I suspect that the phrase most often heard and rarely delivered against in the transactions world is ‘people are our most important asset‘. It’s right up there with ‘there’s a natural cultural fit between our two companies‘ and ‘this acquisition will be earnings accretive in x years’! Why does the tendency to make statements based on zero knowledge and little chance of delivery continue in a market situation which has been proven to be notoriously difficult to predict?
Lets deal with retention in this blog. There are a number of urban myths that pervade corporate thinking in the deal space:
- The organisational structure of a business accurately reflects the process of decision making and the relevant hierarchy. It follows therefore that the people at the top of the pyramid are more valuable from a retention perspective than those below them
- People leave organisations going through corporate change primarily because of inadequate financial incentives to stay.
- The purchase of an asset such as a company automatically ties in the loyalty and willingness to cooperate of the people within it.
- Productivity of the workforce is in some way fixed and predictable.
In my opinion, the biggest single reason why deals fail to deliver value rests with these four statements. There are a few questions which you can answer to challenge these statements. Here they are:
In looking at the relationships you have in your company, does their influence match their seniority in the business?
Does your formal job description describe what you do accurately?
Does your job satisfaction relate most closely to what you get paid? What are the other factors that impact on your job satisfaction?
Does your loyalty to your current employer automatically transfer in any change of ownership? If not, what does that transfer of loyalty depend upon?
Is your personal productivity predictable, ie do you wake up in the morning and know precisely what you’re going to achieve that day? Do you see a correlation between the amount of sleep you get and your personal productivity?
There is a curious connection between the collective capability of people engaged in a creative or challenging task and the individual’s sense of security, self worth and level of engagement. Whilst acquirers often look at the former as a prized asset, they rarely look at the components required to achieve it.
- Cultural traditions do not excuse banks rule-breaking, by Patrick Jenkins of the FT
- Communications…how and why we continue to get it wrong!
Categories: Complex transformation, human behaviour, Human Capital, Mergers & acquisitions, Post merger integration, psychology, Transformation
Tags: Asset, Business, Collective behaviour, Company, Customer retention, Job satisfaction, Management, Merger integration, Mergers and acquisitions, productivity, retention, Small business, stakeholder management
Inarticulate ramblings of a management consultant 
Hi Ben,
I’m actually dealing with points one and two in a merger I’m project managing at this very moment. So your points are of course correct.
Interestingly, I started the organisation structure discussion by talking about what the desired operating model should be. I quickly abandoned that line of analysis as it didn’t resonate with the executives. Too abstract I’m afraid.
So instead resorted to talking about org structure itself and how the business would ‘operate’ within that structure. It’s a different approach but one that worked.
But your point about the org structure reflecting the way decisions get made is quite pertinent. If it doesn’t then it can undermine the whole governance framework and associated checks and balances.
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Hi Toby, great to hear from you and I’m glad that some of my ramblings have found resonance with you. Interesting what you say about org structure…I have an idea on this which I’m going to write on next week. The theme is rather than thinking about organisational structure from the perspective of spans of control, can we think about it as spans of communication? In particular in a deal, that might be very relecant
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Yes, that’s true. In the deal I’m working on at the moment the org structure has two views. The first view is the typical chain of command showing where the authority and accountabilities lie. The second view superimposed on the org structure is to show the grouping of functions that need to work very closely together if the business is to be a success.
Another interesting experience I found (which I think consultants need to be aware of) is that the pathway to developing an organisation structure isn’t necessarily through the development of a target operating model. Executives can be reluctant to be taken through the analytical steps, and prefer instead to go straight to the solution. But to get to the solution there does need to be an implicit logic that addresses how the business should actually operate. In this case, I dropped the term ‘operating model’ and simply talked about about ‘org structure’ instead.
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Interesting point about the implementation challenge…often the most difficult piece of all is stopping those you ask from designing the organisation around the incumbent / potential incumbent and designing it around the need / requirement
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Interesting article Ben. I am currently on the other side of a deal and although it is an asset based deal, there are also risks that are crystalising around retention in the retained business due to longevity issues in the longer term that are impacting both teams. It would be interesting to have a chat and swap ideas
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Great to hear from you, John…happy to have a chat about it. Will get in touch shortly
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