How to Create Better People Experience in M&A

Hello M and A Friends. This podcast is brought to you by dealview. M&A is coming back. Would you like to avoid wasting hundreds of hours managing Excel Trackers and building PowerPoint reports? Do you want to make your process more efficient? Well, I have great news for you. Deal Room is MNA management software to save you time, headaches and improves collaboration so you realize value faster. Learn more@dealroom.net keep here's to the deal. I'm Kisam Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, and what actually happened during M and A deals. Foreign I'm Kisan Patel, CEO and Founder of M and A Science, hosting this conversation with Clint Kendrick, chair of the HR M&A Roundtable Group. Clint's also worked with several Fortune 500 companies and HR M&A leader, and he's an author of a great book called the HR Practitioner's Guide to Mergers and Acquisitions. Due Diligence, I highly recommend. It's a fun read. How are you doing Clint?

I'm great. Thanks so much.

Hey, great to hear we're sort of extending the same theme from Chris's presentation around a people experience and this is a little bit different than a typical podcast interview. I reached out to you because I was working on a blog post. On this blog post I was trying to summarize what are the key lessons that we've done well over a hundred of these podcast interviews and intentionally tried to extract as much information as we possibly can and try to identify what are some of these best practices and key takeaway lessons learned. And I noticed there was this theme that it all related to the people experience and it made me think of you. So I reached out and I thought it'd be great to have more of a fireside casual conversation. Let's go through this list. I came up with. Do a bit of a sanity check. You know, I don't mind being told if I'm wrong or this doesn't make sense. Let's just have a casual conversation. Let's do something a little different and have some fun with it to kick things off. Clint, I think all of this essentially rolls up to this one theme around people focused process. It essentially rolls around the shift from a finance focused M and A approach to now a people focused M and A approach. I just want to hear because you've been actively working on deals for I don't want to count how many years. What are you seeing shifting Just at a high level.

Sure. I'd like to say I've been working on deals for long enough to go from the headshot you have to all the gray in my beard now. So I'm definitely seeing some big shifts. When I first started working on M and as I could barely use the word culture in a room and be taken serious, so I ended up couching it in terms like operational readiness or operational preparedness. And now I can actually use the word culture and have leaders take us seriously. It's really been a pretty profound shift and I think it mirrors an ongoing trend in the business world in general. We're really moving away from a focus on just the financials. ISO has just rolled out a new standard around human capital reporting for publicly traded companies. The SEC wants to know what's going on with human capital. We see this great resignation happening all around us and we're seeing the damage it does to companies and their revenue stream. So I think people are just going to become a greater and greater focus of the business world. And as a people person, I'm really excited to see that shift happening.

Tides are turning in your favor.

And that's not to say that the financial pieces aren't important. We can't pay people without making money. But it's really good to see that things are becoming quite a bit more balanced.

First item I wanted to kick off. The idea here is bringing the end state to the very front of the process. This essentially means getting your integration lead involved. Obviously it's hard to get them at the very beginning, but when it makes sense and when you're headed towards an loi, hey, can you get the integration lead involved and start shaping what a go to market outline looks like? The idea here is to start shaping the involvement in that vision that both companies need to work towards.

I absolutely agree. One of the companies that I've worked for did a really great job of not pulling in just the IMO lead, but really all of the functional leads into pipeline review conversations. And it was really great to get a sense of what was on the minds of our corporate development leaders, the kinds of targets they were looking at, really. It gave me an opportunity as an HR functional lead to understand where I could add value in the conversation. One of the situations I remember really clearly we were looking at buying a small firm for global expansion purposes. When we looked at the final projections of where they wanted to grow this business, it turned out that there weren't enough people in that particular country to staff the jobs that we needed staffed there. So had we made that particular purchase, we would have really struggled to find the talent to fill the jobs. It was a job that required a very specific licensure and there just wasn't the talent in that country. Knowing what the end state was and having me pulled in before we even reached out to that target company so that we could look at the talent realities was really critical. I also think it's really helpful to build out the OKRs so that everybody in the transaction understands why are we doing this and what do we need to do. I think those are really helpful pieces for us to have in place.

You got a good point there. It's not only being the integration lead early, but even the HR and start helping the key folks that are going to be executing on the value creation activities post close to get that full picture view and start getting the thinking early. So HR integration lead and legal essentially should be involved as early as possible?

Absolutely. And I think depending on the deal and what the proverbial secret sauce is, there may be other functions that need to be pulled in as well.

