How do You Measure and Manage "People" Issues?

by Brien Palmer

Most of the deal-makers in a typical acquisition situation have skills outside the people area, such as financial skills, legal skills, business analysis skills, etc. Not surprisingly, by training and by inclination they might want to avoid the "messy" people issues.

An easy rationalization for avoidance might be: "The people issues will always be there-you just have to deal with it." [meaning NOT deal with it.] Or "You can't quantify that stuff, so why bother?" Or "We are talking business here-forget the people issues."

And yet factoring in the people issues does pay off in terms of business performance and employee satisfaction. Literally thousands of companies actively deal routinely with topics such as change management, leadership development, communication skills, trust development, employee retention, etc. These services daily add to the development of human capital all around the globe.

InterLINK Management Consulting provides a unique application of human-development tools to two disparate organizations that are in the process of integrating their operations.

1. Culture

Business culture refers to the unique set of values, mores, and explicit and implicit norms in effect within a business organization. Clearly, organizations that are unlike will experience a "culture clash" if they are thrown together without due consideration of this. One stereotypical culture clash is the purchase of a high-tech startup with a youthful, informal culture, by an established organization with a more formal, staid culture. Such culture clashes have repeatedly proven disastrous to ultimate business performance.

In order to measure culture and make it tangible and visible to all, we use the Denison Organization Culture Survey. This survey is based on 15 years of research of over 1,000 organizations by Dr. Daniel Denison at the University of Michigan Business School. The survey assesses cultural traits using a short questionnaire. The results highlight the differences between the two organizations' base cultural characteristics.

The survey also compares an individual company against the best-performing companies (as well as worst-performing companies). Thus it shows not only the difference in culture between Company A and B, but also how each company measures against the optimal business cultures of the highest-performing organizations.

See the examples of the reports below, which show at a glance how clear and obvious the cultural traits appear, as shown by the dark shading, making this an excellent tool.

 

This tool has two main uses during the M&A cycle. First, it can provide good input during the due diligence process. For example, it can show some potential cultural mismatches as shown above, which can be used to make informed acquisition decisions.

Second, the culture survey can show where post-merger effort is needed. For example, if the purchasing organization lacks the same level of Customer Focus that the other organization has, you can highlight this as a value that the acquired organization brings, and incorporate some best practices into the acquirer. This would also help mitigate the loss of status usually felt by the acquiree.

The Denison Culture Survey provides a valuable baseline to address cultural issues, and actually strengthen the bonds, before they devolve into conflict.

2. Change Management

Any major change involves two dimensions. One dimension is the change itself, and the second dimension is the human reaction to the change: the uncertainty, rumors, resistance, and largely hidden "friction" that causes large-scale change to dissipate quietly over time. Now, any resistance is unlikely to stop the change itself-that is, the acquisition or merger itself. But the human factors can and do undermine the efficiencies and synergies that the purchasing company was counting on.

This is the core or why acquisitions fail: they don't produce the intended results, because the people affected are not on board.

Since this is such a critical area, it warrants a great deal of attention.

Through years of experience, InterLINK has developed some unique tools to measure an organization's readiness for change, and to take corrective measures in areas that are not ready. We wrote the book on Change Management-literally. (Managing Principle Brien Palmer wrote Making Change Work: Practical Tools for Overcoming the Human Resistance to Change, Quality Press, October 2003.) We apply these tools to demonstrate areas of risk (un-readiness) and to design effective interventions to protect your investment.

3. Trust

At the heart of all outstanding organizations is a culture that promotes productivity and quality by valuing and creating trusting relationships at all levels of the company. An acquisition or merger immediately threatens the levels of trust as employees become uncertain about what their future will bring. This lack of trust can undermine even the most strategically beneficial business combinations.

Our experience with trust in the work place enables us to measure the "hot spots" and to enables you to develop or confirm trusting relationships. We find that trust MUST precede any business activity, or else people will not operate to their full potential.

4. Leadership Skills and Leadership Team Continuity

 From Day One, the integrated management team must work effectively together, setting shared objectives, and achieving performance goals. Employees look to the integrated team for any signs of a less-than-unified front. Employees are very perceptive, and can see right through any hollow pronouncements. They can tell quickly whether managers are really "walking the talk."

This management team continuity does not come about fortuitously-it takes a lot of work. First and foremost, the integrated team must be truly integrated. They must be aligned towards common goals, have a clear understanding of their roles, and hold themselves mutually accountable for performance against these role responsibilities. Managers from both companies must have trust and confidence in their superiors, and must see their future aligned with their personal values and objectives.

The quickest way to achieve leadership team integration is to measure the current skill set and the operating cultures. This gives the "as is" condition. Then, based on their understanding of their strengths and weaknesses, and the business objectives desired, the leadership team documents their team charter and individual role responsibilities. This chartering process should address both the business objectives (such as integrating product lines) and the leadership-development objectives (such as increasing skills in a particular area, such as delegation).

We strongly advise companies to set up a management-level "transition team", staffed by managers from both organizations. This team should be assigned accountability for integrating the organizations on both the business and the cultural levels. They should also realize the importance of their actions on both a practical and symbolic level.

While it is important to establish teamwork and good working relationships, it is equally critical to take quick and decisive actions towards integration, as the combined organization is at a vulnerable point. Both the relationships and the business actions should be guided by the overarching vision and the company values espoused by the executives who drove the acquisition. Difficult decisions should be made as soon as practical, driven by the vision and the values desired. This sets a firm tone for the future of the combined organization, and embeds these governing principles in the evolving culture.

5. Transition Planning

Planning for the transition from two companies to one company is a critical element. On the one hand, it can send the right signals, by using an integrated team, setting a clear vision, establishing clear accountabilities, and using good project-management techniques.

On the other hand, transition planning (or failure to plan) can send inadvertent slights in an already troubled environment, set the stage for an "us versus them" climate, and bungle opportunities for synergies. Small slip-ups in the early stages of integration can start the whole process off spiraling down a vicious cycle. In fact, several clients have told us of prior acquisitions that NEVER became fully integrated.

In order to aid with transition planning, InterLINK brings a unique match of project-management skills with the people skills necessary to make large-scale change work. We offer a full range of services, from evaluating any existing transition plans to full-scale development of a detailed transition and integration process.

6. Retention of Key Employees

Often, most of the value of the purchased company-especially a smaller one-lies in the "human capital" of a few key employees. It makes sense for the acquiring organization to retain these key employees, or else lose the true value of the acquired organization.

Managers typically approach retention by offering money to key employees. While money certainly affects behavior, it is seldom sufficient by itself, and is often inappropriate. People want to feel good, and to feel that they are a valued part of a larger effort. They don't want to feel as if they have "sold out." Often the best attractors for employees are essentially free-but more meaningful for the employees and less costly for the company. These practices include recognition, helping provide a sense of meaning and stressing service to a higher good.

Perhaps the biggest attractor for key employees is the ability to make a difference. InterLINK advocates immediately involving key employees in significant positions, both in the acquiring organization and in the integration team.

7. Human Resource Policies and Benefits

The integration of HR policies and benefits between Company A and Company B often presents a challenge, and gives yet another opportunity for inadvertent slights. In one case, just the difference in lunch hours between the two organizations caused a simmering discontent that caused no end of trauma to the managers involved.

InterLINK experience with HR systems, introducing large-scale change, enables smoother integrations.

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