Archive for Topics and Issues — Operations

435 — Smoother Mergers and Acquisitions — Participation Brings Higher Success Rates

Six out of ten acquisitions fail to meet their financial goals. Usually the operational and financial plans are realistic, but they don’t meet expectations because people and cultural issues prevent proper company integration.

Manage Uncertainty

When properly managed, a good merger process will strengthen both cultures, retaining key people and yielding the hoped for synergy that sadly eludes most acquisitions. Culture conflict is particularly acute when the two cultures are quite different, for example in size, centralization, openness, and formality. Even though details of what will happen cannot be known in advance, the process for merging the cultures and managing uncertainty can be clear.

The merger process will be unique to every merger but typically includes: scheduling regular update meetings, a dedicated process for posting and answering questions, and a way to include people who want to be involved in decisions. Post this decision process and invite comments for improvements. Participation is the key to success.

Communicate, Inform, Involve

Frequent and open communication reduces water-cooler talk — that is often misinformed and reinforces fears. Explain simply and clearly the acquisition’s purpose and goals. Make sure that people can personally identify with the combined company’s vision and mission.

Whether in reality, or in people’s imagination, acquisitions affect everyone. Involving those affected in the acquisition decision process — without slowing or complicating it — takes some skill, but is not as difficult as it might first seem. People want to know how they will fit into the new structure. Too often the merger team rushes to define the new structure, rather than involving employees in setting the new structure and direction, particularly how each person will fit into the new structure, his and her role and tasks. Involvement ensures a stronger plan with everyone committed to their new roles and to making the merger work. Ideally you have one person (or more) on the acquisition team who is focused on culture issues. This person, not consumed by the financial, legal, and logistical problems, provides feedback on the people side to the technical experts.

Example — The Acquired is Participatory

Managing any complex company is filled with uncertainty. This problem is magnified for managers facing a newly acquired company, of which they know practically nothing. Ideally they get help from the place of most knowledge — from the managers in the acquired company. Here is an example.

I was working with the Northern California division of Fortune (name changed) when it was acquired by a competitor, Allied (name changed). Anticipating what would happen if they did not act, I urged the Fortune managers to take control of the merger process before the Allied team came on-site. The Fortune management team was very apprehensive, “What could we do? Do we have the authority to do anything? What if we do something and they change it? Who should we ask for permission? etc., etc.”

The Acquired Managers Take Control of the Process

The Fortune team was a sophisticated leadership group that over three years had built open communications and strong relationships at all levels of their Division. Their early discussions of the merger, often about operational details, evolved into a realization that they could best serve the merger process by acting as facilitators between the two companies. So they planned a series of meetings and invited the leadership from both companies to meet, identify issues, and make decisions. They also decided to present the same open and inviting stance they had learned, not the defensive or protective one they had left behind, that still characterized other Fortune divisions, and also the acquiring company.

When the Buyer is Autocratic

They knew Allied had a centralized leadership style, concentrated in their mid-west headquarters. Allied middle management was used to taking orders and giving orders. They did not use, nor understand, participatory decision-making. The incoming Allied management team accepted the Fortune manager’s invitation to meet, but at the initial meeting I could tell, from the Allied manager’s words and faces, that they found the experience confusing. Understandably they had expected to meet people like themselves, managers who acted defensively, withholding information, jockeying for position, and highly deferential to superior authority. Instead they met a deliberately relaxed, friendly, open, candid, and non-deferential management team.

I was concerned by this, because I know that authoritarians usually interpret open behavior as weak. It tempts them to go for the jugular. Indeed a few of the younger managers from Allied were provoked by what they thought was vulnerability in the Fortune managers, and became openly hostile and aggressive. It was almost embarrassing to see these young managers strutting their stuff. But the Fortune managers knew better than to react to this. While they were concerned about the hostility, they controlled their impulses and maintained the open dialog, which, over several meetings persuaded most, though not all, of the Allied team to act similarly.

After several meetings I felt that the Allied vice president recognize the maturity of the Fortune managers, the sophistication of the process they had initiated, and the major benefits it was bringing to the merger.  But he had another problem. Above him was Allied’s top management that tolerated no challenge to their decrees. He rightly saw the dialogue of the joint meetings as a potential problem if it moved in a direction that conflicted with directives from his bosses, or with his own plans.