Number two, culture. It's okay to say culture. Now the idea here is leading with values even early as possible. If the CEOs can start shaping the consideration of doing the deal by understanding each respected organization's unique values and being able to identify where they have commonalities and key differences in culture, letting them get that understanding where, how are they going to mitigate some of the differences and how's that going to shape the actual integration down the road? Love to hear some of your thoughts around that idea.

Culture. In my mind, Kisan is a thing that requires leaders from both sides of the deal to be involved. We want to make sure that both sides of the deal, speaking of beginning with the end in mind, we want to make sure that the target company leaders understand where things are going. And I believe it's better to do that as early as possible. Sometimes you do need to play your cards very close to the chest, but when it's appropriate to share that information, you really want to enroll and enlist the leaders on both sides to have that conversation. That gets much, much easier if you understand the culture of the other side. One of the things that we hear a lot about is about the organization's values. I think it's important to go a step further. Values sometimes look really great on a sheet of paper and sometimes they even have the same words. It's not uncommon for me to see especially startups that have statements like have fun or win and who doesn't want to be part of a winning team that's having fun. But fun can look different ways at different companies. I think about my younger brother and his idea of fun is going out into the woods for a carrying everything that he needs on his back and not showering. And to me that sounds like torture. You push me out into the woods like that and that is not fun for me. To take it to a company level, if we talk about winning, if at one company winning means that you're going to cut margins to land a customer so that you get your customer count up, that might be winning at company A, but if company B considers winning taking only the business where you can maintain the margins, you have a culture shock, have a cultural difference in how things are done and that can really affect how the integration goes with your go to market team. I also think of a situation where there was some significant cultural misalignment early in my career. The acquired CEO was really surprised at some of the changes that were going to be made post close. He was pretty vocal about it. He actually started to sabotage the integration work, started to whisper into the employees ears and some of those key influencers ended up finding different jobs and leaving and it really made that deal lose value almost immediately because that acquired leader was not on board even though the value statements looked almost identical on paper.

With understanding the culture side, here's his view around values. But you have a bit of a more in depth perspective coming from the HR function. When do you would start thinking about getting involved in the deal and shaping the culture risk part?

I like to get involved as early as possible just because I think I have an opportunity to make a difference and understand what we're trying to do with an acquired company and what kind of change will be required of the employees. They go from company A to company B. The earlier you can pull the team in that's going to be responsible for making those changes. I think the better off everybody is. There are a lot of ways to due diligence before the LOI is even signed. There's a lot of publicly available information out there on a lot of organizations and by taking the time to go hunt around sites like Glassdoor, which is an employee review site, I found really interesting information on companies and their culture just looking at their Yelp reviews. If they've got customer facing offices, how do they they treat customers who are unhappy or dissatisfied? You can also find a lot from Better Business Bureau reviews of some offices. So there's information out there for especially smaller customer facing Targets that we can go look at media interviews that founders have given to the media can be really helpful. I remember a situation where a founder led company that we were acquiring. When I looked at where the founder was doing interviews, he had a serial entrepreneur, he had set up a number of small businesses and and all of his media interviews were on a different business than the one that we were acquiring. Our value proposition required him to stay in place and lead for a year. But based on the media that we were seeing, it's not where he was spending his time. He was spending his time on some of these other ventures. We were able to learn right away that he probably wasn't going to stick around and we could make some different choices. In addition to understanding his motivation and where he was spending his time, we understood his values and his approach and his philosophy and. And we found that carried through the rest of the organization as we started to integrate them.

Number three for you, deal structure, integration, risk management are all connected with this. I think there's a few themes. There's one around the valuation model should be continuously updated as you gather information, but also getting integration practitioners involved early to help validate those synergy assumptions. This kind of also reflects back around shaping some of the OKRs as well as we sort of understand what are going to be the goals that we need to line around to make all this come together.

I know that we tend to talk about diligence in terms of confirmatory diligence, mostly for the financials or viability of products. But I think that a big part of diligence is shifting to looking at the viability of the integration plan. For that reason, I think where possible, knowing what the integration plan is early on can make an enormous difference because you know where the company is or at least you'll be learning it during the diligence process. And whether you use a short diligence process or a long diligence process, I love the prior speaker who said the diligence question was how do you sell? If you understand how they sell now and how you want them to sell at point B, you can understand the risk of moving people from point A to point B and you can put your mitigations into place and that makes an enormous difference. And where possible, partnering with the other side and understanding how their teams have reacted to change in the past and the kinds of things that they've found to successfully motivate and incentivize their team to meet different targets or to pivot when market conditions or customer needs have dictated that can also make a really huge difference. Also, Kisan can make a big difference with the communication plan. One of the things that I've seen go terribly wrong or terribly right in a deal is how employees are communicated with on day one. And I loved the example earlier about sitting the leaders in the room and saying, hey, we've just been acquired and letting them sit with that for a moment. That feeling of unease and uncertainty, you're going to deal with that unease and uncertainty in slightly different ways. For the audience you're speaking with, understanding who you're talking to can really help shape the communication plan. Who's the messenger? How are you going to communicate with them? How often are you going to communicate with them? While you might want to start off with a typical way of doing things, a template that as you go through the diligence process, you can continuously iterate that process and come up with some tweaks to it. Sometimes you need to throw the whole thing away and start over if it looks like it's just not going to be workable. But the diligence process and thinking about where you're going to be headed in integration can make just all the difference in the world for ensuring people begin.

