April 14, 2023

E113: Tony Benedict In Merging Technology, Culture, and Processes for Innovative M&A Transformations

E113: Tony Benedict In Merging Technology, Culture, and Processes for Innovative M&A Transformations

Tony is an experienced corporate executive, advisor and board member whose career has spanned two decades at Fortune 500 B2B and B2C companies. Tony is a Partner with Omicron Partners, a strategy, operations and transformation advisory firm where he...

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Tony is an experienced corporate executive, advisor and board member whose career has spanned two decades at Fortune 500 B2B and B2C companies. Tony is a Partner with Omicron Partners, a strategy, operations and transformation advisory firm where he primarily engages with Private Equity portfolio and private companies in the middle market. He has extensive experience in post-acquisition integration and business transformation.

Tony talks about his experience in operations, starting with Intel and then transitioning to a for-profit healthcare system backed by private equity. With this company, they went from 12 to 28 hospitals in 18 months and from 2.2 to 7 billion in revenue. He got the fever for post-acquisition integration and the pressure to do it quickly and correctly. Eventually, the company was bought out.
Contact Tony on
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[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. Today I'm here with Tony Benedict and he is the CEO, advisor. We're gonna talk about, buying and selling companies and mergers, acquisitions, and also we're gonna talk about integration. What it looks like after you purchased the company. Thank you for being on the show, Tony.

[00:00:17] Tony Benedict: Thanks for having me, Ron. Glad to be here. 

[00:00:20] Ronald Skelton: This will be fun. I do these shows to learn. I'm here to learn from you today. Let's see what we can dive into and, what kind of knowledge we can, share with each other as I learn. The first thing I always like to do is your origin story, kind of how did get started. You mind giving us a little bit of the background at how you ended up in the merger and acquisitions world, and how do you ended up on a podcast about buying, selling and growing companies? 

[00:00:41] Tony Benedict: Sure. I'll probably go back a little further than I need to, but, I was working, I changed careers after graduate school and left the pharmaceutical industry and went into high tech manufacturing. And I guess I could say I worked for Intel. Um, probably important to know. And they're a global company. They have, probably half of what they do on the assembly test side is outsourced. Most of the foundry work is insource. It's their own fabs. But, most of the assembly test outside of a microprocessors outsource. So you kinda learn a lot about insource, outsource manufacturing, working for a bunch of other cultures. What it takes to, let's just say digitize processes. It's beyond just automation. It's using technologies to really make processes more efficient once they've been standardized.

[00:01:40] And Intel is one of those companies that they coined the term "copy exactly", which is, you could go into any factory, anywhere on the planet. They have all the same machines and they do all the processes exactly the same. So it's not like you have to learn what they do at a factory in Malaysia compared to a factory in Costa Rica. It's all the same. So that standardization is actually a good thing. And obviously a lot of companies struggle doing that, if they haven't. Especially in the acquisition side. So when Intel acquired companies, they would institute "copy exactly" on the manufacturing side, on the insource. If it was outsourced, they tried to do the best they could to have the same standard processes for, um, contract manufacturing and supplier management. And so that kind of started, the whole operations, experience for me. Really got into it, really liked it. And then when I left, Intel started doing consulting for one of the larger firms and, got recruited into healthcare.

[00:02:59] And what was interesting about that was the company that recruited me was a for-profit healthcare system. There's only about five or six in the US. 80% of all the hospitals are not profit. Working for a for-profit healthcare company was different, but the more interesting aspect of that was they were a private equity backed. So the additional pressure of being for-profit on top of the fact that, it was private equity back was very interesting. And so when I started with them, we had about 12 hospitals and we went from 12 hospitals to 28 hospitals in about 18 months. We went from, I don't know, two point something billion to almost 7 billion in revenue. There was a lot of integration work that needed to be done. And being private equity back, there's a lot of pressure to do everything very quickly and do it right. 

[00:04:02] And so I got the fever for, really more so the post-acquisition integration of m and a, not the due diligence part, but more of the post-acquisition integration. And we ended up going public. We ended up getting bought out. The company that bought us was very slow to integrate. It took them four years to do what I had recommended for our Arizona market. We were in five geographical markets and California was a new market. And I had recommended integrating California in Arizona because we already had, shared services for finance, accounting, supply chain, HR, HIM, which is, really your data management, for your EMR and, patient records and things like that. Ended up being recruited by another healthcare company that was buying another hospital system, and I basically said, look, I'll do your integration for you. It'll probably take between two and three years.

[00:05:09] I got a contract to do that, finish it up early, and then went out on my own. And I've been out on my own since 2016, and I only work in middle market. I mean, I'm a solopreneur practitioner, if you will. And my business model's very different. I use the resources of the client company instead of hiring contractors. Because I like to teach. I was doing, uh, teaching at the university here in Arizona as an adjunct professor, I'd just like to do it. So that's a sort of a subliminal change management strategy on my part. And my practice is, also geared around, a process-based approach for transformation with technology as augmentation. And I also try to, accelerate integration. So if you were to hire, let's say, one of the big strategy firms or one of the big accounting firms, ideally they're looking at a two to three year contract and they put a small army of most, in most cases newly minted MBAs.

