2011 in review

January 1, 2012

The WordPress.com stats helper monkeys prepared a 2011 annual report for this blog.

Here’s an excerpt:

A San Francisco cable car holds 60 people. This blog was viewed about 1,100 times in 2011. If it were a cable car, it would take about 18 trips to carry that many people.

Click here to see the complete report.


The Business Case for Mergers

April 23, 2011

Inorganic Growth – Why?

Fundamentally, acquisitions create value when they enhance the strategic capabilities of both the companies, improving the competitive capabilities of either or both, resulting in improved financial results. There are companies that on their own probably would not be able to make it, but when combined, are able to create a better set of products and services than could have been otherwise provided to the market.

Acquisitions can help grow a company’s market position faster than internal development strategies. It can also provide a way to bring in new capabilities and leverage existing ones that would be difficult without the synergy of an acquisition.

Mergers and acquisitions are being used by firms to strengthen and maintain their position in the market place. They are seen as a relatively fast and efficient way to expand into new markets, and acquire new and useful technologies.

The main objectives for mergers and acquisitions could be summed up as below:-

  • Horizontal mergers for market dominance or economies of scale
  • Vertical mergers for efficient channel control
  • Hybrid mergers for spreading risk, cutting costs, creating synergies, or could also be a defense mechanism to survive against competition
  • Growth for global reach
  • Survival by developing a critical mass
  • Acquisition of cash, deferred taxes, or even excess debt capacity
  • Acquire a bigger asset base to leverage borrowing
  • Top line growth objective, financial gains and personal power
  • Adding a core competency to provide more combinations of products and services
  • To acquire talent, knowledge, and technology (lately, this is becoming a very important reason)

These objectives arise as a consequence of the following changes in the business scenario.

  1. Globalization
  2. Outsourcing
  3. Speed of growth
  4. Shorter product life cycles

Regardless of the reasons companies have for merging, there are some basic assumptions that are being made, and these include:-

  • Mergers and Acquisitions are the fastest and easiest ways to grow
  • Mergers and Acquisitions are likely to fall short of their initial goals
  • Mergers and Acquisitions are difficult to do
  • Creating synergies is a major challenge
  • Shaping and adapting cultures is a major challenge
  • Due diligence is necessary but not sufficient
  • Pre-planning can help increase chances of success

The merger climate is mainly governed by financial, strategic, and psychological motives, and the following specific factors, individually or collectively, can be considered to have facilitated or promoted the current wave of merger activity.

  1. Changing market conditions
  2. Increasing availability of capital
  3. More companies for sale
  4. Easing of regulations
  5. The need to share risk
  6. The existence of complex indivisible problems

Acquisition strategy has been described as an area of corporate strategy where inappropriate mathematical theory and a yearning for greener grass, has prevailed over common sense2.

The objective of a merger and acquisition is to produce advantages for both the buying and selling companies, that is, the resultant entity should be greater than the sum total of the individual entities, that is

Value (A+B) > Value (A) + Value (B)

Motives behind Mergers and Acquisitions

Mergers and Acquisitions are considered to be rational financial and strategic alliances made to benefit the organization and its shareholders. Literature (Napier, 1989) suggests that merger motives are financial (value maximizing) in nature, or, in many cases, managerial (non-value maximizing) too. However, these two are often related. Besides these ways of presenting the benefits to the shareholders, there are some unrecognized psychological motives too, often initiated to satisfy the needs of an individual or a small group of individuals, rather than the long-term benefit to the organization. Some senior managers are motivated to instigate a takeover to be recognized as people with high desires to grow the organization and looking for new opportunities, and as an action against their own fear of obsolescence (Levinson, 1995). Out of a feeling of insecurity of their job, many mergers have thus been instigated. Career moves, egotistical needs to wield power, and empire building attitudes have been other un-stated psychological motives that have prevailed over the rational motives.