Along that change curve, validate assumptions, bring the folks that are executing integration involved early and start shaping the comm plan because that's going to be key messaging as you move through this process. This one is one that's probably a more recent trend that I've noticed is traditionally organizations will approach integration with work streams that are based on function. When we mentioned OKRs and building out a deal and aligning the big picture and why we're buying this company. What are going to be the specific goals of this deal? The idea here is to shift from that traditional approach of functional based work streams to creating cross functional work streams that align around those okrs. Just be more efficient, focused and inherently knock out a lot of the dependency tracking issues that tend to occur.

Yeah, I've always found it on the employee side, especially where I spend most of my time. A cross functional team is almost always required. It's not just hr. We're great at getting people on their benefits and payroll. We have our areas where we really excel. But a lot of the employee experience is shaped by things that are managed by it. What's my computer doing? And trust me, you do not want me being your HR tech support guy. That's just a recipe for disaster. So I've got a partner with it, I've got to partner with tax. I'VE got to partner with the finance team. Depending on how the organization is set up, there might be a shared services model. There's a lot of different groups that need to get involved just to deliver on the employee experience. And now I think about to Chris's point earlier, taking that out to the other human stakeholders in a deal, what's going to happen with the customers? Is it really just sales that we need to worry about, or is there a whole backend process about how they're now going to be invoiced? What's the payables and receivables look like from a customer standpoint? And we can't just leave one function to manage those experiences and expect to not have some value leak if it goes sideways.

That's a great point. Tying it back into customer experience, employee experience, when designating those cross functional teams to take ownership of that as well. Number five, this is probably from an HR interview, but identify actual key people early and figure out what it takes to retain them.

Yeah, this one's near and dear to my heart because this is an area where I messed up. So on the very first deal that I did with the training wheels off, I'd been trained on a couple of deals working for a serial acquirer. I got to admit, I sometimes get a little bit overconfident, as anybody who knows me will attest. Boy, did that show up. I'm like, I know what I'm doing. We've got this handled. And we walk into the announcement meeting, there's a bunch of the employees sitting there. They knew something was going on because why are they in this big hotel ballroom? We go up and we do the announce and I'm ready to go have a celebratory beer because that announce went awesome. And then my cell phone starts to blow up. And I think it was a BlackBerry back in the day. To just give you some context for how old I am, it turns out that one of the key people was a developer who had written all of the source code for the company that we had just picked up. To say he was unhappy would be an understatement. The technical HR term that I would use is pissed. He did not feel like he was being valued in that transaction. And to be real, he wasn't. I was with a firm that really looked primarily at the C suite as the key people. And in this case, we had missed the guy who was probably driving most of the value in that transaction. He had made the thing that they were going to go sell. He was not A particularly personable individual. If you think about all of the really bad stereotypes of developers where they're antisocial, need a haircut, not real personable, this guy fit that. So of course he wasn't going to float anybody's attention during these conversations. But if I had gone and talked to my technical team and had pulled everybody together, we would've caught him. We would've understood that this person was a key player and driving a lot of the value, a lot of that secret sauce that I keep talking about. So one of the things that I've done that helps me out is I pull together what I call a post diligence huddle. I bring together everybody on the deal team. We ask two questions and the first question is about talent. Who are we going to need to keep on board if we're going to take this company from point A to point B? The second question I ask is really a culture question and that's what are we break when we bring this company from point A to point B? Those are questions that are cross functional. It really helps us to understand the target company and who it is that we need to keep around. It can just make such an enormous difference. And I imagine that most of the folks who've done a few deals on the phone have those situations where it's, oh, shoot, we really needed to take care of this particular individual or this particular group and we missed them. It's really great to be able to put some steps in place to make sure we don't miss them in the future.

It's tough because the example you gave, that's a hidden person, that's not somebody that's got a C suite designated title. And it's obvious as a key person. How do you avoid missing that?

