For as long as mergers and acquisitions have been occurring among businesses, one of the areas that continually eludes those making the investments is the IT department. Those responsible for making the decisions tend to lack the technical expertise necessary to ask the appropriate due diligence questions of current IT capabilities, costs and risks. What’s an effective roadmap to integrate IT during M&A and to enable an easy transition? How do you choose what to retain and what to let go? How do you avoid challenges with politics and culture that could derail a transition? And what is IT’s appetite for security risk when the department is at its most vulnerable?

Contributor

• • Karen Porter-Wolf, SVP, Chief Information Officer, Assurant Solutions

Transcript 

Sanjog Aul [00:00:00]:
Hello and welcome to CIO Talk Radio. To learn more about the show, please visit www.ciotalkradio.com and as always, we invite you to join the discussion on Twitter #Ctrlive and look for this show as M&A. Today’s topic is Developing A Mergers And Acquisitions IT Integration Plan and our guest for today’s show is Karen Porter-Wolf. She’s the Senior Vice President Chief Information Officer with Assurance Solutions. How are you Karen?

Karen Porter-Wolf [00:00:29]:
I’m wonderful, thanks.

Sanjog Aul [00:00:31]:
Oh, that’s awesome and I did learn about your trip to Caribbean. So how’s that going?

Karen Porter-Wolf [00:00:38]:
We’re having a good time. The IP team and the sales team are here celebrating a wonderful 2014 in beautiful Nevis near Saint Kitts and having a great week together.

Sanjog Aul [00:00:50]:
That’s awesome. Now the topic that we picked up today, which is mergers and acquisitions, that’s an interesting event which most organizations who want to grow quickly and of course that’s part of their growth strategy and it’s something which is welcomed by the stakeholders and it’s at the same time it’s dreaded by the ones who are made responsible for integrating the two companies. So stakeholders want the integration to be completed in record time and that to successfully so that they can get some ROI from this. However IT which we are going to talk about today primarily which is becoming a fabric for most organization becomes an important piece which we need to work on in terms of integration and many cases there have been many stories about M and A working well, but IT integration fails or it gets delayed. So the ROI that stakeholders want to realize is not coming through. So that said, how about we talk about on today’s show, what are the challenges specifically in ID integration that we have to that’s a beast and we have to tame it and see what is working, what’s not working. So Karen, first question for you, when we are looking at M and A, what is it with respect to IT someone has to do as part of due diligence so that the integration post integration becomes easy.

Karen Porter-Wolf [00:02:20]:
Well, so typically like any large project, once your company has embarked on a mergers and acquisition strategy for growth in most organizations you set out some strategic value associated with whatever the target acquisition is, whether it’s a new market, a new channel, just a bigger geographic location. And so based on whatever the strategic value is, the IT organization needs to really hone in on those investments and ensure that the objectives are being met by whatever the IT teams do at the end of the successful acquisition in that implementation plan. So as you outline a due diligence process. And many teams have a lot of variations on the same theme. But you know, at the end of the day, you’re assessing the capabilities of it. Where there’s gap, where there’s key IT personnel that you want to keep and retain, where you’re going to get the synergies that are expected out of that strategic acquisition, critical issues, risk, those kinds of things. And then in the due diligence process up front, you’ve got to spend the time looking at the target acquisition and ensuring that you’ve got the fit. And even if the business objective is just plain old growing and expanding in a new market, you will be acquiring some capability that could be beneficial to the the core company in that.

Karen Porter-Wolf [00:03:47]:
In that deal. And so I see sometimes it is a cosplay, sometimes you’re looking at how you’re going to gain synergies and reduce the IT investments that exist in the acquisition target. And sometimes it’s a new strategic capability. You’re buying a company because they can do something that the core team can’t do. And you have to be really clear about what the purpose is so that your integration strategy mirrors the objective.

Sanjog Aul [00:04:11]:
Now, when we are planning for mergers and acquisition type of activities, and we know both parties have to eventually come together, so there is planning happening at our end, maybe we are acquiring or we are the acquirer, for example, or we are merging, so we could be mergers or equals. So it’s invariably two power groups, if you will, are talking about what should be retained versus what should be left out, et cetera, and they have their own reasons to come together. How are those intents aligned in the first place for this to really take shape in a desired fashion?

