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The Role and Impact of Leadership in M&A

"Certain leadership skills are really important for different parts of the organization." - Dr. Keith Dunbar

In this podcast, Kison Patel discusses the groundbreaking research done by Dr. Keith Dunbar. As a Managing Partner at JKD Talent Solutions, his team delivers actionable leadership intelligence.

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Keith Dunbar

Dr. J. Keith Dunbar is the CEO/Founder of JKD Talent Solutions and FedLearn. He has over 20 years of talent management experience and 13 years of M&A experience delivering clients targeted leadership insights to enable deal success. Dr. Dunbar has done groundbreaking research on the role of the acquirer and target company leadership in M&A. This research shares insights and approaches on how to leverage individual and collective leadership strengths while mitigating leadership risks in M&A

Episode Transcript

To get us going, why don’t you give us a brief on your background?

I am a retired naval intelligence officer.

I spent a lot of time working with companies, both inside the federal government as well as a private sector company to help them understand their leadership capabilities because every organization inherently has a set of leadership strengths that they can leverage more efficiently and a set of leadership risk areas that they need to figure out how to mitigate. 

Can you tell me briefly about your role at JKD Talent Solutions and how you play a part in leveraging M&A leadership capabilities?

My role as managing partner here is helping companies to understand the leadership strengths and risk areas that they have at the individual and the collective level.

By understanding explicitly, we are able to target very specific solutions to help them leverage those strengths more efficiently and effectively across a deal, as well as mitigate those risk areas, so they can successfully achieve their deal objectives. 

Why is it taking so long for people to realize how much of an impact leadership has on M&A deals?

What I think has really impacted it is that there is a ton of effort, both on the academic and the consulting side that is kind of exclusively focused on the role of the culture in M&A deals, and while it’s a necessity the organizations need to focus on, I think leadership has been subsumed into the culture conversation.

Because the culture piece is so large in deals there is not a lot of attention paid to leadership and its importance in a deal, and yet it is such a fundamental element that determines the success of a deal. 

Read also:
The impact of leadership on deal outcomes

More professionals are now seeing and emphasizing the importance of leadership. What is changing in the industry? 

What I found in a research project I did with a conference board is that time pressures really affect a detailed focus on leadership and deals because there is just the push to get things done as quickly as possible.

Another piece is the culture, but there is also a lack of knowledge of what leadership behaviors they actually need in their organizations for the deal to succeed.

Many know how important leadership is, but they don’t know where to start or what behaviors they need to succeed, so they do nothing about leadership and just focus on culture and integration.

Another area we think impacts this is leaders themselves, as they don’t necessarily want to go through an assessment process so you can understand those strengths and risk areas.

Can you tell me what defines strong leadership? What are these traits?

In the research I did, I looked at what leadership skills are the most important to improving the probability of deal success. Certain leadership skills that we found to be important for different parts of the organization are the ability to lead change, communicate effectively, come to the top, as well as foster teamwork, build plans and those kinds of things. 

How would you strike a balance between looking for those traits versus their hands-on experience on deals previously?

We see trends where we don’t put the best people in leadership roles, and what happens is they don’t know how to lead change or build relationships or foster teamwork.

The balance is helping organizations understand what are the most important leadership skills based on the profiles but also helping them understand what leadership skills are important specific to their deals rationale and deal’s objectives, so they can get the right people with the right strengths in the right place at the right time in order to be effective in what they are trying to do in the integration.

It sounds like the goal needs to be very much clarified to help determine what type of leadership needs to be in place.

Yes. Each deal is different and each deal has a different rationale and a set of different deal objectives that the organization is focused on.

We developed a process that we call critical M&A leadership factors analysis, where we take the deal rationale, the deal objectives, do some interviews and what we are trying to understand is what type of deal it is we are dealing with and what type of integration will be required.

Then we start really focusing on the individual piece and which individuals in the organization based on these deal objectives are going to be most critical to deal success. After that, we look at which teams, business units, and corporate functions, and ultimately start diving into leadership skills and cultural integration.

The outcome of this is that we can be very targeted in assessing the right groups of leaders. Based on that we can build a set of key performance indicators focused on leadership to monitor.

Between C-suite management and middle management, who has a bigger impact on the deal success and why?  

When I did my doctoral research, what I found was that for the acquiring companies senior executives had the most impact on deal success.

They are the ones developing the strategy,  executing it, making the deal, and helping the deal achieve its value. However, for the target company, it was middle management. They are the key to any change.

We all know once the deal gets announced, those middle managers of the target company are very resistant to change. How would you advise getting alignment with those leadership positions and getting them to be less averse to change?

What I have seen to be successful would be bringing teams from the target company and the acquired company together in building direction, alignment, and commitment.

The direction piece is a commitment to the future direction of the new organization, the alignment is the clear understanding of how everyone’s work will align to this new direction of the organization, and the third part is the commitment of the group to the collective goals of the organization.

Middle managers are typically not involved in these types of discussions, but it’s critically important that they become a part of it.

