Dealmakers Planning for a Successful Merger or Acquisition: Success Measures for Alignment, Cultural Integration and Future Considerations

Success Measures and Future Considerations

In the October MidMarket Talk article, we dealt with Dealmakers Planning for a Successful Merger or Acquisition: Aligning the Rest of the Total Organization) and discussed letting all of staff know of the directions and focus of the new organization. Everyone needs to be clear on the reasons for the merger or acquisition. Additionally, as Carleton and Lineberry point out, staff needs to know “the direction of the new organization and the changes that are required for its success. Every member of the staff must be personally informed and invited to help the new organization succeed.” (Carleton & Lineberry, 2004, p. 111)

 

Advisors or consultants working with organizations follow a kind of mantra that sounds simple but is very complex when getting down to the challenges of a merger or acquisition. The Dealmakers or the advisors engaging in human capital issues need to consider three things:

  • Where are we going? (What is a new or needed direction? What IS the case for change?)
  • How will we get there? (What are the methods, tactics, strategies for making a change?)
  • How will we know we have arrived? (What measures could be put into place to gauge success with the change?)

 

As we discussed last month, all members of the new organization need to fully understand the reasons for the merger or acquisition. Keeping in mind that the major reason for the failure of mergers and acquisitions, culture clash is to blame. Culture clash becomes an issue in several ways.

 

As a reminder, we define culture clash as no more than differences in opinions and assumptions as to the “proper” manner and behaviors involved in pursuing the business plan. Culture clash occurs when two (or more) groups have different beliefs about:

  • Observable differences between the companies involved in a merger about: What is believed; what is important; what is valued; what should be measured; how people should be treated; how people treat one another; how decisions are made; how to manage and supervise; and how to communicate.
  • The disruption that occurs when the way one company conducts its business and treats its people is folded in with another company’s way of doing business.
  • Differences of opinion, disagreements, arguments, and different assumptions regarding the internal process of implementing the new business plan and strategy.
  • Perceived differences in organizational beliefs, values and practices.
  • Perceived differences between the two companies in degree of formality in style of dress, language, work space, communication and so forth.
  • “Winner-Loser” language used by either organization’s people. (Carleton & Lineberry, 2004) 


In looking at Aligning the Rest of the Total Organization, we presented an outline of the Staff (all organizational members) Involvement Day and the program goals. Some additional information on how to facilitate the day would be more helpful.

 

Staff Involvement Day: Sample Agenda and Materials

Program Goals

At the end of the day, participants in the Program will:

  • Understand the Case for Change, and the business and economic reasons driving recent and planned change.
    • An executive or senior manager leads this session. He or she will present more detailed information on why the change (merger or acquisition) needs to occur. Additionally, he or she will describe “the direction for the new company and the changes that will be required for the new organization to succeed (more on this later). He or she is also clear about the organizational consequences if those changes do not result in an effective and efficiently implemented commercial reality.” (Carleton & Lineberry, pp 113) 
      • Following this presentation, the larger group breaks into smaller groups for a focused discussion of the presentation and once finished they come back for a Q&A session with the manager or executive who made the decision. 
  • Understand the impact of their attitude about the company and the energy that they put into the job on the company's success.
  • Be clear on the specific Organizational and Management Commitments in progress or planned to address key business issues.
  • Understand what the company's vision, mission, strategy and values mean in their jobs.
    • This activity is a briefing on the values and practices determined by the managers in their All-Managers sessions. (See Appendix A for a sample list of values and management practices)
  • Understand the company's values and practices, and the 360 Leadership Survey feedback reports to managers.
  • Once the staff is clear on the values and practices, the manager can share what he or she designed as an individual Management Action Plan. This would probably need to include a description of a 360° feedback survey and report. The Management Group in their session agreed to be held accountable to those values and practices they created. 
  • Each of the management practices that support the organizational values are observable and therefore, measureable. The 360° feedback survey is designed usually with 25 to 30 different behavioral practices that will be rated by the manager and his or her peers, direct reports and manager.  We recommend an ipsative array rather than a normative one. In simple terms the ipsative array of results examines the relative strengths and weaknesses of the individual and does not compare the individual with other people. The somewhat “homogenized” population of other managers does not help with the unique needs and desired behavior for the new organization. 
  • Individually identify and take action that will directly contribute to the vision, mission, strategy and values.
    • Getting the staff involved is tantamount to success. In a facilitated sesssion, use of the Vector Group, Inc. Strategic Alignment Model (See Appendix B for a display of the model) can help the manager illustrate how those points fit together for the staff.
    • The manager can share his or her Management Action Plan and can walk the staff through the feedback report if it was completed.
      • Staff can see how their manager incorporated their feedback in his or her Action Plan.
      • This briefing demonstrates how serious the manager is in making changes.
      • The manager makes the point that everyone’s own manager will have their own action plan. 
      • The briefing shows that the manager is making changes organizationally and personally. (Carleton & Lineberry, 2004 p. 114)
  • Collectively recommend actions and initiatives for consideration by the Executive Board and senior management that will help the company succeed.

Post-Merger Success Measures

To the transactional Dealmaker, things are reasonably clear as far as the success of the deal if there is a financial return. 

