10 years ago I worked on the integration of Boots and Alliance Unichem in the UK. It was a ground breaking deal in many ways:
- The largest private equity backed transaction / delisting at the time, around USD5.3 billion.
- The buyer, Alliance Unichem, was unknown in the UK…and yet here it was, buying one of the UK high street’s most adored ‘institutions’.
- This was one of the first major private equity deals in the retail / consumer domain, requiring very careful management of the message to the consumer. Note what happened to Cadbury in 2008, following the acquisition by Kraft.
All these considerations placed considerable pressure on the deal team but nothing was quite as significant as the awareness of the single biggest intangible of all…the incredible level of ‘trust’ as a brand value that was the cornerstone of the Boots reputation amongst consumers. This single dimension was not only reflected externally amongst Boots customers but as anyone who has studied the Service Profit Chain (see this link for a quick synopsis) was also mirrored in the attitudes of employees towards their employer and their leadership.
There is lots of academic research on the concept of Trust (see this link…worth a skim read) but in terms of a transaction, you can look at it from two perspectives; how does support your customer facing activities, and how does it support your internal activities.
- As a point of reference for the external benchmark, in this HBS study, high levels of trust between retailers and manufacturers on a pure sales based matrix led to 78% more sales than those with low levels of trust.
- From an internal perspective, Trust relates specifically to the extent this is recognised as existing internally between leadership and the employee base but also across different functions and activities. Perhaps the most obvious benefit is speed of response:
- ….with regard to information flow regarding customer preferences across functions servicing the same customer. If I, as an employee, trust the approach, attitude and intent of my colleagues, my endemic need to validate / verify is reduced and my speed of response is accelerated.
- ….to a change in direction from leadership. Most of the challenge around this relates to the requirement for ‘socialisation’ as leaders attempt to sell the new strategy to key stakeholders in the organisation. Trust enables implementation to start and complete more quickly.
There are three main objections that I can think of, with regard to this measure…I’ve listed them below (with my comments in response):
- The aspiration of every organisation is to be strong in this dimension…indeed, you might interpret it as a measure of corporate health.
- This is absolutely correct and scoring is much more relevant from a ‘direction of travel’ perspective than as a one-time exercise. However, the relative scores across two different businesses in an M&A can at least give you a sense of the relative value placed on these dimensions by the different groups of employees.
- No matter how quantitative, this dimension is entirely reliant on relative judgements, and by their very nature, employees have no other current employer against which to provide a perspective.
- We are confronted with decisions around trust in every purchasing decision that we make. Scoping the reference point on a much broader basis rather than employment is the solution.
- The perception of Trust is a deeply personal one…collective judgements are not really relevant.
- Of course this is true. The individual relationship between an employee and their manager is unique. However, organisations send messages all the time about acceptable / encouraged behaviour. As an example, there’s been incredible progress in the last 20 years around deeply unacceptable behaviour such as harassment and bullying at work. It’s this corporate cultural perspective which I’d look to investigate and quantify.
In summary, there is an interesting dichotomy here. In any external customer survey, the evidence of Trust is probably the best evidence of brand success for any customer orientated organisation. Finding it internally as a part of the culture of an acquired business does not seem to merit the same focus on preservation and celebration…