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Maximizing Top Line Growth Potential

Effective Post Merger Culture Integration

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Today’s Agenda

• Introduction - 5 minutes

• Feature Presentation and Q&A - 50 minutes

• Wrap Up - 5 minutes

Today’s Moderator

Alan Mellish, Senior Analyst

Talent Strategy & Acquisition

Human Capital Institute

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Today’s Guests

Dianne Heard

Executive Consultant,

Acquisition and Outsourcing,

Leadership & Change Practice

IBM

Michael Haid

SVP, Talent Management

Right Management

Steve Towers

Principal Consultant,

Talent Management

Right Management

© 2012 Right Management. All Rights Reserved.

Maximizing Top Line Growth Potential

Effective Post Merger Culture Integration

Challenges Associated with M&A

7

Many mergers fail due to the following reasons:

• An unclear M&A strategy

• Lack of due diligence

• Inadequate integration planning

• Lack of executive alignment on merger rationale

• Loss of focus on day-to-day business

• Merger benefits not driven through in a timely manner

*Mergers & Acquisitions, Global Research Report

Polling Slide

8

What do you believe the major reason for M&A failure is?

A. Unrealistic Business Case Expectations

B. Cultural Mismatch

C. Failure to Communicate Vision

D. Lack of Leadership

E. Organization Capability to Integrate

F. Employee Engagement

G. Other

Keys to Success

9

There are 3 aspects that greatly increase the chances of M&A success:

• Selecting the right leadership team - When given top priority, can increase success chances by over 25%

• Resolving cultural issues - When assessed & addressed pre-merger, can increase success chances by over 25%

• Effective communication - Is most essential with your own employees. Failure to convey upcoming changes poses a great risk to the deal’s success

*Mergers & Acquisitions, Global Research Report

Best Practices

10

Holistic M&A framework provides ability to manage the full M&A process including:

• Strategic M&A leadership council across expertise domain areas provides additional layer of insight and quality assurance

• Deep global knowledge and experience in managing cultural integration issues along with designing and implementing communication strategies

• Highly skilled professionals with expertise across all major functional areas with extensive transaction and industry experience

• Flexibility to quickly engage key resources and tools to match priorities

• Global reach and local presence

• Increased objectivity and independence while maintaining confidentiality

• Consistent team from strategy and due diligence through integration

The M&A Lifecycle

11

Strategy Due Diligence Integration Planning Integration Execution

Organizational Due Diligence

Financial Analysis & Due Diligence

IT Due Diligence

Full Spectrum Staff and Professional Resourcing

Cultural Assessment

Talent Assessment & Development

Organizational Transformation

Project Management

Systems/Applications Assessment & Consolidation

Business Process Optimization

Transform & Improve Reporting & Controls Registration and SEC Filings

Tax Due Diligence & Planning Post-Acquisition Restructuring Deal Design & Structuring

Business Objectives Performance Management Design Governance and Controls

Operational Readiness Opportunity Assessment

Strategic Workforce Consulting

Career Management (Outplacement) Services

Employee Relationship Management Lifecycle (ERM Lifecycle)

12

How do I develop a pool of future leaders?

How do I help them maximize performance?

LEADER DEVELOPMENT Leadership Pipeline Development

Leader Coaching™ Succession Management

Performance Management

What does work look like?

What skills do I need now and next?

TALENT ASSESSMENT Competency Modeling Organizational Assessment Team Assessment Individual Assessment

How do I plan for a downsizing?

How can I reassign talent?

WORKFORCE TRANSITION & OUTPLACEMENT Outplacement Redeployment Career Decision Career Development

How do I align my workforce?

How do I manage the upcoming changes?

ORGANIZATIONAL EFFECTIVENESS

Strategy Implementation Strategic Workforce Alignment

Change Management

How do I keep my team engaged?

What can I do to maximize productivity?

EMPLOYEE ENGAGEMENT Strategic Communications Planning

Workforce Engagement and Retention Strategies Wellness and Productivity Management

Selection

Transition Execution

Talent Assessment

• Who are the top talent that we need to be sure to retain?