Karen Porter-Wolf [00:04:53]:
Great question. The film was always the hardest part. When you’re looking at something grand on the front end and your objective is to acquire an asset and integrate it back with the home company, if you’re not really clear about the objective, you’ll get off on the wrong foot. And so up front, in part of that due diligence, a strategy, part of the goal is to identify the main objective so that everybody can stay aligned and then ensure that whatever the operating model is going to be going forward, do you have the skill set to make it happen with your own team? Do you need to acquire some additional skill sets in the form of a third party in helping put that together, does the acquiring team have the skill set that you don’t have in it? And by skill sets, I mean it could be anything from the ability to actually get an infrastructure Structure up and running or the applications that you’re acquiring have the skill set for the team that needs to do to work on it. Could be even something as complicated as working with third party as a core competency because the acquiring asset has a strong third party integration platform. And so if you’re not clear about what the objective and the operating model is, then those variables that you’re going to run into when you try to identify who those key stakeholders are going to have conflict. And so the important thing is to just identify up front what the objectives is and who the key players are so that any response you’re taking after that is targeted to clearly align towards that outcome.

Sanjog Aul [00:06:25]:
So I like your answer about outlining the objectives up front and get an approval from both parties. Now, when it comes to the actual execution and an interpretation of a situation, how it should be dealt with, who should be brought on board, that’s where there are differences of opinion and nobody’s wrong. It’s basically two different sides have their own perspective, who is going to play the referee.

Karen Porter-Wolf [00:06:51]:
Yeah, you’re exactly right. I think the hardest part is when nobody’s wrong, both sides are right and somebody just has to decide. And so like any large program, you typically have him path for escalation and a key decision maker maker. And at the end of the day in the IT world, traditionally a CIO becomes the key decision maker. And so one of the models that I like to put in place is a expectation of basically professional behavior, right, Everybody’s going to have an opinion. So two parties need to come together and try to influence each other towards an outcome, highlight the issues, the risk and what the recommendation is on the next wave, the path forward. But at the end of the day, if there is no agreement, then those two parties need to come to the final decision maker. In this case, in this example, me and you know, outline their case and somebody needs to own the responsibility for that final decision.

Karen Porter-Wolf [00:07:47]:
So one of the things that I did was early on when assurance decided that they were going to pursue growth through acquisitions was I actually needed to get a par about time for a full time person to be part of the due diligence team and running the integration strategy just because it’s so time consuming.

Sanjog Aul [00:08:02]:
In the integration process we know of course first is the planning and strategy and then you go about executing it. When you talk about two parties coming together, both have their own respective strengths and they are to be brought about, is there value in having a third party completely, not just from an execution standpoint, but actually to take that as a program and run it so that you both executive leadership from both parties are essentially saying you are XYZ consulting firm or an M and a integration firm and you just take over and you will trump anybody else’s decision. Is that a good idea? Is there a dark side to it?

Karen Porter-Wolf [00:08:42]:
I hate to give you the depends answer, but yes, it’s a good idea in some of situations and in some hit situations, probably overkill. The value of the third party is that they’re a neutral voice at the table who can filter through a lot of the emotional issues and come up with recommendation that meet the objectives of whatever the strategic direction is for the company. But at the end of the day, that third party sometimes doesn’t understand the details around the issues that are impacting a business. And so if it’s a smaller acquisition, you probably don’t need the overhead that comes with a third party. So it’s a kind of a depend answer and there is value in some cases to bringing in a third party.

Sanjog Aul [00:09:25]:
Now when you are looking at the ROI and that’s only realized, I would say most part, when the whole thing is done, whole integration process is over. But at the same time you can also show, like in any other initiative, that we have started looking at incremental ROI so that we are showing some wins, is that acceptable?