These joint planning meetings, conducted over several months, had many rough spots but when the dust settled the Allied vice president said that the Northern California Division merger process had been the smoothest and most successful of the many Divisions under his authority.

Example — The Acquirer is Participatory

A Texas chemical plant “A” was under threat of closure. We worked with the managers helping them build a participatory workplace that dramatically improved productivity while rebuilding the self-confidence of the A management team. When an adjoining chemical plant B declared bankruptcy the A managers propose to corporate that they acquire and merge the two plants. Though surprised by this local initiative, corporate agreed.

A was a vast international Corporation with sophisticated, detailed procedures. B was a standalone plant largely operating from the seat of its pants. Managers at A planned to bring order and stability to B. Managers at B feared stifling and suffocation from the order and procedures of A. While the A managers held most of the cards they did not know the plant B equipment and they wanted to retain if possible the experienced plant B employees and managers. What followed was a merry dance that lasted many, sometimes excruciating, months.

When the Acquired is Autocratic

Just as in the previous example the autocratic managers from plant B interpreted the openness of plant A managers as weakness. Plant B managers quickly became aggressive, thinking they could gain the upper hand. Plant B managers were confused when plant A managers did not fight back or fold but simply held their ground, restating their position, mostly about bringing more order and predictability to plant operating procedures and how the plants would be physically joined.

The confusion reached a head when the general manager of plant B resigned. He failed to see how plant could be run without his familiar top-down control style. His view of the participatory decision process was that he was being stripped of authority, that is, he was being asked to resign. When the plant A management team refused to accept his resignation he was totally confused. From his experience how could he run a plant if he didn’t have complete authority.

He wasn’t alone. Most of the original managers and supervisors could not understand participation. To help them learn, the plant A management team assigned some of their lower-level managers and supervises to act as “buddies”, working side-by-side with their counterparts at plant B. As these buddies develop stronger interpersonal relationships most of the plant B employees began to see that they were not being rolled over but were being welcomed. But it took a painfully long time for this to happen.

I was most impressed at the fortitude of the plant A managers in tolerating the kind of disruptive, sometimes childlike, acting-out behavior from plant B. I put it down to the sophisticated maturity of the plant A team that they kept the long-term goal clear — “Use the merger process to demonstrate the values that renewed our plant and made it so successful.” The A management team demonstrated participation, trust, openness, teamwork, tolerance, compassion and true leadership.

Though physically the merger of these two plants was extraordinarily complicated, merging the people side was more so. In the long run both cultures merged beautifully, almost doubling plant capacity at a very low cost. Corporate was delighted.

cc 435 — © Barry Phegan, Ph.D.

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431 — Improve Safety, Reduce Accidents

When leader’s actions show that they take personal responsibility for safety, employees will act safely.

Only With Trust Can You Discover the Truth

It was 7 AM when Andy Brown, Vice President of U.S. Manufacturing arrived at his office. The night before there had been a deadly explosion and fire in one of the company’s Gulf Coast plants. His boss, the EVP Operations, called. After talking for a few minutes Andy put down the phone and said, “He wants to know what happened and he wants some heads on the table. I tried to tell him that I can do either of those things but I can’t do both. He wouldn’t listen.” We discussed his dilemma and he quickly came up with a brilliant one-liner that would make a great corporate bumper sticker:

safe plant bumper sticker

Andy knew that to get at the root cause of the explosion, people must felt safe to speak the truth. If they were afraid for their job, he probably could not get at the real cause and therefore not know what procedure modifications to make to prevent another similar blast. Andy knows that to understand a problem you must look at what led to it, to the context, the situation, the system, the culture. To Andy, the explosion was a symptom and the cause was the system. To his boss the explosion was a problem that someone caused.

People don’t come to work to perform poorly. They want to be proud of their work and feel that they are a valuable and appreciated team member. Few of us deliberately do the wrong thing. There is rarely an excuse for poor performance, but if you look carefully you’ll always find an explanation. Every careless person has a reason.

