Category Archives: Communications

Simple. Elegant. Successful. (Repeat)

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As a kid, did you ever play the Pete and Repeat game with your friends? The one about Pete falling overboard and Repeat being left? Then the whole thing plays round again (ad nauseum). Get it? Repeat is all that’s left? (Yeah, I know …)

Anyway, it turns out (observation courtesy of the smart folks at Bain & Company) that this is the most successful formula for sustaining and growing a business: focus on that which you do uniquely well; understand intimately why it is better; communicate that understanding throughout your organization; repeat.

Successful practitioners of roll-up acquisitions get that formula particularly well. Ditto for those whose acquisition sights are set on bolt-on deals. Have you read the most recent annual report from Berkshire Hathaway? There’s a strategic theme there. Sure, the portfolio is diverse but the acquisition M.O. of each of those companies is focused tightly on growing the sweet spot. Simple. Elegant. Effective.

Simplicity means that everyone in the company is on the same page – and no one forgets the sources of success.

Chris Zook and James Allen, two Bain partners, have written a book on “repeatability” in business, concluding that truly successful companies have crisp elements that differentiate them from their competition and they aim to maximize those differentiators to the exclusion of everything else that ambles down the strategic pike. The book, entitled “Repeatability: Build Enduring Businesses for a World of Constant Change,” is available on Amazon and spin-off articles are available on the Bain website (links below). The Merger Verger recommends the recent article in Harvard Business Review; it has many concepts that have direct application for acquisition strategy and integration planning.

There are several elements of the “repeatability” concept that bear on dealmaking and acquisition integration. First (as always) is the message of strategic intent; get that part right and many of your acquisition risks will be behind you. But … this is not just a process of thinking you are good at this or that; you must really understand your uniqueness in the marketplace. No fluff allowed.

The next key element is to articulate that message throughout your organization. In fact the Bain authors state in no uncertain terms that the greater the distance between a company’s strategic plan and the men and women who are called upon to carry it out, the greater the risk of dissipation, digression, disinterest and disaster. Keep your competitive differentiators clear and make sure that your team knows them and is invested in them.

The final key is the simplest to describe and potentially the hardest to do. Repeat. That is, repeat without straying from your strategy and your differentiators.

In closing, let me pause on the second of the three elements: articulating the message. The Bain authors imply that this step is too often overlooked, under the theory that everyone already knows what their employer does and what it stands for. Not true, they say. But if going the extra mile to articulate issues of strategy and competitive uniqueness is a value driver in normal settings, how much more so in the context of an acquisition?

A link between well-defined, shared core principles and frontline behavior was more highly correlated with business performance than any other factor we studied.

Take the time to truly understand, articulate and sell your company’s strengths to your newly acquired staff. They will be better performers and better apostles for it.

Some useful links:

Bain & Company website

Bain specialty site on Repeatability in business

HBR article: the Great Repeatable Business Model

Amazon.com: Repeatability

About the Art: Danish architect Bjarke Ingels Group’s award winning design for Kazakhstan’s new National Library, modeled on a möbius strip.

Too Many Balls (and Too Few Planes) in the Air

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So the woes are official.  United’s recent announcement of its 2Q 2012 quarterly results confirmed what virtually every customer already knew: the merger of United and Continental is still causing problems.  It’s not quite Jeffrey Smisek with his Head on Fire but it’s not good either.

Even the most carefully orchestrated integrations can hit clear air turbulence, particularly when merging entities as complicated as airlines.  Let’s look at some of the issues in hopes of finding a little preventive medicine.  (Ahem … American, are you out there?)

The UAL announcement noted the following problems:

  • Cut-over to a single reservation system has been more complex than anticipated.
  • Changes to the frequent flier policies have wrought confusion and pissed off customers, particularly at the most-active flier levels.
  • On-time arrival metrics have slumped.
  • Flight cancellations have increased.
  • Baggage handling mishaps have increased.
  • Spare plane inventory was cut back only to have to be rebuilt.
  • Reservation transaction times have increased, making them more expensive and more frustrating to customers.
  • Changes to the company’s revenue accounting system have led to revenue adjustments.

Continue reading →

The “Lesser Whole Theory” Bites United

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Poor United Airlines has been receiving a lot of unfavorable press recently, mostly about unhappy premier customers. The Merger Verger has discussed the integration process with United at some length over the last few months and basically believes that they have done a good job at planning for and executing the merger.

So what’s going wrong? And are there lessons for the rest of us in this turbulence?