 

The data on all these measures are routinely collected by the Finance, Legal and HR Departments, and can be used to monitor and assess organizational performance subsequent to a merger or acquisition.

Financial Success Measures 

  • Increase or decrease in share price
  • Increase or decrease in revenue
  • Increase or decrease in operating profit
  • Increase or decrease in profitability
  • Pay back of capital costs
  • Recovery of any premiums paid
  • Increase or decrease in productivity levels
  • Increase or decrease in market share
  • Loss of key executives
  • Loss of key staff

Cultural Integration Success Measures

The following measures are not routinely collected by the organization and are specific to measuring the progress and success of the cultural integration.

  • Web-Based Staff Opinion/Attitude Survey (Sample or All Staff)
    • Targeted or all-staff sampling at intervals to quantify the staff’s perceptions of and satisfaction with the integration activities to date. 
  • Web-Based Cultural Due Diligence (CDD) Resurvey (Sample or All Staff) 
    • A re-survey can be administered at or around the midpoint of the integration effort and the results compared to those of the initial survey.
  • Web-Based 360° Leadership and Management Survey
    • Follow-up surveys determine how well the manager is modeling the core values and practices.
  • Monitoring of Customer Service Levels and Customer Satisfaction
    • If these measures exist, they can be monitored to for variation from the norm.
  • Focus and Monitoring of Current Organizational Measures
    • Specific focus and monitoring of current measures of productivity.
  • "Listening Posts" and Focus Groups
    • People within various business units and functions can be assigned “listening post” duty to informally and periodically gather small groups of staff and ask them abou their satisfaction with the cultural integration, check or unresolved issues and ask for suggestions for improvement. 
  • Customer Interviews/Focus Groups/ Surveys 
    • Interviews and focus groups with or surveys can be conducted with key customers to assess the customers’ perspectives on the merger and how it is playing out in the marketplace. 

 

Staff retention, tardiness, absenteeism, performance to budget, and so on can also provide indicators about the status of the cultureal integration. Operational meaasures of facttory through-put, in-process inspection, out-of-box failures, etc. can also be used. Other measures of cultural integration can be spcifically designed and developed as the project parameters become known.  (Carleton & Lineberry, 2004, pp. 117-119.)

 

Next month: Future Considerations for Dealmakers.  


References

Carleton, J. Robert and Lineberry, Claude S., “Aligning the Total Organization,” Achieving Post-Merger Success: A Stakeholder’s Guide to Cultural Due Diligence, Assessment and Integration, Pfeiffer, John Wiley & Sons, 2004, pp. 111-116.

Carleton, J. Robert & Craig, Gary W., M&A Roadmap for Success, Unpublished Working Paper, ©2011, 2013, 2017. 


Appendix A

Organizational Values and Practices (Examples)

The following are examples of an Organizational or Corporate Values with supporting Management and 
Organizational Practices:

 

Commitment

  • Holds people for the commitments they make and challenge excuses in a positive way when appropriate.
  • Is willing to support the policies and positions that the management team has taken, even if one does not personally believe they are the best choices.
  • Encourages others to feel a sense of ownership for the tasks they perform, and the quality of the products or services they provide.

 

Teamwork

  • Links individual and team performance to overall organizational success, to help people feel an integral part of a larger effort.
  • Takes a "fair” share of the risks in mutual activities.
  • Knows when to involve others in decision-making and when to make decisions independently.

 

Customer

  • Ensures organizational members are clear about what their customers need and want from them.
  • Provides authority and support to allow decision-making that will satisfy customers.
  • Behaves as if his or her role in serving customers is both challenging and exciting.

 

Trust

  • Encourages spontaneous expression while decreasing any feelings of embarrassment or risk.
  • Is consistent in word and action.
  • Avoids saying anything about people that he or she would be unwilling to say to them directly.

 

People

  • Listens openly to people's ideas regardless of their position in the organization.
  • Readily recognizes and rewards good performance.
  • Attempts to positively resolve any misunderstandings or hard feelings with other people or groups within the organization.

 

Some examples of organizational values from real companies Vector Group has worked with include:

  • Commercial Awareness 
  • Customer Driven 
  • Honesty and Openness 
  • Working Together 
  • Spirit 
  • Dependability 
  • Quality 
  • Commitment 
  • Ownership 
  • Urgency 
  • Pride 
  • Risk 
  • Motivation 
  • High Expectations 
  • Recognition 
  • Trust 
  • Respect 
  • Assuring Direction 
  • Encouraging Initiative 
  • Modeling Excellence 


Appendix B


STRATEGIC ALIGNMENT MODEL©

©Vector Group, Inc., 2018

Gary W. Craig is Managing Partner and COO the Americas and Asia for Vector Group, Inc. You may reach him at gcraig@vectorgroupinc.com.  Vector Group is a global consulting firm specializing in systematic and systemic organizational diagnosis and interventions to ensure that corporate strategy, culture, and infrastructure are aligned to achieve breakthrough success. The firm’s focus is on Cultural Due Diligence (CDD) and Post-Merger or Post-Acquisition Integration. Vector Group, Inc. pioneered the concept of CDD. For more information, you may visit our website at http://www.vectorgroupinc.com or call us at (800) 566-0877.
 

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