In this particular case, when a source code review was happening, we asked a bunch of questions about where it was developed. And I found out later that this individual's name came up a number of times when that tech team had gone in. And I think the onus is on the acquirer in most cases. Usually the acquirer is a little bit more sophisticated about the process. It's on the acquirer to really understand what it is that you're wanting to buy. Had I asked better questions of my colleagues, I would have understand better who those people were. Sure this person was hidden. He wasn't going to show up as a name on an org chart. But as my colleagues were doing their diligence in their various work streams, his name had come up a few times when I Tapped one on the shoulder and said, hey, have you heard of so and so? They're like, oh, yeah, yeah, he's great. And I'm like, why didn't I find out about him? That's why I started to put that post diligence huddle in place. That's not necessarily scalable. That was an acquisition with. It's been years, but it was under 200 people. I think it was like 180, give or take. That may not be scalable to an organization with thousands or tens of thousands of employees that you're bringing over. But I'm inclined to believe for most of the deals that most of us do, which are those middle market deals that we can usually find those hidden.

Gems, figure out who the company mayor is.

Yeah.

All right, number six. This actually came up in a couple interviews this year. But the idea of reverse diligence makes integration smoother. And here we're essentially trying to get the target organization to understand the parent organization, what that organization looks like, their different business lines, and how are they going to fit into it.

You want to make sure that there's that culture fit that everybody talks about. One of the things that I'm seeing outside of the M and A context is companies who are being really forthright in their recruiting efforts to explain their business and what's going on. I have a friend of mine who applied for a job, went through the interview process and was offered an opportunity to talk with several employees who were already there so that they could ask those culture questions. Am I going to fit into this company with my background, having gone to this school or growing up in this part of the country or belonging to this particular demographic? And I think that's a really great approach to transition from the way that we recruit people off the street to the way that we share information with the target company. It's very transparent. It's very honest. Now, obviously we need people who are under the tent to have those conversations. But being able to go in and talk, especially with the leaders at the target company and say, this is who we are, this is what we do. These are our non negotiables, this is how we're thinking about integrating you, it allows them to really understand what the future plan is. For a lot of the folks that I've worked with, when it's been smaller deals that are founder driven, those companies are their baby. If we can tell them how we're going to take care of their baby, it just makes an enormous difference in terms of cooperation, in terms of the Mind share that we get. And in terms of helping us to avoid stupid mistakes because they really get involved and roll up their sleeves and want to help make sure that it's as successful as possible. And if they're not armed with the information to do that, we're really not setting them up to help us.

Yeah, I like the idea of getting the non negotiables out there early. Do you feel that resolves some of the things maybe earlier or adds clarity and comfort with doing the deal?

Yeah. One of the companies I was with started doing that about halfway through my tenure where our integration management office came in and it was one of those things that we first rolled out about the time the deal closed and then it kept getting pulled further and further forward. So we were giving that information sooner and sooner because we found it was valuable information to have sooner. We had a deck that said, hey, this is how we do things. This is how we're thinking about your integration. Here's some information about the company, here's who some of our key players are, here's what some of the other companies that we've acquired have experienced and what they've said and some of the lessons that they've learned. And I really think that Induction conversation, it made the integration go so much more smoothly.

I like the idea of bringing in the lessons learned from other deals.

If you've never sold a company before or never been acquired before, it can be really a surprising experience. You think it's going to go one way, but the reality of it is sometimes not that way. And trying to give folks a realistic preview of what they might expect or the emotions they might experience. In a lot of organizations where you end up with somebody who's got a lot of control and now they no longer have that control, that can be a huge shock to the system. And so being really transparent and at least helping to prepare them for that system shock, in my mind is just an act of kindness so that they're at least starting to think about it even if they're not fully prepared in the moment.

All right, number seven, this is a little curveball for you. It's just something that doesn't come up in HR interviews. Building essentially an operating model to define how the M and A function works. And this is where ideas of Agile M and A is a framework creating some of the techniques around it that your team's looking to standardize on. Any thoughts around that? And this kind of lends to some of the earlier things around having frameworks in place to really Set the team up for success, give them the ability to make their own decisions and move in more of a agile fashion as opposed to just strictly relying on a standardized checklist.