Much has been written about the “need for speed” in the integration process over the last few years. (Who hasn’t read the Band-Aid metaphor a zillion times?) But does that need apply to all aspects of the integration process or is it better used selectively? Clearly in the case of financial controls and employee (and management) reshuffling, speed counts.  But United’s problems seem to center around customer service issues, in particular the combined software systems and the training on those systems.  That suggests three possible explanations:

  Continue reading →

Merger Integration Gets (Some) Respect

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The Good News: The power and value of proper acquisition integration has dawned on the rating agencies.

The Bad News: They’ve realized that poor integration can hurt a company (and its credit strength) more easily than good integration can help it.

Despite having seen a ton of integration checklists over the years, I can recall few that focused any special attention on the rating agencies.  Lots of lists talk about stakeholders and about investors and even about lending banks, but the needs of bondholders and rating agencies generally get short shrift.  Maybe it’s because few if any of the spokespeople announcing a company’s latest and greatest deal want to shine any spotlight on the risks that it poses.

But that is the rating agencies’ job, assessing the downside.  And like other forms of stakeholder communication, the integration professional’s choice is to shape the message or let the message randomly shape itself.  Take your pick.

Here is where the importance of addressing your content to the needs of the precise audience becomes absolutely critical. 

It is not overly simplistic to differentiate between the debt and equity audiences in the investor base in this way:

  • Equity analysts and stockholders want to know that the deal brings upside potential.
  • Ratings agencies and lenders want to know that the deal WILL NOT bring downside potential.

As you can see, their interests are fundamentally different.

So your messages should be fundamentally different.  Not the facts obviously; the focus.

Illustration: Express Scripts’ acquisition of Medco Health Solutions

At the time of the acquisition announcement, here are some of the value drivers that the two companies identified as behind the deal:

  • Generating greater cost savings for patients and plan sponsors
  • Creating more efficiency in the supply chain
  • Closing gaps in care and achieving greater adherence through our combined behavioral and clinical approach
  • Optimizing our ability to respond to an increasingly complex Medicare and Medicaid environment
  • Enhancing mail pharmacy technology to optimize patient care and satisfaction
  • Accelerating the research, development and deployment of trend management solutions to address inefficiencies in the marketplace

Each of those goals will require an enormous amount of analyzing, strategizing, and planning, followed by intense amounts of coordinated “picking and shoveling.”  The good news is that Express Scripts has a long history of successful integration so the right framework is there.

That said, the rating agency S&P is still concerned and announced this past week that it had put a negative outlook on the debt of the newly combined company.

“The acquisition introduces integration risk, in addition to a temporarily stretched financial risk profile.  Express Scripts will need to rationalize the combined back office functions, distribution capabilities, and claims adjudication platforms while maintaining its existing customer base.”

Translation: The success or failure of this $30 billion dollar deal will rest with the integration process.  FULL STOP. 

Recommendation: This is a clear case where there needs to be an entirely separate set of stakeholder messages aimed at the lending side of the investor base.  And it has to be not just about “what” but about “how.”  How are all of those goals going to be met? How are the two companies working together to achieve that? Accepting that all of those goals are bold and good but that you will not be able to achieve them all at once, what are the priorities and why? What are the systems in place to achieve them and what systems to track results?  What things could impair progress and what fallbacks do you have for them?  Make me comfortable that this is all going to work.

Don’t Forget Visual Communication

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There’s a good piece on the difference between brand managers and brand leaders in The Mergers Daily and I recommend it as a seed for thinking about the role of not just oral and written communication in post-merger integration but visual communication.  Here’s a snippet:

“Brand leaders understand the fundamental proposition that brand is not just a logo but is the sum total of the experiences customers have when exposed to their products and services.”

This is not artsy-fartsy stuff with little meaning to an integration process.  This is the visceral visual connection between each and every customer and their experience with your company.  Think of it as the graphic manifestation of your deal’s strategic intent: an absolutely key issue.

Saying “Nothing” versus Saying Nothing

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Question: What should you say when there is nothing new or substantive to report?

Answer: Something.

Professional integration managers know that frequent, open communication is one of the cornerstones of a successful acquisition.  But they sometimes get paralyzed in those inevitable periods when the process is moving along according to plan but without crossing any new milestones.

The Merger Verger was talking recently with the CFO of a regional chain of apparel stores that found himself in just such a position.  He wanted his team to be communicating with key stakeholders (especially employees in this instance) but he didn’t see anything really pressing to tell them.  Things were proceding more or less as hoped, with nothing particularly positive or negative to report.

