PeopleStar Klint Kendrik: Audio automatically transcribed by Sonix

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PeopleStar Intro:
Welcome to the PeopleStar Podcast. We deliver leadership perspectives from industry experts on their people, architecture, routines, and culture as they solve HR's newest challenges. And now your host, Julie Rieken.

Julie Rieken:
Hello podcast listeners. Julie Rieken, host of PeopleStar, and today I'm super thrilled, I've got Klint Kendrick with us. Klint has written two fascinating books. Klint, I wish I'd had these books, maybe a little bit sooner, because I could have definitely used the advice, but I want to share with our listeners the titles of these books and establish you as an expert in this area. So the two titles of the books, The HR Practitioner's Guide to Due Diligence in Mergers and Acquisitions, and the second title, The HR Practitioner's Guide to Cultural Integration in Mergers and Acquisitions. And having had that at Trek Star, gosh, I wish I'd had your books ahead of time and you've got some great work experience and life experience. Klint, welcome to the podcast. Give us a little bit more about who you are and your background. And then we're going to have a fascinating conversation about drivers of culture in mergers and acquisitions. Welcome.

Klint Kendrik:
Fantastic, Julie, thank you so much for having me. And I'm a real M&A geek, right? It's a passion that I have. I've been acquired a few times in my career as one of those guys who got a job offer with companies that were being bought, and sometimes it worked out, and another time I said, no thanks, you've messed with my comp too much. So, I come from a place of a person who's been acquired as well as a person who's done over 100 M&A deals with some big-name companies. I started my M&A career at Boeing. I moved then to an Alibaba-backed venture capital firm that was looking at some acquisitions in the gaming space with Western companies. From there, I moved to Oracle and SC Johnson, and now I'm with a large retailer who I won't name for reasons that I'm sure folks understand. But I've done over 100 M&A deals and I really have a passion for making sure that this work gets done well. So I'm excited that folks like you find them useful as you go through your M&As.

Julie Rieken:
Definitely, so, in addition, one of the other things that I think is really interesting about you, as we were talking just ahead of our recording here, was, you mentioned you have a Ph.D. in organizational leadership and you're a scholar-practitioner. Tell us what that means for the audience. I think that's really important to set the stage.

Klint Kendrik:
Sure, absolutely. So, I'm educated beyond my intelligence is what I like to tell folks. So I have a Ph.D. in organizational leadership. I also have an MBA and a master's in IO Psych, and my undergrad degree was actually in accounting. So I bring together that blend of understanding the numbers as well as the human psychology, but in my opinion, Julie, academic scholarship are only useful to the extent that they're relevant to what we do in the workplace. And that's not to denigrate the work of some really fantastic academics out there that lay the foundation for guys like me to come in and say, how do we apply this scholarship to the real world? And that's really the … that I've taken in writing the books is I've done my research, I've got my lived experience, and my goal with the two books is to really distill it down into something that an HR person confronted with their first M&A deal can pick up that book, read it cover to cover in a few hours, and they at least have a basic understanding of how to make this an easier process than it would have otherwise been.

Julie Rieken:
I love it, one of the things we've got to do is give a link to your books because I am on Amazon.com or wherever you sell them. As soon as we are done, I can't wait to read them. But one of the things that we talked about, and I think this is going to be fascinating for both, for me and for our audience, personally relevant that mergers and acquisitions are hard work. And you, one of the things you cover in your book are some of the five key drivers of culture clash in an M&A. Having experienced this, we can learn a lot from these five key drivers. And I'm wondering, can you just take us through it, and let's just talk about what these things are and how should how should HR professionals be thinking about a merger or an acquisition before it happens? Let's start that conversation.