Categories of Mergers and Acquisitions

Mergers fall into four general categories – rescue, partnership, adversarial, and hostile takeover. In each category the resistance levels between the people of the two organizations are quite different – from full cooperation to complete resistance.

A rescue is a response to a financial assistance call, and hence the acquiring organization is normally looked upon in a positive light.

A partnership category, where most mergers take place, is when both parties actively desire to combine.

The adversarial situation is when only one firm has a strong inclination in the deal and the two parties invariably want different kinds of deals.

The maximum resistance is faced when there is a hostile takeover, when one party is actively trying not to go ahead with the deal.

The characteristics of the mergers in these different categories are as given below:-

  • Rescue
    • Major weakness in operations or management
    • Top management generally requested to leave
    • Requires tremendous attention by the acquiring firm to retain key employees
    • Cooperation tends to be high between companies
    • Significant issues often overlooked in the negotiations, compromises made later on
    • Management foes not have to sell the benefits of the deal
  • Partnership
    • Surprises or strong hand tactics are scarcely used
    • Goodwill and respect prevails
    • Top management is positive about the deal, but forgets to sell the benefits to the employees
    • Once the financial deal is concluded, management forgets the integration details
    • Communication is the key to the organization’s acceptance of the deal
    • Management packages and agreements with the key employees is critical
  • Adversarial
    • Negotiations become aggressive
    • Typical barrier of one against the other
    • Win-win situation needs both parties to work at it
    • The management of the acquiring company holds a better position
    • Job security issues intensify as uncertainty prevails during negotiations, with talks of layoffs and closures start coming out
    • Productivity drops significantly and resistance rises before the actual closure of the deal
  • Hostile Takeover
    • Communication cannot overcome gossip and internal coffee-table talk
    • Animosity high and left behind by the acquired company
    • Win-lose atmosphere exists
    • Key talent invariably are the first to leave
    • Human resource failures are dominant

Gen Y Views on Leadership

April 22, 2011

During my travel and speaking to a variety of GenY people who have been gainfully employed, on their views of what is the kind of leader that they would like to work for, I got a few answers that I thought was worth discussing.

They highlighted the following traits that they would look for.

  1. Lead with the Heart

It is necessary that the leader puts their heart and head together. Accomplishing extraordinary things, calls for extraordinary work. Leaders must put forth objectives that they believe in, so that they can live it. They need to recognize the work put in by the team members. All members of the team must be treated fairly for what they contribute. Leaders should mark and celebrate accomplishments and make the members feel like heroes.

  1. Get a “buy-in” on the vision

If leaders can lead with the heart, this would be possible. Leaders must communicate in a way that the vision or the objective is accepted by all the team members. They must set an inspiring objective, which members would like to align to. While the organization would like to focus on the bottom line, the leaders must not lose sight of the building of human capital. This could happen only with a shared vision that focuses on people which in turn could generate results.

  1. Walk the talk

Leaders need to walk the talk. People like to follow the leaders who model the roles that they would like their team members do. When leaders practice what they preach, they get their message across quickly and effectively. After all, they are seen as “mentors” and the team is dependent on what they see, so that they can emulate the behaviors and build a strong team. Finally it is “team work” that makes things happen in any organization. It is necessary that the leader not only guides the rowing of the boat, but also shows how it is done. Leading and doing have to be in alignment. They should create standards of excellence by example, for the team to follow. Leaders should not only be able to put up signposts to direct the team, but also roll up their sleeves and get under the hood, when people are not clear on what or how to do things.

  1. Challenge the process

Leaders should be willing to challenge the way things are being done and look for different ways to be able to do better. They should be willing to change. The pace at which things are moving is so fast that there is a constant need to adapt. While it is necessary to have some processes, leaders must be willing to challenge them and seek newer ways of doing things and constantly moving ahead on the learning curve. The “what was good yesterday is good for tomorrow” is not something that can be considered true any longer.