This is where I should probably point people to your book, which is really fantastic. Talking about how to do Agile M and A. Well, part of what I love about that is it's got real stories and real situation so that those of us working in the M and A world can really get a sense of it from other practitioners. One of the things that I see this a lot, Kisan, is with the change management piece. I know you're talking about the operating model overall, but I think with change management I see this a lot. We want to get everybody on the same page, but you can't change everything at once. Just like you usually can't set up the operating model all at once. There's things that need to happen before you can get from point A to point B with your operating model. And I think you've got to pull everybody together. So I think it was your fourth point where we were really talking about the cross functional nature of integration work. Bringing everybody together and having those conversations about okay, what are we going to do in the next 30, 60, 90 days? I often hear about the 100 day plan and sure it's great to start with a checklist, but again it's only good if everything's a cookie cutter transaction and I've done close to 90 in my career. I'm becoming a more and more firm believer that if you've done one transaction, you've done one transaction and that every deal is different. Having those conversations at 30, 60, 90 days where you're looking at what happened and how you need to tweak things in the big picture is great, but we're learning new information on an almost daily basis. Once we can really get into the organization, having those stand up meetings really critical because new information might change the way that we manage our priorities and trying to understand which priorities are we really going to pull forward right now, what needs to change right now and what can wait until later as we accomplish certain milestones or benchmarks. Really holding those retrospectives and trying to understand what it is that we maybe could have handled a little bit differently and are there things that we need to do into the future so that we can really apply what we're learning right now to work streams down the line. And I really trying to get out in front of that with the pre mortems, trying to understand, okay, if something goes wrong, what will it be as we gain more information through the integration process, we need to be having those conversations more and more often. Okay, hey, here's a couple new pieces of information that we didn't have. How are we going to apply that? How is that going to break things? How is that going to help things? It really is in my mind the way that we need to do things, especially with the speed of integration increasing.

You covered a lot of good agile techniques, some of the ones I favor, and I like the idea of being iterative as you think through change management. But even the operating model, like looking at that as a continuous process. I'm probably going to go back and change that to just be agile because I think that's what it rolls up into and there's a lot of ways to approach it. Like the change management side, you're not going to be able to go from one way of operating to another all at once. It's going to be through a series of iterations. We're going to go back to another HR one. Number eight, empathy. Just one word, that's it. Let's chat about empathy and the importance of it in the context of M and A.

If you're outsourcing empathy to the HR department, you may have a problem because it can't just be us having empathy. It really has to be the entire organization that has some empathy for the acquired employees. Being acquired is one of the most difficult things that people will go through in their careers. And if you've never been acquired, then just ask some of the people that you know. When you get around the Thanksgiving table or you have your holiday gatherings, ask the people in your life, any of them have been acquired. Just wait. If they say yes, I promise you that if you don't say anything for 15, 30 seconds, they will tell you all about the experience. And unfortunately, most of the time it's not going to be a great story. I was asked a while back what my first experience in M and A was, and it wasn't when I became the HR guy on a deal. The first time I was acquired was real easy. All they did was they changed the name on my paycheck and I got a new email address. And the second time was when that same company so I was acquired once. It was a consolidation play by an organization that was bundling up a bunch of different recruiting firms. I was a headhunter at the time, bundling up a bunch of recruiting firms to then sell to another organization. The second time I was acquired in the same job, it upended Everything. I had a brand new baby at home. My son had been born three or four weeks prior to the acquisition being announced. My wife at the time was not working outside the home. She had a full time job with two young kids and they laid out my new compensation package. And I did the math and Kisan, I think I shared this with you before they changed my bonus structure in such a way that I was worried about paying my rent. It had just changed everything so dramatically that I was really dealing with that very bottom of Maslow's triangle. Am I going to have a roof over my head? Am I going to be able to take care of my kids? The answer was no. And I said, I don't think this is going to work for me. And I ended up moving across the country to find a comparable job. So clearly that experience of being acquired was really not a positive experience. And I'll never forget the way that that manager delivered that. He actually looked like he could care less as I've got the maturity behind me and unfortunately I've had to be that messenger a few times to laying somebody off or delivering bad news is never easy and some people just go blank face to protect themselves emotionally. But had he shown just a little bit of empathy, I think that it would have been a much easier experience on me and on my coworkers. Because when I shared with my coworkers my experience, a lot of them were in the same boat and I think it may have tipped several of them towards leaving. And within a few months, none of that initial team was there. I walked away with a million dollar book of business. Several of my coworkers walked away with a million dollar book of business. And that company you. Right away me and my coworkers lost our careers. The company lost millions of dollars in reliable revenue. Nobody really won because there was a real lack of empathy in how that was handled. But if we make it even a little bit less dramatic and let's say people stay around, you want their hearts, you don't just want their hands. Empathy is really one of those things that you have to have. You've got to be able to answer those core questions from the employees. And we all go back to Maslow's hierarchy of needs. It's those basic survival needs first and I think a lot about our announcement meeting, meetings where a lot of times they end up being a sort of acquirer victory lap. Hey, this is why we bought you. And here's all the strategic reasons. Meanwhile, everybody is sitting in their seats, slack jawed, surprised and they're like, wait a minute, can I feed my kids? Can I pay my rent? I really don't care about your strategy right now. I care about what I'm going to have to go tell my spouse when I get home or how I'm going to get through this and what I'm going to share with my friends. And then on the upside, a happy workforce is a productive workforce, and a productive workforce is a profitable workforce. Keeping people relatively happy means the business is going to be more successful. The last point that I would really make about empathy is to keep in mind that the acquired team, everybody's coming into the new organization at the same time. They're learning new processes, they're learning new ways of doing things. Unlike folks that come in off the street who are surrounded by people who get it. They know the system, they know how to do the expense report. They know if it's hourly. When do you have to clock in? When do you have to clock out? That's not happening with an acquired team. That entire team is coming over with no support. It's a big group. They're all lost in the woods together and they're going to talk to each other. They're going to share where their frustrations are. And in the absence of information, they will make up their own stories. It's what we do as human beings. It's how we've become the dominant species on the planet is we try to understand our surroundings and we try to protect ourselves for our basic survival. So we'll take. Take pieces of information and we will try to fill in the gaps. It's just what we do. Those stories are geared toward our survival and our survival is not guaranteed when things are all sunshine and unicorns and rainbows and flowers. Our survival is guaranteed because we know that the world can be a dangerous place. Now magnify that by the number of acquired employees who are sitting around talking to each other, and I guarantee you that, that everybody is preparing for the worst case scenario. And often I find on the target side of things that leaders don't really understand that dynamic because they're the ones that have put the company up for sale or they're the ones that said yes to the acquisition offer in most cases. So they've had months to adjust to the idea that things are going to be a little bit different. And they're up in front of the room all smiles, but the employees are like, what's going on? What's happening to me? And a lot of times their leaders have a hard Time empathizing as well. So those employees really do feel lost and rudderless. So anything we can do to give them information, to help them feel secure and to just really honor their dignity as human beings can make an enormous difference. I feel like I could talk about this all afternoon, but I probably ought to stop now because I know there's another point and perhaps some questions.

