Christina Martini and Jennifer Fondrevay discuss how Jennifer transitioned from advertising to marketing and her experience with being part of leadership teams through a series of mergers and acquisitions and the human capital issues that arise during significant inflection points in an organization.
In this episode, Christina Martini and Jennifer Fondrevay discuss:
The importance of human capital challenges and considerations in today’s business world.
The characters you may see during a post-deal landscape.
Talking about the people from the due diligence phase, not late in the deal.
Seeing the opportunity in change.
Key Takeaways:
Be open minded, have contingency plans, and be nimble in your interactions during inflection points.
M&A transactions are an emotional process for everyone.
Bring on a human capital advisor – someone who can advise as to the people challenges you are going to face during an M&A transaction.
Know what you’re good at, how it contributes to the new vision, and make sure people know that.
“When you are operating from a position of fear, people act differently.” — Jennifer Fondrevay
FEAR NOT: HOW TO MANAGE BIG CHANGES WITH TOM STEWART
Jennifer Fondrevay talks with Tom Stewart, executive director of the National Center for the Middle Market at the Ohio State University Fisher College of Business, about company culture, and in particular, about what happens to the feeling of a place after a merger or acquisition. That’s often a bad news story. But it doesn’t have to be.
The partial shutdown of the U.S. government is a cautionary tale of negotiations gone wrong. From a business standpoint, there are career-shaping lessons to be learned. As a leader, you need to bring your ideas forward, even when facing a wall of opposition, and create a win-win for all involved. There are four important takeaways regarding the actions (and reactions) of the recent failed negotiations at the White House.
Chuck Schumer and Nancy Pelosi had barely sat down, when President Donald Trump stood up and left. What went wrong in the Oval office? Setting politics to the side (and I’ll leave it to you to take sides): what needs to change to stop the stalemate? Against the backdrop of the partial U.S. government shutdown, here are four takeaways on what’s missing—and how to communicate a win-win outcome:
1. Bring It: “Neither side came into the negotiation with respect for the other,” according to Jennifer Fondrevay, a Chicago-based M&A consultant. “In countless negotiations I’ve observed, in mergers and acquisitions, when respect isn’t there for the other side, rarely are the negotiations or the final deal successful.” In her work with the Harvard Business Review, Fondrevay touches on how “us vs. them” thinking leads to a stalemate. “Each side has to appreciate what the other side brings to the negotiation. People give lip service to the idea of compromise, but it’s tough to deliver when each side feels that compromise gives away their power. Coming to the table with respect for the other side’s position enables you to find that common ground.” The polarized nature of our political spectrum has made mutual consideration a rare commodity. The conversation shuts down when respect isn’t seated at the table.
2. Run The Options: According to Forbes contributor, Codie Sanchez, it’s best to start a negotiation by stating what you want. “You will hands-down not get what you don’t ask for,” she writes, and that double negative creates a positive picture of where negotiations often begin. So when the president says, “Will you give me what I want to build the wall?” it appears to be standard operating procedure. But notice the language from the Oval Office—and a powerful intention—that’s glaringly absent from the short dialogue between our political leaders. There’s a difference between asking if we can come to an understanding, and asking if you will agree to give me my way. The missing intention? The importance of agreement. Pelosi and Schumer met the President’s statement with a simple “no”—the absence of agreement or options. Then the President left his own meeting, declaring it a waste of time. No options? No compromise? No conversation. Staying open to options is the first step in finding a solution.
3. Raise The Stakes: In most business deals, those involved will directly receive a result from their efforts. However, our governmental leaders bear no direct personal impact from the shutdown. (Unfortunately that’s not the case for over 800,000 government employees who are working without pay). It costs the President nothing to walk out of the room. No immediate votes, no measurable political capital – indeed, many in his base may admire his strong backbone and commitment to principle. And digging in seems to have equal appeal for the Democrats, for a number of reasons. What would have changed if the Senators had replied, “We’re here to find an agreement that puts the government back to work—and we’re willing to talk about the Wall in that context”? Some would argue that those words would fall on deaf ears. Perhaps. Some might say that a version of that offer was made, but to no avail. Beyond this speculation lies a principle of effective negotiations: When confronted with an opposing viewpoint, it’s crucial to reframe the conversation around what matters most. When you have a stake in the outcome, you care about agreement. Discovering new solutions is the reason for the conversation. Fondrevay points to the importance of the human factor in every business decision: “True leaders consider the impact, and the after effects, of their agreements. Beyond the transaction, ‘making things work’ means working through people to reach your goals. “
4. Back Off The Blamestorming: There are always opportunities for new solutions. Why? Because we have an unlimited capacity for innovation. Yet, in our national dialogue, blamestorming has replaced brainstorming. New solutions seem out of reach, at least for now. But alternatives always exist. From penicillin to Pinterest, there are millions of examples of how teams have come together to overcome insurmountable odds. Remember what South African leader Nelson Mandela said, “It seems impossible until it’s done.” Looking past what’s past is key to creating the future.
