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CBIZ TALENT & COMPENSATION SOLUTIONS
The Culture AuditFebruary 3, 2017
Mergers/Acquisitions – Success or Failure
What Percentage of Mergers/Acquisitions Fail? • Define Failure
- Merger versus PE acquisition- Shareholder value (Public versus Private)- Future break up value
• McKinsey (2014 Study) 70%• KPMG (2015 Study) 83%• Harvard Business Review (2015 Study) 70% to 90%
2CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES
Components of Failure
Why do acquisitions/mergers fail?• Poor/Inaccurate Financial Modeling• Economic Whipsaw (e.g., commodities, sector slowdown)• Catastrophic Event(s)
- Untimely Death of Key Officer(s)- Unexpected Market Disruption (e.g., technology, etc.)- Competition
• Customer Concentration Issue• Lack of Trust & Synergy
- Dynamics between the buyer and seller
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Historical Due Diligence – Human Capital
Corporate mergers or PE backed ventures • May be differentTypical requests • Headcount, employee lists• Compensation schedules - 3+ years, base, bonus,
commissions- Owner(s), key execs, staff
• Incentive Compensation Plans• Benefit Plans, Vacations, HR Policies• Roles (potential duplications; e.g., CFO, HR, shared
services)CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 4
Historical Due Diligence – Human Capital
Typical requests, continued • Non-compete contracts and ancillary documents
- Non-solicitation; clients and employees- Confidentiality- Severance
• Change of Control Clauses• Key employees (Sales, R&D, etc.)
- Critical client, vendor relationships- Pending retirements
• Legal contingencies (EEOC, etc.)• Union Contracts
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The Culture Audit
The Deeper Dive
• Know your own culture (Job #1)• The Team (The Buyer or Acquirer)
- The “Wise Sage” tied to the Buyer
10,000 Hours (Malcolm Gladwell - Outliers)- Outside consultant; becoming more common
• Crosscheck Business Philosophies
- Open book versus closed book
- Entrepreneurial versus corporate?
- Decision making styles (autocratic versus democratic)CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 6
The Culture Audit
The Deeper Dive• Culture interviews
- Tenured and new employees, all levels…the lower the better
• Titles & Functions, formal and informal roles (e.g., CFO’s)• Performance management processes• Turnover rates
- Industry- Geographical
• Employee engagement – existence of data (e.g., recognition, training, investment in people)
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The Culture Audit
The Deeper Dive• Glassdoor• Processes and procedures
- Inner workings of the acquisition target- How tightly or loosely the organization is run (i.e., expense
reports, charitable contributions)- Micro-management versus laisse fare
• In-depth strategic planning/budget processes (does it exist?)• Communication styles
- Emails- Face-to-face, verbal
CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 8
The Culture Audit
The Deeper Dive• Treatment of hi-potential employees
- How relates to employee engagement and communications
- Feedback: frequency & type (e.g., millennials) • In-depth Analysis of Ownership and/or Key Officers
- Ownership transitions Motivations after receipt of check
- Flight risks- Potential malcontents
CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 9
The Culture Audit
Deliverables• Culture Audit Report
- Pros, Cons- Potential Risks- Possible Solutions- Roles and Souls
Next Phase• The merger is ‘in process’ until the social merger is
complete; A Merger = Emotions• Storming Norming Performing• Stay differentiated – External OD consultant
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Acquisition Ground Zero
Announcement Communication & Execution• The announcement itself
- Predetermine a communication plan• Be proactive – Have a plan in place• Define the framework of onboarding new employees• Early in the process (subject to typical contractual
limitations) workforce integration plan• Collective input
- Involve top HR leaders- Senior Executives
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Announcement Communication & ExecutionMission & Vision• Leader body defines new organizational direction• Sample deep and broad: multilateral versus unilateral
- Buy-in occurs organically • Evaluate shared values, common
operating principles, and standard processes• Appreciative Inquiry Approach – what is working
Transition
CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 12
Managing New Beginnings
Neutral Zone Leadership – The ‘Moses’ Way• Magnify the plagues – Increase need for change• Mark the Ending – not hanging on to the past• Deal with the murmuring – valuable information• Access to the decision makers – two way communication• Capitalize on the ‘wilderness’
effect – creative thinking and acting• Resist the urge to rush – this
is not a normal time or normal rules
William Bridges Transition Model
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Transition
Announcement Communication & Execution• Some will have a difficult time making the transition
- Provide resources• Think Roles before souls
- Right seat on the right bus• Option to self-select
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Considerations
Tools• Use of retention bonuses (e.g., duplicative resources)• Career transition services
- People remember how they were treated on the way out- Public relations fallout - Employ the use of outside third-
parties to assist with such deliberations and communication
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It is not all about the numbers
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CBIZ Talent & Compensation Solutions Contacts
Jason M. MeschkePresidentCBIZ Talent & Compensation Solutions & EFL [email protected]
Leslie AndersonManaging Consultant, Career Transition Services & Executive CoachingCBIZ Talent & Compensation [email protected]
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Questions?
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