How to Modernize a Process-Based Company

Hello M and A Friends. This podcast is brought to you by Deal Room, an M and A Science company. The integration phase in M and A determines if your deal will be a success or failure. Poor planning puts value realization at risk. You need a platform that allows you to do integration planning in parallel to diligence. This allows your functional leads to do both diligence and integration planning at the same time. Also, your integration teams won't waste time rediligencing the deal so they can focus on value creating activities. See why the best in the industry use Deal room? Go to dealroom.net to learn more. Again, that's dealroom.net 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 MA deals. I'm your host Kisam Patel, CEO and founder of M and A Science. Joining me today is Naomi o'. Brien. Naomi is the Senior Director Head of M and A Integration at Honeywell. She's a seasoned integration leader and currently owns the integration strategy across all of Honeywell which includes building a scalable integration practice in support of all acquisitions, divestitures, joint ventures. Prior to Honeywell, Naomi spent close to 10 years at Cisco in a variety of roles which included successfully leading integrations and separations. Today we're going to talk about how to modernize a process based company. How are you doing today Naomi?

Great, great. Thanks for having me.

Hey, my pleasure.

Yeah, I started my M and A career at Cisco. I've led many integrations, small tech and talents all the way up to my last one. There was a four and a half billion dollar acquisition. So lots of fun experiences, lots of failures along the way, lots of learning lessons and what I found doing integration has become a real passion for me. No two deals have ever been the same. The constant learning and evolution as we get through different deals, complex deals and the likes has just been so exciting. Since I joined Honeywell after Cisco, I've been working to build and create an integration practice here to help all of Honeywell's businesses just really have that thoughtful integration planning and execution on the forefront as they go to do transactions.

Coming from Cisco to a more non acquisitive company like Honeywell, what are the biggest changes you've had to make in your M and A process?

Some of the biggest things have just been lack of experience. There's a very different experience level when you're doing a few transactions a year versus many having cross Functional folks that are dedicated to M and A, which is what we had at Cisco versus at Honeywell, makes a difference as well because again it has adds to that experience level that you need for the consistency base in the process and less ramp up as you go through deal execution. So it's probably the biggest thing. Another thing is just difference in tool and management of how you go through integrations in the process. When I came to Honeywell, they were very much still using Excel to manage their integration planning and how they did coordination across. And one of the first things we did was stand up a tool here because just having that ability to see the cross functional dependencies, see the issues and risks before you have to end up in a reactive mode is just so incredibly helpful.

Anything else around process specifically, because I know you mentioned adding in cross functional folks. I know the traditional approach, a lot of people tend to create playbooks and have large checklists. I know last year we interviewed Karen Ashley and she talked through the transition at Cisco where they really shifted away from that very bulk process oriented approach that is huge.

When I came here same they had checklists. And checklists are so hard because it doesn't allow people to really think outside the box. And especially as you start to get into deals that are more complex, especially for a company that is doing this pivot from an industrial to a more software technology industrial, being able to have the flexibility to to say okay, what matters based on the deal rationale and what are we trying to achieve successfully out of this? You can't do it on a checklist because as you start to go through and you say check, check, check, I'm done. You've missed several things that are important and critical for this success of implementation or execution. Really it's challenging and it's pushing the team to say, okay, checklists can be guidances. Think of them as frameworks. Think of them and I tell people think of them as like the bowling lane, the bumpers, right? So that the ball doesn't go down into the gutter. Think of checklists as that. Okay, you have something to keep you from going into the gutter. But what are some of those additional things that we need to consider as we go through this process? Where do we really need to keep the pulse?

I like that. Is there things that you changed even beyond that? Say you dial back, that you have these sort of lists that at least give you some guidance. Anything else in terms of just the way the thinking or even the management approach? How do you go about getting teams organized and Things of that sort of.

The biggest observation coming in was that all the functions were very siloed and looking with their horse blinders on of the things I need to do, one of the things we needed to do is just bring everybody together and say, okay, let's get awareness across the functions as to what your negotiables and non negotiables are. As you think about your integration planning and the considerations that you go through. Because a lot of it was that most of them weren't even aware of what each other was doing or what was important to the other teams. And granted they had some dependencies that came across, but they didn't understand the critical factors that approach brought to it. So we needed to bring everybody together, go through what playbooks they did have, go through. Again, what's negotiable, what's non negotiable. And what I mean by that is when we think of non negotiables, cybersecurity, that's a non negotiable, we're going to do our cybersecurity checks and the likes. What is negotiable? If you think about network implementation, the timing for that, because you don't want to be disruptive as you go through the process and at the same time you don't want to overwhelm the target. And when you have a lot of siloed functions that are just going in to do what they need to do, you don't have that comprehensive kind of plan to ensure that the day to day is being managed to help the target continue to do what they need to do, which is run their business. Really having those functional leaders understand across the board, hey, this is what each other's doing, this is how you interwork with each other and to define those negotiables and non negotiables. That way they have an understanding of how do we deconflict things, what's important, what's something that has more flexibility.