No, this is a really good one. It's critical. It ties right into relationships and change management directly. So let's break this down. We have folks that get it, and maybe the HR folks are more attuned with being empathetic and understanding. But then you have a variety of different profiles of people involved through different functions and so forth. You got folks that we tend to do this. We tend to get laser focused on the milestones and the project plan and make sure that progress bar is moving fast enough to get the steering committee and the board happy. And then we have finance folks that just. Just are into the numbers and the idea of empathy comes off very different. How do we turn this into some practical steps that can be shared to help encourage empathy across the board?

So as much as I like to poke fun at my friends in finance, there's actually something I learned from a great finance leader. So props to those of you who came up through the finance ranks. He talked about management by walking around. This was back in the days when management by objectives was the big buzzword. He talked about management by walking around. It was phenomenal. We ended up with a deal, and he ended up corp Devlead came up through finance, and he was handling both the deal side and the integration side of this particular deal. And he literally just walked the floor. Now, this was back in the time when we could actually be within six feet of each other without half of our face covered. And hopefully those days are dwindling down soon where we'll be able to walk around and greet people. But he would literally just walk the floor and check in with people. One of the things that I learned from him was that we read it in the HR literature. It's sometimes hard until you see it in practice. Is that the person that most employees trust the most is their direct manager. It's assuming they have an average relationship with them. So he went in and he started with those middle managers and just sat down and said, how are you doing? What's your team asking about? What's going on? That was a really good lesson for me to watch how he interacted with those folks. I think that's a really good Way to operationalize empathy is just ask the questions. Ask, how are you doing? And then pause. Our response for most of us is going to be fine. Fine is a social answer, but it's not necessarily a real answer. Okay, great. I'm glad you're fine. What's going on? How are you feeling? And by asking those questions, what can I do? What should we be doing differently? What do you like and what are you not liking? That can really help us to understand where people are and where we might need to change things. And sometimes it gives an opportunity to address maybe some myths that have come up in the acquisition. Some of the stories that I've heard in deals have been just, well, we heard that you guys bought us to shut us down. Well, I hadn't heard that. I'm sitting here on a stack of requisitions I'm about to drop. So we can add 15 or 20 people to your team, probably not shutting you down, but we can at least have a dialogue about what's really going on. And if there is bad news, it gives an opportunity to really personalize that bad news so that we can say, yeah, you know what? That actually is true. A couple of members of your team aren't going to have jobs at the end of this. I'm not at liberty to tell you who they are, but I want you to know that, that we're going to give them some outplacement assistance. We're looking for opportunities for them right now. We're going to bridge the time that they have here and give them several months of income guarantee so we can have conversations that help to fill some of that knowledge void that make us as buyers seem a little bit less like terrible monsters.

