Many companies will do mergers and acquisitions, there are things to learn

1. The first pitfall is believing that a merger of equals can actually occur.The reality check is one group always benefits, if you believe in equality, there will be inequities along the way and self-destructive behavior.
2. The second pitfall is focusing so intently on strategic fit that you fail to access cultural fit, which is just as important to a merger’s success, if not more so. The cultural fit is this is the way we do things.
3. The third pitfall is entering into a reverse hostage situation, in which the acquirer ends making so many concessions during negotiations that the acquired ends up calling the shots afterwards.
4. The fourth pitfall is integrating too timidly, with good leadership, a merger should be complete within 90 days.
5. The fifth pitfall is the conqueror syndrome, in which the acquiring company marches in and installs its own management everywhere, undermining a reason of the merger – getting an influx of new talent to pick from.
6. The sixth pitfall is paying too much, paying a high premium which can never be recouped in the integration.
7. The seventh pitfall afflicts the acquired company’s people from top to bottom – resistance. In a new merger, new owners will always select people with buy in over resisters brains.

In terms of new products, put your best people in charge. They are good, hungry and passionate in their work and it will result in better results. To do this the President of the company has to talk about the venture and why x person has taken the job and the great expectations the company has for this venture.

Linking to dividend paying stocks, in a company’s cycle when it decides to move to a new level, it will be involved in new products and mergers and acquisitions. There are many good reasons to do them, however bear in mind the pitfalls and maybe you will decide to grow internally first.

There are more questions than answers, till the next time – to raising questions.

Strategy is finding the big aha (a smart, realistic, relatively fast way to gain sustainable competitive advantage) and setting a broad direction, putting the right people behind it, and then executing with an unyielding emphasis on continual improvement.

The strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep your pockets. Pick the product or the service and concentrate on that aspect.

To get to the big aha, there are 5 sets of questions to be answered:

A)    What does the Playing Field Look Like Now

1. Who are the competitors in this business, large, small, new and old?
2. Who has what share, globally and in each market? Where do we fit in?
3. What are the characteristics of this brand? Is in commodity or high value or in between? In is long cycle or short? Where is in on the growth curve? What are the drivers of profitability?
4. What are the strengths and weaknesses of each competitor? How good are their products? How much does each one spend on R&D? How big is each sales force? How performance-driven is each culture?
5. Who are the business’s main customers, and how do they buy?

B)     What the Competition Has Been Up To

1. What has each competitor done in the past year to change the playing field?
2. Has anyone introduced game-changing new products, new technology or a new distribution channel?
3. Are there any new entrants, and what have they been up to in the past year?

C)   What You’ve Been Up To

1. What have you done in the past year to change the competitive playing field?
2. Have you bought a company, introduced a new product, hired a competitor’s key salesperson, or licensed a new technology from a start-up?
3. How you lost any competitive advantages that you once had? for example a great salesperson, a special product, a proprietary technology?

D)   What’s Around the Corner?

1. What scares you most in the year ahead – what one or two things could a competitor do to nail you?
2. What new products or technologies could your competitors launch that might change the game?
3. What M& A deal would knock you off your feet?

E)  What’s Your Winning Move?

1. What change you do to change the playing field – is it an acquisition, a new product, globalization?
2. What can you do to make customers stick to you more than ever before and more than to anyone else?

The above questions ask what are you good at? What is your competitors good at? Why use them instead of you?

The next step is the Right People

Only if important people are assigned the strategy, will it be acted upon, if not the normal will continue. The people must fit the job, the business situation and right strategy.

To win companies do two things very well – they imitate and improve. When you find the best practices the strategy is to adapt them and continually improve on them.

As long as you are not a direct competitor, companies and their people love to share their success stories, all you have to do is ask.  Learn from them, what do they do well which can transform to your company or investments?

In terms of budgeting, Mr. Welch believes it should answer 2 questions:

How can we beat last year’s performance?

What is our competition doing, and how can we beat them?