Another aspect to focus on is the idea of organizational network analysis, which is useful in M&A because it helps identify who the key influencers are that need to be brought in, and sometimes they come from middle management.   

Of all these different angles to incentivize participation with the leadership, what do you see that actually works the best and leads to the greatest success?

I think first and foremost, you need to reduce anxiety as quickly as possible. With the companies that take a more structured and focused approach to the leadership factor, we’ll see that they are able to make talent decisions much faster.

By doing so they are positioning themselves much better to alleviate that anxiety and identify the key talent that they need to retain immediately. Once we can address that, we can go into saving time, reducing risk, integration, making connections, and areas to solidify those messages that we are trying to communicate.  

What is the distinction between culture and leadership?

Things around leadership behaviors, influence processes, follower attitudes and behaviors, how situations play out, how people interact, influence, and behave - all of these belong to the culture box in an organization. 

However, if you don’t understand within the acquirer and the target company whether you have leaders that can lead change, build relationships, and foster teamwork, your efforts regarding any kind of cultural integration are going to fail because you are playing on leadership risk at that point.

I believe that the elements of the leadership piece need to be pulled out of the culture component because you need to understand not only how organizations communicate, but you also need to understand whether you have leaders that can communicate effectively. 

I am curious to know, what is specific that you could use to identify leadership that is going to have a higher level of influence on collaboration and communication?

Leaders really need to understand how to use technology to figure out how to motivate, integrate, and get their team focused on the successful direction of the organization. You need to not only push the team to use technology tools but to show that you can use them too. 

Can you get into some specifics on how you identify somebody that’s suited to have that change-orientated approach when leading transformation?

Today we are able to discern a lot of things through assessments and we spend a lot of time trying to figure out whether or not the organization is change-ready. The organizational network analysis is another good tool to help you understand how influencers are impacting the organization in bringing them in as change enablers to whatever your deal objectives are.

In most cases, organizations haven’t spent enough time communicating what their change management process is. So, when we see lower levels of the ability to lead change in the acquirer or/and the target company, we recommend that they spend some time going over a change management framework that they are using or if they are not using one, to adopt one. 

Additionally, it’s important that the leaders are self-aware, because when they are they are more likely to notice when they are doing something that is detrimental to the success of the deal and you can then get them positioned better to work as a team, all thanks to assessment data.

Can you distinguish if you are referring to a quantitative or more of a qualitative approach?

It is a quantitative approach with some assessments. Hogan for instance is self-assessment focused, where individual answers where they fall on a number of different questions across three different assessments that make up this leadership potential survey group.

What you get is a clear understanding of where the person is on each of these factors and the typical leadership traits or challenges that they will face based on how they score on that assessment. 

People hesitate to fire people, and I see this as a problem, especially when you have leadership that isn’t going in the right direction. What are your thoughts on that?

Human beings are inherently conflict-averse. So, for that reason, people tolerate individuals that they know don’t have any kind of useful capabilities that they need for deal success and they just keep moving them around in the organization instead of making the right decision about cutting the cords.

When it comes to behavior changes, companies have to make that value judgment or cost-benefit assessment to determine whether that kind of an investment in an individual is going to have an impact they are looking for or is that going to be a wasted investment.   

I know a lot of companies that are creating their corp dev function from scratch. I am curious to know, how would you approach that? In terms of building that dream team, what are some of the leadership traits you would look for?

In the leadership factor in M&A that we did with the Conference Board, we asked people to look at five different deal stages and we asked them to prioritize a set of twenty-five leadership skills across these stages.

For the strategy and target evaluation, we saw thinking strategically, using sound judgment, providing vision, knowing the business, financial acumen, and the focus on customer needs came to the top. But, as we started to shift over to due diligence and integration planning we started seeing more people and personal leadership skills starting to come out, like communicating effectively, team leadership, organizational savvy, or inspiring trust. 

So if I were an individual tasked with building a new corp dev function I would want to find people that have these leadership skills. It’s not a case where every person needs to have these skills and strengths, but more about finding people that have these skills as strengths.

What is the craziest thing you have seen in M&A? What was the worst leader you encountered like?

Maybe not necessarily crazy, but what I consistently see is that companies don’t spend the time to choose the best leader, whether that’s from the target company or the acquiring company. Companies just assume that their leaders are the best leaders and can do no wrong, where in reality there is maybe someone in the target company that can do it much better.

The worst leader I have seen was in the federal government. It was one of the first deals I ever worked on and I was responsible for integrating the learning capabilities of ten different organizations into the enterprise learning capabilities.

This leader had a perspective that the people he led were there to support him and our perspective was to support them because they were on the front lines doing what needs to be done.  Those kinds of perspectives like the one he had I believe will cost you deal success. 

Before we finish off, can you tell us a little bit about some of this research you are working on?

We have cornered the research on what leadership skills impact the success and the probability of success in deals. The other area we are working on is where we partnered with Hogan Assessments.

We found out that Hogan never looked at their data to look and see if there are certain personality factors that indicate an individual that is going to be more successful at a deal or less successful.

So we hope to share the results about leadership skills and leadership personality in successful deals and understanding the connection between those. 

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