Great info. It reminds me of I'm trying to teach my kids empathy as a means to conflict resolution. The key questions or I frame to them is how do they feel? Why do they feel that way? Oh, when he mentioned that reminded me of that.

It's a lifelong skill, that's for sure.

Number nine, rip the band aid off. In terms of integration, I'm sure you got some thoughts on what this means.

I am a really big fan of if you know that a change is going to happen that people aren't going to, like, disclose it as early as you can. And I realize that you have to choose a level of transparency. It may not be appropriate to share everything at the announcement meeting, but as early as possible, you want to rip that band aid off. And I can think of a situation, a company I was with for A while with salespeople's compensation plans, what would end up happening is we would bring everybody over and we would essentially keep the sales commission plans exactly the same for about a year. And then we wondered why the attrition for acquired salespeople spiked at the one year mark. I gotta be honest, I just shook my head and I'm like, that's really mysterious. Why are all of the salespeople leaving when we change their commission plans? It's almost like we messed with their money or something. It just blew me away that people did not see the link between the fact that we were messing with people's money 12, 15, 18 months after they were acquired and the fact that they walked out because they'd already gotten used to leaving things the way they are. And certainly people would have left during that year if we were going to change their plans. They would have left pretty early on, but that would have given us an opportunity to backfill them with other people, pay them to stick around for a while and transfer some knowledge about those key accounts and maybe even make some visits and find a way to financially incentivize them to stay around longer and help manage that transition. But instead, we just kind of left that band aid on and then we ripped it off a year down the road. And it, it is almost always disastrous once people get into that groove after that first, depending on what you communicate to them. But usually it takes a couple of months for people to get over the shock and to settle into a new way of doing business. And if you're going to start to change things after they've settled in, you end up keeping them in a constant state of turmoil. What's coming next? What's coming next? What's coming next? And we create just this insane amount of anxiety. And rather than being focused on the job at hand and trying to really be productive, they're so busy managing their uncertainty that all of their energy goes to trying to figure out when the other shoe's going to drop. And goodness gracious, how many shoes do they have to drop? Because everything is changing every few days. And I do think this is one of the areas where we do have to be a little bit careful with an agile methodology is because it's if every time we learn something new, we're changing the employee experience because of something that we've learned can be really disruptive to the employees understanding what we think that End State is going to be, communicating it clearly and then working as quickly as possible to get to that End State. So that the employees are in one long period of change instead of multiple shorter bursts of change. It just makes it more likely that we're going to keep those employees and keep the value in the deal.

Yeah, there's a point there that you could be too agile and not know where your floor is. And then also point is, early in the process, it's easy to link the change to the rationale of doing the deal and it sort of gets wrapped in the comm plan. But the changes you make down the road, then it drags on like enough is enough. You got separation like this thing's not going to end. And I'm tired of this environment.

Yeah, it's really hard on people if you can think about a time in your life and I think, think most of us have these times in our lives where it was like, I just need a minute to breathe. Will the world please stop beating me up right now? I just need a second to recover. And having seen integrations that have gone not particularly well, that's how the employees feel. They just walk around exhausted and battered. And I think it's also important to understand Kisam, what the employees have been through prior to that. I've been part of the acquisitions of a number of distressed companies where the employees have already been through a lot of change as the company keeps trying to pivot, find its feet, find new customers and find ways to tweak the products so they're more marketable so the company can stay afloat. You add all of that experience to now an acquisition and people are just already emotionally exhausted by the time you get them. And it can be one of the most compassionate things, the most empathetic things we can do is to just, hey, here's the change that's coming up, here's where we think we're going. We still need to get to know you a little bit better so that we can make these plans stick. But this is the broad strokes of where things are going and it helps them to lock into some certainty that we're getting from point A to point B and we're going to do it as quickly as possible instead of, hey, we're going to get there and reevaluate, decide if you're going to have to pivot again and change again and do something different again that they quite candidly may not have the emotional energy to do anymore.

Have you seen the integration process go smoother if the target has a change oriented culture? Because what you described reminded me of a startup. And then is that momentum already there? This is nothing new.