[00:06:28] They kind of, go at a certain speed and do certain things. I've got my playbook down to really with the process-based approach. And, I have a, what I call an alacarte methodology. I could do in half the time what they do in, let's say two years, it'll take me a year. The second healthcare company, I finished it up a little over two years. I said between two and three, I think, your larger firms would've went three to four on that. And again, I came in as a, an interim W-2 and I had a full staff. So I trained all my people on what they needed to do, and we got it done. Very different than, directing, consultants, sort of project managing consultants and so forth and so on.

[00:07:24] Ronald Skelton: Is there something to be said for, like, is the speed, there's something to be said for like ripping the bandaid off and getting it done? As opposed to dragging it off and still being cautious that you don't, cause huge disruptions. Is there a cost benefit, to doing it quicker or what's the real win? 

[00:07:37] Tony Benedict: Yeah. Working for private equity, the mindset there is get it done. So when you move to, let's say the non-private equity space, there's nothing wrong with the same get it done attitude, right? I think just from my own experience, and I don't want to generalize this too much, that there's a lot of fear. So if you're acquiring another company, the company you're acquiring all those people, the first thing that goes through their mind is, I'm gonna lose my job. Okay. And there's two ways to sort of deal with that. If you're the person that says, I'm gonna lose my job, I remember, when I worked for the private equity, and we got acquired by a public comp, we went public and we got acquired by a bigger public company. One of my employees came up to me and said, I hate to do this to you.

[00:08:31] I love working for you, but, I got another job. I feel like this is gonna be the Hunger Games in about six months. What a comment. That's fear. That's total fear. You have to as squash people's fears. I think there's a certain amount of fear in the target company. You want to prevent attrition. I think the messaging and communication that never really goes out is that, people are more valued than everything else. If you're doing a private equity portfolio company, it tends to be more focused on the transactional financial side of save money, right? Consolidate everything that's duplicative and cut where you need to and save money. Well, short term thinking, nothing wrong with that, but you have to go beyond that. And having done it for private equity, there's a way to do it where you can consolidate and save money, but also preserve human resources.

[00:09:39] Because what isn't taken into consideration is that you may actually need more people in another area. So you can redeploy them, where they're needed and just say, listen, are you willing to learn new skills and a new job? Cuz I have a position for you. Who's gonna say no? And so that's really the people approach that needs to happen. That's why I like to use the client's resources instead of hiring contractors. Cuz I could get them very excited about doing really interesting work while they're helping do what needs to get done in a, more accelerated way. And most consulting firms don't do that. They don't teach you anything. They're there to do that for you and you just kind of sit there and watch and pay the invoice every month. And again, I'm not against big consulting companies, but, I just wanted to take a much different approach to that.

[00:10:37] Ronald Skelton: I like your approach and the fact that you're teaching them. And a lot of times, if an integration goes well, a company buys another company integration goes, well, it's addictive. They're gonna buy another company. And if they bring an outside resource to do the integration in, they're gonna have to do that every single time. To where if they have somebody like you or somebody willing to train these, now they've got a team of people that have been through it. They can assist with other acquisitions they do in the future. 

[00:11:03] Tony Benedict: Yeah. That's true. Back to the healthcare company, private equity back for profit. It was all of our own resources. We did not really hire, outside consultants. All of it was done by our own resources. And to go from 12 hospitals to 28 hospitals in 18 months, you have to move fast. And the only people that have the institutional knowledge are your own resources. It takes a consultant a certain amount of time to kind of get spun up. Or I don't care how many times they've done it in healthcare, every acquisition's different. I've never been on any client engagement where it's exactly the same as the last one. They're all different for different reasons. The size of the transaction is always different. How many locations do you have? What's the level of cost reduction you're trying to achieve and why? What type of acquisition is it?

[00:12:01] Are you going to actually integrate it? Is it a product add-on? How much talent do you really need to retain? And most of the cases you should retain as much as you can. There's also the process, business process integration and standardization. And then there's the whole technology side of that. And then there's the market itself. Is this acquisition core to your business or is it a step out of your core business? And how do you deal with that? And then there's that big ugly thing that nobody wants to talk about, which is culture. And so there's a whole complexity grid that I have that I use to really characterize every acquisition so that I could adapt my playbook to what needs to get done and then go through the process to accelerate. And everybody wants sort of a, well, gimme your project plan. Well, I'll give you a project plan when we talk through, all the questions I need you to answer for me. I'm not gonna give you a standard template that you'd get with some of the, more traditional firms. 

[00:13:08] Where they have a, phase one, phase two. There's four steps in phase one, and there's seven steps in phase two. That differs, from that perspective, when you look at, methodology, playbook, et cetera. At least that's how I approach it and why I'm different. 

[00:13:26] Ronald Skelton: And I think there's some assumption that when a company buys another company. The predominantly winning culture is the one that did the acquisition. And the smaller the lower markets, what I see is a lot of times, both cultures evolve. I'm curious on this middle market and the upper market, is it primarily, your big medical company buys a smaller medical company, is it's either a culture fit in it or it's not? Or is there some morphine that goes on both sides?

