The challenge of a fast-growth business is to drive performance without breaking the organisation in the process. It’s a tricky proposition as a chief executive must be obsessively thinking about finance, talent and operational infrastructure. Get one area wrong and the wheels can come spinning off with alarming speed.
At Criticaleye’s recent Private Equity Retreat, held in association with Santander and Brewin Dolphin, executives shared their thoughts on overcoming the barriers to fast growth.
This is what they had to say:
Integration is the Key to Successful M&A
There are numerous examples of companies that have destroyed value through poorly executed M&A. Cyril Stocker, COO of safety and survival business Survitec, argues that in many cases this is down to a lack of thought and planning about integration.
Cyril has been integral to around 20 mergers and acquisitions at Survitec and has learned plenty of lessons along the way. “Integrating a new company is infinitely more complicated than the process of buying one, but it is on the integration that people tend to spend the least time,” he comments.
While acknowledging that due diligence is necessary, he prefers to take a sceptical approach to the information that is provided. “You will only have access to certain managers and they will have a vested interest in getting the best price, so they are unlikely to reveal anything too nasty about what is going on within the business,” he explains.
“You are often dealing with a group of executives who only want to give you good news; integration teams need to be warned that due diligence is guidance only and will always be wrong. The problem here is that your bank case and your equity case are both based on due diligence.”
He states that time and effort should be put into communication as “no matter what business you buy, everyone within it will be terrified, because they think that they are about to lose their jobs”.
“With every change process, performance always goes down. How deep it falls and how long it lasts depends on how well the integration is conducted and how good your communication is – in the early stages it is impossible to over-communicate,” he says.
Bev White, UK CEO of staffing specialist Gi Group, agrees that organisations need to consider the impact on people. “We don’t pay enough attention to the human side when we buy or merge businesses. I think we pay a lot of attention to the numbers and the strategic plan, which are very important, but you must make sure that there is a strong culture supporting that.
“Do not dodge an honest and open conversation about what the implications of a deal could be on your staff.”
Be Open to Challenge but Create Alignment
Alignment within the leadership team and buy-in to the strategy throughout the rest of the organisation are critical to success in a fast-growth business.
“A CEO needs to create an open environment in which senior team members can trust each other and challenge when necessary,” comments Giles Turrell, former CEO of Weetabix.
“It is also good to have a plan that everyone has bought into and has had a hand in co-creating. This is incredibly important when it comes to driving alignment. People need to understand the key-drivers behind a strategy.” He also believes that, contrary to what many may think, private equity houses do “get the importance of people”.
He says: “I think big corporates can learn a lot from how PE houses operate, because they simply won’t compromise when it comes to talent.
“They also get the importance of strategy and the right financing. Getting the financing, or the capital structure wrong can absolutely destroy a business.”
James Boot, Senior Relationship Manager at Criticaleye, comments: “The most effective private equity CEO is the one who has taken time to build a trusted team around them and can therefore focus on more strategic priorities.
“It is also important to carve out time to sense-check important business decisions with trusted peers. Things often go awry when the CEO doesn’t have the ability to reflect and is too involved in running the day-to-day business.”
Set Out Your Pillars of High Performance
At property management group FirstPort, Nigel Howell had to steer the business out of a turnaround situation when he took the hotseat in 2015 (after initially joining as CFO). Since then, the company has gone from strength to strength and Nigel believes that, from a cultural perspective, a real shift occurred in the organisation when, as CEO, he set out criteria for high performance which employees could buy into.
He explains: “I distilled a very simple message to bring pride and ambition back to the business after a difficult time. I based this around four pillars: strong health and safety; high site standards; great customer communications; and healthy estate finances.”
By Marc Barber, Managing Editor, Criticaleye