The final instalment of this series of blogs, from the perspective of a mythical CEO of a family owned business being acquired by a multinational corporate. It is based on my experience of deals across Asia and is not specific to one particular transaction. If you’d like to read the previous parts (which may make sense as they’re written in chronological order), you can access them here – Due diligence, Management Interviews, First 100 days.
What I want to do today is play out the difference in the ways of working…not from an academic, theoretical framework but from the way it feels on the ground. I hope they ring some bells, are entertaining and perhaps inform an approach in the future.
This is written in the first person from the perspective of the acquired CEO.
We do things differently
Over the past few months, the real differences in approach have started to emerge. Let me give you some illustrations;
Cash management and finance
We’ve always managed cash incredibly closely. Remember that for years, our bank was effectively the financial reserves of our owners, we didn’t have formal banking relationships. So all spend was authorised at the top. If we travelled anywhere, it was in the back and low cost!
For our new owners, it feels like every function has incredible levels of autonomy to spend whatever they need to spend…within the context of operational improvement or risk mitigation. Quite how we’re going to make any money with this level of investment is a good question.
What’s really difficult for us to understand is that in the past, finance was merely a coordinator of this process…the real decision makers were the owners. Going forward, it looks like the CFO is going to own the process from start to finish. The problem is that my current Finance Manager has neither the skills, the language capability or, probably most importantly, the internal authority to run the function like that.
The implication is that we need to hire someone new…inevitably more expensive. Which takes me back to my point about making money!
Speed of response and innovation
We are used to doing things quickly here. There was always the potential that the owners would say ‘no’ to something…often not necessarily for very rational reasons but if they were happy with an idea or were the originators, we’d have a new product in the market really fast. Our customers and our employees liked that about us. If you listened or read what they said about us, it was frequently highlighted as a really positive thing.
The process was simple. Someone came up with a good idea, they might approach me first…we’d go together to the owners, they’d make a decision more often than not on the spot.
Things are a little different now. Product development is run on a global basis. We went through the process recently for a really smart new idea, which from some informed customer feedback, had some real potential. We submitted the forms, business case, market feedback summary etc, a few weeks ago. I had a chat with the regional head last week…he told me confidentially that it would take 3-4 months to get approval!
Customer, what customer!
The way we deal with customers is really different. For them, their major global customer relationships are based on market position, competitive tendering and pricing. Their salespeople are set individual targets and are rewarded based on their personal performance. Pricing is centrally managed.
For us, our local relationships are based on network, history, service and personal connections. Our sales people, they got a bonus based on how we all performed. We’ve never paid commission. Pricing has been more of an art than a science. I’d look at an order, speak to the sales and ops people, think about the customer (in terms of the length of relationship, loyalty, importance and future prospects), think about a fair margin and give them a price. We would rarely negotiate, certainly not with those customers who know us…they know we’re giving them a fair price.
Both are fine, just very different and integrating them to some kind of standard approach is going to be a challenge. What’s interesting is that when confronted with these stark differences, the tendency amongst our new owners is to look at process, ours is to look at practice. A big difference indeed.
Categories: Corporate Culture, emerging markets, Employee Engagement, Family owned businesses, Mergers & acquisitions, post acquisition integration, Post merger integration, Selling, Transformation, Value Preservation