You're getting to really come together, bring that approach together so they can connect the dots and what they're looking for, how that lands with other functional lead and what they're looking for.

Exactly right. It was a gap that we identified when I first got here.

Was there any approach that you took in the way they communicated, structured meetings?

First thing was I set up a monthly functional sync. So this is just with the functional leaders to talk about, hey, here's some of the changes in approach, here's some of the changes in process that we're doing across integration. Here are some Things that we're going to involve folks in as we try to bridge the gap between diligence and execution. So that was probably front end. Secondly, having the integration leaders more in tune with the integration teams because a lot of our integration, most of our integration leaders here have no previous integration experience. Making sure that they're on a weekly cadence with the functional teams that are doing the execution so that they're staying on top of, okay, these are the activities we need to do over the next 30 days. And then at the end of 30 days, taking a retrospect look back to say, okay, did we accomplish everything in the last 30 days that we set out to do? And if not, what are some potential impacts going forward that we need to adjust for as well as helping the team switch their mindset in the next 30 days to say, hey, this is what's coming up. What do we need to do to prepare to ensure that we're set up for success? Where are the things that we need to make sure we have to go run things forward or get approvals or just make sure that we're all completely aligned?

We're gonna have a lot of fun talking about how to drive change. I wanna make sure we got the areas that you did end up changing. You mentioned one was adding cross functional folks. We talked about upgrading the tech stack, getting off of Excel, that's always a good start. And then the checklists. Did you make big adjustments? It sounds like you brought em, consolidated, reviewed them and really made it clear that you had lists but kept them more as guides. People kind of new areas to get into. But then they're doing their own thinking and then you've got the different functional leads together, really collaborate, understand what they're looking for, what are the non negotiables, what are the negotiables? And then enabling that collaboration across the functional leads, they can better understand how their roles come in. What they're specifically looking for enables monthly syncs with those functional leads. I like that you also added retrospectives, be able to look back and see what changes made an impact that were good, that could be adjusted and continue to evolve from there. Was there anything else that I missed?

What I want people to know is really just don't underestimate the level of communication. Some people assume things that, oh, it's getting communicated or people are sharing it across and it's not really happening. And I know people don't like to have a lot of meetings and people's calendars can get inundated with that. But when you're really trying to stand up a process and build a practice change is hard. And to get that change it takes a lot of two way communication. It's not just a one way push down, like it's got to be this way. It's a lot of feedback. It's a feedback loop to say, okay, what's worked in the past and what hasn't worked and the things that haven't worked, what could we tweak or how could we change those to make it better? And I'm not saying perfect. I'll give you the tool as an example. Standing up the tool. I had a lot of pushback in the beginning about standing up an M and a tool. People would tell me, oh, but it's not perfect. And I said to him, sure, yeah, let's look at the 70, 30 or 80, 20 rule. It's never going to be perfect. But at the same time, is it better? Ask yourself, is it better than what we had? Is it enabling people to be more successful? Is it allowing efficiencies where you didn't have them? And efficiencies in this case was it had zero version control with Excel. But here, at least with a tool, it's real time. All the functions can go in, they can update their statuses, you can see where things are at just quickly visually, you know where the issues and risks lie. And I think there's a lot of value to be had there. And so really articulating how this helps and improves their lives as well as listening and being able to say, okay, I get it, this is painful. What can we change to make this a little bit better? And I think that really goes a long way.

Yeah, I like the listen first approach. Was that a big part when you got into the role as you got to know the different people on your team, different functional leads. Getting into a little bit about that, Dave, what are you looking to improve?

I was in a total observation mode for the first 30 to 60 days. Really. I was riding along the integrations, were already in flight, trying to understand how they approach things, getting a little bit of a historical perspective of how they got to where they were and then just again having the conversations of, okay, what were your pain points? Hey, what do you think about this? Leveraging some of my experience, experience from the pain I've had on integrations that I've executed in the past to relay just that thought expertise across to them. And I'll tell you, I think it came across very well. It was very valued. People respected my experience from before. In turn, I think it got the thought processes just running with everybody to where they started thinking like, wow, yeah, we could do this, and what about this? And that's where you want to get to. You want to get to the point where people feel like they have some stake in the game, that they have some control and they can change things to make things better as well.

Listen, first, can we talk about how you train people for M and A? This is a challenge for a lot of practitioners where a lot of moving parts in M and A that touches pretty much every function, and you have folks that have never done M and A before. So how do you train people for M and A?