Karen Porter-Wolf [00:09:47]:
It has to be. In the day that we’re living now, we have to be able to demonstrate small wins, early returns and success stories that build on a grander objective over time. I don’t think that you can have an IT strategy where you’re acquiring some entity and expect that you’re going to wait 18 months before you see the return. That said, you build the plans with a medium to worst case scenario and then you hope to start achieving those returns early on. And that’s easy to do if you identify it up front in a due diligence, but I mean it’s hard to execute on like anything, you always get caught up in multiple priorities and distractions from the other lines of business.

Sanjog Aul [00:10:32]:
If you are to take IT integration as a program or a separate unit of work that needs to be completed and you have a closed door conversation with the stakeholders. What are the directives set for you.

Karen Porter-Wolf [00:10:49]:
For an acquisition the directives that are like any major program, they are the outline of role, the outline of responsibilities, the outline of the end objective. If the team that’s part of those discussions include the acquiring entity, they get held to the same standard and so typically some of the worst behaviors are coming from the core team who wants to just take the organization you’re acquiring and fit it back into the board, if you will. And so the outline of expectations up front with all the parties who are involved is the most important piece and then from there you just got to hold people accountable. Leadership is not a one size fits all kind of approach and each scenario requires adjusting for the parties that are involved.

Sanjog Aul [00:11:41]:
And if I were to go out and look at the weakest link in this whole IT integration process based on your experience, whether it is a merger of equals or it’s an acquisition where people drop the ball.

Karen Porter-Wolf [00:11:58]:
It happens everywhere. I’m not sure that’s a singular plate, but for me, one of the biggest challenges is if you don’t have a really good plan upfront and dedicated resources to achieving that objective, you are going to have tons of escalation that occur throughout the whole process of the program and there’ll be lack of alignment, there’ll be infighting, there’ll be passive aggressive behaviors. It’s really more like a leadership thing over a large program when you think about an acquisition and so the plan is only the first step and then you got to work the plan and you got to hold people accountable for the pieces that were part of the plan. Easy to say, again, hard to do. It can become the weakest link because we like in it, we like to talk about things that people don’t understand instead of breaking it down into something that’s an easy consumable piece of information.

Sanjog Aul [00:12:50]:
Let’s take a quick break listeners. We’ll be right back and let’s dig deeper. You mentioned that once the plan is good, then rest of the execution could be relatively easy. So what does a good plan look like when you’re talking about idea integration in an M&A environment? So please stay tuned, listeners. We’ll be right back.

Sanjog Aul [00:15:01]:
Welcome back. So if I’m asked to build a house and I’m asked to plan it the best way I can without the assurance that I’ll even get a chance to live in it, then why would I plan it well and what would I do? What would be my intention? So let’s take it back to the M&A integration idea, integration planning. So you invite people from both parties and say, okay, let’s talk about what the plan is going to look like. And those individuals are not even sure after we get to a certain stage, whether their own jobs will be there or not. So with that as a mindset, what would be the shape of a plan that would give them to give their basically allow them to give their best and as a result, you get a proper plan created in place.

Sanjog Aul [00:15:49]:
So I’m trying to put this curveball in there because planning itself and objectivity would be great, but here we have people’s mindset at stake.

Karen Porter-Wolf [00:15:58]:
You’re exactly right Sanjog. I mean, at the end of the day, there’s a huge fear of job loss and what’s going to happen to my family? My identity could easily be tied up in the job. I’m playing with a company that I work for and so when you have some people’s worst fears actually coming to fruition, you typically will experience the worst behaviors that people will bring to the table. And so if you’re not able to have those really difficult conversations up front with the teams that are going to be working on the plan is only going to be as good as the people that you’ve got working on it. And so you actually have to spend time talking about whether or not the people who are going to be participating in that plan are going to have job or not have job. It requires some of those really tough conversations that happen when you don’t know the answers yourself

Karen Porter-Wolf [00:16:47]:
but you’re trying to reassure people that you’re trying to do the right thing for the overall entropy and the organization as a whole, which quite frankly, from their perspective, they may not have a stake in because they won’t be a part of it and so communicating openly frequently, what you do know, what you don’t know who’s going to be on the surviving team and if they. If you don’t know who’s going to survive, you need to help communicate when you’ll know who’s going to meet on the surviving team and then really be clear about some of the retention plans that you have available to you to keep people for as long as possible and help them find jobs if they’re not going to be part of the entity that remain.