I asked my contact whether he was pleased with the way the integration was going. “Yes,” said he.  I then asked him whether the fact that the integration was proceeding as hoped might be of interest – reassuring, motivating, etc. – to his employees. “Yes,” again.

So that is the news.

It is essential for executives to remember that the turbulence of an acquisition reverberates through lower levels of the employee infrastructure over and over and over.  People do not stop talking with each other.  And if they have no new information about which to talk they will frequently assume the worst.  Saying nothing just because there is no landmark event to report on opens the door to uncertainty and misinformation.

One of the most positively-charged pieces of “non-news” that you can communicate to stakeholders is that the integration process is on track and that you are making steady (if uneventful) progress towards the objectives of your acquisition.

All major projects cycle through periods of high-profile events and followed by others of steady but unremarkable progress.  People get that.  But don’t underestimate the   reassuring value of a simple “we’re moving along just fine” update every now and then.  It can be powerfully good news.

Question: What other forms of “non-news” have you found useful to communicate to stakeholders?  How does this type of information differ from group to group?

Short Course in Communication

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For any merger integration professional, effective listening is an absolute pre-requisite for success. If your communication skills are weak, your career will be short.

So The Merger Verger highly recommends a recent Forbes article entitled “10 Communication Secrets of Great Leaders” by Mike Myatt (available here). It is an excellent short course in effective communication and offers a very quick study for busy merger professionals.  Do yourself a favor and read it.

If you take nothing away from Myatt’s piece, take this:

Communicating is not about you or even your idea; it is about your audience.

It is about your audience.  When passing out merger messages, do not fail to reflect on how to reach the individuals that constitute your audience, on what their concerns and agendas are, how much information they can handle in one sitting, and what elements of your message may add to or distract from its core for them.

[listening?]

Aside, the First:

The picture that illustrates the Forbes article was a 2-D Mount Rushmore of Great Communicators: Lincoln, Churchill, and King.  I strongly recommend that everyone stop briefly to consume the Gettysburg Address.  Never before or since have 278 words contained such emotion and power.

Then try Churchill’s “we shall fight them on the beaches.”  Finally, read the whole of the speech that most people know only by its sound bite: I Have a Dream.  After reading these three short pieces, you will know in absolute fullness one cornerstone of each man and what he stands for.

Aside, the Second:

For you New Yorkers, the Morgan Library & Museum will be hosting an exhibition entitled “Churchill: The Power of Words” from June 8 to September 23, 2012.  It looks like it should be very good.  Plus you get to see the Morgan Library.  Who doesn’t love a two-fer?

Uniting with Customers Online

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The Merger Verger recently had a very interesting discussion with the folks at the new United Airlines about the use of their website as a tool for connecting with customers during a merger.  While most of our focus here at The Merger Verger  is on companies much smaller than United, there were some very interesting take-aways from their experience.

  • Following the legal merger in late 2010, the company created three new websites, one for all customers (who might have questions about how the merger would affect them, their travel plans, their frequent flier status and a host of other issues and questions), a second for members of the old United frequent flier program, and a third for members of the old Continental frequent flier program.
  • UnitedHub.com, the broad site, included many elements aimed at smoothing the integration turbulence for the consumer: overview of the company and operational changes, an explanation of the impact on customer loyalty programs, a timeline of the integration, FAQs, videos explaining everything from the CEO’s vision of the new company, to how to navigate the new United website to what to expect from the new fleet of 787 aircraft.  Customers could post questions or comments, traverse an integration timeline and make connections with other customers via social media links.  It is a VERY through tool for making sure that the turbulent process of merging incredibly complicated companies was both transparent and comforting to its customers. (Clicking on the illustration will open a much larger, more readable version.)
  • Hub was set up explicitly to enable customers to ask questions and get answers about the merger.  All of the usual corporate-site stuff – from online reservations options to investor relations information – is absent from the Hub site.  It is just for customers and just about the merger.

Now, smaller companies may not need this level of standalone online communications with their customers but the concepts of individual attention to the worries of the customer – particularly in a consumer-facing company – are very instructive indeed.

  • According to my contact at United, an essential element of the communication strategy was to “give information to customers at the point when they are most clearly paying attention.”  Doing so maximizes the information’s impact and reduces the likelihood that frequent, expensive or frustrating repetition will be required.
  • “Customers pay attention at different times.” The key has been to analyze and understand when they are most likely to pay attention and target information delivery around that timing and through the channels that they are most likely to consume.