It's interesting because as I came into the role, I quickly found out that the integration leaders had zero integration experience before they led these integrations. And don't get me wrong, very senior, very competent, capable folks. But again, there's something to be said about applicable experience versus conceptual. Right. So it's very hard to teach somebody the conceptual of, oh, when you encounter this in a deal, these are some things you can think about versus you're living the deal, you're living the failures, you're running into the issues, and you're having to fight the fires real time. One of the first things I did as I listened to some of the integration leaders that were already in flight was I thought, okay, I need to create a. An integration leader startup program. So basically, what are some of the initial deliverables, the expectations that they need to have from a cadence perspective? Just some consideration points as they go to approach certain situations and cycles of the deal. And then I spent a good amount of time just handholding through the process. Right. Because there's a lot of context that has to be applied through that. Not just for the integration leaders, also for the functional leaders as well, or the functions. Because as we've seen, there's been a lot of turnover in markets and roles and jobs, and people don't know what they don't know. And so helping to just identify contextually, okay, these are things you need to consider. These are things you need to think about. I've encountered something like this in the past. And what do you think about doing this? And really trying to get them to think about it versus you telling them how to do it is probably the key. On the coaching moments and the teaching moments, the integration leaders have really just hit the ground running with it. We meet weekly. I do sit in on their weekly integration meetings just to make sure, hey, if there are things that they don't know or they can't answer that I can jump in. Right. And help provide that additional context. So yeah, I think that was the first start is just really creating that startup package, startup training program for them and then delivering the coaching aspect of it as they actually go to execute through the process.

I like called it the integration startup program. Is that a formal presentation that you walk through workbook things to reference?

It's actually a teams folder filled with documents that I have a read me first document that kind of talks them through what each of the deliverables in that folder are and what they're used for and where in the cycle that they would use them. And then the other side of it is the coaching aspect of it. They're going to meet with me, right? They're going to have a weekly cadence with me so that they can ask their questions so that I can provide feedback or thoughts. It's a teams folder just really filled with different deliverables and documents we've typically been using as we go through front end and then deal execution post close.

Makes a lot of sense that you put that effort to build that out and get everybody up to speed. We talked about this already a little bit about the changes. In terms of getting people to really embrace the changes. Is there anything that you sort of expel in that direction?

The biggest thing again is getting them to think for themselves. So getting people to really get excited for what they're doing and how do they make their lives easier? Because when you can show somebody how it makes their job less challenging, they're more willing to put in the time and effort for it. I've had many sessions, especially as I do the monthly functional syncs, to really talk about the pain points and the challenge. What are you guys seeing? And one of the biggest things we found on that was some of the functions weren't as mature as the other functions. We started to have each of the functions share their playbooks across and what we found was there were some extreme differences. You had some that were just really well thought out and put together and you had others that were just less mature because there wasn't either a lot of activity in that space previously or the experience levels were different and they wanted to leverage what the other functions had used to just really develop and build out some of their playbooks and processes. And I thought that was just great. The fact that they wanted to share and help each other out, it helps accelerate the process.

But you need good leadership. You have to empower the functional leads. To take ownership of what's in their scope and what needs to be done.

No, definitely.

How do you ensure integration success?

Prior to the previous point I mentioned about the forward look and the backward look, we do a 30, 60, 90 before we close the deal of integration planning. So what are the things we want to accomplish in the first 30 days for 60 days, first 90 days. And as we go through that process, we do ensure that it's critical integration activities first of all. So it's not oil, the ocean, you don't want to have everything in there. What are the critical things that matter? What is it across all of the functions and where are the cross functional dependencies? And oh by the way, how do these tie back to deal rationale? Because at the end of the day we have to ensure that we're achieving the deal commitment that we set out to do. One of the ways we do we look at this is from an integration scorecard perspective. We like to look at people, how we're doing across from people perspective, from a financial perspective, go to market and technology. What I mean by people is looking at it from you have a hiring plan as an example that you need to execute in order to scale the business. How are you achieving that on a month to month basis? What are the things you're doing to find these folks for this business? Retention plans that you've put in place to ensure some critical skills don't leave and then looking at attrition numbers. And when we look at technology, it's not just capabilities, it's also milestones, product insertion, those types of things that are enabling your technology forward. When I talk about go to market, it's the selling motion, it's the channel, it's your sales strategy. What are the things that you need to do? Do you have cross selling across businesses that you need to make sure that you're able to do and if so, do you have the proper incentives in place? And then finally the financials is really just looking at your typical financials of revenue, gross margins, synergies. What do we need to do to achieve those? What I like to tell the team is as they go through through their integration planning for the 30, 60, 90 in particular, because that's when a bulk of the activities do happen is can you tie it back to deal rationale? Can you tie it back to what we're trying to commit out of the deal?

Can we give some examples of what are some metrics? These are good. I like how this breaks things down. It's a much simpler way of looking at integration gives you the cross functional thinking around it. But do you have examples of what would specific success metrics be in those different categories?

As an example, on the people, the hiring plan, we actually have them break down by function needed for hiring and by month what the hiring plan needs to be. So in month one, so the first 30 days you said you were going to hire two salespeople and a customer excellence person, whatever it is. And as you're going through the first 30 days, it's hey, have you gotten candidates from recruiters? What part of the process are you at? Have interviews happened? Does it look like you're going to be successful in achieving that? So that those people are hitting the ground running from day 30 on? So that's one example there, I'd say on the go to market from a selling motion perspective sometimes. And we've had this experience even here at Honeywell, where there are expectations that some of the other Honeywell businesses, the ones that don't acquire this company, are going to be expected to help sell. There's some sell synergies that are put in place into the model. What incentives do you have in place? Have the business leaders talked and agreed that maybe 10% of their goal of these salespeople's goals in this other business is to sell this, this acquisition product or this capability or technology. And then how do you measure that? Do they need a training program in place? What are the things that have to be set up so that they're set up for success and so that we can ensure that we have the leading indicators to understand whether it's going to be off the rails? Because if it's going to go off the rails, you want to get ahead of it. You don't want to be reactive, you want to have the mitigation plans ready to go and in place.