Through these two questions, discussions will come forth with a growth scenario or an operating plan.

Linking to dividend paying stocks, as investors you are doing this work. Mr. Welch helps formalize the questions, but in the end you are concerned is why is the company you are investing in going to continue to make profits and pay you a dividend. The why includes the competition and what advantages the company has. Your research will help you answer and as you answer the question, more will come. You will look at the people in the company, both senior and next level people and do you expect the company to continue to perform?

There are more questions than answers, till the next time – to raising questions.

If you ask what is constant in the business world, the answer is change. How do you deal with change?

1. Attach every change initiative to a clear purpose and goal. Change for change’s sake is stupid and enervating.
2. Change should be a relatively order process and to do that people have to understand why change is necessary and where the change is taking them.
3. Hire and promote only true believers and get-on-with-it types.Sometimes the best solution is to hire people who believe change is necessary to do the work.
4. Look for people who ask “Why don’t we ….”   These people have courage about the unknown and know if they fail they can pick themselves up and move on.
5. Ferret out and remove the resisters, even if their performance is satisfactory.
6. Seize Opportunities
7. When companies have difficulties, they have to sell divisions to pay their debts. Other companies can buy at bargain basement prices if they seize the opportunity.

Crisis Management

5 useful tips

1. Assume the problem is worse than it appears.
2. Assume there are no secrets in the world
3. Assume your company’s profile will be portrayed in the worst possible light
4. Assume there will be changes in process and people. No crisis ends without blood on the floor
5. Assume the company will survive, ultimately stronger for what happened.

Remember during the crisis the business still has to run and trust is what you need at every turn.

Linking to dividend paying stocks, every company faces change, although as long-term investors we do not want the company to do anything not to continually pay its dividend. One of the many ways to protect yourself is judge to see how the company handles change and how did it handle its last crisis. If you are impressed, and you believe they were doing the right thing, it is easier to make the investment.

There are more questions than answers, till the next time – to raising questions.

The people are hired, now they need to work together, steadily improve their performance, be motivated, stay with the company and grow as leaders. In other words, they need to be managed.

To manage people a company should

1. Elevate the HR to a position of power and primacy in the organization. The HR people need to build leaders and careers.
2. The HR position in the organizational chart as well as in fact is a direct report to the CEO or without a doubt the second most important person in the organization.
3. Use a rigorous, non- bureaucratic evaluation system which means it is clear and simple – what I thought the person did well, how I thought they could improve. It should measure people on relevant, agreed on criteria; ideally done twice a year; and when talking about next career steps – as who could replace them if they were promoted.
4. Create effective mechanisms – read: money, recognition and training to motivate and retain. People want both recognition and money.
5. Face straight into charged relationships – with stars, sliders and disrupters.Sliders are people who hit a wall but were once good performers. Use either new jobs or training with them; if it does not work show them the front door.
6. Disrupters – these are individuals who cause trouble for sport – show them the front door.
7. You need stars or top 20% to win, however star’s ego has to be kept in check. You can never be afraid of your stars and ideally the star will be replaced within 8 hours, to show no person is indispensable.
8. Never treat the 70% for granted, treat them like the heart and soul of the organization.
9. Within the group are many stars, they need to be managed and shown appreciation.
10. Design the organization chart to be flat as possible with blindingly clear relationships and responsibilities. Managers should have 10 direct reports at a minimum and 30 to 50% more if they are experienced.

Letting Go is Hard to Do

If the above are in place, although letting people go is difficult the process will be easier because people will know where they stand and where the company stands.  3 reasons for layoffs are:

Firing for integrity violations or any form of ethical or legal breach.

Layoffs due to economic downturns – there should be preparation beforehand. People should have an idea of how the division is performing. Open communication should be the order of the day.

Firings for non-performance – if the person is ineffective in their jobs, it is seemingly easier to do, which is why effective evaluations are very important. If they are in the bottom 10% and the company has tried, it is much more open process for everyone and all employees will know where they stand. The part to understand is the boss owns the process – try to do it right. No surprises, no humiliation.