Accidents Are a Symptom of a Cultural Problem

You can’t understand the cause of the accidents unless you put yourself into the employee’s shoes, understanding why the employee bypasses procedures, takes shortcuts, and ignores obvious evidence of mounting problems, and why, after an accident, the employee justifies this behavior with, “That is how we’ve always done things here.” Culturally speaking the employee did nothing wrong. He or she did just what was expected, behaving appropriately to his or her situation, to the culture, to what managers ask for, not in words but through their actions.

We each know what it’s like to work under pressure to get the job done. You feel that push every minute, in everything you do. Senior managers may even have a bonus for on-time or early project completion. Leaders typically deny any relationship between accidents and their leadership. Ironically, if their division does well they will quickly claim personal credit. But if there is an accident that same manager will blame it on external events or someone at lower levels. Looking in the mirror is painful.

Safety or Profits, or Safety and Profits? — Example

Jack, the manager of a large processing plant regularly preached to his managers and employees about safety, yet the plant’s safety record lagged well below the company’s norms. Jack was unaware of the contradictions between what he preached about safety and what he said through his actions. In management meetings he focused on the numbers, on productivity, labor hours, maintenance costs, expenses, overtime and downtime. It was clear to his managers, and everybody below them, that financial performance trumped safety — every time. Jack justified his emphasis saying, “That’s’ my job. If we aren’t profitable we won’t stay in business!”

We suggested to Jack that if he wanted to improve safety it would need to share the stage with finances. The message took repeating but Jack eventually heard it. He started opening his management meetings by asking for the safety numbers and how these affected his employees. It wasn’t long before the safety numbers improved — significantly. Jack was surprised to see that along with improved safety numbers, productivity slowly rose. His conversations with supervisors revealed that improved safety was improving employee morale and work attitudes. Employees were bringing more responsibility and energy to their jobs.

Fear Brings Silence

Most corporate executives claim they are not afraid to say what they think when they are in meetings with their peers and the CEO. Is that true? Executive meetings are typically dominated by the powerful field of competition, power, authority and control. Put a bunch of alpha males in the same room, human nature prevails. If this were the open savannas of Africa, fangs and claws would be bared — there would be blood. That’s scary.

But in the controlled calm of the executive suite competition is more subtle. Fear is largely suppressed and denied behind a cool front. What is thought and what is said may be worlds apart. When not speaking up, except about “business” issues (levels 1, 2 and 3 of culture) is the model at the executive level, you can be sure it’s the same down below.

Investigators of the BP Gulf oil spill, along with other well-researched “incidents”, unearthed the fear of speaking up. Most companies have box cars full of safety procedures. They don’t need more. The problem is that even when employees know the rules, know what should be done or see something being done wrong, they don’t speak up, don’t say “Stop.” Anyone who has worked in a large organization knows exactly how that feels. Bravery is stupidity.

Ironically, leaders in these bureaucratic and autocratic cultures often imagine they can improve safety by issuing even more rules and harsher directives, maybe even shouting at people to follow the rules and speak out. Of course in a culture or fear and passive-aggressive obedience, this has the opposite effect. It brings more fear, more silence.

Executives Will Get What They Ask For

As we say repeatedly on this website, what people do at the top gives permission for what happens below. To say that in reverse — if there’s a problem at lower levels you can be sure it is mirrored by a similar problem at the top. So if you plan to improve or develop a safer work culture the leadership team might ask itself, “What can we do differently to show we want things done differently in safety?”

These discussions invariably include the human levels of culture. They bring more openness and trust in the leadership team. When leaders combine that with trying new ways of showing safety in their daily work, they start changing the culture. This happens automatically as people below look up, see the new expectation and copy it. People want a safe workplace. When they see they have permission it doesn’t take long before the workplace is more psychologically and physically safe.

Warnings:

1. It is important that leaders don’t navel gaze by asking what they’re doing now that fosters the present safety problem. Human behavior and cultures are far too complex for such simple analysis. Searching for behavioral causes only brings accusations, denial, makes people angry, and in any case looks backwards rather than forwards. It’s more useful to ask, “How can we show greater safety with small changes in how we work together as a team and to how we each do our daily work?”

2. Delegating safety problems to Human Resources or to the engineering department is not only irrational, (it is a leadership issue, not a procedural, training or HR issue) it is counterproductive. People know safety is a leadership issue. When leaders delegate the problem there’s a clear message, “Don’t change. Keep things the way they are.

cc 431 – © Barry Phegan, Ph.D.

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