CBIZ Talent & Compensation Solutions: The Culture Audit

CBIZ TALENT & COMPENSATION SOLUTIONS

The Culture AuditFebruary 3, 2017

Mergers/Acquisitions – Success or Failure

What Percentage of Mergers/Acquisitions Fail? • Define Failure

- Merger versus PE acquisition- Shareholder value (Public versus Private)- Future break up value

• McKinsey (2014 Study) 70%• KPMG (2015 Study) 83%• Harvard Business Review (2015 Study) 70% to 90%

2CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES

Components of Failure

Why do acquisitions/mergers fail?• Poor/Inaccurate Financial Modeling• Economic Whipsaw (e.g., commodities, sector slowdown)• Catastrophic Event(s)

- Untimely Death of Key Officer(s)- Unexpected Market Disruption (e.g., technology, etc.)- Competition

• Customer Concentration Issue• Lack of Trust & Synergy

- Dynamics between the buyer and seller

3CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES

Historical Due Diligence – Human Capital

Corporate mergers or PE backed ventures • May be differentTypical requests • Headcount, employee lists• Compensation schedules - 3+ years, base, bonus,

commissions- Owner(s), key execs, staff

• Incentive Compensation Plans• Benefit Plans, Vacations, HR Policies• Roles (potential duplications; e.g., CFO, HR, shared

services)CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 4

Historical Due Diligence – Human Capital

Typical requests, continued • Non-compete contracts and ancillary documents

- Non-solicitation; clients and employees- Confidentiality- Severance

• Change of Control Clauses• Key employees (Sales, R&D, etc.)

- Critical client, vendor relationships- Pending retirements

• Legal contingencies (EEOC, etc.)• Union Contracts

CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 5

The Culture Audit

The Deeper Dive

• Know your own culture (Job #1)• The Team (The Buyer or Acquirer)

- The “Wise Sage” tied to the Buyer

10,000 Hours (Malcolm Gladwell - Outliers)- Outside consultant; becoming more common

• Crosscheck Business Philosophies

- Open book versus closed book

- Entrepreneurial versus corporate?

- Decision making styles (autocratic versus democratic)CBIZ TALENT & COMPENSATION SOLUTIONS & EFL ASSOCIATES 6

The Culture Audit

The Deeper Dive• Culture interviews

- Tenured and new employees, all levels…the lower the better

• Titles & Functions, formal and informal roles (e.g., CFO’s)• Performance management processes• Turnover rates

- Industry- Geographical

• Employee engagement – existence of data (e.g., recognition, training, investment in people)


The Culture Audit

The Deeper Dive• Glassdoor• Processes and procedures

- Inner workings of the acquisition target- How tightly or loosely the organization is run (i.e., expense

reports, charitable contributions)- Micro-management versus laisse fare

• In-depth strategic planning/budget processes (does it exist?)• Communication styles

- Emails- Face-to-face, verbal


The Culture Audit

The Deeper Dive• Treatment of hi-potential employees

- How relates to employee engagement and communications

- Feedback: frequency & type (e.g., millennials) • In-depth Analysis of Ownership and/or Key Officers

- Ownership transitions Motivations after receipt of check

- Flight risks- Potential malcontents


The Culture Audit

Deliverables• Culture Audit Report

- Pros, Cons- Potential Risks- Possible Solutions- Roles and Souls

Next Phase• The merger is ‘in process’ until the social merger is

complete; A Merger = Emotions• Storming Norming Performing• Stay differentiated – External OD consultant


Acquisition Ground Zero

Announcement Communication & Execution• The announcement itself

- Predetermine a communication plan• Be proactive – Have a plan in place• Define the framework of onboarding new employees• Early in the process (subject to typical contractual

limitations) workforce integration plan• Collective input

- Involve top HR leaders- Senior Executives


Announcement Communication & ExecutionMission & Vision• Leader body defines new organizational direction• Sample deep and broad: multilateral versus unilateral

- Buy-in occurs organically • Evaluate shared values, common

operating principles, and standard processes• Appreciative Inquiry Approach – what is working

Transition


Managing New Beginnings

Neutral Zone Leadership – The ‘Moses’ Way• Magnify the plagues – Increase need for change• Mark the Ending – not hanging on to the past• Deal with the murmuring – valuable information• Access to the decision makers – two way communication• Capitalize on the ‘wilderness’

effect – creative thinking and acting• Resist the urge to rush – this

is not a normal time or normal rules

William Bridges Transition Model


Transition

Announcement Communication & Execution• Some will have a difficult time making the transition

- Provide resources• Think Roles before souls

- Right seat on the right bus• Option to self-select


Considerations

Tools• Use of retention bonuses (e.g., duplicative resources)• Career transition services

- People remember how they were treated on the way out- Public relations fallout - Employ the use of outside third-

parties to assist with such deliberations and communication


It is not all about the numbers


CBIZ Talent & Compensation Solutions Contacts

Jason M. MeschkePresidentCBIZ Talent & Compensation Solutions & EFL [email protected]

Leslie AndersonManaging Consultant, Career Transition Services & Executive CoachingCBIZ Talent & Compensation [email protected]


Questions?


Economy & Finance

CBIZ Talent & Compensation Solutions: The Culture Audit