Linking to dividend paying stocks, it is easier and normal to pay attention to where the HR person is in the organization; how is the company developing new leaders; but most of what a company reports can be seen in how they let people go. It is not easy to close a plant or line of product knowing people’s lives are affected, however the company only has an x amount of resources. Times and legislation changes which mean changes happen. How reasonably open they are when something like that happens tells the true character of the company.

There are more questions than answers, till the next time – to raising questions.

One day you are leader, what does that mean? Before you were a leader you were concerned about growing yourself. Now you are concerned about growing others or the people who you are the leader of.

What leaders do

1. Leaders relentlessly upgrade their team – using every encounter as an opportunity to evaluate, coach and build self-confidence.Coach means guiding, critiquing and helping people improve their performance
2. Build self-confidence means pouring our encouragement, caring and recognition
3. Evaluate means making sure the right people are in the right jobs.
4. Leaders make sure people not only see the vision, they live and breathe it.
5. If you want people to live and breathe the vision which you are always talking about show them the money – “Show me a company’s various compensation plans, and I’ll show you how its people behave”
6. Leaders get into everyone’s skin, exuding positive energy and optimism.
7. People watch their leader, display a can-do attitude
8. Leaders establish trust with candor, transparency and credit.
9. Being transparent in both good times and downturns. Ideas that help the team’s success are shared and responsibility for when things go wrong stay where they belong (it is lonely at the top)
10. Leaders have the courage to make unpopular decisions and gut calls.
11. You are not a leader to win the popularity contest – you are a leader to lead. You are not running for office, you are there. When you know something go with it.
12. Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
13. When you are leader, you are not the expert; your job is to have all the questions. The What if? Why not? How come? The questions need answers.
14. Leaders inspire risk taking and learning by setting the example.
15. You can create a culture that welcomes risk taking by freeing admitting your mistakes and talking about what you have learned from them.
16. Leaders celebrate.
17. Have fun, enjoy the times of success; there are many ways to celebrate.

Note there are many paradoxes with the list, performing balancing acts everyday is leadership.

So how do you hire great people?

It is hard.

Acid Tests – come at the outset of the hiring process.

Integrity – do they tell the truth? Do they admit responsibility for past actions; admit mistakes and fix them? They play to win the right way, by the rules?

Intelligence – a strong dose of intellectual curiosity with a breath of knowledge to work with or lead people?

Maturity – the individual can withstand the heat, handle stress and setbacks, and enjoy success.

Positive Energy

• Ability to thrive on action and relish change.
• They love life – love work and play

Ability to Energize Others

• To get people revved up. To take on the impossible and enjoy it.

Edge

-The courage to make tough yes-or-no decisions. Effective people know when to stop assessing and make a tough call even without total information.

Execute

– The ability to get the job done.

If you have the 4 E’s Energy, Energize, Edge and Execute then look for P or passion

Hiring is difficult. Mr. Welch says when he was younger he picked the right person 50% of the time; 30 years later it was 80%. The key point is every hiring mistake is yours. Take responsibility and make the ending is candid and fair.

If you can ask one question about a person, ask them why did they leave the past job?  Why the previous job?

Linking to dividend paying companies, if the company has been making profits for a number of years, the biggest challenge the company has is to hire and grow its leaders to continually make profits in the years to come. Reviewing articles in the press about the leadership of the company will give clues to whether the hiring process is a good one.

There are more questions than answers, till the next time – to raising questions.

In this case Winning is written by Jack Welch with Suzy Welch published by HarperCollins, NY, 2005.  It is book which came from question and answer sessions after presentations from Mr. Welch. Many people had questions of the next steps, what does it take to win? Mr. Welch offers his opinions from his role as the former Chairman and CEO of GE and his present consulting positions. In his travels he had seen many things go wrong as well as opportunities for improvement.

To start with you need some basics – a mission and values statement that you can live by and do on a daily basis. Those statements on the wall must be the force that guides the business through the cycles of the business.

