The firm faced a number of challenges as it tried to expand its client base and revenue opportunities for its partners. A number of its clients were disappearing through mergers and acquisitions. It wasn’t positioned to take on national or international clients because of its small size and local focus. While it had some success bringing in talented individual practitioners, it wasn’t able to offer the opportunities to other small firms that a larger organization could offer and so mergers were few and far between.
And then a much larger firm came knocking. There were some initial exploratory chats with the senior partners from both firms. They discovered similar cultures and similar practices and processes. Of course, the larger firm had a much bigger and diverse client set but that had some appeal to the smaller firm’s partners. As the discussions progressed, the managing partner decided to take a more disciplined approach to the possible merger. She engaged the other partners and senior staff to develop and apply assessment tools that would allow them to make a fully informed decision and provide an effective framework for the integration if the decision was to proceed. She talked to a few of their most loyal clients and got their blessing. She informed the principals at the larger firm of her intent and received the green light from them as well. Interestingly, when she asked those same principals how they would assess her firm leading up to a decision on the merger, she was greeted with silence and blank looks. She wondered to herself “do they just want our client base?”
With the agreement of the firm’s partners and senior staff, the goal was to identify the salient factors that would provide a comprehensive assessment framework for a possible merger with the larger firm, complete the assessment using the framework and, if a decision to proceed was made, use the framework as a platform for managing the integration.
The managing partner asked the firm’s COO to facilitate the exploratory sessions with the partners and senior staff and lead the assessment activity. The COO proceeded to draft a frame of reference for the initiative to confirm his understanding of what he was being asked to do. The frame of reference included the following points:
- The need for complete and total confidentiality throughout the assessment process.
- Responsibilities of the participants including full, active participation, frank, open discussion and respect for the ideas and views of other participants. He also suggested which partners and senior staff would be responsible for assessing the larger firm’s practices, processes and functions.
- The kinds of factors that could be included in the framework. He suggested things like the larger firm’s financial strength and performance, its client mix, strategies and growth plans, the benefits and costs to the smaller firm, its existing clients, individual partners and staff, practice compatibility and competitive and operational risks.
- The process for selecting the factors including and the rating scheme and inclusion criteria.
- The process for using the assessment results to reach a decision.
- The timeframe for the development of the framework, the conduct of the assessment and a suggested target for the decision.
The COO reviewed his approach with the managing partner. She suggested a few tweaks and agreed to distribute it to the targeted individuals to get the process started. The framework creation process the COO outlined in the frame of reference document proposed the following seven steps:
- All involved meet to agree on the frame of reference
- Individuals submit proposed assessment factors to COO
- COO consolidates and rationalizes submissions and sends out for review
- Individuals rate and rank each factor presented and return to COO
- COO consolidates results and sends out for review
- All involved meet to agree on framework
- If necessary, repeat steps 2. through 6.
The meeting on the frame of reference, chaired by the managing partner, was a contentious affair. Four of the partners and all four of the senior staff members involved agreed with the frame of reference up front. Two partners were opposed to the merger and so opposed any further assessment activity. The other two partners were fully in favour of the merger and so questioned the need for so much rigor in the assessment process. The managing partner was in that role for a reason. A strong communicator and collaborator, she managed to persuade the outliers of the value of doing the assessment as proposed. There was unanimous agreement going forward. Independently, she also reviewed the approach with the clients she had spoken to previously and asked them if they would like to participate. They agreed.
And so the submission and consolidation of suggested factors proceeded according to plan over three rounds and six weeks. The initial round netted 114 submissions and 82 unique factors. The second round added another 12 factors and the third round added just 3 new factors but ended up with unanimous agreement to the assessment framework and the 97 assessment factors included.
The Managing partner and COO met with the principals at the larger firm, reviewed the assessment framework with them, developed a plan for the assessment to be carried out and identified the staff from the larger firm that needed to be involved. When the Managing partner offered the larger firm the opportunity to conduct a similar examination of her firm, they declined. She wondered again, “do they just want our client base?”
So off they went, the smaller firm assessing the larger on their 97 factors.