Klint Kendrik:
Perfect. So I think the first thing we have to do, Julie, is, really define culture inside a work context. So there's a lot of different definitions. Those folks who are geeky, like me, will look at Edgar Shine and some other leaders and look at those definitions of culture. At the end of the day, I think that culture is how people get things done in the workplace. You can't take people out of culture, right? So it's how people get things done in the workplace. And part of the challenge, Julie, is that it's such a big area, right? People touch every part of the organization. So in an M&A, we can't sit and look at each and every element, not just past the weeds' level. We're talking, you know, digging-in-the-dirt level of granularity. We just can't do it. We don't have time. It's not value-added. So we have to focus on those places where people do things differently and is likely to create some friction. So I worked very closely with an intern through the Chicago School of Professional Psychology, which is where I went for my doctorate and my master's in IO Psych, and he interviewed a number of other experienced M&A practitioners, and we sat down and sorted through that interview data to come up with the five areas where culture clashes are most likely to arise in an M&A. And here's what they are. So the first is decision-making, and we can talk a little bit more about each of these as we go on, but the first is decision-making. The second is collaboration styles. The third is some really tactical operations pieces. Fourth is communication. And the fifth, and probably the one that ends up being the area that gets the most focus, is organizational self-concept. So how does the organization see itself? So those are the five areas. And Julie, as we look at these, I think it's really important to note that this is a comparative exercise, right? So not only do I have to look at the company that's being bought, we often refer to that as the target company. So the seller, we have to understand what's going on in their world, but that's not enough. We have to have enough self-awareness of our organization and how it operates, that we can do a comparison to really understand where those areas of friction are going to come up. And I guess one other thing that I will add before we dig into those is, I hear people sometimes, especially business leaders, that will say, well, why do I care about friction, you know? If you look at the top left-hand corner of the check where we bought you, it says our company name on it, we're in charge. And well, I hope that our current talent marketplace brings a little bit of light to why that's a bad idea if you need people to run that business. And if you chase them all the way over something goofy, then you've destroyed value. You've paid a premium for this company, and if all of your talent walks out the door with their customer relationships, your revenues go down; with their institutional knowledge, your processes take longer. At the end of the day, how people do things in the organization will affect the bottom line, and that's why we should care.

Julie Rieken:
Such a big deal. Friction really does hit the bottom line, and in today's market, we all know it's just too volatile to be able to not address these things, and so you've listed five really important things. Can we start with number one and let's just think about HR practitioners and how can HR practitioners help reduce culture clash when it comes to the first thing: decision making. What should we be thinking about?

Klint Kendrik:
So we've identified a few areas inside these dimensions, we call them sub-dimensions, that really help us to shape the way that we think about each of these dimensions of culture, each of these areas where culture clash happens. So when we look at decision-making, we tend to look at things like how centralized are decisions. So are they all coming from the center of the organization or do people at different levels in the organization have decision-making rights? Is there a process or is it sort of fly-by-the-seat-of-your-pants? How much debate is permitted in some organizations? Absolutely fine for a lower in the organization employee to question the CEO directly and other organizations even that CEO's vice presidents aren't going to question her decisions once they're made. Are decisions made proactively? Are they made reactively? What's the risk tolerance? How much analysis versus gut feel? So we look at all of those areas and go, okay, what's the clash going to be? And so just to take one of those, let's look at room for debate. As an HR professional, some of my leaders want me to challenge them. They want me to say, hey, I don't think that that's the right way to do things, or I think that's great and maybe we should tweak it a little, or I love your plan. Other leaders I've worked with, all they want to hear is, You're brilliant, I love your plan, Let's go do it your way. And how I navigate that as an HR leader, it affects the decision-making that I make. It will affect decision-making with the people who are part of my team. And so if you think about applying that to an entire organization when that changes from one style to the other, it really throws people into disarray. What I should also add to that, Julie is that I don't make values judgments on that. I have certain work styles I prefer to operate inside of, but those aren't everybody's work style preferences. So again, looking at that, just that room for debate, I've seen people in organizations where debate is not permitted go into organizations where debate is encouraged and really struggle because they don't know how to raise the issues and they feel like a fish out of water and that can really be uncomfortable for them. Now, I personally prefer to work in an org where I can debate, but that doesn't mean everybody can or that it's even the right way of doing things. We just want to look at those differences so that we can help people adapt to their new organizational culture.

