3 Ways To Screw Up Your Newly Purchased Company
I have been pondering the thought process of corporations, and their acquisition of companies, for several years. I am perplexed with many actions that follow the signing of the agreements.
With all the companies changing hands these days I thought it a good idea (will see how good by how badly I’m flamed) to toss out a few nuggets to chew on; a few items to ponder. I hope these thoughts help make a future transition easier and ultimately less stressful which produces happier employees, which yields better customer service, which translates into higher profitability.
Here are 3 of a longer list of items that I think are major fopas when acquiring a new company; perhaps even worth considering for your own company. In the Letterman style of the top 10, let’s do a top 3.
3) Not understanding the personnel pecking order
The inner workings of a company are not always apparent. We have the false opinion that the managers are the ones in charge and while the paper titles and the org charts indicate the hierarchy, the reality of who is in power is often quite different. Who holds the true influence in the company? Who knows the real stories behind the stories and who knows the products you sell and how they work?
You don’t know what you don’t know and what you don’t know may hurt you.
New acquisitions necessitate changes, including moving people into suitable roles. Sometimes that new role becomes “job seeker”. The manner in which changes are made, especially involving people, is delicate and should be done with wisdom and compassion, not numbers based evidence. I have witnessed numerous poorly executed changes where top management terminated, reassigned or reallocated personnel without any clue of the disarray and churn left in the wake of their decisions. The fallout of such churn is felt for years and more importantly, customers suffer as a result.
I am not suggesting that we turn a blind eye on bad behavior, poor performance, or any other mission critical factors affecting legal or customer based issues. I am, however, suggesting not every change requires a strong arm approach and having open conversations with the new team will often yield more favorable outcomes. As radical as that idea is, talking with the team and actively listening to their response, is a positive thing.
2) Changing the name of the acquired company
There seems to be no monopoly on who is allowed to make this blunder. If the new acquisition has a less-than-marketable name, by all means change it. If the company has a long history of bad service, inferior products, and unethical practices then besides the first question of why one would make such a purchase, change it quickly with a huge splash. If the goal is to address a new market or industry, a changed name is perhaps a grand strategy.
I have seen companies change their long-standing name thinking this will, well, dang – I have no clue what they are thinking. I make the far-fetching assumption that marketing sang the song of better rhyming with the yet to be discussed new 4-page mission statement. Perhaps sales fancies a cute acronym, after all, everyone has them these days. Then the fatal blow, a board member suggests a new name to position the company as a cutting-edge player in this new Internet age. One word; Yikes!
Besides the obvious cost of changing the name on business goods, legal documents, contracts, contract renegotiations, logos, marketing material, signage and way more, consider the lost mind-space. Mind-space is the investment made for a ranking in the consumer’s brain and corporations pay billions to occupy a small fraction of that space. Ever consider what a frog has in common with a beer and why a company would pay several hundred million dollars for advertisements to entertain you with the idea that there just may be a connection?
When a company changes its name, it weakens every product and annihilates every advertisement, flyer, radio spot or promo that has been created and it is positioning itself in the start-up space which is now flooding faster with new entrants than ever in our history. No one knows the new company, not even the search engines and the lost SEO is an entire post alone. Add to that, consumers are so trained to spot spam from unknown sources it may be argued the grand change will fall on deaf ears for months, possibly years, and quite a few will never make the connection that the new is the old but allegedly better.
The idea is to be new, so the name change will put the garage shop start-up on equal ground with a 30-year giant who changes their name. The competition will flourish in the newly vacated space unless the company changing its name equally quickly rushes back. An expensive task and one that may not be accomplished. Of course, the presumed goal was better market recognition so one is left questioning the strategy.
30-year giant market leaders don’t change their name, you say. Well, I may have to agree because as I ponder the age of the recent company which did just that, it was actually 40+ years old and the purchaser paid 5 Billion dollars for it; That’s a capital B. The second, well maybe third step, was to change the name to something so foreign to where the company was playing it was lost in the landscape. This was THE market leader in the space with a worldwide footprint. Competitors would reference this company when saying they were “better at…” anything and this group set many standards in the industry.
In my mind, there are several reasons to purchase a company. But purchasing a market leader and changing their name to give up the market mind-space is an incredible act which I just cannot wrap my head around.
And now, the number one way to screw up your newly purchased company.
1) Making changes before you know the full landscape
Besides the obvious absurdity of purchasing a company we do not believe in, why would we choose to impose changes upon an organization whose process is not understood? Several answers come to mind and none are worth penning here, except perhaps, Ego.
There are sayings; Seek to understand before seeking to be understood. Listening is more important than speaking because we have 2 ears and one mouth. The list is quite voluminous and I’m sure you have uttered several already.
A few interesting items to consider.
First, people are not things.
Second, I would suggest the goal of an acquisition is to incorporate a new company, team, and products successfully, with as little friction, turbulence, and market disruption as possible; to make the resulting organization better, stronger, and more viable than the sum of its parts.
Third, people are not things.
Unless the company was purchased to be dismantled and its assets absorbed into the collective it is likely a major portion of the company value is based on its people. People with a capital P – Not an asset, not a resource. People aren’t too fond of having things done to them without their permission. Oddly enough, people will endure significant hardship when they give their permission. People are full of insecurities, contradictions and conflicted beliefs – a lack of information fuels these immensely.
These are not new facts. We know this stuff and yet somehow what we know and how we act are disjointed.
Good money was just spent to purchase a company and the first thing that happens is changes are rolled down from corporate with statements made on how things will now be better. Other times a statement comes from corporate stating how nothing will change. Whichever the strategy, chances are both statements will be received with equal disdain.
Let’s consider the company being acquired; they are in a state of unknown flux. During acquisition talks, conversations are had with key executives and perhaps a few key team members. Often the employee base has little knowledge about what is transpiring and often their first awareness that a change of ownership has occurred is the company staff meeting. The new acquisition, the investment, the resource, the asset, is now in a volatile state of tension. Blow up a balloon to its max capacity and a pin will easy explode it, leaving little. A deflated balloon can absorb many pin punctures without much evidence of injury. The newly acquired asset is a filled balloon.
The people factor will take time, patience, and skill. The time can be reduced with open communication. This isn’t a series of 5 videos announcing how things will be and resistance is futile. It is painting a clear vision of the future, asking questions and listening. It is providing leadership as the new team seeks to understand WHY things were done the way they were, WHY that policy is in place and WHY has this “always been done this way”. Surprisingly the mere asking why challenges assumptions and identifies better ways; engaging the acquired group in the process, paving the route for the anticipated changes and deflating the balloon. Occasionally, corporate even discovers a new idea. Additionally, major setbacks can be averted because the team knows why.
Mishandling this phase destroys more potential, disrupts more process and wounds more people than can be measured. The impact is deep and can cause significant turnover. For knowledge-based organizations this translates to your investment walking out the door and your future lost opportunity costs have just spiked. If you hear statements like “they weren’t a team player”, “they are never happy”, “they weren’t engaged” and similar, these are often a result of mishandling the integration phase evidenced months and sometimes years later.
Management needs to stop being a boss and become a leader. Create a vision, and lead, don’t drive, the integration. The resulting organization will be stronger and customers win. Happy customers reward organizations with their wallet and praise.
Written by Wolf Scott
Founding Fellow at IOIHAN www.ioihan.com