The first revelation the partners in the smaller firm experienced was that they were not a big priority for the partners in the larger firm. The plan that originally allocated five weeks for the assessment took ten weeks, largely due to the lack of availability of the larger firm’s partners. At the end of the ten week period, reviews of 86 of the 97 factors were completed but the partners agreed that they had sufficient information to reach a decision. The decision: seven of the eight partners and the managing partner voted to proceed with the integration. The COO and senior staff involved also supported the move. The lone partner against the move decided to go into private practice. The key driver for the decision? The potential for the smaller firm’s partners to increase their client set and consequently, personal income. The managing partner informed the principals at the larger firm of their decision which set the formal and legal steps in motion.
During the assessment process, a number of factors received lower ratings that suggested they should receive extra focus during the negotiations and the actual integration effort. Those lower rated factors included:
- Dissonance between the larger firms stated core values and actual practice. They didn’t seem to practice what they preached.
- Highly centralized decision-making at the head office rather than the local decision model claimed.
- Inconsistent application of standard processes and practices across the larger firms practices.
- No centralized client focus versus the claims of an holistic client view.
- The transition plan for the smaller firm’s clients.
- The transition plan for the smaller firm’s staff.
- The larger firm’s rudimentary technology infrastructure and services compared to the smaller firm.
- The intended role of the smaller firms partners after integration.
- Rationalization of the smaller firm’s external relationships and providers.
- Concerns over budgeting, cost allocation practices, billing, security, human resource practices
Some of these concerns, including the placement of the smaller firm’s partners and staff, were addressed during the negotiations. Other factors dealing with operational concerns were addressed as part of the integration activity carried out over fourteen months following the formalization of the acquisition. The concerns over cultural issues were raised but not explicitly addressed by any formal follow-on actions. However, because they were identified, the smaller firm’s partners and staff had a heads-up of what to expect. That awareness made the transition somewhat easier to manage.
Fourteen months after the integration, all seven partners who made the move were very positive about the change. The majority of the staff also had a positive view. The smaller firm’s clients were also happy with the transition process and their relationship with the larger organization. The managing partner, who guided the transition though to its completion, retired with the knowledge that the merger was a change well done.
How a Great Leader Succeeded
The managing partner did a number of things right:
- She engaged the key stakeholders
The managing partner took on the role of sponsor for the change. She brought her partners in early, engaged the COO and senior staff up front and even brought in a few key clients. That helped raise issues and concerns early in the process and ensured appropriate attention and resolution. She also brought in the COO in the change agent role to guide the development and execution of the assessment process. Finally she engaged the principals of the larger firm as key participants in the merger process.
- She formalized the assessment process
By overcoming the initial resistance from half of the partners and completing the assessment framework, she was able to provide all stakeholders with the ability to make informed, rational decisions and guide the integration activities to the benefit of all parties. The objective assessment enabled by the collectively formed framework was a cornerstone for the success of the merger.
- She used her soft power effectively
Even as the managing partner of the small firm, she did not have the hard power to make a unilateral executive decision as do so many managers in sponsor roles. She had to use soft power; persuasion, logic, humor, collegiality, collaboration, negotiation, active listing, partnership. She succeeded under very demanding circumstances with very demanding partners. She managed to diffuse a potentially highly emotional debate and turn it into a rational, knowledge based review and decision.
- She helped her partners understand what was important to them
Although, in the final analysis, the partners’ potential financial gain was the key driver to the decision to proceed, forcing them to go through a thorough due diligence exercise helped them understand the other factors that were important to them. That resulted in a transition incorporating roles, services and practices that they valued. Had they not agreed to go through the formal assessment process, they would likely have lost much that they valued at the smaller firm including, perhaps, their positions as partners.
If you’ve been through mergers or acquisitions, you know how stressful they can be and how contentious the issues can become. In reality, they’re often not much different from other types of major business or technology change. The managing partner in this case did all the right things: she involved all those who needed to be involved, when they needed to be involved; she collaborated; she communicated; she helped the participants figure out how they were going to make the key decisions; she showed leadership throughout.
If you find yourself in a similar situation, put these points on your checklist of things to do so you too can be a Great Leader. And remember to use Project Pre-Check’s three building blocks right up front so you don’t overlook those key success factors.
In the interim, if you have a project experience, either good or bad, past or present, that you’d like to have examined through the Project Pre-Check lens and published in this blog, send me the details and we’ll present it for others to learn from and comment on.
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