James F. Dowling
- January 10, 2002
A multinational manufacturing company spent more than a year identifying a strategic acquisition of four divisions from a competitor. They performed a detailed examination of finances, products, customers and core design and manufacturing resources. After an additional three months of work obtaining clearance from shareholders and the Italian, German, French and United States governments, the acquisition was approved and executed. In anticipation of having expanded markets and dominant market share, the company's share price increased by more than twenty percent. With all of this diligence, how could it be that one year later, customer service measures are at an all time low, profitability is only marginal and almost none of the critical employees of the acquired company remain?
On the other hand, the nation's foremost multinational Call Center Company made a decision to reinvent itself to become the foremost eCare Company leveraging its essential capabilities and building a completely new, state-of-the-art compliment of internet-focused customer care services. To make the challenge more interesting, a nine month time frame was imposed from decision to first customer billing. In a matter of weeks five companies were identified for acquisition and within six months, all were acquired, assimilated and contributing to realization of The Vision. With all of this haste, urgency and risk how is it that this company grew fourfold, its share price grew tenfold and almost all of the essential people remain productive more than two years later?
There were remarkable differences in the methods used to select and qualify acquisition candidates but in the end, the potential of the two acquisition programs was pretty much equal. Certainly, the manufacturer had a less risky proposition since they were extending their current operations albeit with a new product line and new customers. However, the risk of defining a new marketplace, packaging a new line of products and bringing them to market in nine months was only partially offset by the fact that the new offerings would be made to existing customers who had shared risks with the company before.
Comparing the Projects
The most significant difference between the two methods was the speed and intensity applied to the projects. The manufacturing company demonstrated caution, and an almost plodding tempo while the Call Center Company attacked the effort with reckless speed and intensity. The difference in speed should not be confused with a difference in thoughtfulness and it is likely that the total effort invested by both teams is comparable when the numbers of people and length of workdays is considered.
The two programs prove to have more similarity than difference until Assimilation Plans are studied and then the one answer to both above questions reveals itself. Both companies developed plans for bringing the companies together and how they would work following assimilation.
To minimize change, the manufacturing company chose to have the four acquired divisions work under combined management chosen from within their ranks and operate autonomously from the parent.
To maximize product value, the Call Center company chose to combine the five acquisitions and operate them separately from current operations but to integrate executive and operational management to the greatest extent possible.
In their effort to minimize change, the manufacturing company left management and direction of the acquired divisions to an inexperienced team. One senior executive likened the action to "cutting of the head from an octopus and expecting two of the arms to take control." The divisions failed to consolidate or even collaborate. Essentially, they continued to operate as they had before the acquisition without the unifying force of a parent company. Over a short period of time, customers became confused, suppliers took advantage of disunity and employees became fearful of company failure.
The Transition Plan necessary to integrate companies and management forced the Call Center Company to examine all operational systems and to focus on delivery of an integrated product suite to a valued customer. Consequently, they took thoughtful measures to ensure that essential people would remain productive; to blend operational processes assuring continual product and service delivery; and to bring the best of the best technologies from each of the companies to create The Premium Product Suite. By considering true assimilation of people, process and technology, all of the negative effects experienced by the manufacturing company were avoided.
The Transition Manager explains her approach as considering "something old and something new, something borrowed, something blue and something bold." The bold goal of six months to service delivery set everyone on a single objective thereby removing ambiguity of purpose and forcing most people to look well beyond the acquisition. By examining the values and culture of the acquired companies, she was able to incorporate some of the old company's character in the new one. Examination of what people wanted to shed provided her with the opportunity to make the new company more attractive by creating something new for them. By considering what people wanted to bring from their previous roles and companies, she avoided removing strong attractive forces that might have caused attrition. Her blue' element is translated to color or more specifically the celebratory manner with which all activities and communications were executed to keep spirits high.
The formula for managing transitions is deceptively simple but therein lies its power. Regardless of the magnitude of the change, people will be effected by it and without active and thoughtful management those that are effected may respond in undesirable ways.
One Change Management text suggests that the lions will run out ahead attacking what they think the problem is while the mules will dig their heels in and resist change stubbornly. There will also be a number of sheep who mill around watching the scary lions who seem to be paving a safe course and the mules who seem to have a lot of good reasons not to change. Our Transition Manager friend suggests building a plan to keep the lions focused on the goal; help the sheep feel comfortable following the lions; and if necessary, feed the mules to the lions.
Thoughtful consideration of what to preserve; what will be new and attractive; what should be carried forward; how to maintain high energy through the transition; and what bold goal will enable people to think past the change provides a strong foundation for transition planning. Consideration of people, process and technology systems broadens the plan and places focus on business needs. Transition planning combined with a strong focus on getting the job done has enabled organizations to emerge from even the most challenging change efforts stronger than the constituents were at the onset.
This article originally appeared in Mid-Range Computing.
About the Author
James F. Dowling is the former vice president of the alignment consulting practice at the Technology Evaluation Center (TEC) based in Montreal, Quebec, Canada. TEC researches IT products and suppliers as well as the ways companies obtain business value from IT.