[00:13:53] Tony Benedict: I think there's more than one answer to that question. My sense of it is that culture is either not taken into account at all, or there's an assumption about culture that is 95% of the time wrong. The second healthcare, acquisition integration I did, the senior executives kept saying, well, our cultures are very similar. That's all they would say. And the reality was is they were very, very different, very, very different. There were similarities in, in terms of, how they addressed accountability. And in healthcare, there's an accountability problem, in my humble opinion. But generally speaking, they kept saying how wonderful their cultures are and how compatible they are.

[00:14:46] And what ended up being the reality of that is the senior execs from the target company all got packages and were, I don't know, how do you wanna say it? Released? If the cultures were that great, it would've ended up a lot differently. So it tends to be ignored or assumed incorrectly. And if you look at the failure rate, of a lot of acquisitions, culture is probably in the top three, if not top five reasons why, there's failure. And a lot of that unfortunately ties back to leadership. And whether they recognize that or not. 

[00:15:29] Ronald Skelton: And the problem, it's deeper than that, I think. If you separate all the executives and put 'em in their own room and at the same time say, describe the culture of the company. Every single one of them is gonna come up with a different answer. I've never seen it to where everybody uniformly knew the exact culture of their company. And the fact of the matter is, if you had 10 executives and you ask all 10 of 'em, and they give you 10 different stories, all 10 of 'em are incorrect. Because what you're asking somebody is what is your perspective of, or what is your view of the culture? And it's some combination of all 10 plus, that's the executive culture. Now you gotta get down into the actual worker environments, the line managers and everybody else, and figure out what do they see of the culture as. You're not gonna get that on a spreadsheet, and you're not gonna get that in the due diligence process unless you've got somebody you know in there, and asking questions, the right questions at the various levels. How do you address this problem? 

[00:16:26] Tony Benedict: Yeah. That is so true. I have to tell you that. I can tell you from just experience at larger and mid-size companies. A great example, I worked at Intel when Andy Grove was CEO and Intel published their mission, and their values. And it was on your employee badge, it was on the back of your badge. What was interesting is if you were walking down the hall, Andy Grove would stop you and he would make you recite what the values were. And if you didn't know him, you had a bad day. I mean, you had a real bad day. So people memorized them, which doesn't necessarily mean anything unless you actually, you have to walk the talk as well.

[00:17:10] The healthcare company that I was mentioning earlier where they said the cultures were very similar, their values were published in the corporate office building on the wall. I could tell you that nobody followed. The C-Suite would say, oh, yeah, I absolutely do. I never saw evidence of it at all, even in the C-suite. So you're right. It's very different, depending on who you talk to. I do think there's great examples of companies that were built on very strong values like Netflix originally. Her name, Patty McCord. She was, in charge of HR and she built the culture on values at Netflix. The online shoe company that Amazon bought. Same thing, right? 

[00:17:58] Ronald Skelton: Zappos? Or whatever is that?

[00:17:59] Tony Benedict: Zappos. Thank you. I was gonna struggle with that. So there's great examples of where people really, they were hired for that. They were hired for the values because those values are what drive behaviors. And that's culture. I think culture is one of those things where, If you can get it 70% right, you're doing really, really well. I agree with what you're saying and I don't think there's a good answer for why things are the way they are. I do think that, again, cultures assumed a lot, or it's ignored, especially when you're acquiring another company. And then it gets ugly. I've seen great examples of, especially in the pharma industry where, the acquisitions, their culture is very different. They're a smaller company. They're very entrepreneurial. There's a lot of comradery and collaboration, and they're acquired by a larger company, and they're supposed to assimilate into this, this culture of this larger company.

[00:19:02] It might be more impersonal, it might be whatever. And when things slow down, what needs to get done isn't getting done fast enough, it gets ugly. They'll bring in, what I'll call the cost cutting consulting firms and they'll just start hacking. And it's a bloodbath. And I've experienced that as an employee and I've also seen it, as a consultant. It's unfortunate that's what happens, but it happens a lot.

[00:19:31] Ronald Skelton: So inside of cultures and environments and stuff, if you really look at it, there's the overall culture of the company and the missions of values and stuff. And then there's actually this subcultures in various areas. So if you think of a company, for instance, I'll give you a good example. I worked for Lockheed Martin when I first came outta the military. When I was in the military, I was military intelligence, top secret clearances and everything. When I went to work for Lockheed Martin, I worked on military contracting projects. So at any given day, a Star General, a 1-star, 2-star, 3-Star General could be getting a tour of our building. Or a ful bird colonel or something. You walk down the hall, their number one contract, they didn't have any clearances.

[00:20:11] Their number one contract was a civilian company doing, advanced IT design stuff work. Those type of, guys. The engineers, they would show up in shorts and a button up short sleeved shirt. If one of those guys come onto our projects, like, look, you gotta show up at least a button up shirt. You don't have to wear a tie. But, we can have VIPs walking through at any time. It's like, no matter what, bring a sports coat, bring, like, it's expected. There's a different dress attire and different culture expected when you walk into that office over there. And it's the same thing if you look at, I did some consulting in a company, can't see who it was, but here in California, everybody's laid back. They show up engineers, hoodies and stuff. They wrote software for the financial industry. Very laid back t-shirts, shorts, and hoodies.

