Former Ernst & Young Partner and Coca Cola CEO Doug Ivester once told me that 30% of acquisitions fail because the acquiring company overpays and saddles itself with unrealistic pro forma plans. They get behind and never catch up. Kenexa CEO Rudy Karsan and his team had no intention of letting that happen to them with their acquisition of Salary.com late last year. Instead, as they reported on May 3, over their first six months, their transition management has them ahead of plan on all the main dimensions.
Karsan knows that financial returns are highly correlated with employee engagement. He explained to me that their studies show that the total shareholder return of the 25 corporations with the highest levels of employee engagement were +18% over the last 15 years as compared to a -4% return for the bottom 25 corporations. Further, employees with effective leadership are six times more engaged than those without effective leadership. There’s more on this in Karsan’s book We: How to Increase Performance and Profits Through Full Engagement.
Thus, Karsan knew that he had to put effective leadership in place in Salary.com to engage his new employees.
Job #1 is building trust
In many ways, Kenexa’s success with Salary.com began earlier in the year when Karsan recruited Zahir Ladhani out of AstraZeneca and put him on Kenexa’s bench for six months. This gave Ladhani time to learn Kenexa’s culture while waiting for the right assignment.
Salary.com was that assignment. Karsan installed him as the new head of Salary.com and let Ladhani lead the due diligence. This allowed Ladhani to get to know all the key players and practices within Salary.com.
As they got closer to doing the deal, Ladhani picked 4-5 people out of Salary.com to be his core management team. They then used the month between the announcement of the deal and the closing to evaluate all the people. This set them up to tell everyone what their status was on Day one and which of three buckets they fell into:
1 – Stay for 90-120 days to help with the transition. Then exit.
2 – Leave today. (All the finance and G&A people were in this bucket.)
3 – Be part of our team. (200 of the 300 people)
It turned out the lack of games and posturing was a big trust builder.
Job #2 is recognizing people and making them feel appreciated
This had started with the appointment of Ladhani as head. On Day one, Karsan let everyone know that Ladhani spoke with the Kenexa management team’s voice. He was Salary.com’s people’s “last level of appeal”. Ladhani then empowered his team and put them to work, recognizing their accomplishments along the way.
Job #3 is acknowledging you’re not perfect
Because the “leave today or stay for 90-, 120-day” decisions had been made before the actual acquisition, certain people were let go, including some that should not have been, and Ladhani and Karsan regretted this later. After the acquisition, once they realized their mistake, they brought those individuals back. This happened in 3-4 cases, and most importantly, they had the humility to accept their mistakes and correct them.
Job #4 is growth and learning
Karsan’s grandfather in Kenya used to tell him that “The day you stop learning is the day you start dying. You don’t have another choice.” The same thing is true for organizations. Learning is a core value for Karsan and for Kenexa. He and Ladhani did not make this a choice for the Salary.com people. They needed to adopt the Kenexa culture immediately. From Day one, the Salary.com people that were invited to join the team were treated the same as the rest of Kenexa’s employees.
Of course there were some bumps on the road. Certainly the Salary.com people appreciated the firmness of the process. Though some of them would have liked to date before they got married, the results speak for themselves. Of the 200 Salary.com employees invited to be part of the team, Kenexa has lost only 3-4 “A” players. And in their most recent employee engagement survey, six months into the acquisition, the scores of the former Salary.com employees and the rest of Kenexa are “indistinguishable”.
This is how effective leadership can accelerate employee engagement and business results and is a good example of Step 1 of The New Leader’s Playbook for Acquisitions: Choose how to engage the context and acquired culture.
Context is a function of the business environment, organizational history and recent business performance, informing the relative importance and urgency of change. Culture underpins “the way we do things here” and is made up of Behaviors, Relationships, Attitudes, Values, and the Environment feeding into readiness for change. Crossing context and culture helps you decide whether to Assimilate, Converge and Evolve (fast or slow), or Shock. Choose your way during the early stages of evaluating a possible acquisition. Then map contributors, detractors, and convincible watchers so you can move each of them one step by altering their balance of consequences.
Click here to read about each step in the playbook
Click here for YouTube videos highlighting each step
The New Leader’s Playbook for Acquisitions includes the 10 steps that executive onboarding group PrimeGenesis uses to help new leaders and their teams get done in the 100 days after an acquisition what would normally take six to twelve months. George Bradt is PrimeGenesis’ managing director, and co-author of The New Leader’s 100-Day Action Plan (Wiley, 2009). Follow him at @georgebradt or on YouTube.