What about the financial?

Financial is that one's always a tough one, I think depending on the type of deal you're doing. So one of the things we're learning is that sometimes when we're doing these more software technology ones, we can't have these very aggressive out the gate revenue targets. We really need to understand how they have achieved the success that they've achieved. And what are some of the selling practices and selling motions they currently have in place to do that in order for us to scale it to said model or deal commitment that we're trying to do. So those are ones where we're obviously tracking what's the forecast, what are the bookings, what's the Time from order to bookings to revenue. Looking at all of those factors in order to again understand what the leading indicators are. Leading indicators I think are probably one of the bigger things that we've had to put some focus on lately is how can you tell before it happens, how can you get a sense of whether things are doing as well as you think they are or whether it's something that, gosh, we really need to start pivoting and thinking about how we're going to mitigate this.

You got an example of that where you come across something as that lead indicator and take some swift action to course correct the people.

One's probably the biggest one. When you look at the hiring aspect, when you say, hey, in order for us to achieve sales in month two, we're going to have these two salespeople and if you don't have those two salespeople identified and brought up to speak. Because think about it, anytime you hire somebody new, there's a ramp up process. They're not familiar with the business and they're not familiar with the company. Those two are some critical factors that you've got to put the time, time in for. If you start to get down the path of you're at the end of your 30 days, maybe you had some candidates but not really identified what you want, then you're going to miss already. That's the leading indicator. Don't have the person in place to go off and execute. So what does that mean? What's the impact then? So you have to start thinking of impacts to your plan and what you thought you were going to do between days 30 and 60 and how are you going to course correct further on down the road? Because it doesn't mean it's a free pass. Just because you missed that first one doesn't mean, oh, we don't have to achieve what we said we were going to do in 30 to 60. It just means, okay, now you have to figure out how you're going to accelerate that makeup of what you were going to do in 30 to 60 over, let's say 60 to 90.

That's cool. I like how they use that example essentially using these metrics and to give them as leads to know when you got to take action. We didn't cover technology. Do you have any interesting examples around technology?

Even on the technology front when we have capabilities and I'll give you an example yet you acquire a company and you think, okay, this is such a great capability and we want to roll this and they tell you, yes, this is an enterprise level solution, it's going to be great. And what you come to find out is enterprise level solution may have a different definition for a small company than a large company. Like the size of Honeywell. Semantics are a lot, right? You go to roll out what you think is an enterprise level solution and it's not really to that level. So then you have to take a step back and say, okay, what do we need to do to make this an enterprise level? We have to offer some additional capabilities, we have to put in some additional feature sets and that takes time. Those kinds of things where as a leading indicator, this is our definition or our threshold for an enterprise level capability or solution, these are the things we need to do to get there. These are the stepping stones or these have been numbers of features or the quality and quantity of things that a company would buy. Thinking of that enterprise level solution, that's one way you look at it, is okay, what would we need to roll out? And if it's a multitude of things, okay, what's the timeline for that? Are we on track based on those milestones? And if not, again, it's the impact forward, looking backward, you're not going to get a free pass. So what do we have to do to accelerate? Do you need to bring in a couple more people to help enhance that or to get back on track onto the speed that you need to do to actually get this orderable?

And do you keep statuses on these metrics? I see green, yellow, red, or what does that look like we do?

So I have a monthly integration scorecard that I send up to our CEO every single month. And that scorecard is at a high level summary. There's the people, the technology go to market and the financials. And it's done with a green, yellow, red, red, meaning it's not recoverable. They've got to get onto a recovery plan, a get well plan of some sort. Again, not a free pass, but it just means that they're not going to be recoverable for the year of what we set out to achieve. Yellow, meaning it's off the rails bit, but it is recoverable. So they have a plan in place of how they can accelerate or modify things that they need to do to get back on track. And green means they've hit the nail on and everything is rosy and looking great. So that's the high level. In addition to that high level summary, I also have each of the active integrations have a one pager that kind of gives more into the KPI and the Leading indicators associated with each of those four major areas. So if they want to provide a little more detail on the financials about revenue impacts as an example, with supply chain issues these days, a lot of folks are highlighting the fact of how there's potential impact on their ability to achieve customer deliverables. And the same with people with the great resignation in place, you see a lot of retention and attrition aspects that aren't looking green as well. And so they've got to have those mitigation plans. So the one pager allows them to provide a little bit more commentary associated with each of those as well as showcasing how they're performing relative to the financials based on the plan.

There's no way for anybody to hide from you.

There's nowhere to go.

They got to report up. Can we go to when you start thinking about these metrics and how do you approach that?

