Category Archives: Talent

Talent is the Key to Post M&A Success

Late last year, Chief Executive ran a great article entitled “Stars and Keepers” that noted that about half of all mergers and acquisitions fail to deliver value. Although the usual suspects of poor synergy and incompatible cultures are usually blamed, much of the blame should be placed on lack of an appropriate talent identification and requisition strategy.

As the article points out, the real expertise about innovative products, services or processes tends to be carried around by employees in their heads and unlike an assembly line, such employees are portable. They can walk out the door and never return, especially if they’ve already sent their resumes, which is likely since most people get nervous when M&A discussions are in the air and start looking for new work, in case they are the ones to get the shaft. And once talent is gone, it can’t be called back. And if enough talent leaves, there goes the value you spent so many millions of dollars on acquiring. The merger is considered a failure.

Before you start M&A activity, it’s important not only to have an integration strategy, but a specific strategy for talent retention. One framework for creating a talent retention strategy is outlined in the referenced article. It starts with the creation of a simple 2*2 grid for sorting employees in the merged company along the axes of “criticality” and “future fit”. This allows you to segment employees into transition, integration keys, keepers, and long-term stars.

  • Transition
    Even if these employees are star performers, they won’t be needed because they fill redundant support roles. A plan will be needed to assist them in finding a new job and transitioning out of their current role.
  • Integration Keys
    Although they have the critical skills required for the transition, these employees don’t have a long-term future in the organization. The plan will have to include offers with appropriate incentives that will entice them to stay on during the integration, as well as a plan for helping them transition out of the organization after the integration is complete.
  • Keepers
    Although these strong performers are not yet stars, they have the potential to be stars in the future. The talent retention plan will have to include a communication strategy to convince them to stick around, outlining their potential role in the company of the future.
  • Long-Term Stars
    These are the people central to the synergies identified as key to a successful M&A transaction. They are the ones that possess the unique skills or intellectual capital required to continue to grow the business. It’s critical that the plan not only includes an outline of their future role in the company, but a personalized communication plan and offer for each star that you want to retain. Because if they leave, the M&A will be a failure.

After you’ve identified the stars and keepers, the next thing to do is flush out the plan. The article provides the following outline, which is a good start:

  • Flesh out the retention plan and stick to it
    Don’t say one thing and do another. All employees have to trust you.
  • Focus on best-of-breed, not just home-grown talent
    The goal is to protect the value of the merger, not to favor existing employees.
  • Adapt the offers to the employees
    Every employee is unique. Don’t take a one-size-fits-all approach.
  • Communicate early and often
    People get very, very nervous through a merger. Be sure to quell their fears on a daily basis.

Can China Be Innovative? IBM Says “YES”

Can China be Innovative? I asked this question here on this blog about a year and a half ago after doing a fair bit of reading and research on the subject – which led me to the conclusion reached by Denis Simon of New York’s Levin Institute, that China risks becoming a good 20th-century industrial economy just when it needs to figure out how to be a 21st-century knowledge-based economy if it doesn’t move in the right direction.

The reason for this is that it takes more than a new science policy (as mentioned in the Economist article Something New: Getting Serious About Innovation, registration and subscription required), additional funding, a stemming of the “brain drain”, and a protection of intellectual property rights to build a knowledge-based economy – it takes a culture, and more specifically, a culture that fosters innovation, not conformity.

But it seems like IBM, who moved it’s global procurement headquarters to Shenzhen, China back in the fall of 2006, thinks that China is far enough down the road to open its first supply chain innovation center in Beijing. Dedicated to helping companies worldwide integrate and transform their global supply chain capabilities, the center will leverage the company’s expertise in supply chain research, business consulting services, software capabilities, and it’s own Integrated Supply Chain experience (which brought the company from the brink of bankruptcy in 1993 to a company that saved 6.2B in 2006) to create new solutions for companies around the world.

According to the press release, the Beijing Supply Chain Innovation Center will collaborate with companies to develop innovative solutions that include:

  • Virtual Command Center
    a SOA (Service Oriented Architecture) supply chain visibility solution that integrates and synchronizes supply, demand, and logistics information
  • Carbon Tradeoff Modeler
    that helps companies include carbon output foot-printing in their supply chain optimization efforts
  • Supply Chain Optimization
    tools and modelers that enable companies to design and operate agile and adaptable supply chain processes and networks

… and is available to be leveraged by any IBM client world-wide — immediately.

It’s a very interesting development. It means that the pockets of innovation are becoming larger and that China might be capable of accelerating down the innovation highway faster than one would expect. However, given that China, like India, contains a great disparity between its urban centers, which are rapidly giving rise to a new middle class, and rural areas, which are only beginning to taste the “new” China, it also means that China might be exacerbating some problems as it solves others. I don’t think we’re far enough down the road to make any calls yet, and this leaves me with my initial thoughts: it will be very interesting to see how this plays out over the next few years.

Where are all the (Supply Chain) Leaders?

Get offa me!
Away from me!
Get me outa here!
Don’t follow me!
Don’t bother me!
I’m no leader.
from “Leader” on “Essentially Naked” by Bif Naked

In his latest article (“Supply Management Transformation: A Leader’s Guide”), Robert Rudzki of “Transformation Leadership” and Greybeard Advisors notes that he likes to ask two questions when presenting at a conference: “Do you believe that most senior executives around the world understand the enormous potential of modern supply management?” and “Do you believe that those same executives understand how to achieve that enormous potential – how to build the transformation roadmap?”. He also notes that while 10% of the audience – at best – might raise their hands for the first question, there will be no hands raised after the second is asked. I have to say I’m not surprised.