  1. Enable action from others

Leaders need to create an environment where others are empowered to act. They need to create an environment where team members can experiment and try new things. They need to provide support for innovation. They should be seen as supportive to help build spirited teams that can work in collaboration. Leaders must establish a climate of mutual respect, if they want to see sustained extraordinary efforts by their teams. They must create an environment that build trust, which strengthens the team members and make people feel capable.

Leveraging the Generation Differences in Leadership

April 21, 2011

Today’s workplace comprises of three generations of leaders.

Baby Boomers (BB) – those born between the years 1945 – 1960

Generation X (GX) – those born between the years 1961 – 1981

Generation Y (GY) – those born between the years 1981 – 1994

and we would soon see the coming in of the next group

Generation Z (GZ) – those born after 1994

Each generation comes to work with different needs. They have different views on how they should be treated, how they should be compensated, have different attitudes towards work, and have very different views on how they should be managed and led. Successful leaders have seen this and have not only adapted to embrace these differences but went on to leverage them.

It is critically important to get them to work together in a productive manner. A successful leader would need to focus on three very general aspects in particular.

1. Communication

2. Tech savvy

3. Work-Life Balance

Communication styles and preferences are very different. Businesses recognize email as the most common and preferred way of communicating, while situations would prompt the need for telephone or audio / videoconference or perhaps even face-to-face. BBs are usually more comfortable with face to face as they have gone through their years, participating in meetings. GX have grown up with voice mail and email and would often prefer this mode, as they would be comfortable with computers and smart phone devices. GY have grown up with technology all around them and would tend to prefer texting and social media. Often they do not differentiate between medium of communication whether work or personal. They perhaps would like to share their work ideas with colleagues too in this medium of communication.

While the message is the important part of communication, for it to be effective and well received, the choice of the medium by the leader may become the differentiating factor for success. If the recipient of the message is not engaged in the process, they are less likely to understand the message and respond with the required action. It would thus be smart for a leader to ask the team about how they would like to communicate and how they prefer to receive the information, and discuss how to build these preferences in the organization’s communication process.

Tech savvy is not the same as defined by these three generations. Today’s business needs effective use of technology as teams work together across geographic locations or even if they are working from the same site.

While GX and GY can be assumed to be more tech savvy than BBs, BBs are also upgrading their skills and integrating new technology in their work life, as they also believe that communication and tech savvy are interlinked.

Leaders could view differences in technology capability as an opportunity for training and development. Encourage the technology savvy GenY to teach or train the GenX and Boomer employees how to utilize software or other technology tools and techniques necessary to perform their roles.

Work-Life Balance has become a strong point of negotiation in the present day interviews, which gives us an insight that differing attitudes and expectations are prevalent across these three generations. BB grew up in an environment where loyalty and dedication was encouraged and rewarded. Being focused only on results, although beneficial to the organization overall is most likely to create conflict with GY employees. GY workers are more interested in work-life balance and will spend work time on their Facebook page, which is something BBs would probably only do at home and perhaps during weekends.

As a leader, if one could view this aspect of GY behavior, as a need to take a break from work, would probably be the way to go. The BBs and GX probably prefer coffee breaks instead. Integrating this need of GY like a break time would perhaps generate the desired outcome.

Tons of research show that each generation views work differently. Each generation has different things that motivate them. Even with differing communication styles, tools, and methods leveraging the diversity of these employee groups will increase productivity. Members of these generations will need to learn from each other and develop the capacity to accept various points of view. Bringing together these different generations has an additional benefit of establishing a “learning culture” in the organization, which lays the ground for ongoing growth and development.

Hello world!

April 9, 2011

Hello World!

Eureka covers a vast range of topics – Leadership, Human Resource Management (HRM), Business Analysis (BA), Mergers and Acquisitions (M&A) and Education.

Requesting viewers / readers to share their comments and contribute to the spirit of ‘Global Learning and Development’.