Julie Rieken:
Klint, I wish I'd had that list because when I think about what you've just gone through, that would have been really helpful for me as a leader or for other HR people to say, what are the patterns of behavior that we've established? How would we answer these things? And then sharing that with a new organization like, here's how we do that? Oh, we don't have a process for that, but now that we're combined, maybe we should. I want that book so that I can look through that list, read through it with a leadership team, and just maybe assess ourselves so that as we think about bringing in new organizations, how would we answer these ourselves and what would we want that to be so that we could at least be thinking about that checklist? That's amazing, I love it. So that's decision-making. Love that and just that list alone could help reduce a lot of friction and a potential clash just by being aware of the ways that we think about decision making, cool. Collaboration styles, that's number two.

Klint Kendrik:
Yeah, so collaboration styles, when I think about this, this is usually how teams work together in roughly the same organizational layer, roughly. And so we look at things like role clarity. Do people have clearly defined and distinct roles and responsibilities or are they more flexible? How are conflicts handled? You know, some organizations' conflict isn't mentioned. Other places, you know, you'll have a knockdown drag out till it gets sorted out. The leadership will either get involved or they won't get involved, depending on the culture. What do bonding opportunities look like? And this is one that people tend to focus on a lot. Some organizations will have a quarterly gathering. I see this a lot in the startup world where once a quarter the boss will grab the company credit card and everybody will go out for a happy hour or a nice dinner. And then a big organization comes in and it's like, Hey, we don't do that here, that's not in the budget. So all of a sudden this team is left to figure out how they bond now, how they get together, and how they form that team cohesion. So just those bonding opportunities. Another one is trust. So acquisitions and I feel like I've done a lot of low-trust acquisitions in the last few years. I think that's, as our world changes, we're seeing less trust between leaders and those people being led. So if you're walking into a low trust environment from a high trust environment, it can be a massive change. And the same if you're going the other way. And by trust, I mean usually, do you feel like your leaders have your back? And are the people around you going to do what they said they're going to do? Next things are speed, how quickly does the organization expect people to move, and then how are resources allocated, or do resources go-to favorites, is there a business case? And again, those are some major differences, areas of friction, where I worked on a deal once where resource allocation was a huge thing at this startup. Boy, if you thought that you needed a $600 monitor to do your job and you needed 12 of them, boy, that company founder was going to make sure that you had the best equipment out there. And then my big employer acquired them when we were like, Yeah, two monitors is good, thank you very much.

Julie Rieken:
Or you need a process, a decision-making process to request your resources.

Klint Kendrik:
Right, right. And I'm old enough to remember, fill this form out in triplicate and it sort of feels like that.

Julie Rieken:
Alright, that's amazing. Collaborations, again, your books are going to be so helpful just thinking about all of these different elements of how do we collaborate together. I love that. Ok, anything else on collaboration styles?

Klint Kendrik:
I don't think so.

Julie Rieken:
Alright, let's move on to operations. This is a big one, I would imagine, different kinds of operations. Talk to us about how HR practitioners can smooth things out at an M&A around operations.

Klint Kendrik:
Yeah, absolutely. So we tend to start off with operations thinking about levels of specialization. So do people wear multiple hats and they're valued for having experience in multiple areas? Or do the top leaders really want subject matter expertise? Seldom is there a middle ground on that, especially as organizations of different sizes and complexity come together. One that I find really hits HR people are reward practices. So that's one of the basics of putting together variable compensation programs is, is our variable comp program driving the behavior that we want it to drive? And I'm sure that we've all got stories of sales commission plans that we've put together that you watch the sales team start to behave in a certain way because of how you're incentivizing them, and you're like, Oh, I did not realize that I had a guy once hold back on booking sales until the beginning of the quarter because he wasn't going to meet his thresholds to get the next percentage of bonus. So he held on to closing of Book of Business for about three weeks because it was close to quarter-end, and then all of a sudden, first of the next quarter, all of that business gets signed. Well, you know, in that time, the firms lost out on three weeks' worth of revenue from having those deals signed. So, how we put our reward practices in place will drive how people behave, and salespeople are just a real easy example of that.

Julie Rieken:
We've never had that here, Klint, I have no idea why I'm getting. So true, that's a really important one to think about.