Sanjog Aul [00:17:30]:
So as a leader, you just mentioned that you will communicate well, you will reassure them. So you’re doing your job and perhaps the reason you reached at that position is because you have the emotional intelligence to separate out the uncertainty from the job that you have to do. Now, that’s not what the people who are receiving your message are made out. Perhaps some of them are, but many of them don’t. How is that being received? What type of messages actually work versus I mean, either not have an impact or further make them more nervous.

Karen Porter-Wolf [00:18:04]:
Yeah, you’re absolutely right because everybody will interpret a singular phrase or some kind of visual clue at something that was never intended. And so it’s never about a singular piece of communication. Obviously, at the announcement of an intended acquisition or the close of an acquisition, you got to go out and tell people that those things have happened but this whole thing about communication is frequent, what you don’t know. And so anecdotal story, we were in the process of acquiring a company in Europe and it was actually going to be a backward integration. So the existing Europe poll was going to be displaced by the acquired team and that was a new space for everybody to play in

Karen Porter-Wolf [00:18:47]:
and so a lot of the conversation that we had in the beginning with the existing Europe team kind of went like that, you are going to be part of an acquisition, we are going to backward integrate you with newly acquired company and that word backward integrate became this red flag. People were running around within a span of an hour from the initial announcement and just inventing all kinds of stories and so we actually had to create a message panel for all the managers in the downline to be able to say, here’s the salient points that we’re trying to get across and then here’s the whole faq, frequently applied question, refined when you get the question, here’s how we’re trying to handle that and so that helped creating a tool that people could tell the story and by having that tool the message panel allowed some consistency in the meshing and it kind of settled down the team. But we realized we needed to actually build a message panel into the toolkit when we were creating the plan for acquisition.

Sanjog Aul [00:19:49]:
Do you think authenticity versus priority flavor works well when you are in M&A? If you very in an authentic manner, say, this is a reality, it’s a business reality, so whatever is going to happen, it’s going to be done keeping in mind that we really are interested in your well being. However, the business must go on or you sweet talk and later on even more lose more trust if you try to do wordsmithing.

Karen Porter-Wolf [00:20:17]:
No, you absolutely are right. You have got to be as authentic as possible and you have to tell people the hard truth right at the end of the day, the way the world communicates now with information that’s available at your fingertips and people calling out truth and recognizing lies or political statements for what they are, it’s just not going to be an acceptable method for talking to people anymore. And so you have to kind of put the hard things out there. And I think when you’re getting into senior leader jobs and you’re moving into these spaces where you’re acquiring companies and you’re talking about different cultures, you’re talking about different personalities, and you’re really trying to make people feel like you care about them, but you don’t even know them, you have to be as authentic as possible and you have to those awfully hard, difficult conversations about the well being of the organization and the well being of the individual, which may or may not be the same thing.

Sanjog Aul [00:21:14]:
If you are looking at the overall planning, the one which you just mentioned, what would be some of the milestones of that planning which would allow you to have a decent enough blueprint of success which can be relayed to all parties which will do two jobs. One is it’ll give clarity and second, it’ll give assurance that where do they fit in the whole puzzle or the final puzzle which will be a merged set of pieces from two different entities?

Karen Porter-Wolf [00:21:46]:
Good question, hard answer. At the end of the day, there’s no one size fits all but the model and the plan on acquisation. The milestones really do depend on what the objective is. So for example, if you’re going to do a full integration, the objective is get synergies out of the organization and the conversation you have and the milestones you have with a full integration is we will be fully integrated when we drip $20 million out of this entity by the end of the year and so people understand that each stage, full gate throughout the process, is intended to get to this end game of $20 million in this hypothetical example but if you’re not going to do a full integration, if you’re going to do some kind of hybrid, that’s where the milestones get tricky. And so the both parties having the right answer or an option that will work just as effectively as another, requires negotiation, requires influence, and requires different milestones to observe. And so for an example, if you’re going to acquire a company that has digital capabilities that don’t exist in the home entity, and that’s a new capability, you don’t even know how to lead or grow or even manage, you may have to create some milestones in there that talk about reviewing metrics that allow you to determine what success even looks like.