[00:20:51] And if you look at that when you're doing acquisitions or mergers and you're trying to take a look at the, the culture you're trying to integrate, how do you work out the fact that there's subcultures and there's variations? And, all that together may not, if you're in Intel and you've got it down ironclad. How do you work with somebody that's kind of got a mixed handbag of random stuff?

[00:21:14] Tony Benedict: I will say that, what you bring up is very, very common. If you're a large multinational, you have hundreds of cultures and across divisions and departments within divisions. The bigger you are, the more complex the culture is. Totally. The smaller companies, obviously, they're a little easier to work with. That being said though, the most important part of addressing culture is, what are the goals and objectives of the company? So if you're trying to let hypothetically grow revenue 20% and you've targeted, certain product lines. And you're acquiring another company that's giving you another product line, how are you measuring growth, profitability, et cetera, et cetera? And keep people focused on that.

[00:22:08] The last thing you should be worrying about is whether people wear sandals to work. Are they getting the stuff done? And it really comes down to operations, operational integration. Are you getting the things done you need to get done to hit your goals and objectives because you're measuring that. And, I think that gets lost a lot. Unfortunately, for whatever reason, Ron, you could build your own list of reasons why it gets lost, but it does get lost. 

[00:22:38] Ronald Skelton: I think a lot of it has to do with our own internal cognitive biases. We tend to think people should look like and act like we do. So if you showed up to work every day in a suit and a tie, and you see all these guys walking in, in t-shirts and flip flops, surely they're lazy. And it's not intentional. They shouldn't be, what do they call it? What's the word these days when people get erased? 

[00:22:56] Tony Benedict: Canceled. 

[00:22:57] Ronald Skelton: Yeah. They shouldn't be, it is natural human psychology to have internal biases and internal things that influence our decisions. The real question is how do we address them and how do we avoid acting upon them? I love what you did. Is it helping the numbers or hurting the numbers? Is it helping the business achieve its goals or hurting the business? If you could separate that from, how can he work in shorts and in flip flops, right? You think of my world, I went from Lockheed Martin, suit and tie to the.com world where we had kegers on Fridays and there were circle slides, children's slides to go from the second floor to the first floor.

[00:23:33] The first week I was there, a beer truck showed up and started unloading kegs for the monthly, one Friday a month they would have kegers. It was just a totally different culture. When it comes down to, when as you really looked at the brass tax of things, if I really looked at who was doing stuff, those teams still pull 40, 50, 60 hour weeks. They still rolled up their sleeves and were shooting for high, uptime and availability and highly performing machines. The same way the other companies I work for were. The only difference is how did they relax? So, I like your approach of, what are the company's goals?

[00:24:08] What are they trying to achieve? Is this a impact in the bottom line? I think the reason a lot of times these executives get the walking papers is, they just don't fit in. I can't even get my quotes on here. They don't fit in, and it's like, okay, who cares if they fit in? Are they getting stuff done?

[00:24:23] Tony Benedict: I was trying to think of the name of the book. I'm almost finished it, but it was recommended to me by a guy that, is sort of an HR consultant and he says, you have to read this book. It'll change the way you think about, people and culture. And I have to say, so far I'm probably about three quarters of the way through, and I'm totally enamored with the book and the ideas. And when you think about, small company cultures versus big company cultures and leadership and the differences in leadership, when you're in a small company, it's almost like, a family environment, right?

[00:24:59] Eating out every Friday you're doing kegers or pizza or whatever. And people get along and you work hard, but you play hard. And then you get, to be a little bit of a bigger company. You start adding more locations and each location will have their own culture based on the leader that runs the location. But at some point, if you have multiple locations, you'll have offsite events where leadership will come in and you'll try to, we used to call 'em group hugs at Intel, but, in essence, you want to harmonize at least the leadership and management cultures to make sure that, everybody's kind of marching in the same direction.

[00:25:42] So you go from family to say tribe, and then as you get much, much bigger, it becomes like, not a great example, but you'll understand when I say it. You look at a guy like Genghis Khan. The way he led these disparate groups of tribes made him very effective. Companies sort of mirror, their own evolution depending on how good the leadership is and how much you focus on culture. And if you look at Jack Welch and both of his books, which I've read, he said the entire, responsibility of any executive is resource management. And he started the management leadership in Crotonville. And he realized that, instead of being hacksaw jack, cutting costs and whatever, if you're not number one or number two in your market, we're getting rid of you, kind of thing.

[00:26:40] He realized he was wrong about that and started focusing on people. And most of the really good senior execs that have left GE ended up becoming CEOs of other companies. The point is that, people make the difference. People are everything. After that, it's the process. It's how the work gets done and how you integrate operations to make it efficient to achieve your goals. And you can build a culture around that. And what's unique about my approach and why it's accelerated from my point of view and my playbook, is I focus on goals and objectives, and I focus on people first. I could care less about technology, I'll do that last. Because if I could get the people and the goals and objectives, and the business processes straightened out, the technology part's so easy. I could do that last.

