Rip that band aid off!
When it comes to disruptive transformation, including M&A, I say ‘rip the band aid off’. Others say ‘go slow to go fast’.
This article makes the argument for ripping off that band aid. Because you can’t afford the cost of confusion.
This advice from the authors of the book Five Frogs on a Log (from which many of these ideas come) sums it up nicely:
“Increasingly, the companies that win are those that learn faster, act quicker and adapt sooner. They will compress time by making and executing early, informed decisions about economic value creation, ruthless prioritization, and focused resource allocation. They will use these decisions to take early firm stands on management, deployment, organization structure and culture. Their actions will increasingly be linked to long-term, sustained economic value creation.”
As soon as a disruptive change is announced, bad behavior shows up in ways most could never anticipate. Employees, fearful of losing their jobs, fill in any gaps in information with the worst-case scenarios and share them with as many colleagues as possible. Competitors point out to your customers and supply chain that this change will impact them in horrible ways so they should abandon ship immediately.
This is why I say rip the band aid off. This is also the advice of Pritchett, one of the premier experts on M&A integration – to seize the opportunity to get it done quickly.
Do not prolong the change by setting up committees or workstreams that have endless meetings and create pages and pages of project plans and checklists. The mind-numbing, morale-destroying, ego-deflating litany of actions that make your knees buckle. Refrain from the idea that everything is a priority. That is nonsense.
Focus on those activities that create value. The rest can wait. Ruthlessly prioritize those value creating activities and resource them adequately.
Let’s break this down into three steps.
Step 1: Conduct a value driver analysis
This value driver analysis is the foundation both for an accelerated transition and for how a company makes decisions and takes actions long into the future.
Step 1 actions:
Interview key executives and determine what actions should be taken to increase revenue, decrease costs, or otherwise capture the value in the deal or change.
For each action, guesstimate the quantitative impact, the time frame, the assumptions.
Calculate a simple measure of shareholder value for each action.
Assess the probability of success of each action by identifying its interdependencies with other actions, obstacles that would have to be overcome, resources required for implementation.
Rank the value driver actions based on its financial impact and probability of success.
Conduct a working session with leaders to build commitment and consensus on the prioritized value drivers and concentrate resources.
Step 2: Connect with your stakeholders
You cannot afford the cost of confusion.
When investors, customers, suppliers, and employees spend time worrying and wondering, they aren’t spending time investing, buying, supplying, or producing. Yesterday’s suspicion turns into today’s gossip, tomorrow’s scandal, and next week’s crisis.
Effective communication in times of great change is based on four simple principles:
1. Silence is not an option, even if you don’t have all the answers.
2. You must know and verify what stakeholders are most concerned about.
3. You must have an integrated information strategy that addresses stakeholders’ concerns, builds on their hopes, and speaks to them through channels they trust, in terms they can understand.
4. No secrets, no surprises, no hype, no empty promises.
Step 2 actions:
Identify all key stakeholders such as shareholders, customers, supply chain partners, employees across all locations.
Gather data through focus groups and interviews by asking the following questions:
o What is your understanding of the reason for the change/deal?
o Do you see value for yourself with this change?
o Have you been told how the change affects you and other stakeholders?
o What have you heard from other customers, suppliers, business partners?
o What are your concerns?
o What would spark your enthusiasm?
o What challenges do you see ahead?
Flood the channels quickly, with targeted messages. People gravitate toward clarity. It attracts support and stabilizes the organization. It reduces distraction and increases focus.
Be aware that competitors are taking advantage of the confusion and conjuring a downside message for everyone who will listen.
Enlist middle management. You can’t afford to have disaffected middle managers. Give them a prime spot in your communications matrix.
Don’t neglect your customers. If you aren’t willing to be open and honest with customers, prepare to lose more value. Customers should be at the top of your list.
Step 3: Staff the team for execution
This final step covers a lot of ground.
After the value drivers have been prioritized, assemble the team to execute on the value drivers while also taking care of three big priorities that enable solid execution:
1. Org structure
2. Culture
3. Retention incentives
Step 3 Actions:
Stand up a transition team – that isn’t bloated nor a members-only club. Transition teams can increase morale and enthusiasm and speed decision-making – all crucial to an accelerated transition. But remember the purpose of the team: make rapid progress on things that create real economic value, real fast. See Step 1.
Create concrete action plans for each value driver – execute.
When changes to org structure are required, focus on role clarity relative to value drivers, don’t focus on boxes and lines. Good org design is about the optimization of performance, not the accommodation of ego. Change provides the best excuse to renovate outdated structures and align new roles with business priorities. Just tinkering rarely yields meaningful results.
Select and deploy culture role models for others to emulate. Changing culture requires changing behavior. Behavior change does not happen because you rolled out a new set of values or a new vision statement. Behavior change happens when new experiences create new beliefs that drive new actions. And the right actions, when reinforced, become new habits.
Summary
Transformations and M&A deals are high-risk propositions with potentially huge payoffs. The consequences of failure are long-lasting and frequently fatal.
The Accelerated Transition plan summarized here and explored in detail in the book Five Frogs on a Log, presents an integrated proposition for getting a company from point A to point B with as little disruption and destruction as possible.
I highly recommend the book for the real examples it provides of the results from going fast and the consequences of going slow.
This approach enables leaders to navigate any transition with speed and focus.
So put your foot on the gas and let’s go!