The conversation changes when the parties involved recognize the value of mutual agreement. When the agreement matters more than the individual agenda, blamestorming stops and new ideas can begin. It’s neither “my way” or the “highway”—there’s a new route, if an agreement is going to be reached. Agreement is the discovery of an alternative that’s always been there, we just haven’t seen it yet.
In life, where we put our attention is where we will find our results. Focusing on partisan resistance is not moving towards the goal of agreement—and getting the government working again. There seems to be a fundamental misunderstanding in these recent political negotiations: despite recent events, we need to work together. The coaching for business leaders is clear: Relationships, and respect, always matter. Otherwise, we all walk out on the opportunity to discover a new solution.
Deal success can hinge on how companies address human capital as they plan and execute an M&A transaction, according to panelists at a recent ACG Detroit event who discussed how to mitigate blind spots, prepare for the unexpected, and look beyond financials.
The chapter’s November lunch and learn program, titled “Uncovering the Blindspots of the M&A Deal Journey,” also explored cultural challenges, including the “us v. them” dynamic that can arise after an acquisition, and how to retain talent after a deal closes.
I served as moderator for the discussion, which featured three executives from the Detroit area who offered perspectives from private equity, investment banking and consulting. They included Emily Murto, vice president of private equity firm Stratford-Cambridge Group; Ellen Clark, managing director of M&A advisory firm Greenwich Capital Group; and Dan Ellis, director of Townsend Search Group, an executive search and consulting firm.
Below are insights from the panelists. (Comments have been condensed for clarity).
Avoid blind spots by considering the people, getting alignment, being prepared and establishing clear expectations
Jennifer Fondrevay: As a C-Suite marketing executive, I experienced three separate multi-billion dollar acquisitions. I determined there had to be a better way of managing the people aspect. The research I conducted over 2 ½ years with executives from all sides of the M&A deal equation confirmed the “unexpected people problems” often cited for deal failure can be expected. Pre-planning your organizational structure and people strategy at the very early stages will set your workforce up for success and accelerate their productivity.
Ellen Clark: One of my biggest challenges is making sure the shareholders’ expectations are correct and aligned, and making sure they are truly ready to sell the business. The other is making sure they are prepared for the process. I set expectations up front that they must remain engaged throughout—it’s not going to be easy. We spend a lot of time up front getting ready, prepping the management team so they’re not lost in the conversation. Everyone becomes fixated on the finish line and we always try to slow them down.
Emily Murto: For a lot of the management teams who are selling a business, this is the first time they have gone through this transaction. I try to be mindful of what is the easiest way for them to answer questions to make sure they are accurate and true, while being mindful that the management team may not have signed up for this.
Dan Ellis: For me [as an executive recruiter] it’s about utilizing all of your service providers to really hone in on exactly what you are looking for, and being clear on expectations. Any time executives feel like they can do it all themselves, that they are the expert in order to save a buck, that is the quickest route to failure.
“What you’re really investing in when you buy a business is the people. It’s sometimes a matter of just trying to find the right role for them.”
EMILY MURTO Vice President, Stratford-Cambridge Group
“People” challenges can be minimized through pre-planning and defining a strategy across organizational layers
DE: Any time you introduce someone new to the business, it’s like an organ transplant: The organ may get rejected. You need to make sure that you’re staying ahead and helping to create expectations of what the role is. Define the role and define what everybody’s thoughts are on the role.