[00:27:38] A lot of your consulting firms focus on the technology. Well, what ERP system and, which vendor are you gonna choose? And we'll help you do that. And the whole engagement of two to three or four or five years for God's sakes is around your ERP system and so forth. Care less about that. They all work. Do you have the right people in the right positions? Does everybody have the skills and competencies? Does everybody know how their work impacts the goals and objectives of the company? Does everybody have a pretty good handle on how they're all gonna work together? And, you kind of go from there. And so that's very different. It's very, very different. It's probably not the norm and most of your major consulting firms. Everybody has their frameworks and their, operating models that they bring in. Ours is unique and, et cetera. They're useful, but they're not gonna get you there.

[00:28:40] Ronald Skelton: There's a reason why, so many of these integrations fail. And I think you just hit it on the head, is they're focusing on the tech stack, as I call it, the different technology. As opposed to focusing on the real resource, which are the humans, to make up this company.

[00:28:57] Tony Benedict: I was asked this question in the past and, there's different ways to answer it. Most of your investment banks that are selling, companies in the mid-market. They go through anywhere from six to nine months of due diligence. I know they're, they've been trying to shorten that time period for a long time. They have typically have junior MBAs doing cash flow statements. You might have some legal advice on intellectual property, patents, any pending lawsuits or whatever. You've got sort of the legal side, but most of the due diligence is financial. You have good quality earnings.

[00:29:39] You're looking at rolling 12 months or rolling 24 months. T here's not a lot of time to do site visits and ask a lot of what I would call the complexity questions. How many manufacturing sites do you have? Where are they located? What are the cultures of those locations? How many products are made at each location? I have a whole list of questions that I ask, because all of that ties back to how are you gonna achieve your goals? How are you gonna get people to sort of, line up behind those goals? Uh, standardizing your processes.

[00:30:17] You may outsource customer service to a three pl, well, let's say, your customer service is in-house. You buy another company and their customer service is outsourced to a three pl. Do you leave it that way? No. Why? Because you have two different customer experiences. Try managing that. You can't. So you have to pick and choose what you're gonna do. You're gonna bring it all back in house. You're gonna outsource it to a three pl. So you have to go through and really make decisions about how you wanna operate. For what I would call the holistic customer experience.

[00:30:59] Whatever it is, I don't care if you're making widgets, you sell software, you're in cybersecurity, you have a customer, there's an experience. You wanna make it easy for them to buy from you and buy more from you. And really it's all about that. Your investment banks, they don't go deep on that during due diligence. They just don't have time. Right. They're trying to just sell the company. So a lot of what they do tends to be more transactional as opposed to what I would call customer experience and process. What are all those processes that, that really support the full customer experience? Private equity firms might have an operating partner that might do site visits.

[00:31:43] And my question in that situation is, how many acquisitions have they integrated? Does it matter that they have 30 years experience in that industry? Yeah, probably. But if they've never done an acquisition before, and they're going in sort of green on that, that's imposing some form of risk on the acquisition and the success of it.

[00:32:05] And everybody's different. I'm not saying some operating partners with 30 years experience, aren't qualified. It's just, their experience is their reality. So again, it kind of rolls back to the complexity factor that I do my assessment on. And I help execs make those decisions. Here's the pros, here's the cons, here's what makes sense. You have to have those discussions. 

[00:32:32] Ronald Skelton: I think one of the biggest downfalls in the mergers and acquisition space at our level, at the small to medium market. I think it carries over into the, into that mid-market and even some of the larger deals are out there is the communication plan isn't thought of until the integration phase as opposed to being part of how we gonna communicate all of this. In my mind, that whole plan on how you're gonna communicate it, should come before the full acquisition. It should be part of the due diligence. I'm a big believer in that everything you have now, everything you've ever had in the past, and everything you ever wanna have in the future comes in direct correlation to conversations you've either had avoided having or should have. And if you want to be successful, like how do we communicate this?

[00:33:19] Same thing when these business transactions, each party has these unmet expectations. The guy buying it expects a certain thing, and the company being acquired as panicking think they're expecting certain things. Like, I'm gonna get fired, I'm gonna lose my job. And all those unmet expectations and failure to communicate what's expected. I think that's the downfall in, in a lot of these deals. Like you said in our notes, the m and a failure rate is still hovering around 70%?

[00:33:44] Tony Benedict: Yeah, it is. I think you bring up a very good point. There's a lot of hidden agendas. And who's running what agenda? And really that ties back to leadership and communication. There should only be one agenda, and it should be the same agenda everybody works to and communicates to their employees about. And it should be your interpretation of the agenda. This is the agenda. This is what we need to accomplish. Now we're gonna assign roles and responsibilities to get it accomplished, and everybody's gonna have a role and responsibility because we have a lot to get done. A lot of people, and this is probably human nature and the nature of ego, is you get a lot of, middle managers or senior managers that are trying to, toot their own horn during an acquisition and kind of push a little bit of their own agenda.

[00:34:42] Especially if there isn't, if one agenda has not been communicated, they're gonna take advantage of that and kind of push their agenda for their area, so they can shine. To me it's back to senior leadership and are they on the same page? Are they pushing one agenda and is it being communicated on a regular basis? And I mean weekly. Weekly for the first six months, maybe monthly after that or something. But you come up with a schedule so people aren't always wondering what the heck's going on.

