With the consolidation wave just starting to gain momentum in the A/E/P and environmental industry, it seemed appropriate to get into a subject that many firms in our business seem to have an ongoing problem with— that being screwing up the companies we acquire. What constitutes “screwing up a company,” you may ask (and rightly so)? The answer is very simply ANYTHING you do that hurts revenues, reduces profits, destroys value or creates new liabilities.Let’s back up for a minute. No one who buys another company deliberately screws it up. It is always an accident. And we have a lot of smart people in this “industry,” so you would think we’d do better than other business types when it comes to buying or merging and then really integrating the two firms into one better company. We don’t— but it is not for lack of good intentions or brainpower. Here’s a small sampling of ways we mess up the companies we buy:We take the employees for granted. They may in fact be the greatest asset, and if they do quit— or worse, become demotivated and stay— you will lose money. We must involve the new employees in the decisions to change the company. We have to form relationships with them at all levels. We have to communicate the larger context opportunities that they will now have from becoming part of a larger organization. We have to keep finding ways to make it good for them— instead of doing things like stripping away their ownership and then expecting them to work just as hard as they used to, or taking their incentive pay scheme away and expecting it to have no negative effect. You don’t want a mass exodus. Not only do you lose capacity and capabilities, it looks bad to those who stay and to those outside the company as well. A large departure of employees can set you on a downward spiral that you may not come out of.We take the founders for granted. They have a lot of knowledge. And they may be the most entrepreneurial people in the company. The founders STARTED the company. They are going to be wired a little differently from those who manage it. Not to say the founders are perfect or know everything, or are the most motivated people there— they may not be any of those things, especially post-acquisition. But they should not be ignored or marginalized, either. They have relationships, both inside the company and out, that could either help or hurt the new organization. Keep them positive about what is going on. Get their input. Stroke their egos some. Show them you care and value their input and respect what they have accomplished. Turning them off is not going to make you more successful!We don’t do a thorough examination of what the acquired company does well and what it needs help with. Too often, changes get made and we throw the baby out with the bathwater. Clearly, the acquired company probably has some problems— all firms do. But they also probably do some other things really well. Take the time to study the firm and really KNOW what makes it successful or what hurts its performance before taking too much action. Unless you have a major turnaround project on your hands, you will be rewarded with a healthier organization post-acquisition than if you just assume that because you are bigger and you were the buyer that you know everything.We don’t involve new company people in our own firms quickly enough. You have no time to waste getting folks from the new company to your company, plugging them into all of your management meetings, getting one of them on your board of directors, and soliciting their input on your business planning effort. But most importantly, we need to be working with them on projects and they need to be working with us on projects. Get their folks in front of our clients so they immediately have new project opportunities. This is so critical to morale and to their feeling good about their new owners post-acquisition— it may be the most single important thing you can do!We get too draconian over trivial matters, but wait too long to change policies that are incompatible with our own. Minimize the minor changes that aren’t necessary, because you can never predict their full effect on the culture. A good example might be going from free coffee to charging 25 cents a cup because you always charged your employees =25 cents a cup, and a quarter isn’t anything anyway. Or, insisting that nothing hung on a wall can go above the cubicle height. This kind of stuff can really mess things up. Conversely, big differences in policies— such as their people all get four weeks vacation per year, while yours get two, or they bill once a month vs. on an ongoing basis— may need to be addressed right away. You will either cause resentment from your existing staff that could plant the seeds of failure or allow something that is obviously not a good business practice to continue and ultimately hurt you.Buying and integrating two companies into one seamless whole is never easy. But the rewards of doing so— and costs of not doing so— are great enough that it is worth trying to learn all you can about it.Originally published 5/3/2010
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.
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