EC: You need to have alignment. I advise my sellers to ask questions, especially when talking about selling to private equity. It’s more than just dollars and cents. It’s so important that there is a culture fit. I encourage the seller to talk to others to get perspective. If it all falls apart afterwards and the company, the culture, the legacy is destroyed, then it’s just not worth it.
JF: The team you have in place may not be the team that’s going to get you to the next level. That is a tough decision. Compassion equally means being smart about the value of the people. How can that team and those individuals contribute in other ways? How can we leverage their value and not lose their expertise?
EM: What you’re really investing in when you buy a business is the people. It’s sometimes a matter of just trying to find the right role for them. An individual might have great things to contribute and just be in the wrong seat. We had an individual who had grown the business tremendously, but we knew he probably didn’t have all the capabilities needed to lead the new team going forward. We benefited from his expertise by moving him to another seat on the bus and bringing on another individual to lead.
DE: If you are not going down another layer deep you may not be aware of what’s really going on. We were involved with a confidential replacement because the company had promoted a general manager who was a toxic leader. If only the sponsor had spent more time with the organization and really talked with the people. The more people we can get involved in the organization, the better it is because we look for disconnects.
You can’t anticipate human behavior, but you should be prepared for people to transition
JF: My book highlights that when people operate from a position of fear, they change. You can expect them to act one way in one scenario, but when operating from a position of fear, all bets are off. I encourage executives to conduct a pre-mortem to consider all of the ways a decision could go wrong.
EC: It’s something I refer to as Stockholm syndrome: when a kidnapped person suddenly has compassion for their captors. In an M&A transaction, there is a shifting of loyalties. The management team will realize that the person they have seen as the enemy is going to be paying their paycheck when the transaction closes. The owner of the business selling doesn’t anticipate this. That’s why we spend so much time up front. That keeps the leverage in the hands of the selling shareholder so they’re not beholden to the individuals who have now gone over to the other side.
To hear highlights from the discussion, check out the recording of the “Uncovering the Blindspots of the M&A Deal Journey” panel.
M&A IS MESSY: THE IMPACT OF COMPANY CULTURE PRE AND POST SALE WITH RYAN TANSOM
Jennifer talks with Ryan about her experiences with M&A and how she has met a need that many businesses don’t think about until after the fact. That need, of course, is keeping your employees and more importantly middle managers in the loop about their future with your company once it is sold.
You Will Learn About:
Jennifer’s background in advertising and marketing.
How she got into M&A.
Who her book is for and why she launched Day One Ready.
Why M&A is important to a business.
Why incorrect valuation is the main reason businesses fail the first year after a merger.
The culture clashes that happen after a sale.
Painting a clear picture of a company’s future is critical.
How Jennifer provides transparency to the M&A process.
The types of leaders you need to include in this process.
Emphasizing how the employee fits into the new system.
The stats of failure for an M&A business during the first year.
The steps to considering people first.
The importance of respect.
Jennifer’s parting advice.
Takeaways:
The fact is your company will change after a merger. You need to ask the right questions and include the right people in your company to create a uniform and clear representation of how the business will change for the employees just looking for marching orders. If you show respect to your employees it will go a long way.
Jennifer Fondrevay, talks with Mark Potter, Publisher of Canvas Magazine, about the human side of mergers and acquisitions, and how to best manage the overall employee experience through the changes that inevitably occur.
Understand The Human Side of Mergers & Acquisitions
Leaders throw the term around like we’re high financiers – “M&A.” The reality is that mergers and acquisitions aren’t only about the numbers. There is a human impact, and too often that isn’t taken into consideration or it is not given the consideration that is due. You think nothing is going to change? Think again. It already has the moment M&A is mentioned, and your people know it. More mergers fail than succeed, and the ill-considered impact on employees is a big reason. The only thing we have in business is trust and credibility. If you give those up during the current M&A project, you’ve given up everything. Don’t undermine the trust you’ve built in the team. Understand the human impact of mergers and acquisitions.
Jennifer Fondrevay spoke with MMG Editor Kathryn Mulligan about her research into why so many mergers and acquisitions fail, and how acquirers and investors can address workforce considerations earlier in the M&A process.
She discussed the “us v. them” dynamic that can emerge in the wake of a transaction, the common mistake of trying to hold on to key executives while neglecting other employees, and practical steps investors and acquirers can take to address common causes of M&A failure.