[00:35:14] Ronald Skelton: So a weekly communication, this is who our values, this is who we are, our goals, this is what we're trying to accomplish, and expectations. And this is what we expect out of you as individuals contributing to this. I think the expectations is often missing. And I also think there's a human nature to go, we'll deal with that later. Let's get this closed and we'll deal with the, we'll deal with how they react later. I really see that, I mean in our markets, I see it. I ask people all the time that, Hey, we're about to close on this company. It's like, cool. What's your communication process with the employees? They got 75 employees, right? Is anybody there know you're acquiring it?

[00:35:49] No, we're closing on Tuesday, and then we'll tell them. Okay, what's your communication plan? You're closing two days from now. What are you gonna say to everybody? And they have like, well, we're just gonna tell 'em we bought it. And I was like, okay. What do you think the reaction? So I actually wanna do a little series on here. We're covering some of it right here. I might actually put this episode in that series called You Bought It Now What? It's really there, it's really in that scope of a lot of people, they're just trying to get to that finish line and they think the finish line is, I bought the company.

[00:36:18] And that's not the finish line. The finish line is, it's integrated in and it's a working component of whatever I'm building. Even if it's your first company, a lot of people think, I'm only buying one. There's still an integration phase of they're working for somebody new now. And if you're buying a hundred, the finish line isn't, I've acquired it and the revenue's on my books. Now the finish line is, they're actively happy, engaged, in team, working towards a common goal. 

[00:36:44] Tony Benedict: I think you make a very valid point. When you acquire a company there's sort of that. There is that mental model of, Hey, we acquired it, we're done. And so that could lead to, and I just saw this in a blog and I know what it is, and I was glad to see somebody else talking about it, but it's head in the sand management. It's like being an ostrich. You put your head in the sand and it's like, well, we bought it, we're done. Put your head in the sand and everything else will resolve on its own. We don't have to manage anything. Everybody will just keep doing their jobs and, if something comes up, somebody will figure it out. I've seen a lot of that. And boy, that is a real bad management style. 90% of solving a problem, is defining it first. 10% is the solution. I think Einstein said that, or somebody, as smart as him. 

[00:37:41] And so avoiding problems is a bigger problem. Again, it's back to ostrich, the ostrich management style. And people, have a tendency to say, well, we're done now. We solve that problem, we're done. As if nothing else is gonna happen that's gonna be problematic for them. And in post-acquisition integration, they're all different. There's different degrees of complexity. You're not done until the whole company is marching to the same music, to really engage the customer and fulfill the customer experience, whatever it is. I don't care what industry you're in. And that could take, a year, could take two years, could take three years.

[00:38:32] Culture takes years. It takes years. But the operational aspects of integration, you should be able to really nail it in one to two years, depending on size, complexity, whatever. The culture is gonna just, it has to evolve and it has to be shaped by leadership. And again, I think a lot of times it's ignored. I would encourage people to read Patty McCord's book Power because it really dives into, how values drive behaviors. And that's really the, origin of culture. And if you don't live the values, and act on 'em, then you're not walking the talk. And people get confused. 

[00:39:18] Ronald Skelton: I think we're talking about values and stuff like that. I think one of the missing components and values is measuring things against them. So companies all the time, they'll set up their mission statement and they'll say, these are our four core values, but they don't make decisions against the core values. Meaning that if they're in a meeting and something's like, Hey, should we do extra y? And then and I've said through many of these meetings, like I don't remember anybody going, okay, well our core values are A, B, and C. How does this mesher up against though? Which path measures up best against our core values?

[00:39:47] It's just rarely done. People kind of put 'em on. They spend the time, they go to offsite, sometimes they hire big firms, they help them create these, and then they put 'em on the wall and that's their decoration. And they say everybody live by that, but they don't measure themselves against it.

[00:40:01] Tony Benedict: Yeah. One of the things that is not measured in post-acquisition integration and should be, and I make sure that it is, my clients is, employee retention. And I walked into an acquisition, about nine months after it closed. And the target company, about 80% of the supply chain organization left. They had 80% attrition in the supply chain organization. And the acquiring company was picking up all the slack. I've never seen people more stressed out. Cuz they were picking up the extra work and people were threatening to quit. There were people crying, they were so stressed out.

[00:40:51] I had to hire and train really, almost an entire supply chain department. Just to kind of get them back on track and focused and ease the test, attention and stress. But employee retention, it should be one of the metrics you wanna keep, especially if they have, institutional knowledge. Why would you let that go out the door? That's just foolish. 

[00:41:15] Ronald Skelton: I think the problem with employee retention is it's a trailing indicator. Meaning that by the time, there's a problem with it, people are already leaving. I've interviewed probably about a hundred, 30, 140 people by this point. And this comes up over and over again, and I just told somebody on the show, this is my second show recording today. I recorded one this morning. I even said it on with him. If I ever go back into the tech world where I write software again, I'm gonna create a mergers and acquisition tool that becomes a leading indicator for employee retention and what's happening during the communication process of acquiring companies.