It depends on the nature of the change oriented culture. Think about a water park, right? So you think about that lazy river where you kind of just surf down. And sure, there's some bends and some curves and it's all smoothed out and there's still some change happening in the direction of the flow. You're still moving forward. And then I remember as a kid going white water rafting a few times and one time I got tossed out of the boat and got pinned against a rock. So it's all water, it's all moving, but it's how quickly is that water moving, what's it moving against? And what's that experience like of being in that water? I can assure you a couple hours on the river left me far less exhausted than three minutes up against a rock until I was pulled out. So I think it depends on how much change that organization has gone through, the magnitude of the change, and really how well that organization has handled the change. Just because an organization has been through a lot of change doesn't mean that they've been through that change. Well.

Got it. Well, that concludes my top nine takeaways from the series of podcast interviews. I wanted to run into some of the questions. I see one here from Ken. Have you seen any formal tools that can be used in the diligence process to evaluate culture and identify areas of potential friction in the integration process that should be anticipated?

Yeah, there are a ton of different culture assessments out there. One of the big things that I think is important about whichever tool you use is to understand that you need a very realistic understanding of your own culture as well as the culture of the target company. I've been part of several very large organizations where there were micro cultures inside that organization and we couldn't use the parent companies or the large enterprise culture statements to really assess what was going to happen to the target. So we really had to drill down to the business unit and really even the department, if it was a large department that was going to be the catching organization and understand how do they really operate, how do they really do things? So we had to have our own house in order and then use those same dimensions of culture to look at the target company. There's a lot of different tools, a lot of different ways of looking at culture. I've seen some that have tried to distill it down to six or seven elements of culture. I saw one assessment that was almost 200 elements of culture. And I think that there are pros and cons of using each One that's probably outside the scope of this conversation. But at their heart there are a lot of fundamentals. How do they communicate? Who gets to make decisions? Is it a directive culture or a collaborative culture? So a lot of different things that I've seen work, but understanding those differences really is the key critical part of that.

Thank you, Clint. Any other advice for practitioners? I've read off my sort of top takeaways. I'm curious Clint, what would be some of your topics, themes or big takeaways from your lens?

On the HR side, my biggest takeaway is really to think about the people as early as possible. Not all M and A involves people. I've seen deals where it's a real estate transaction or moving around intellectual property or brands or things like that. This advice doesn't apply in those cases. But if there are people involved, really think about the people upfront and think about how much of the value of that organization is really being driven by the people. Apply an appropriate level of effort and attention to make sure the people side of things are managed. We've all seen the numbers. 70 to 90% of deals fail to meet their financial objectives. I saw a recent EY study that said a third of that is because of cultural differences. If we're looking roughly a quarter of all deals, if I take a third of 70% are failing because of cultural misalignment. That's a lot of value being wasted. Think about the people upfront. Think about it early and really it's a team responsibility. Culture is about how we do things and we do things through people for the most part. You wouldn't outsource that to just your HR department. There's not a lot of us in HR who are really OPS experts. We're not the folks out there doing the execution. So we're not the ones who should own all of culture. We've got some great expertise, some great ways to guide, but it's got to be an all scape. Everybody's got to be participating in those conversations.

It's interesting when you talk about understanding organizations culture, it's one of those things that doesn't seem like it happens quick. It's not that you float around a five question survey and here's your results here. I think about that and contrast it with today's climate when deals are moving incredibly fast. Contrast that and it's just short diligence periods to get to close and how do you even fit in time to really understand that company's culture?

Just like everything else in life, do the best you can with what you got at the very beginning, you've got access to some key leaders. Ask them those questions, ask them, hey, how do you think your team is going to react to this change? I started asking that during HR diligence and it's not a question a lot of sell side folks have expected to be asked. And the way that that question gets answered can be really telling. Sometimes I get a really well crafted answer and then I'm like, okay, this is complete nonsense. I want the real answer. So I'll start asking other people how they see things being managed. Other times it's a really thoughtful answer where it's both the good and the bad and we can plan around that and then just recognize, like everything else with an agile methodology, as you get more information, you're going to pivot, you're going to make some tweaks and changes to the way that things are done. The other thing that I see quite a bit, Kisan, is that a lot of times, especially in larger organizations, the culture at a headquarters location or the culture in that C suite, those top five, 10, 15 people and the culture on the floor with the people doing a lot of the work lower down in the organization are night and day different. We can learn a little bit from the folks at the top of the house, but a lot of our culture change initiatives have to happen at the bottom of the house too. And what we do at the top and what we do at the bottom sometimes do not mesh at all. So we're going to have to change as we get more information from people at different levels in the organization. We should just expect that it's going to be complicated and it's going to be messy and we're not always going to get it right, but we're going to get it more right if we pay attention to it than we will if we ignore it.

Best you can with what you have thank you so much for your time today. I enjoyed this conversation.

Thanks for inviting me. It was a lot of fun.

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