This is unfortunate because you need a strong leader in place to not only achieve a supply management transformation, but to communicate the benefits of such a transformation to the senior executive team. This person must be willing to advocate change and put her neck on the line. She’ll need to develop a bold vision with stretch objectives that relate to the primary interests – namely ROIC (Return on Invested Capital) and ROE (Return on Equity) – of the executive team. Furthermore, she’ll also need to lay out a specific transformation plan and roadmap with concrete milestones and construct a business case that offers a performance commitment in exchange for the executive support needed to make it happen.

Furthermore, the “transformation” she leads must go beyond simply a re-organization of the organizational chart. Although it is true that a poor organizational design can impede success, an organizational design is rarely a driver of success. The quote by Petronius Arbiter, circa 210 BC included by Robert in his article says it all:

We trained hard … but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing , and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.

Finally, the leader must ensure that the interests of all of the key stake-holders and participants are linked to the objectives of the transformation process. It must be part of their performance objectives and part of the criteria used to determine their compensation.

It’s a great article, which is also filled with great information on the six dimensions of successful transformation, drivers of world-class supply management, and successful supply management organizational design.

Should You Recession Proof Your Business … or Idiot Proof It?

Industry week recently ran an article on how to “recession proof your business” by three authors that had a rather interesting take on how you go about this. According to the article, you start by identifying the tribes that constitute your business and determining where they are in their sociological progression. If they are in the “life stinks” (stage 1), “my life stinks” (stage 2), or “I’m great” (stage 3) stage — where the latter is said to be the case for 48% of workplace tribes in the U.S., then the consensus (of the authors) is that your business won’t survive the recession.

It’s obvious that a “life stinks” and “my life stinks” mindset is a recipe for disaster. But why is a “I’m great” mentality mindset insufficient? As the author’s note, this is where the theme is “I’m great, and you’re not”, people at this stage have to win, and winning is personal … they’ll out-work, [out-]think and [out-]maneuver their competitors, and the mood that results is a collection of “lone warriors,” wanting help and support and being disappointed that others don’t have their ambition or skill. As I’ve mentioned before, the day of organization man is over … it’s the era of networked person, who’s a team player.

In comparison, a tribe that has reached the “stage 4” mindset, where they believe that “we’re great”, have evolved beyond a loose organization of lone-warrior organization men into a tightly knit organization of cooperative networked persons. As the authors note, they are nimble, innovative, stress-resistant, and adaptable — the qualities that help them do well no matter the circumstances. They align on core values, build strong relationships, and develop plans in real time — the key to the responsiveness needed to navigate the troubled waters of a downturn and the uncertain demand that it brings.

Thus, the authors contend that the best way to “recession proof” your business is to do what it takes to help your team reach “stage 4”. Now I’ll agree that this is a necessary factor for success, and one of the keys to surviving a downturn — but, I hate to say it, it’s not necessarily sufficient. It takes a good team — but this team needs good data, good technology, great support, and resources. If your team doesn’t have good data, how will they make good decisions? If they don’t have the technology they need to capture good data and analyze it in real-time, how will they be able to take action with any confidence? If they don’t have your support, how likely are they to be willing to put their neck on the line when it counts most? But most importantly, if they don’t have the resources, and more importantly, if you don’t have the resources, does it matter?

Innovation, enabled by an innovative team, is the best way to survive a downturn and come out as a market leader, but that team is going to need good systems, good management, and the resources to ride it out. That requires you to be running your company appropriately in the first place — to be making smart long-term decisions on a regular basis and spending the corporate coffers responsibly. If you’ve been following the market, throwing money away like the boom is never going to end, making bad decisions year after year, or acting like an Enron or Boo.com (remember them? — if not, look them up) — in short, running your business like an idiot, then chances are that a great team is not going to save you — because, at this point, there won’t be enough of your company left to save. And when it comes right down to it, if you’ve kept your team free of idiots, there’s a good chance that your teams quickly achieved “stage 4” on their own — which would mean that your business is already recession-proof. So isn’t the answer to idiot proof your company?

Are Your International Procurement Skills Up to Snuff?

the doctor is pleased to welcome Dick Locke of Global Supply Training back to Sourcing Innovation.

My guest post on the issue of keeping talent mentioned a ten-question quiz on global supply management skills. After the post, there was a surge of people who took the quiz. I have to say the results were disappointing. I graded the first thirty answers that came in after my guest posting. The average number of correct answers was 1.5 out of 10. Two people tied for top score with six correct answers. The average number of questions that were answered at all was 5 out of 10.

If I assume that the answers largely came from readers of this blog, I suggest some training is in order before you source outside your home country.

The quiz had questions on cultural differences, legal issues, customs and logistics, foreign exchange risk management and sourcing techniques. I’ll be the first to admit that it’s not a perfect quiz. Two of the questions are US-centric, and one has some wording that misled a few people. However, there were many areas where basic knowledge was obviously lacking.

  • Two people out of 30 recognized my description of the U.N. Convention on the International Sale of Goods.
  • Two people out of 30 knew that forward contracts were the standard way to protect future exchange rates.
  • Five people out of 30 knew that the buyer has the in-transit risk of loss under the CIF Incoterm.
  • Estimates of the time it takes a container vessel to travel from Japan to the US West Coast ranged from 5 hours to 56 days. The average and median were about 18 days. Only one person came within 5 days of the correct answer (9 days for a Panamax or post-Panamax vessel). OK, that one is US-centric.
  • On the brighter side, twenty out of thirty recognized that Japan is a country where people have difficulty saying “no” or giving bad news directly. That question had the best result.

At the risk of appearing self-serving, I think it’s obvious that the people who took this quiz need a skill upgrade on global issues before they work outside of their home country.

As a final note, Dick’s company, Global Supply Training offers training on international procurement issues.

Onegai shimasu, Dick.