Transitions Transitions -- Acquisitions Acquisitions ChangeChange

Fighting the Urgency AddictionFighting the Urgency AddictionRalph LassiterTraining & Organizational Development

Guess What?

However, I will share . . . Reasons for acquisitionsCurrent Integration processApproach to managing changeMeasurement processLessons LearnedContinuing issues . . .

HDR’s Strategic Goal is to be . . .

One Great Sustainable Company

One Great Sustainable Company

A Legacy FirmA Legacy FirmReturn on

Shareholders’Investment

Return on Shareholders’

Investment

Four Themes Drive Our Strategies

Employer of Choice

Organization of Choice

Consultant of Choice

Investment of Choice

One Great Sustainable Company

Return on Shareholders’

Investment

A Legacy Firm

• Acquisitions is at the core of HDR’s growth strategy.

• Acquired firms close gaps in geographic presence or service lines

32 Firms Acquired in past 10 years32 Firms Acquired in past 10 years

1

3

2

1

2 2 2

5

8

6

0

1

2

3

4

5

6

7

8

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Average Employee Population per FirmAverage Employee Population per Firm(Range: 10 (Range: 10 –– 159 Overall Ave: 48)159 Overall Ave: 48)

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Our Acquisition Process is fairly typical

Business Leader Recommends

Target

Document Signing&

Announcement to Staff

Integration ProcessBegins

ManagementTeam MakesGo/No Go Decision

Due DiligenceConducted• Acquisition Manager• Business Champion• Finance Manager• HR Representative

Final DecisionMade

We’re still taking baby steps with our Integration Process1. On-site Integration Manager

Former operations leader Primary liaison & communications agentGuides integration process

2. Integration ChecklistDesigned by T&ODSchedule-specific activitiesCompleted during change management training

3. Change Management Training for Leaders (1 day wksp)Immediately following deal signingFocus is understanding and applying key principles

4. Change Participation Training for Employees (1.2 hr mtg)Focus is seeing the silver lining & participation in the integration process

Key message for leaders – “Making the deal is a warm-up, the real job is making the deal work!”

Mergers/Acquisitions start as Financial Proposition

But become a Human Transaction

Leaders must manage the transition of process, procedures, systems, etc, etc (CHANGE)

Performance Consultants provide CM technical assistance

Prosci certified (www.prosci.com)Extensive tool box (templates, sample plans, forms, etc.)

Prosci’s research indicates that the greatest contributors to success . . .

1. Active and visible executive sponsorship2. Buy-in from front-line managers and employees3. Exceptional project team4. Continuous and targeted communication5. Well planned and organized approach

Source: 2006 Prosci Research Report

Our experience indicates . . .

Build leader change management competencyIMMEDIATELY!!

Develop a CM Plan with involvement from leadership team (HDR & acquired firm)

Over communicate with all key stakeholdersIntegration manager on the ground from the beginning

Integrate CM activities within reoccurring management activities

CM or Integration is a regular management team agenda item

Businessprocesses

Changemanagementprocess

Tendency is to apply CM as an after thought . .

1st acquisition: 80+ employees

No Change Management

5 original employees retained, 5 years later

Business improvement process Change

management process

Integrating CM, from the beginning, generates significant returns . . .

1 Year Post Acquisition Measurement indicates that CM integration Increases: • Productivity• Service & Deliverable Quality• Client Satisfaction• Morale - Less employee resistance• Profitability• Organizational Change Competency

CM Training introduces theRisk and Flight Model

Turnover of valued employeesTangible customer impactActive resistance

Comfort / security

Worry / uncertainty

Risk / flight

Productivity lossEmployee dissatisfactionPassive resistance

Normal work environment

time

degree

1st communication or1st rumor

Time

Incr

easi

ng fe

ar a

nd re

sist

ance

© Prosci

Transition Performance Curve

Time

CurrentPerformance

FuturePerformance

(t)

(d)

Leaders’ Goal with CM:• Minimize Magnitude of Performance Drop• Minimize Length of Performance Drop

Change Principles – In Summary

Communicate – Communicate - CommunicateSeek input - Encourage Questions & OpinionsDon’t Be Afraid to Seek or Share Bad NewsBeing Well Informed Reduces Concern & Resistance

Anxiety caused by Change is Natural & InevitableManagers & Employees React to Change SimilarlyBuild Desire – Business & Personal Change Reasons

Successful Change is an On-going Process Requires Everyone Takes Planning & Time.Problems will Occur, Even with the Best Planning Be Patient, But Proceed with a Sense of Urgency

Communication is Critical

“I don’t understand how these changes affect me!”

Most merger integration problems rooted in communication issuesCommunication problems

Lead to Productivity problemsLead to Morale problems lead to Profitability problems

Develop a Communications Plan

Start communication effort ASAPCommunicate frequently

Use face-to-face methods primarilyProvide regular, written acquisition updatesAddress impact on employeesSeek bad news

Provide avenue for employees to ask questions All managers should practice MBWARegular communications from senior manager

ADKAR consists of five phases that occur when change impacts us:

Awareness Awareness of the need for change (why).Desire Desire to support and participate in the change (our choice).KnowledgeKnowledge about how to change (the learning process).AAbilitybility to implement the change (turning knowledge into

action).ReinforcementReinforcement to sustain the change (celebrating success).

ADKAR is introduced as primary CM tool

With non-managers, the goal is to have them participate in change, not perceive selves as victims

Ask questions and make recommendationsHelp solve problems, support your co-workers and remain results oriented.Avoid public support and private criticism of change; instead discuss concerns openly Take advantage of opportunities to grow professionally.

Change can feel like a jump into the unknown – bringing fear, anxiety, anger and confusion.

You may ask . . .“Why am I doing this?”“Will it be easy & painless?”“Or difficult & scary?”

Finally . . .“Where & how will I land ?!?”

Once you leave behind what is known and safe, you’ll find yourself in a place of ambiguity and disorientation –

The Neutral ZoneYou may have no control over

your environment,

But, you do have control over your response to the environment!

The actual impact of each change on you is directly related to how you react to the change.

.

Key Principle

Build & Maintain Your Resilience

Anticipate change Take care of yourselfTrain for changeUse a wide angle lensLearn from the pastAsk advice from veterans Be flexibleKnow & use available resources

Lessons Learned – Continuing Issues

Never a good reason to not build CM competency

Integration management is a full-time assignment

Due diligence should include culture assessmentToughest call: Good deal financially but poor culture fit

Assessment is 1 year post-acquisitionMeasure Morale-Engagement sooner

The BIG One! (400-500 employee firm) – Yikes!!

Transitions Transitions -- Acquisitions Acquisitions ChangeChange

Fighting the Urgency AddictionFighting the Urgency AddictionRalph LassiterTraining & Organizational Development