy, because you end up supplying too much information too early in the conversation. This habit gives your opponent in the negotiation a significant advantage.

As I work with leaders in organizations of all sizes, a similar observation could be made about leadership. Being dumb is sometimes smart, and being too smart is often dumb. Let’s examine some examples of why this dichotomy is a helpful concept.

To make enlightened decisions, leaders need good information. It sounds simple, but in the chaos of every day organizational issues, it is sometimes difficult to determine which set of information is true.

Rather than blurting out their preconceived notion of what is going on, if leaders would simply act a little confused, like the brilliant detective Colombo, they would elicit far more information from other people.

The way to execute this strategy is simple. Refrain from making absolute statements, and ask a lot of open ended questions. This draws out alternate points of view from individuals and allows the leader to hear many nuances before tipping his or her hand.

When leaders display hubris, and expound their perspective on every issue before others have a chance to voice their ideas, it stifles collaboration and creativity.

Therefore, being smart is often a dumb strategy. Of course, no rule of thumb works in every situation. Leaders need to know when the time is right to divulge their opinion.

Unfortunately, due to over active egos, most leaders like to weigh in on issues far too early. This colors objective conversation and cuts off interesting alternate perspectives.

The same logic holds when making decisions after the information has been gathered. If leaders would say, “I wonder what we should do,” instead of, “Here is what we have to do,” they would draw out the best ideas available.

Smart is dumb and dumb is smart in terms of getting a smorgasbord of options from which to choose.

The antidote to this problem is simple. Leaders need to understand this dynamic and catch themselves in the act. By being alert to the dangers of advocating too early, leaders can improve their batting average at allowing everyone to enter the conversation at an appropriate level.

Sometimes in a crisis situation, it may be necessary for a leader to be highly directive and quick on the draw. Usually, it is better for the leader to allow conversation around sensitive issues, and then work with people to find the best solution.

If you are a leader, it is important to catch yourself on this issue and begin to train yourself to have more patience and improve your listening skills.

It has been said many times that the Lord gave us two ears and one mouth, because we should listen twice as much as we speak. Many leaders do not understand this simple logic, and it works to their detriment.

They are dumb because they are too smart.


2014 in review

December 30, 2014

The WordPress.com stats helper monkeys prepared a 2014 annual report for this blog.

Here’s an excerpt:

The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 35,000 times in 2014. If it were a concert at Sydney Opera House, it would take about 13 sold-out performances for that many people to see it.

Click here to see the complete report.


Changing the Trajectory of Trust

December 27, 2014

cometIn most organizations the level of trust is something that needs improvement at all levels. As a consultant, I am rarely called into an organization where the CEO tells me, “We are in excellent shape here. I can think of no area where any improvement is needed.”

Usually there is a rather long list of things that are broken, and the top leaders want me to reach into my medicine bag and pluck out a miracle that can be applied in a two hour workshop for the supervisors and managers that will produce a remarkable cure.

The dilemma for me is not in finding out what is wrong, but in getting the top brass to recognize their role in creating the problems they sincerely want me to fix.

It is a rare CEO who will tell me, “Things are in very bad shape here and you are looking at the source of most of these problems.” I have actually met a few leaders who are smart enough to think that way, but they are definitely in the minority.

Most leaders have a view that if you can only get “them” to do better, then most problems will vanish. In 98% of the cases “them” does not include “me.”

When trying to build a culture of higher trust, one analogy I like to use is trying to change the trajectory of a comet. The comet is made up of millions of particles that travel in a pattern so that it becomes recognizable.

We could change the trajectory of the comet to a higher orbit by changing the position of each particle in the tail.

It doesn’t take a rocket scientist to recognize that changing the trajectory of the comet’s head is a far more efficient route to a better orbit. Future particle movement will follow any alteration to the movement of the head.

So it is in any organization, it is the behaviors of the leaders that ultimately determine the level of trust throughout the entire organization.

The most effective combination I have found is where the top leaders insist on participating in the culture improvement effort rather than directing it to be done solely by an external consultant.

There is a role for the consultant in enabling the process, but it is a support role. The top leaders need to invest the time as teachers of a better culture of their own invention. The consultant has the time and experience to suggest certain tools that work and also allow the leaders to be participants in the learning process along with everybody else.

As the culture change takes hold, if the top leaders continue to reinforce higher trust actions and practice them daily, the momentum starts to change quickly. Once people see a genuine change starting at the top, they gladly participate in any training efforts to spread the trust-building tools throughout the organization.

You can actually observe the process accelerating as the percent of advocates grows. Once the head of the comet is heading for a higher orbit of trust, the pace of change picks up dramatically and before long the entire comet has been moved.


Holiday Gifts

December 20, 2014

happy mature business man with santa hat  is giving you a presenThis time of year, we naturally think of giving gifts. Whether with family or friends or in the work environment, we want to show our affection for each other with tangible presents.

At work, we often see some kind of bonus or financial benefit that has been baked into the compensation package long ago.  It arrives during the holiday season by design. While welcome, if the bonus is expected and predictable, the impact as a gift is muted.

How can leaders combine the habit of giving gifts with a resolution to do things better in the future. Do you have a way to figuratively place “gifts” for the people who you interface with on a daily basis? I am not thinking of the tangible gifts, but rather presents of a different kind. Here are a few of the gifts you might consider giving more often to people at work, or at home.

Time

The most precious thing for all people is really time. Reason: scarcity and value are what make something precious. Time is scarce because it is fixed (24/7), and it is valuable because we are all habitually short of adequate time.

You can give time to people by thinking through how you can be more considerate of theirs. For example, you can have shorter meetings, cut out some Mickey Mouse work, reduce conflict, lower the e-mail load, prioritize better, eliminate redundancy, communicate more clearly, and so forth. There is a never ending supply of ideas to save people time at work.

The other way we give time to people is to make ourselves more available to them. We are all pulled too many ways and find it difficult to balance our own needs with those of others.

People do recognize and appreciate when you take time for them if they need it. Giving the gift of time means demonstrating with your calendar that you are accessible.

Trust

When you give people the gift of your trust, it multiplies and then comes back to you with more trust. Real trust is essential for people to function as they were designed to do.

So many people dwell in an environment of extremely low trust at work every day. In most environments, the extension of more trust is the most effective way to uplift the culture and improve the work experience. For example, reducing the tendency to micromanage is a great way to demonstrate higher trust.

Attention

In the rush of daily activity, it is easy to take people for granted. We get wrapped up in the stresses that consume our day and forget to acknowledge other individuals who are striving to do their best. See them work, and recognize their effort and dedication.

Care

Empathy for what others are experiencing is the best way to have people realize you care about them. If you show an interest in their challenges and triumphs in life, they will see that love and reflect it back to you. The visceral feeling of being cared for is part of the human condition that is essential: like the air we breathe or the food we eat.

Support

Strongly linked to care is the notion of support. We all need help from time to time, and the gift of our physical or emotional support can make a huge difference in the quality of another person’s day. Be proactive with your support. Be more like Santa and less like Scrooge.

Recognition

Reinforcing people in an appropriate and thoughtful way when they do good work helps improve their self esteem, and is always a welcome gift. Recognition triggers their intrinsic motivation to do more good things. It enables empowerment and is kind of a liberating force that encourages people. Thus, recognition is a force multiplier.

This list could get very long if I let it, but I will keep it short to give readers the gift of brevity. My present to you this holiday season is the idea that with very little time and effort, you can have the wonderful spirit of giving gifts  every day in your work and home life.


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