The next thing is candor – it is often easier in the company not to speak your mind, either because it is not really asked for or because you do not need to make a job threatening stand at the moment. However if you have candor you will bring more people and their minds (most of us are in the service business) into the conversation; when the ideas are given the ideas can be debated, be expanded upon and acted upon quicker; and candor cuts costs of meetings to confirm what everyone already knows. Candor works well with budgets and appraisals – for example if the discussion is the person is not good, the written appraisal needs to reflect that.

Coming from candor the value of differentiation comes next. Mr. Welch believes company’s win when managers make a clear and meaningful distinction between top and bottom businesses and people, when they cultivate the strong and cull the weak. If everyone is treated equally and bets are sprinkled all around like the rain on the ocean, business and people lose.  The job of management is to know and invest in the strong businesses or product lines and look to selling the ones that are not performing well.

On the people side – there are 3 categories: top 20% of your people; middle 70% and bottom 10%.  The next step is to act when people are in the category. If you are in the top 20% there are a variety of measures to keep them there and working hard. The middle 70% needs to be engaged, motivated and those with the potential to move up are identified and help do so. Note: everyone in the 70% needs to be motivated.  The bottom 10% need to leave the company. The key to the system is before dividing people into the 20-70-10 portion, implement a candid, clear-cut performance system with defined expectations, goals and timelines with a program of consistent appraisals.  The problem with not doing the 20-70-10 is when there is a downturn and people are let go, it tends to be the underperforming first and they do not know because their evaluations for years was doing good.

In addition to ensure everyone has a say or stays motivated, GE used the process of Work-Out. People came together to discuss better ways to do things, how to eliminate some of the bureaucracy and roadblocks that were hindering them. Management would look at the ideas and say yes or no to the recommendations and pick to resolve 25% of the concerns within 30 days. The idea is to ensure everyone is heard and respected and that is something everyone wants and companies need to do.

Linking to dividend paying stocks, in a world where government wants to treat and demand everyone is treated equally and respectfully, companies should be doing that. The company needs to invest and expand on its profitable lines and weed out poorer performers. The tough part is putting in a system which is fair and automatically lets you know where you stand. Every company believes they hire the best, however once an employee is in, most do not do a good job for the person beyond their job title.  If you invested in a dividend paying company, it has products or services which consistently produce a healthy profit, it should be a no brainer those products and services receive the greatest resources. How a company treats its employees is harder to tell and various measures arise to try to compare. Most investors look at the top 10% to see why the top 10% leave the company.

There are more questions than answers, till the next time – to raising questions.

 

In many communities there are alternative free newspapers which typically cater to the young market because the message is different from the established methods or looking through the newspaper it looks different than established newspapers. The newspaper caters to the music, dance, theater, art or the creative community. To examine the Evolution of Indie Culture there is a book called Slanted and Enchanted by Kaya Oakes, published by Henry Holt and Company, NY, 2009. In cities with an active indie culture, there will be greater opportunity because every once in a while someone breaks out to the regional or national level of interest. In many communities, the indie culture is the entry point to what the band or artist believes will sell and make them a living. In order to make a better than subsistence living, the appeal has to be made to the corporate crowd who typically have more disposable income. The indie crowd would tend to say it comes at a large price to “sell out”. When you are a “starving artist” you will depend on others in the same mind set, and that makes the indie culture have great ties to each other. Those in the indie culture tend to have non establishment viewpoints because their concerns tend not to be highly ranked on the corporate concerns, however a good company has appeal to the indie culture.

Linking to dividend paying stocks, the indie culture is essentially entrepreneurs who try to make a living in the arts world and they quickly learn the low cost methods to do so. In terms of promoting themselves, some have the best websites including video, because they need to. This means the corporate world can learn much from the indie culture. The indie culture can also help turn corporate “greed or non-ethics” into a concern for the broader public, which means if you invest in a stock which needs the broad public for continual profits, it should be as good as community citizen as possible.

There are more questions than answers, till the next time – to raising questions.