Yeah, so these are definitely all agreed to before we commit to do the deal. There's an alignment with the executive sponsors and with our executive leadership team on what success looks like with respect to those numbers, obviously what's baked into the deal model. And then they also have to highlight the integration plan and business execution as to how they're going to achieve those. So that's all done before we can move forward to commit to the deal. And not to say it's perfect, there's obviously opportunity to tweak it a little bit, but the variance level is not going to be much from that. They've got to have it pretty fairly detailed at that point.

Okay, so it does come up really early. Who's involved?

The executive sponsor, the GM of the business, typically the integration leader, when we can bring them in early. So that's always my challenge as well, is trying to get an integration leader pulled in as early as possible. Myself, our deal team or our corporate development team. And that's, that's typically where we caucus across each other and some of the functional leaders as well. So when you have some of the higher, more mainstream functions like HR and finance and it, they're typically also included in those conversations as well.

Why is it so hard to get an integration lead in early?

Yeah, it's interesting again, when you don't have a dedicated integration team. As an example, at Cisco, there were dedicated integration leaders. That's all they did is two to three deals at a time on their plates. They would churn through all the acquisitions that Cisco did. Honeywell doesn't really have that model. Honeywell is more of as the probability of the deal is higher that it's going to happen, then we're going to go pull somebody from their day job to lead the integration. And so while we can try and get folks in at the diligence level, at least on the periphery, double hatted from their current job and the potential new opportunity that they're going to do, it's not always the case. So sometimes it gets a little bit further after diligence that we're able to do that. And typically I become the bridge for that. So I sit through all the diligences and identify integration considerations and then bridge that gap of knowledge with whichever person gets designated as the integration lead for the effort.

That's true. Like large organization or large M. And a function would have those dedicated resources so it's easier for them to say put you up early in the process, get involved. But then most organizations that are doing one to a few deals a year, they don't do that. It's a shared resource. They pull somebody from a business so they're not likely to pull them in until there's that high certainty that the deal is going through. What value or difference do you see between the two? I feel like you'd have some good insight. And what's that specific value of having this integration lead? Because this comes up quite often when you work with different organizations and the fundamental principle there is start the integration think as early as possible.

Oh, it's a night and day difference. In an ideal world I would have a bunch of integration leaders because I think the model that Cisco has is absolutely spot on. I think you enable the integration leader for the most success when you have them brought in as early as possible into the deal. And the reason for that is they get all the aspects of information, all the decisions that were made and why, they understand all the risks and the mitigations that are identified through diligence. They are part of some of the additional discovery opportunities that happen versus getting it secondhand. When you get information secondhand, there's always some opportunity that things slip through the cracks or some pieces get left out or forgotten. And inevitably even with that, sometimes you have transitions of people that like leave the company and then, then you have a complete gap of what information may have been discovered or found through that process. And so I think the earlier you can bring an integration leader in, I think the probability of is so much higher on execution.

Thanks for clarifying that. For our industry practitioners listening, what happens when you get three of those metric areas and miss on one other one?

It really Depends on the deal. Given what's going on in the environment today, with great resignation and supply chain issues, you can have a variety of challenges. As an example, on a deal you could have where people and go to market are more important factors because you know that without those, your ability to hit the technology and the financial metrics are going to be a miss. It really just depends on what the deal commitment factors are, what you're trying to achieve. When you think of the four things, you have a box and the box doesn't necessarily have to be equal. You can have a box with different sized sides, but at the same time it's what sides do you need to execute the others. And so thinking about it from that perspective, again, in my example, being the people in the go to market to achieve technology and financials, if you don't have the people, you're not going to have the, the skill sets to achieve the capabilities. And without that go to market channel and sales strategy in motion, you're not going to achieve your financials either. So really trying to think about which ones are more relevant for your current situation and it'll change deal to deal.

So there's not one that just stands out to you as the most important.

If you ask Honeywell, it's probably financials. They want to make sure that we're achieving the financials. That's probably the number one marker. If that's red, get a problem. But I think for me, like, just, just given what's going on in the market, we're seeing a lot of turnover, a lot of change in roles and people, and that can be problematic. If you acquire a company for a specific skill set, a skill set that may be more challenging to backfill. Again, it just really depends on the acquisition. But there are gonna be different factors that are gonna cause you to take a pause and say, that's critical. We can't afford any impact in that space.

Yeah, it's huge. I just heard about integration that's already hitting over 17% attrition. It definitely is a big thing.

It's not unusual in today's space.

Definitely a different environment. It varies. It varies and it varies almost to who's involved with what part of the deal. But it also changes based on the deal and what those value drivers are as that fluctuates deal to deal. When things start getting into the red, what happens to the integration leader? If they have some of these items that flagged red, how do they get them out or what's the response?