• What are the cultural differences we need to manage?

• Who are the best candidates for key roles?

• What are my strengths & weaknesses relative to my new role?

13

Leader Assessment & Selection

• Preliminary talent assessment during due diligence – focus on leadership, culture, and identification of integration risks

• Assessment of acquired leaders to make selection decisions as needed

• Identify near-term developmental needs for key roles

Leader Development

• How do I integrate executives into a different company & culture?

• How do I integrate, engage and retain acquired leaders?

• How do I lead most effectively in the new organization?

• How do we develop people here?

14

Develop Current and Next Generation Leaders

• Executive coaching programs to accelerate leadership capabilities in a very different culture

• Customized leadership development programs to accelerate integration, build relationships, and drive productivity

• Enablement sessions to orient leaders to new management systems and processes

Organizational Effectiveness

15

• What are the major change challenges associated with the integration?

• What do we need to do to mitigate risks to benefits realization?

• How well are we managing these challenges?

• What’s working well and where do we need to improve?

Organizational Development

• Baseline organizational assessment - Executives, Managers, Employees

• Comprehensive change strategy to mitigate risks and ensure value realization

• Ongoing assessment to identify new issues and measure improvement

• Program management and cadence process to track activities, and reporting on progress

Employee Engagement

• To what extent do employees feel engaged in their new role and organization?

• What are the key drivers of engagement?

• Which groups are doing better than others?

• How do we improve engagement over time?

16

Employee Engagement & Retention

• Annual surveys to assess progress on employee engagement, culture, work environment, and integration.

• Focus groups to drill down on identified issues • Work with leadership teams to review key findings, and execute

recommended improvement actions • Customized programs to drive integration & engagement

Workforce Transition & Outplacement

• How do we manage a downsizing in a way that manages the needs of the employee and the company?

• What can we do to help some people find new roles in our company?

• Are my peers being treated fairly during these transitions?

17

Redeployment and Workforce Transition

• Career development - facilitated process for employees to develop skills and competencies aligned with organizational needs

• Redeployment - self-awareness and career decision-making solution to assist employees in making informed career choices about voluntary separation

• Outplacement – personalized approach to career transition with flexible access and connections to critical resources until they secure a new opportunity

Why manage change? A well designed & executed change management program mitigates risk and speeds value realization

During an acquisition, change management helps acquired leaders and employees deal with the pain of transition and integration, while propelling them to a productive state more rapidly.

Significant Drop

Performance

H

L

Time

T

P

Productive Time (8 hr day) Normal = 4.8 hr During Change = 1.2 hr

Source:

Bureau of Labor Statistics Study

Managing change and cultures helps companies minimize the depth and duration of performance disruption

…after all, the critical asset is the people – their expertise,

enthusiasm and commitment!

18

Point of View - Integration Executive Situations that inhibit productivity on my deal …

Leadership Concerns

1) I have 4 out of 6 acquired executives who will receive major payouts at the end of Q2 and we have had a devastating Q1

2) My Integration Lead for Product Development is unsuccessful in building a relationship with the acquired Product Development executive

3) I have acquired leaders with deep technical talent who can't seem to get connected to the technical community

4) We are integrating and at the same time transforming our organization into a whole new entity – help!

Employee Experience

1) I've got 100 people going on transition primarily in one location - how can I build good will and avoid negative press?

2) I have people in India who can't participate in team calls in Europe or the US due to phone restrictions and who can’t get their data through a slow network

3) It took an acquired employee two months to get a PO through our system

4) People are very concerned about relocating to a site 10 miles away. Anything we can do to mitigate?

19

Point of View - Newly Acquired Executive or Employee Situations that inhibit my team’s productivity …

Leadership Concerns

1) Who has the upper hand in making a sales call – those of us who know the new product or those who “own” the client?

2) I have deep technical expertise … I wonder when that will be recognized by our new owners… when will I be “smart” again?