Karen Porter-Wolf [00:23:04]:
And the success measure of that milestone is an agreement on the metrics and so the pragmatic approach to what does success look like, everybody’s happy and everybody’s playing nicely in the sandbox requires you to have that next level and sometimes a third level of detailed conversation around what the level of milestone that will indicate we are making successful progress and those dialogues need to happen because each company now we get into the new space of digital consumer digital buying, and the world keeps changing faster and faster. So your old milestones need to kind of adapt with that.

Sanjog Aul [00:23:43]:
So you did mention about the messaging which where you had that messaging panel and you told even your managers what needs to be communicated. That’s awesome because that’s where it’ll all start. However, when it comes to the execution and you want to have certain type of mindset created, you can subcultures created within the teams during that time when the M&A is in progress, that means your deputies, your lieutenants should have some specific expectations set for them. So they carry out exactly what you would have done if there were five of you. What do you do to make that happen?

Karen Porter-Wolf [00:24:21]:
Interestingly, at some point in the past two to three years, I had to create a leadership profile that talked about the competencies of people who are going to work on these acquisitions and really it applies across the board for any leadership discipline as IT really becomes part of the business and it highlights the pieces of the puzzle that you’re responsible for, typically the team you lead, the pieces of the puzzle that you’re accountable for, which is the either the discipline that you’re accountable for, regardless of whether you own a body and what that success looks like. So if it is ensuring that the stakeholders are telling you they got what they wanted and they didn’t get something on time just because you wanted to check the box or say you delivered something on time. They actually got something they’re happy with. So an ongoing feedback loop would be part of something you’re accountable for. I actually call the role a business board leader. So you’re responsible for the board that you represent, the business you represent as an IT professional, and you need to be thinking like your business leader.

Karen Porter-Wolf [00:25:30]:
It also includes the pieces that you need to inform people about and you need to have responsibility for communicating on. So the active engagement and getting information and communicating information becomes part of the leadership profile for people who are going to be part of the acquiring entity and or the entity that’s acquiring a team and it becomes something you have to reinforce on a regular basis as the leader of those lieutenants.

Sanjog Aul [00:26:01]:
Let’s take a quick break listeners. When we come back, what if. Let’s talk about what if the people who you have as deputies, who you may have groomed with leadership and other ways so that they are in sync in terms of the way things should be communicated and planned, et cetera. Now comes the integration, now comes the uncertainty. And there could be people who may not be buying in into what you have suggested and they could very well be your deputies and who in turn are supposed to influence people who report to those deputies. It could get interesting where there is acceptance on the surface, but passive aggressive type of behavior or reluctance to really carry out the plan. Number one, how do you identify such situations, number two, how do you handle them because all of this is possible. Please stay tuned listeners.

Sanjog Aul [00:26:56]:
We’ll be right back.

Sanjog Aul [00:28:51]:
Welcome back. So, IT integration situation. Leadership has laid out great plan. There are a few people who are not buying into it, but of course, just for the sake of tagging along, they said yes, but now they’re supposed to make things happen. Leaders are clueless till the very end. What do you do? Karen?

Karen Porter-Wolf [00:29:18]:
I love this question because regardless of whether this is tied to an acquisition, integration or any other large project, the leadership team as a whole are either going to make or break you. And so typically when you start out, everybody says, yeah, I’m on board. And then they’re going home. And either being passively not participating, waiting for something to fail, or undermine the initiative in their circle of influence. And so at the end of the day, you have to have the hard conversation. You can’t really get to whether or not this is just an individual who needs to be heard. And once they’re heard, they understand the situation has been heard, a risk has been identified and that mitigation plans are in place and typically they’ll get on board or whether this is just somebody who’s not going to make it, somebody who really cannot make the change in the timeframe you need. I mean, you just don’t have 18 month end times for people to eventually come around.