My experience is nothing Just necessarily goes from green to red. Right? So there's always a transition. You should be at least be able to see the indicators or see the train wreck before it happens, so to speak. If you have an integration leader that's in tune with what the plan is, where they should be and where they're not, then you can raise the flag early. And what we like to say at Honeywell is we want to have what we call a transparent operating system. Let's just say it that way, where if something is not going well and don't wait until it's completely on fire before you raise the flag and say, hey, I need help. It's reaching out proactively. Hey, this is either an issue area or an area I'm keeping a focus on because I have a sense that it's not going 100% to plan or hey, I need some help here because I'm not sure how to navigate this given the situation or the circumstances. And I'll give you an example. When we acquired a company, we had conversations and alignments with the target leaders that we were going to transition some of the financial responsibilities from their leader quickly upon close so that they could focus on the commercial aspects of the business. What we found was, and again, this is coming down to the hiring plan, right? You have to hire a financial person to go and then take over those financial responsibilities so that this person can go do the commercial day job. Not necessarily a simple task, so to speak. Especially when you're talking about this smaller business, it gets down to a point where it's okay, maybe have identified somebody, but we're not on the time track because we said we would do it in the first 30 days. We're now at day 20. Person we identified, maybe we can get them onboarded by day 30, but then they still have the ramp up. And this leader wants to go on vacation because he's been working hard on the team. So there's a whole slew of things that it's, hey, just raise the flag. So we can say, okay, what interim things can we put in place? Can we have some folks that are sitting in there getting that day to day insight into how they're doing their financial processes so that when this person comes on board, it's a different transition versus it's too late or we're behind the bar and then this leader's upset. So different situations, different things. It's more about the how do you raise, how do you ask for help, how do you bring in other people and folks that can help in the process.

Is there a mechanical approach of doing that or is it more about communicating, getting everyone comfortable to speak up early or having meetings where you prompt people to do that?

The mechanical approach is the tool. It's the tool. Certainly you're going to see if something's delayed in the tool. You're going to see something that should have been done and there's going to be notes associated with it to say, okay, yeah, we identified folks, but person's not going to be on board. So anybody looking at that can go through the tool and say, okay, wow, this one's looking like it's going to be potentially behind and what do we need to do there? But at the same time I also put the responsibility on the integration leader to flag some of those items. We have a weekly roll up report that they send of hey, here's a summary of the week of how things are going and oh by the way, here's some, let's call them focus areas because you start calling things issues or then people start thinking their hair's on fire. But let's talk about the focus areas of where we potentially need some support and help.

Since most of the people you mentioned were inexperienced, how do you select an integration leader?

Yeah, I really encourage the business leaders to identify folks that have the ability to navigate the company cross functionally. It's not ideal to have somebody who's fairly new to the company who doesn't know who to reach out to. You got to get quick responses and quick reactions in there. So that's probably the first. The second part of it is do they have any understanding of the business? Because I think there's some ability to leverage that business expertise and that understanding of how they need to be successful to operate that that is also helpful. And then the third thing is really finding folks that have dealt with complex program management inevitably. I don't think I've ever seen an integration plan go a hundred percent to plan ever. And you have to be able to navigate those complex waters of okay, that's going to be an issue or that's on fire. And at the same time I got to go deal with this over here and the stakeholder management and the communication up, down, sideways, having those as probably my three biggest factors of considerations is what we look for. I obviously help look at profiles to give them some sense of okay, if you're going to bring me these six profiles, I think these three are probably best suited just based on their previous experience. The next step from there is I usually they offer up to as an example. I'll talk to both of them just to get a level, set the expectations, get a sense of what they think the job is versus what it actually is and whether there's still a desire to do that going forward.

I want to hear how you do that. How do you level set what M and A integration is?

It's deal time, depending on the deal. If it's global, you're working around the clock. You're dealing with different cultural, company factors, global factors. And I tell them you don't have to be an expert in all of these functional aspects. That's what you have the functional teams for. But you still have to have a pulse. You have to have a sense of like when you need to go reach out to people to get support and help, where you want to put your silver bullets for anything that may be not going the way you want it to go. And then just being able to influence folks as well. Because inevitably you're going to have to create this comprehensive change management plan and not everybody's going to want to be aligned because people are going to have their horse blinders on and they're going to say, this is what I have to do and I have to do it by this, this timeframe. And you have to be able to articulate to them that, hey, if you do it like that and you don't take the rest of this into consideration, it's going to impact XYZ and we're all not going to be successful. So really having a leader that's able to just get into the trenches and I say work around the clock, it really is in the first typically 90 plus days and then it smooths out from there. So it's a real big ramp. And then as things get under control and things start to go into their own motion gets easier.

So you're pretty candid about it. You don't quite scare them off. Just give them a good heads up of what's coming.

You want to be real, right? Because you don't want them to come in and be like, oh, this is a bait and switch. I thought this was going to be my cushy stepping stone to a GM role.

What's the biggest challenge that you're seeing today?