IMPORTANT NOTE: YOU CANNOT SATISFY ALL OF THE PEOPLE ALL OF THE TIME. 

On any given TwitterDay you can find complaints about the new United website and the new United reservations system.  Ditto for specialty social media like Flyer Talk and Mile Point.  United told me that they monitor these sites for customer insights and trends.  But they accept – as we all need to – that there will be some degree of dissatisfaction with the changes … always.  The point is to minimize the dissatisfaction, not aspire to eliminate it.

  • Lessons:
    1. Understand what the customer cares about and WHEN he or she wants (or is most likely to focus on) the information.
    2. Use small bites, not trite “sound bites” but digestible packages of thematically consistent and focused information.
    3. Do not use industry jargon when dealing with consumers; they don’t care and will turn off.
    4. Create opportunities for information flows TO you.  This requires what your mother called “listening.”  Bonus: not only does listening provide you with potentially useful information but it makes the customer feel respected and engaged.  Listening is a two-fer.  (Click here for previous posting on the art of listening, from McKinsey & Co.)

I welcome others’ comments on how they have used their websites to affect a smoother integration process.  Thanks.

Thank Heaven for Shiny Objects

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“Tell it and tell it fast” is a recipe for dealing with bad news and PR disasters espoused by Robert Dilenschneider.  He should know; he is the former head of global PR firm Hill & Knowlton.  “If you do that,” he goes on to say, “[the problem] goes away in a day.  The attention span of the public is very short.”

Acquisitions will almost always include something that you would rather not have to publicize.  Dilenschneider would have us believe that we needn’t fret so much about it.  The Merger Verger agrees.

Thoughts:

  • Bad news will always “out.” Your choice is (1) deal with it or (2) deal with it plus the all the questions about why you weren’t forthright in the first place.  Few unpleasant choices are so easy.
  • We are in the age of information overload.  No sooner is your nightmare public than some bigger disaster or bigger outrage grabs the limelight.  Thanks be to the Shiny Object syndrome: your news will command attention only until the next shiny object leaps into view.
  • So: seize the high ground proactively and quickly. This will put you – not the Tweetybirds – in charge of the conversation.
  • Present the story in the most humdrum, ordinary-course-of-business way possible. Telling legitimately bad news in a way that is both forthright and boring can be tricky but it is worth the effort.  Why?  Because it makes your object less shiny.
  • Show sensitivity, not angst.  Sensitivity suggests careful thinking; angst suggests indecisiveness (at best) or guilt (at worst).  Either way, the predators will smell it and your object will become shinier.

Anyone got any interesting stories about dealing with bad news?  Share them.

Cat Eats Bucyrus and Rocks

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Nice piece over the weekend in the Milwaukee Journal Sentinel interviewing Steve Wunning, President of the mining division of Caterpillar Inc. (NYSE: CAT) about the integration of Bucyrus, now eight months underway.

Link here: http://www.jsonline.com/business/caterpillar-pleased-with-bucyrus-integration-2u4fq4o-142194715.html

Cat made two important integration decisions:

  1. Despite a history of the Bucyrus name dating back more than 125 years they chose to get rid of it, and
  2. They did so immediately.

The Merger Verger has seen this choice backfire on a large company buying a much smaller one to launch a new business line.  In that instance, the buyer did not have the goodwill that the seller had in its market place and the name change – together with a pompous “big player” approach to selling – sent customers packing.  That has NOT happened in the Cat/Bucyrus merger and the combination sounds like it’s hitting on all cylinders. 

The article does not address cost cutting in the integration process but one has to presume there was at least some operational overlap.  What is absolutely clear is the extent to which Cat paid attention to the revenue side. Try to imagine the sales lead time for a product like a large piece of mining equipment. Clearly, plans were being drawn up for integrating the selling effort long before the deal closed.  A key part of that process for Cat was communicating the benefit of the merger with customers, particularly on the Bucyrus side.  The result is that their demand is so strong, they are running short of product. 

Sidebar: Readers’ comments on the article are almost entirely from former Bucyrus workers lamenting the loss of the brand.  I too tend to mourn the loss of longstanding American brands but in this instance am certain that Cat’s leaders made the right – even if locally unpopular – choice.

Question: Is the reported shortfall of available product for sale a misstep in the integration process?  If there was an imbalance of focus on top line (odd, but possible), then yes.  If sales are exceeding expectations for the merger, then probably not.  That said, there is definitely something that has slipped somewhere if product is running short.  Anyone got any insight into Cat or similar situations?  We’d all love some color on this.