Karen Porter-Wolf [00:30:09]:
And so you have to have those tough conversations, sit down with people and say, hey, look, here’s the situation and here’s the behavior I saw you exhibiting and the impact of that behavior is XYZ and as a leader, I think one of the biggest challenges is really getting to the heart of when somebody is doing something that’s undermining the overall objective of the team, the company or the initiative, and really getting to the heart of that specific behavior. So you can call it out to them because there’s also situations where people don’t realize that they’re doing their thing. They can’t see themselves with the same eyes as an outsider but then there are situations where they’re deliberately just not going to get on board. And so the hard part is once you’ve called it out and they keep repeating the behavior, you have to have the conversation saying, you know what, it’s not going to work.

Karen Porter-Wolf [00:31:03]:
You’re gonna need to go, thank you for your participation and I wish you the best in your journey ahead and that’s hard. That’s really hard because a lot of senior leaders and junior leaders think they can save people. They think they can. They’re the difference maker by having the conversation and people are gonna get on board and they’re gonna get the trust they need to be able to do what they have to do but there are a percentage of people who just aren’t gonna make the change and those hard conversations really are not fun.

Sanjog Aul [00:31:32]:
And you’re so right about it where when you do come to know that this is happening, then you can tackle it and I’m sure enough leadership education and experience is there in the team, in a merged team or an individual company to make that happen. What if we were to look at in terms of preventing the leakage, which starts at the very onset versus when you get to know about it. So what probes and sensors, if you will, you would have out there so that when you are about to start this and something like this is happening, you get to know sooner than later because the damage has already started.

Karen Porter-Wolf [00:32:10]:
Yeah, you’re exactly right. The earlier you find out that something’s going off the rails, the easier it is to fix because it’s a course correction instead of an all out change of guard. The some of the easy things to do is just to establish a regular cadence of a feedback loop. So one of the things we did in the Europe acquisition that I talked about was the senior leader of the operating team and I agreed to have a conversation every three weeks, every four weeks. Hey, how’s it going? What are you hearing? What am I hearing? I actually went out to the team and met them and talked to them. Like, I get that you’re concerned and here’s the goal and here’s the objective and the team that you’re acquiring. So the Europe team we had that was going to go away and the Europe team we were acquiring, both of them had to have a different dialogue and at the each milestone along that communication point, you get better at highlighting issues and concerns and raising the red flag

Karen Porter-Wolf [00:33:06]:
that’s exacerbated by time zones, it’s exacerbated by culture change. And if you can establish a one on one relationship with whoever the key leader is in the acquisition for the business unit that you’re acquiring or the capability you’re trying to integrate, it creates a better feedback loop over time. There’s a better trust typically you need to do some of that face time to build that level of trust because it’s not just an email relationship. You really got to know these people and so if you can get there, you can have early probes to help you identify when people are off course.

Sanjog Aul [00:33:40]:
Leaders are not always right in terms of the decisions they may make with respect to technology or what should stay and what should go. And there have been many cases which have been quoted where it did not make sense to the people below, but they just kept their mouth shut because of the obvious risk of losing their job in the process. How do you prevent that?

Karen Porter-Wolf [00:34:08]:
Easy does, hard does. At the end of the day, somebody has to make a decision to move forward with something and you’re right, bad decisions are made all the time. The bad stories are when everybody else knew it and they never said anything about it and so part of this communication is creating enough transparency, creating enough vulnerability, creating enough of a early warning system to have people finding avenues to communicate, whether it anonymous letters to the CIO or a feedback loop or suggestions where you’re anonymously submitting questions, answers, those kinds of things in the beginning to ensure that you’re not stepping on a landmine. Clearly, some decisions are just not popular, and it’s not a bad decision, but it’s the ones that are really going to kill you down the road that everybody else knew and people just didn’t hear about. And so the goal is to try to create a level of collaboration where people feel like they have a voice and they can be heard but at some point, you’re making decisions and you’re not just endlessly going through these religious wars on technology.

Sanjog Aul [00:35:15]:
Looking at the overall portfolio, which could be rationalized as part of this M&A activity and the integration, what is being done in order to make sure that we get the breathing room. While they may not want to give you breathing room because they want to integrate it somehow quickly enough so that they realize ROI but if you could take the time, that particular time to clean the portfolio which is coming together, then you’d be better off. Are you offered as a leader that flexibility, that additional budget, that immunity, that breather?