Great resignation, lots of turnover. And what happens with that is that people take their inherent knowledge with them. When you think about M and A process and integration processes and how you go to execute them, a lot of what it is is up here. When you've done several deals, what you would do the next time, right? You have your best practice, you have your lessons learned, you have your battle scars from doing previous deals. And when people leave, it's hard to, in maybe two weeks, transition that amount of knowledge off to somebody else because of that. One of the other things that I've started doing in Honeywell is creating a single source of truth. When I came in, it was like, oh, we have diligence files in a teams folder and we have deal model in a shared network drive, and we've got integration plan in Excel. And it was like, how does anybody keep this stuff straight? You really have to take a minute to think, okay, where do I need to go to find this piece of information? And instead, what we've started to do is leveraging the tool. We're using the virtual data room space in there for all the diligence stuff. We're putting all of our integration planning in the tool as well. We're putting the deal modeling and stuff in there as well, because it's got a document repository, and that way it's a true single source of truth. And then the same with the integration planning for the functions, because as the functions put their plans in there, if somebody leaves, you don't have to scramble to figure out, like, gosh, what did they do and what was accomplished and what is left to do. You have it all spelled out and you have exactly the status of what was accomplished.

That's helpful. You're right. The big challenge right now is retaining people. Is there anything specifically you're doing to mitigate that risk?

I wish I had the magic keys on that one. I think it's just market right now. That's a hard one.

Make every role remote.

That certainly helps. Probably top of mind for a lot of people because they've become accustomed to it. Over the last couple of years, I've.

Noticed that I've seen about well over 80% of the interviews I've been and participating or I'm not going back to the office. There are some good questions here. So, one, how do you allocate the right level of accountability between the deal team, the gm, the functional leads, and make sure everyone is pulling their weight?

Yeah, you have to really create the process up front where you say, okay, here are the deliverables. We're going to do as we do, deal execution, like diligence, who's responsible, diligence readouts, commit briefings and such. And you have to really hone in on, okay, who's responsible or who's accountable for it. So doing a RACI based on the deliverables you expect to achieve and then having regular meetings with them just to make sure you're aligned and you're getting to the level of deliverables that you expect. And certainly we're not perfect at that either. And it's something we're constantly evolving. But it definitely helps to start off with a type of RACI to do that.

That makes total sense. I have. How's value being translated to Honeywell's current clients once an acquisition has been made? Is that handled by the integration team?

I don't know that I would say that I think there's a good level of communication that happens with the usually the leaders of the business, the GM level to talk to especially the larger clients just to really help them understand the strategy and the vision that we're trying to do and again articulate the value that this provides for them. Sometimes even talking about the roadmap certainly helps, but that's not at an integration level usually. That's typically more done at the business level you want.

About the people. How's the employment environment impacting integration? Are people more or less flexible because of the impacts of the great resignation?

I don't know that we've changed our thought process on flexibility there certainly probably should take a look at that. But we're seeing the impact at the end of the day, I know everybody is right across the market, especially M and A today is growing the number of transactions, the number of companies that are wanting to do that. So the people are pulling people left and right. So yeah, we're seeing the impact as well on our side. I can't say that we're changing from a flexibility perspective on this so much and who knows what'll come in the future. And I think certainly everybody's going to have to think about what they're going to be able to do to retain those folks better.

It's such an interesting dilemma. Everybody got comfortable in the working for the recliner at home.

Yeah.

How do you deal with a seller that became difficult to deal with during the implementation phase.

So sometimes you have earn outs, which is one way to deal with that because it's. That should motivate them a little bit more to accomplish the commitments that were set in the deal model. Other times it's you gotta play the game with them. You gotta go through the hand holding and the coaching, have the empathy and go through the process of okay, what's the problem? What's the issue? I think having leadership alignment early on is usually more beneficial. In the long run, from an implementation execution perspective, what I mean by that is starting to bring them in on what the vision is of integration, not necessarily what the metric associated are. Because obviously you don't want to do that until after you close, at least from a revenue financial perspective. But having the alignment of what you think it looks like so that you can get a sense from them as to whether they think that allows them to be successful or not. Because the alternative is you have a one sided plan. And when you have a one sided plan, inevitably you find your execution. That's your assumptions are not 100% correct. They feel that they've been set up for failure.

Another question just came in. Does Naomi's IMO establish a steering committee? If so, who gets to be on the committee?

Our steering committee, for all intents and purposes is really our executive leadership team. We have what we call a corporate deal review board that we hold as a standing meeting twice a month. It allows us to bring different issues and opportunities to it as needed. That includes our CFO or our general counsel, the business leaders, obviously the business presidents and the GM of the business. Typically the integration leader is involved in that as well. And then they have some functional leaders, just depending on what the topic or conversation is. So you either bring in the HR functional leader or IT or the likes. But it's a standing meeting so that when issues arise where you need that steering committee guidance and oversight or structure. So as an example, when things aren't necessarily on the rails is more of a typical instance of when we need to have those sessions, they bring forward what they call their plan or get well plan or whatever it is that they want to move forward with or the recommendations. And that team will either bless it or challenge it and pressure test some of the things that they're proposing to move forward with are. And then until we get to a particular, there may be follow up required from those sessions as well. But that's typically how our steering committees tend to work.

Does your team also run the processes on partnerships or minority investments? If so, are there any differences to highlight in your approach there?

Not mine in particular. That's probably more done on the deal commercial side.

Okay, okay, I heard that. I've never seen an integration plan go 100% to plan. What's industry average in your opinion of plans that actually are planned?

