It is a widely known fact that acquisitions have a high rate of failure. Some people talk about 50%, whilst research shows that the rate is likely to be much higher. But why is that? A lot of money is invested in acquisitions, and a considerable amount goes into the due diligence processes related to finance and legality. But in our experience of supporting clients pre and post acquisition, it is addressing the intangible factors that is the key to success.
But what does that actually mean? A quick Google search suggests organisations need to look at “integration management, communication planning and tools” to integrate people effectively – sounds very much like project and programme management to me – arguably quite a hard way of approaching the less tangible? Of course, the planning is a crucial aspect to acquisitions and integration – but what about the actual individual key people? Capability of the top team? Cultural synergies and watch outs? Future relationships with all their risks and opportunities? How come so much money is spent on acquisitions and the tangible factors, and so little on the people? Is it too bold to say that an organisation without its people wouldn’t add much value in an acquisition?
A good example of an organisation taking this seriously is one of our clients, Smiths News, the leading newspaper and magazine wholesaler in the UK. They are an exciting business, with a strong focus on sustainable organic growth as well as diversification. In 2009 they successfully acquired Bertrams, a book wholesaler and earlier this year they acquired Dawson Holdings, who supply books to college libraries, newspapers and magazines to airlines as well as providing marketing services. Dealing with the acquisition of just one business is a complex and risky affair, but Smiths News was facing a real challenge – three businesses, three top teams, three cultures, three markets and three business plans.
With the backdrop of plans to integrate one of the Dawson businesses, the Smith News’ leadership team established that whilst they had done a lot of due diligence, a key area they wanted to address in more depth was the people side of the acquisition. They contacted Organisation Effectiveness Cambridge (OE Cam) to help them understand where the people in the acquired businesses were strong and weak – both individually and collectively. This would help provide the right support, identify talent, inform organisation design and gain an understanding of how talent could be moved across the group.
In addition to seeking a greater understanding of the capability and culture of the three businesses and their fit with Smiths News, they wanted to articulate a strong message about Smiths News’ business culture, and demonstrate the importance of understanding and developing people at Smiths News. This provided an opportunity to establish a common understanding of the importance of how people operate in addition to what they are delivering. Another area we were able to support them with was to understand the cultural perspective of acquiring an international business, and the ability to engage with Country Managers in different languages.
Based on our experience and taking into account what Smiths News had already done to understand Dawson Holdings, there were four key areas we wanted to address specifically:
- Competencies (including technical, functional and behavioural), in respect of working at Smiths News;
- Leadership and leadership relationships;
- Individual values and style;
- Cultural fit.
Whilst these were the main focus, our multi-dimensional approach to organisational effectiveness enabled us to also review some of the more tangible factors such as governance, operating models & accountabilities and strategy. Understanding the ‘less tangible’ people dimensions in the context of the ‘rational’ processes and structure, results in a far more robust analysis.
Working in close partnership with Glenn Leech, Smiths News’ Group HR Director and project sponsor, and other key stakeholders, we developed a capability and culture review, specifically tailored to the challenge of this acquisition. We also worked in partnership with the outgoing Chief Executive of the acquired business, to ensure getting the right review and the engagement with the people of the acquired business.
Senior Managers in key roles in the Dawson businesses were reviewed individually and collectively against key business criteria, to enable Smiths News to support transition into their business and thereby maximise value added by the integration, and to accelerate their understanding of the capability of the people they acquired and their cultural fit.
A particular challenge was to look at over 20 individuals in different roles, based in the UK, Central Europe, America and Asia, operating in different businesses, markets and cultures. To address this we went beyond assessing competencies. We reviewed capability and cultural fit against different roles, within the context of new line management relationships with Smith News and cultural sensitivities cross-country and between the organisations. To facilitate early engagement and accelerate decision making, we involved Functional Heads from the outset, providing the opportunity for early dialogue around the acquisition and their expectations. This also gave us the chance to gain insight into the collective capability and dynamics of the top teams, which was warmly welcomed by all parties.
The outputs of the review provided an understanding of the top teams in all three businesses to deliver the respective business strategy both on an individual and a collective basis. This informed decisions about how to foster the talent, getting the right people in the right roles, suitability of people to take on bigger roles in the group as well as how to support people’s transition into the business. Individual feedback was provided to all the participants by OE Cam as part of the commitment to develop them.
Our team received positive feedback from the individual participants as well as our client. We delivered invaluable insights within a matter of weeks and helped focus a process that could have easily dragged on over a year. Smiths News was able to make informed decisions, strategic plans and effectively support the acquired people early on in their journey of building a stronger, more connected business.
OE Cam invested significant time and resource in understanding our requirements and translating them into a practical plan that could be positively articulated to the acquired management team. Their insights have informed key people decisions and have accelerated our understanding of individual and collective capability. They effectively became an extension of our leadership team representing the business with great professionalism and empathy. Their project management skills were outstanding and the team went the extra mile when we needed them to”
(Glenn Leech, Smiths News)
Benefits of OE Cam’s approach
Organisation Effectiveness Cambridge works with a range of organisations, to support them in taking a proactive and early account of organisation, people and culture dimensions. Acting on these insights has increased shareholder value and supported post acquisition integration.
Our tailored approach in looking at capability and culture, whilst considering organisation effectiveness as a whole, can offer our clients much more than just a “classic” competency assessment.
- Ensure that the right individual and collective capability is in place to deliver the strategic plan
- Create clarity around staffing plans well in advance of integration
- Address potential cultural clashes and capability issues early on in the process
- Support and advice on key relationships between existing leaders and new people to accelerate building of good and effective relationships
- Improve the understanding of the tangible factors of the acquired organisation beyond the classic due diligence (e.g. around accountabilities, governance)z
- Help to engage early on with key stakeholders, facilitating exchange and relationship building from the outset
- Support allaying (understandable) fears of acquired top teams around their future that can decrease performance by facilitating early decision-making and setting of expectations
- Foster and accelerate the process of getting to know the acquired businesses and their key players.
So if you are about to spend a small fortune on acquiring a business and all the associated tangible assessments and due diligence processes, have a think – would it all be worth it if the people weren’t right?