Karen Porter-Wolf [00:35:57]:
So the short answer is no. You’re not typically given some percentage or some dollar amount that’s included in the acquisition to go through and rationalize but you got to get clever around the work effort that needs to be done with a portfolio of the acquiring company as well as your own portfolio and you’re constantly rationalizing, whether it’s through application, life cycle management, or some compelling event like an acquisition, to get to a place where you’re rationalizing your portfolio. Small, medium, large and so one of the Objectives within a due diligence effort. If you really have a good plan, and of course you iterate over time, you build a plan that becomes more and more rigorous over time, but you’re identifying not only the key personnel, but the key synergies around where you have big risk. So it’s always risk based and that allows you to find the funding that you need to solve for rationalizing some of the biggest risk related portfolio challenges

Karen Porter-Wolf [00:36:53]:
and then also within any acquisition, you have the ability to do concurrent things with projects that are going to accomplish multiple objectives and so if you have the ability within the first 30, 60, 90 days to kind of do a small, medium, large rationalization effort and you’re looking at what you’re acquiring and thinking, you know what, I can’t do anything about these big ones because they’re huge and they’re expensive, but I can do stuff for these small and medium one. That’s the opportunity that you have. You have to really have laser like focus so that you accomplish multiple objectives with anything that you’re looking at. I know there’s not typically money set aside. I think the best thing you can do in that is really have a strong governance model. What are we going to do? When are we going to do it? Who gets to decide?

Sanjog Aul [00:37:43]:
When we talk about IT expenses. IT leaders are known to be asked for doing more for less or more for nothing and when it comes to M&A, as we discussed, you’re not given the breather. However, there has to be some budget put together for IT integration itself to go smoothly enough and not have a resource constraint. What’s the magic that you have to pull at that time because you do not really have a whole lot up front and I’m assuming there will be some estimation, some guesstimation that leadership has to do in order to get enough buffer and not ask way too much. So it gets turned down. What do you do in this case?

Karen Porter-Wolf [00:38:28]:
What we have learned to do. So we didn’t get it right the first few times. What we have learned to do is to really outline security risk and gaps for technology that is old or brittle in a way that help create a compelling story. So for example, you’re on an email system that requires an upgrade, but it’s a million dollars and that wasn’t something that they were planning on doing in the business strategy. Well, you now have an opportunity to capitalize that expense or to look at something with new eyes that’s not just an expense driven event. And so as you look at security risks and the gaps associated with whatever target acquisition you’ve got, you can, you can include things that are upgrades that are overdue. Some of them are nice to have and some of them are just plain old critical. You got to add that in there.

Karen Porter-Wolf [00:39:17]:
Where you have licensing issues that typically any company knows where they’ve got issues and they need to do an audit but they’re not doing anything about it. You need to include that because if you don’t do it can hurt you down the road. Wherever you have audit findings and remediations that are currently underway with the acquiring target, you need to include that. You need to include some buffer for severance. You need to look at data conversion and the additional staff. If you’re going to get a rift in advance, like you’re going to reduce people and you don’t have those skill sets on the, on the core team. So you need to build some of those things into your plan with a little bit of a buffer and then really spend time with your business partners on understanding that if you’re not approving the full budget, here’s my, my I can give up 20% but you’re going to lose these things in these synergies and I we’ve gotten to a place where we can actually build in the plan for post integration then on those types of issues.

Sanjog Aul [00:40:21]:
So whenever we rattle the stable state, which is bound to happen when there’s an M&A event, you become vulnerable as an organization, there is some instability in the weight functions and there are some security related risks. What do you do to make sure that you are changing wheels on a moving car which is running stably?

Karen Porter-Wolf [00:40:47]:
I would love to tell you it’s a hope and a prayer. But it’s back to good planning. And of course like anything, your plan is only as good until you need to execute on it. I think with any type of objective you’ve got to have the right leaders in place with a combined entity or with an acquired entity. And the balance of leaders in the role is there are a myriad of them like you. You may need to have people on site in a country who have authority and decision making capabilities. They also need to be held to the standard of leadership competencies that are going to be associated with running a high performing team. So they need to be able to communicate with others and have a level of executive presence that can share risk in a way that’s not perceived as a guy who’s calling.