Well, I don't know what the industry averages on that and I think it really depends again on the level of understanding of integration brought in on the forefront. Cause in my experience I've seen integration is typically an afterthought. And that's it's heartbreaking, honestly, because then you will find yourself almost rest assured in a recovery plan, get well plan situation if you don't bring integration in early enough. The more thoughtful, the more time that you have to put together an integration plan so that you can pressure test everything so that you can actually visualize how you're going to execute it over a period of time. And I'm talking small chunks, right? This is why we do a 30, 60, 90 approach. Certainly there are things that don't happen until 12 to 18 months, but when you look at what are the critical things that have to happen in the first 90 days and you start with day one and then what's in the first 30 days, 60 and 90, you have a better ability to control your destiny on that and see what the impacts are. And without that, you set yourself up for failure. And certainly even with a 30, 60, 90, not everything's going to happen accordingly because you're going to find that once you close there are skeletons in every closet. You're going to find where the bodies are buried and whatever else, and you're going to have to deal with that. But ideally, as you've gone through the process, the planning process, you've had some considerations on those and you have some mitigation plans in place that when you encounter them, you're not 100% reactive. It's oh, we thought about that. We thought that could potentially happen and here's what we're going to do to pivot.

Has ESG changed your playbooks?

I don't know if it's changed our playbook, so to speak, or if it's changed more of our assessment of deals. Maybe is a better way to look at it. Looking at our ESG portfolio and understanding if we go after something, how does that impact or how does that help and enhance the ESG strategy?

That's a whole talk track of its own.

It's like the new buzzword.

It's interesting. It's very interesting. I like reading some of the press releases that really have their ESG spin into the positive favor of why this M and A deal needs to happen on your team. How do you look for the talent of integration? Practitioners will have a long career in this field. And how do you have a conversation with those who are not cut out for the role?

I've already started having these conversations because again, at Honeywell, it's a one and done kind of role. It's they typically do One and they move on. And what I've started to do is talk to the ones that are coming to the end of their roles about, hey, what about doing another one? Maybe you had a smaller deal. Think about, you try to make it sexy. You say, hey, what about doing a large, complex integration that has these global aspects to it, where maybe you're dealing with eight different locations or countries and all these complex technical aspects or whatever, or product complexities, and it starts to get a little more exciting. Starting to have those conversations gives people a different maybe impression or understanding or perspective. Because when they're just doing these small deals that are maybe one location in the U.S. they're very simple. It's not something top of mind for them to say, oh, yeah, I want to go do another one of these. But if you start to give them the, oh, this is all the stuff that you could learn and these are all the aspects that you'll get out of it. The light bulb goes off and it's, yeah, that does sound cool. The other conversation, not so fun. I think you just have to be honest with people and say, look, you want to set yourself up for success. And it's these coaching moments. If you had a lot of coaching moments along the way and people just aren't getting it, then you have to just be honest and you have to say, let's just be honest with us, right? Like this maybe isn't the right field for you. Or maybe, and the alternative is maybe they need to do something smaller. Maybe you've given them something that's too much for them to chew and they need to start off with something that allows them to really progress better in a pace that is more aligned with how they can operate. I'd say honesty is the best aspect on relaying to somebody that they're not really cut out for it. Or maybe they need to take a different path.

Didn't tell you fired a lot of people before.

I'm not saying it's an easy conversation. It's not, certainly. And I've come across my share of people who probably shouldn't be doing it, but at the same time, you can't have that person failing and struggling constantly through it. And I don't think they want to either. Helping them realize or maybe actually see that is probably a better way to help them maybe naturally exit it than not.

That sounds fair. I've seen more people that shouldn't be an M and A on the front end of the deal as opposed to the back end. Naomi, what's the craziest thing you've seen in M and A?

Some of you may have heard me talk about this before, but my last acquisition at Cisco that I led the integration for was the four and a half billion dollar acquisition of Acacia Communications. And that one had the probably the longest time between announce and close of 601 days. As you can imagine, 601 days is a long period of time, especially when you're acquiring a public where the employees have no idea whether they have a job. They have no idea what's going on really, because there's a lot of hesitancy to move forward with a lot of integration planning and such and so trying to keep the employees just jazzed about it and moving forward and making sure that things Progress. But yeah, 601 days due to China regulatory approval. That's probably the craziest thing I've ever seen.

Wow, that's like a year and two thirds of another year. It's a long time.

It's a long time.

Do the terms change?

They did.

Because you'd have to keep renegotiating the deal.

Yeah.

For the better or for the worse?

Depends on whose side you were on.

Fair enough. That's a record I've never heard of that long of a period. Naomi, thank you so much for joining me today. I enjoyed this conversation and learned a lot.

It was my pleasure. Thanks for having me.

Thanks. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. Please subscribe for more content and conversations with industry leaders. If you like our podcast, please support us by leaving a five star review and sharing it. I enjoy hearing feedback and connecting with our listeners. You can reach me by my email. It's Kison K I s o n dealroom.net M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Deal Room's blog@dealroom.net blog. Thank you again for listening to M and A Science. See you next time. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.