3) This organization is so matrixed, I can’t figure out who my new boss is or if I even have one.

4) We have had a terrible quarter in the new organization due to a drop in sales productivity while we learned new systems, and our pipeline for next quarter is down too. I am worried that our best sales people will leave.

Employee Experience 1) Some of my friends are on transition. Will the new company treat them fairly?

What does this mean for me and all the extra work I will have to pick up?

2) As a first line manager, I have never had to put someone “on transition.”

3) I really hate self service environments – please don’t send me one more link; give me a human being!

4) They may only be relocating us to an office 10 miles away,

but that adds two hours to my commute! 20

Applied Change Management and the Results Example #1

21

Leader Alignment: Are We All On the Same Page?

About the Situation Change Management Actions

• New and rapidly transforming entity in IBM

• Customer demand increasing for end-to-end value chain

• 5 major acquisitions within the past two years

• Expectation of rapid business case achievement

• Proposed a joint Leader Alignment to accelerate achievement of future state, align strategic priorities and accelerate teaming

• Built a custom-designed work session with main tent and targeted breakout sessions

• Facilitated a 1.5 day session of 50 IBM heritage and acquired executives; focused on achievement of above objectives

The Results

• Aligned priorities across the entity as well as detailed milestones for each acquisition; addressed misperceptions which accelerated early corrective actions

• Newly acquired executives cited the value in understanding the “bigger strategy” and their part in achieving the future picture; also now feel part of IBM

• The Integration Executives and Brand VPs cited this as “Incredibly valuable and saved us months of time in struggling with some of the big challenges ahead.”

Applied Change Management and the Results Example #2

22

Organization Design: Yours, Mine and Ours – Building a Better Structure

About the Situation Change Management Actions

• Survey identified a global function with extremely low satisfaction scores

• Function was comprised of skilled professionals from 3 recent acquisitions

• Broader entity this function supports was going through dramatic transformation

• Shared functional survey results and write-in comments with the WW Executive

• Conducted Executive-led roundtables to “hear” the concerns and inefficiencies, first hand

• Facilitated org design work sessions with leadership to re-design the organization

The Results

• Redesigned organization structure to include broader efficiencies, more consistency in operations, greater role clarity, and leveraged best practices from acquired organizations

• New structure and the rationale for the changes was broadly vetted across the organization and communicated extensively with employees

• Second integration survey showed a dramatic increase in satisfaction – up to 35% points increase on survey items

Applied Change Management and the Results Example #3

23

Talent and Development: Population of High Potentials – At Risk

About the Situation Change Management Actions

• Acquired population of high potentials were at high risk for leaving IBM

• These were the managers we needed to lead and shepherd their employees through integration

• We wanted to rapidly get these high potentials connected with mentors inside our organization

• Identified a pool of 28 high potentials • In-depth assessment against IBM

leadership competencies, de-railers and 360 feedback

• Comprehensive feedback to the individual and his / her manager

• Designed “60 Minutes of Development,” and mentoring program with IBM executives

The Results

• 25 of 28 of these individuals remain with us today; several have been promoted to broader roles and / or given more global responsibilities

• The Integration Executive cites the development work as a key driver of retention with this high risk population

• Program participants cite the program for: 1) understanding what it takes to succeed at IBM and 2) helping them accelerate their “executive presence” to a new level

Summary and Q&A

24

The goal is to minimize the depth and duration of performance disruption

Holistic approaches and connectedness throughout the M&A life cycle phases are key

Talent initiatives need to be integrated and address both Integrated and Acquired perspectives/needs

Thank You

Need assistance? Call Member Services (866) 538-1909 or email support@hci.org

It’s your turn! Ask our experts…

Dianne Heard

Executive Consultant,

Acquisition and Outsourcing,

Leadership & Change Practice

IBM

Michael Haid

SVP, Talent Management

Right Management

Steve Towers

Principal Consultant,

Talent Management

Right Management

Thank you!

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