Klint Kendrik:
Yeah, what behavior are we trying to drive? And that rolls into execution. Is it a doing culture or is it an ideas culture or is it somewhere in between? Do we value what people think and what they say in their innovative ideas, or do we need them to deliver something tangible? And what's interesting is a lot of folks, when we talk about some of these things, say, well, we're really both. But this is where really a level of introspection makes a difference because often organizations sway one way or the other and even a slight tilt to the left for one organization and a slight tilt to the right on another organization can create that friction in that clash, and you just want to be aware of it. Other things right now in the world of virtual is just being present, right? Do we have a butt-in-chair culture where everybody is expected to be in the office? Do we have a fully remote culture and all of what drives that? And I mean, that's a hot topic right now. How do we operate? How do we work together? How do we share information with people? And then finally, who's responsible for developing people? Is it the manager? Is it the individual? Are there formal programs or they're not formal programs? So all of those elements really make up how that organization operates, how they get the work done that needs to get done.

Julie Rieken:
Love it, again, I'm making a mad list, which I won't need because we're going to have an … Okay, because we'll I'll have a book with this stuff in it. Okay, communication, Klint, number four.

Klint Kendrik:
Sure, so communication, transparency. So are your top leaders transparent? I've seen some organizations where the top leader will put a Slack message out the minute he's thinking something, right? It's this almost ADD style, I got to put out what I'm thinking right now, super transparent leadership, versus somewhere, the leader has to sit on it for a couple of days and then wordsmith it 12 times, and then it has to go in a very, very specific format. And some people try to lock that into organization sizes, and I can tell you that that happens, those two extremes I've seen happen in both big and small organizations. So we make a mistake sometimes when we lock these things into organization size instead of truly looking org by org, so transparency. Formality is the next one. Is communication done more informally, the infamous water cooler or instant messaging versus, you know, emails or formal memos that go out? How frequent are the communications? Are they daily or are they minute by minute? Or do you hear from your leader once a quarter? What's the expectation there? What I call audience orientation, and this is basically who are you writing to? And so some leaders write in a way that they want to be completely clear on the message, right, and they want to make sure that there's no ambiguity. Other leaders read it up to the reader to decide what they're saying, and there tends to be a lot of context in reading between the lines that people are responsible for doing, so is the audience doing a lot of the heavy lifting for interpreting your message? The next one is positivity. So are the messages always upbeat and cheerful, you know? We had a terrible quarter, I saw an email like this once, We had a terrible quarter. We're struggling right now, but it's looking up for next year, right? So it's got to be this, always a positive message, whereas other leaders are sometimes more negative like, oh, I know the numbers looked great this quarter, but we've always got to be on the defensive. We've got to always be selling. So that positive versus negative, and that can be a huge shock to an organization if a positive leader suddenly ends up with a negative messaging, or a leader who tends to try to inspire people by looking at the struggle, right? We got to overcome the struggle, suddenly comes in with everything's okay, as a message. So we've got to watch those elements. And then finally, what I call interpersonal savvy, and this was a bit of a challenging one to figure out where it goes. But we saw this in a lot of the organizations that we interviewed where some groups will tolerate a talented jerk and other groups absolutely will not. So how much interpersonal savvy do members of your organization need to have when they communicate? Are talented jerks tolerated, or are they escorted out of the business?

Julie Rieken:
This is fascinating, to think about all of these components. Ok, love that. Anything else on communication before we get to our fifth component, which is organizational self-concept.

Klint Kendrik:
So, why don't we dive in? Organizational self-concept is one of those that really speaks to how does the organization view itself. So, you know, before I jump into the dimensions, Julie, it might be helpful to think for a moment about where most companies do culture assessment, it's in this organizational self-concept. And I've seen groups that have basically said, you look at the value statement of the buyer and the value statement of the seller, and if those values are largely aligned, then you've got a good culture fit. So let me throw an example out for you. Have you ever seen an organization, Julie, where one of the pieces of the mission or vision or values is, have fun or win? All the time, right? So Julie, we just had 4th of July weekend and I'm curious, what did you do for fun? What was fun for you over 4th of July?

Julie Rieken:
Oh, I went on runs with my friends and then we had a barbecue.

Klint Kendrik:
Nice, nice. So I heard, went on runs, and so, are you an exercise person or do you enjoy that kind of thing? Perfect. I love that you love to run, that sounds like absolute torture to me.