[00:41:46] I think you could actually monitor, like if you had a list of all your employees, you could figure out their LinkedIn profiles, all their online job. All the different places they post their resume and before the acquisition, do a flat line basically, set a, a bar of how many times people update their resume and stuff. And then as soon as you make the announcement, track that. Cuz it's a leading indicator to say people are actually starting to update their resume and start posting things online and, their resume. I've got a thousand employees and 130 of 'em have resumes that have been updated in the last six months.

[00:42:20] I announced the mergers and acquisition. What did that do to that number? It's three months in. What does that number look like? How's that number changing? I think there's a way to track this and know that, wait a second, something's going sideways here. We better communicate better before it's the employee retention number that you're looking at now, or you just mentioned looking at, cuz that number comes out as, how many people did we lose? Not how many people are trying to make the escape is what you really want to know. Then you can address it ahead of time. 

[00:42:46] Tony Benedict: The number one thing that can be said immediately upon announcing that, you're gonna be acquired is that, to a swash people's fear of losing their job. There's gonna be new jobs. There's gonna be the same jobs we have now, but we're gonna also add a bunch of new jobs. We need to know who's willing to learn new skills and take on new responsibility in a new job. And start tracking people who really wanna let's say, develop and evolve into a different job. And so that's more proactive. And that's very effective when you do it early, early on, because people will go, oh, wow.

[00:43:36] Well, I'm ready for a change. Great example. This is the first healthcare company for profit. We went public, we were acquired by another public company. We were changing the electronic, medical record systems. So everybody in my department, I was CIO, and VP of supply chain and operations. So I had two jobs and the IT people were freaking out because we were going to a completely new system, and they were all trained on the old system. I said, well, who wants to learn how to use the new system? Raise your hand. And I said, it should be everybody because guess what? You are all gonna have jobs and I'm gonna put at least one of you in each hospital so that you're there supporting the hospital for that new system.

[00:44:27] And then everybody else had to learn the new system and we started assigning roles, we sort abilities and people, didn't freak out anymore. And so we had a high retention rate. For all the employees in IT, I think I lost one manager. It was somebody that I liked and I really wanted to retain that person, but they end up moving to another, company. But the point is, is you gotta be proactive with it. You gotta really describe what it's gonna look like. As much as, you need to share with people. And then people will get excited about taking on new responsibility, learning new skills, starting a new job, and you're in the same company. There's a way to do that and, I think when you use the resources of the client company, which is what I do, you have a higher probability of employee retention rather than bringing in consultants.

[00:45:23] Cuz consultants means, I'm gonna lose my job. That's what people see. It's a perception, right? How many people have been there? They go, oh, geez, they're bringing in, I won't name any company, but I'm gonna lose my job. They're gonna eliminate my job. And so you have to, be a little bit more proactive in how you approach it. And also, like I said, I use the client resources for that. I try to avoid bringing in contractors for that reason, because I don't wanna lose anybody. 

[00:45:54] Ronald Skelton: I've been through some of these before and, they bringing outside people in and they're trying to do stuff, and they're asking you all these weird questions. It's very uncomfortable. Now, here's a scary thing, and I'm a hundred percent to this day believe this. The best employees out there are already employed. So if you lose somebody and you're now dipping in this job pool of, I've gotta replace this guy because he got uncomfortable and left. He was probably one of the good guys.

[00:46:17] Tony Benedict: Yeah, I would agree with that. My experience and it sounds like yours, and I'm sure a lot of other people would attest to the fact that the people that tend to leave in an acquisition tend to be the high performers. And the low performers are the ones that they're gonna stay no matter what. I'm not saying that's good or bad, it's just sort of the reality of the situation. And honestly, if they're really a high performer, they might be leaving for completely different reasons than what you think. Probably been thinking about it for a while, and the acquisition was just a kick in the pants, they might have been sick of working there. They want something new. They want something exciting. 

[00:46:57] I try to identify those people early because to me, they're great candidates for a new job in the company. But yeah, I agree with that. It tends to be the high performers that'll the, that are first ones leave. 

[00:47:09] Ronald Skelton: When I was in tech, it was so hard to get good tech employees. We were giving hiring bonuses 5, 10, 15, sometimes $25,000 if you'll come work there. If we seen, a startup that was struggling with funding, not getting the second round of stuff, it was like Walters, we would hunt their people down because we knew they had great engineers. That back then somebody was about to get acquired by a big PE or they gotta go public. And we knew they were about to go. So there's some major changes. 

[00:47:34] That's when we would try to dive in and get their lead engineers and stuff cuz people are just naturally resistant to change. And if they have to change anyway, they'd rather select a known. Like I said, I've always been a big fan of, the best employees are probably already employed, somebody who's got 'em. And that includes our employees. Like if somebody's always trying to pick people out of our companies.

[00:47:55] Tony Benedict: I think you're right on that. I think the tech industry sort of has, its own ecosystem for, programmer type resources where there's a high demand for certain types of programming languages and people can jump around as much as they want. Money tends to be a big motivator in that space. It is just a reality of what it is. The challenge is what I think really keeps a lot of programmers motivated. At least that's been my experience with them. 

