Merger & Acquisition Thoughts

Mergers and/or acquisitions provide the merged companies and/or acquirer with the perfect opportunity to evaluate systems and processes of the various entities. Best practices dictate that three factors be taken into account -- timing, objectivity, and analysis. Let me comment on each of these three factors.

Timing -- It is wise to move thoughtfully rather than expeditiously. Pressure to achieve synergies can cause a rush to judgement. It can also cause a loss in productivity and raise costs (lowering profits). There is a balance that must be struck. The best timing is the one that least negatively impacts operations while achieving cost savings at a modest pace of growth.

Objectivity -- It is wise to engage a third party. This is because both the acquired and the acquirer can be wedded to their systems and processes. The correct third party is one that possesses the requisite skill to do the analysis and the independence to objectively make recommendations. A failure to use a third party often leads to a biased decision that diminishes possible synergy savings.

Analysis -- It is wise to "ask the correct question." If the wrong question is being asked, then the wrong answer will be generated. For example, asking to compare the functionality of one HR system to another HR system is the wrong question. Who cares if one HR system is as good or slightly better than another? The correct question to ask is: does one HR system support superior or more efficient HR processes than another? That question is more likely to yield a correct answer.

The Playbook

A playbook is a powerful tool. It captures best practices. It provides a guide for those new to the team and its plays. It expedites learning. It increases the likelihood of success. But much like a defense that encounters an offense that it has never seen before, the playbook can become a document worthy only of being used as kindling. 

What are the potential problems of slavishly following the "playbook"? First, it can be wrong. The foundation for great leadership is humility. Humility allows one to consider that a proven playbook may yet not be appropriate for "this" situation. Second, it can create unnecessary havoc. Successfully marching toward a cause that ultimately fails is an avoidable disaster. Third, the playbook creates "drones." Drones follow the playbook even when it is obvious that it is failing. That is why defenses facing a new offense ultimately get blown out. They keep trying the same strategies that worked in the past. Finally, the playbook destroys morale. It destroys the morale of those that attempt but fail in following it. It also destroys the morale of those that it inflicts it damage upon.

Be careful when using a playbook. Hold on to it loosely. As Bob Lewis says: "There are no such things as best practices. There are only practices that fit best."