Julie Rieken:
For me too, I still do it, Yes.

Klint Kendrik:
So my point there is that, you know, for fun, you go running, for me, I'm going to sit at home with a cold adult beverage and sit out and chat with my buddies. And exercise is absolutely not on the menu for us. But if you think about that, we both had fun over our weekend. We just express that behaviorally in very, very different ways. So if all we do in doing an organizational assessment, a cultural assessment, is look at those value statements where things like have fun and win, get operationalized with your organization going for a run, and my organization, taking people out to the most fattening lunch that we can find, we're having fun in very different ways, and that creates friction in the organization. So the areas where we have found that we want to focus with this organizational self-concept is where does the customer fit in? So is the organization focused on the customer or is it focused on the organization itself? And that can create clash if, you know, the customer is always right versus the customer needs our services or products and we'll tell them how to best use them. Two very different ways of thinking about your customer. What is the organization's purpose? Are people really locked into the purpose or is it just another job? Or do you have two purpose-driven organizations with very different purposes, and some people are going to feel alienated if the purpose doesn't align. What about commitment? Are people in an org where they go above and beyond? Or do they sort of do the minimum to get by? And that can be kind of hard to get to in early assessment. But often there are signs in places like Glassdoor or some of the other social sites where we go out to look at company information. How about traditions? What are some of the important traditions in the different organizations? I've been with, somewhere, every Friday is a happy hour, or every Tuesday lunch is brought in and people sit down to collaborate. Or the interview process, I've seen some companies where they'll send candidates home with homework to do, and that's a very important tradition in the organization selection process, while another company doesn't value that tradition, and then suddenly there's clash with those hiring managers and how they do business. The last two are agility and inclusion, and agility is the ability to react quickly. Well, some organizations shouldn't react quickly. You know, I worked for a company that built airplanes. The last thing you want to do is change how you attach wings to the fuselage of an airplane, right? That is not a process where I want agility. I want to be able to step on that plane and know that those wings are going to stay attached, thank you very much. I don't want an agile process there. Other organizations need to have an agile process with how they do things, and you've got to figure out how those are going to come together. And then finally, inclusion, this day and age, you know, we all have different ideas on inclusion. We all know that we want to feel welcome, but organizations express their commitment to inclusion in very, very different ways, and we want to make sure that we at least understand those differences. So, again, a lot of different areas there, but all very important to look at as you're trying to bring two organizations together.

Julie Rieken:
This has been amazing. I'm thinking about the five things. Again, we talked about the five things that can create culture clash in a merger and acquisition. This is something a lot of us have experienced. And just thinking about how we as HR, or as leaders, or as both, could just go through a checklist and think about how do we actually behave in this? And you made a comment earlier about having a really honest introspection of how, really, who are you? It seems like to just be really honest about who you are and think about what are those areas that we should think about and maybe share when we bring organizations together? Gosh, that would have made for a lot easier road for some of the things that we've done, and I think this is going to be so useful for people that are in these situations themselves.

Klint Kendrik:
Fantastic, I'm so glad to hear that. You know, at the end of the day, Julie, like I'd mentioned, I've been through a number of acquisitions. One of the times when I left, I had a newborn and a one or two-year-old at the time. They messed with my pay mix to a point where I ended up leaving the org, and I'm just really committed that other families don't necessarily have to go through that same pain of finding a different job because the acquisition just wasn't working out. And I think that we as HR professionals, we really do become key to whether or not those folks have a dramatically negative impact, whether it's culture, whether it's rewards, whether it's leadership, and anything I can do to help make sure that these go more smoothly for other people I'm all in for.

Julie Rieken:
Well, I think that's going to happen. Reminder, Klint Kendrick, author of HR Practitioner's Guide to Due Diligence in Mergers and Acquisitions, and the HR Practitioner's Guide to Cultural Integration in M&A. I'm excited to read these. I know our listeners will be too. Klint, thanks for being a guest today.

Klint Kendrik:
Great. Thank you, Julie.

PeopleStar Outro:
Thanks for listening to the PeopleStar Podcast. For the show notes, transcript, resources, and more ways to get a seat at the table, visit us at TrakStar.com/Podcast.

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