[00:48:29] Ronald Skelton: If you look at even my history, and I wasn't a programmer. I ran big data centers and stuff like that. I look for people that had problems. Because I honestly think there's only probably three to 4% of the people on this planet that are natural problem solvers. And I consider myself one of 'em. I could walk into a data center that's actually have high down, down times, things are falling all over it, build the team, put it back together and get it into the three nines, four nines, five nines back then, but I could help solve that problem.

[00:48:53] But once everything, and have standard operating procedures, everything went running smooth, slick. And once it's all going and I go to work every day and there's no outages and stuff, I'm like, okay, what am I even doing here? Because my identity was around getting it to run smoothly. Once it was there, you're like, okay, so if you looked at my resume, it's like one year, two year here, one year, two year there. They're like, why did you leave? I fixed all the broken stuff and I went somewhere else.

[00:49:15] Tony Benedict: That's a good point. I remember having a conversation with actually somebody who hired me as a consultant, and I said, I'm curious, why you hired me? And he says, I could tell from your resume, you're a builder. I said, as opposed to what? He said, a sustainer. And he said, there's two kinds of people. There's people who build things, and then people who sustain or run things. The builder is the guy that is, you're going a hundred miles an hour and you get a flat and you change it while you're going a hundred miles an hour. Again, probably more, more human nature than anything. I thought it was nice that he was that candid with me and I took it as a compliment.

[00:49:55] I think your points well taken, is those people that tend to leave, tend to be builders. Example of their, they're natural problem solvers and they need something. And if they're not getting it where they're at, they're gonna chase after it. And it makes sense. And you know what? You can't have five of those people in the same department. There's not enough there for them. 

[00:50:18] Ronald Skelton: And that's the reason why a lot of founders, they don't like the p and e route because, there's a golden handcuffs. They get acquired and, they're expected to stay around for 2, 3, 4, 5 years afterwards. In their mind they designed it, they built it, they sold it. It's time to go back to their builders. Like, I gotta go back and build. So I think that's a critical point you just made there, is there's two different mindsets, especially in the entrepreneurial world. And we all need the operators, we all need the sustainers. I'm on that builder side. I like to create new things and stuff, and I'm constantly looking on, out there for the operators. The guys just like to do the same thing in day in and day out, because I know that if I have to do the same thing three times in a row, I'm bored and it may not get done.

[00:51:00] Tony Benedict: The sustainers make the world go round. And you need both. You need to know how to manage both, when it comes to acquiring another company. Both resources are good resources. It's just how do you manage that particular type, in an acquisition. The more experience you have with integration, the more you are attuned to where to put people or how to nurture them into a position where you know they're gonna want to stay. Every industry I think's different. Pharma tends to be more, um, esoteric in that.

[00:51:41] But energy's kind of like that. I'm trying to think of the other industry, that is, is kind of, it's almost like a closed system. But I think pharma is, energy is, you could argue healthcare is a little bit like that because they're very highly regulated. And people that are in it for 20 years, it's hard for them to leave that industry and go to another industry. Anyway, I digress. 

[00:52:07] Ronald Skelton: That's okay. We're above the hour now, so let's do this. If somebody could remember two or three things from today's show, what would you want 'em to remember?

[00:52:15] Tony Benedict: Sure. I think it's a great question. I would say that, in post acquisition integration, people should be always be first. Then process, technology's always last. I think if you approach it that way, if you're, and again, complexity is a driver for how you approach and whether you can accelerate your acquisition integration or not. I think, and that's ignored. And also culture is how to deal with it early so it doesn't kabosh the integration. I think those three things would be, super important for people to remember. And obviously if you need help, you can reach out to me and we can talk about your situation. 

[00:52:59] Ronald Skelton: That was my next question. Real briefly, so just who is your target customer? Like, who do you like to work with and how do they reach out to you? 

[00:53:07] Tony Benedict: Middle market companies, anything in the manufacturing. Again, I don't care what it is you make. To me the manufacturing model is something that I'm very familiar with and love to do. Anything on the, even on the smaller pharma, even the larger pharmaceutical, and manufacturing. I've tended to move away from healthcare only because, a lot of the larger systems can't get any bigger. And bigger isn't better in healthcare. At least that's my, belief.

[00:53:41] But if you're a smaller health system, anything under 20 hospitals, uh, anything over that you're kind of big and we won't get into that. You can reach out to me, um, directly through LinkedIn or I think you have my contact information, Ron. If anybody, is looking and just wants to call me or email me directly.

[00:54:04] Ronald Skelton: Awesome. So I'll make sure we put your, LinkedIn contact on our show notes for you guys are out there. And then is it okay to put your phone number in the show notes for people? 

[00:54:13] Tony Benedict: Sure. You can, email and the, I have a voiceover IP phone. So it rings wherever I'm at. 

[00:54:19] Ronald Skelton: Awesome. So we'll do that. We'll put your contact information in the show notes for you guys. And I appreciate having you on the show today. We'll call that a show. 

[00:54:27] Tony Benedict: Thanks for having me, Ron. Really enjoyed it. Great conversation.