Karen Porter-Wolf [00:41:35]:
They need to be able to influence, they need to be able to collaborate, they need to be under understand the business at the core of how any company makes money. They need to be able to leverage their personal network, not sit there in the role that they’re created in this example in some country and not know who the key players are and key decision makers are so they can pick up the phone and make a phone call and that’s hard. You don’t just do that overnight. You build a well oiled machine over time and you start having the team members balance out the level of competencies that you need to have for an organization. I know it sounds a lot academic, but over time if you’re really keeping your eye on the ball, you’re not holding players on your team who aren’t able to contribute to the whole. As the whole become different over time, you’re always adding new acquisitions to the balance of the whole and you’re adding new leaders and that team had to integrate too.

Sanjog Aul [00:42:34]:
Now you did mention about vulnerability and instability and for that you have to use your leadership chops to make that happen. Let’s take a quick break Listers. We’ll be right back and talk specifically about the security challenges. It’s for most organization it’s not a matter of if but when. They would either get hacked or somewhere some compromises would be made in terms of their information security. So what is being done now in this day and age with respect to security, information, security related risk mitigation and prevention? When it is the time for M&A. Please stay tuned listeners. We’ll be right back.

Sanjog Aul [00:45:02]:
Welcome back. So let’s talk security and risks, especially when two organizations are coming. They were in today’s day and age and now you are not fully cooked. You are like two ingredients in a recipe. They were to be get done and they were assimilated, but that’s not happened. So with CIO or CISOs, all of these people have to come together to come up with some transient plan, if you will, which will at least maintain that security or at least not let it deteriorate.

Karen Porter-Wolf [00:45:32]:
Yeah, exactly. And first, there are a lot of companies who still have to have the whole I need to sell the idea that we need to do this, which creates another layer of challenges on top of the fact that everybody agrees you need to do it. So if you’re in a situation where you’re actually having to convince people that information security is important, that you need mitigation money and prevention money, then you’re actually starting before the start line. And those are even bigger hurdles and the education that you have to defend up front to get people to even understanding what the risks are and that they need to actually do some funding in that state is. It’s a journey. Once you get to the place where, today any kind of seminar or conference I go to, the biggest conversation topic is around security challenges for all CIOs and the biggest common denominators are helping to educate the board of directors because most of them don’t really understand what the risks are.

Karen Porter-Wolf [00:46:31]:
They are fiduciary, responsible for ensuring that the company that they’re on the board for is not going to have a risk on their watch. Just like CIOs don’t want to have some kind of breach occur on their watch but that education is now where everybody’s at the same level of understanding and so some of the challenges are just ensuring that you stay up to date on the technologies that can mitigate risk. So anything that perimeter facing but the bigger risks are around your employees. People who don’t know the things they do create additional risk because they’ve inserted some kind of virus into your network or your laptop or worse, a database owner has a password that they share with everybody and so now they’ve got the keys to the castle.

Karen Porter-Wolf [00:47:22]:
And so we’ve embarked on a don’t be that guy training program because when people hear that they’re the one, they were the weakest link, they’re shamed into trying to adopt new behaviors, but I don’t even know how many people who don’t use passwords on their cell phone and it’s really a simple, easy thing to do, but people think, oh, I don’t want to be slowed down. And at the end of the day, we’re all responsible for ensuring that we’re protecting the company assets and until people get that, that’s a journey that will take time.

Sanjog Aul [00:47:55]:
When it comes to the leadership, the type of DNA which would better fit that merged entity that has to be identified and then among the incumbents and perhaps someone from outside have to be identified as the one who will be the top honcho. So when it comes to, yes, there would be things happening and other executive positions as well, but when it comes to the CIO what is the due diligence that needs to be performed in order for this to be an objective decision versus a power struggle?

Karen Porter-Wolf [00:48:30]:
Exactly! And it’s not so simple to go and just have a singular conversation with the talent for the acquiring entity and compare it to your current team. There’s gotta be objective conversations with other people. So have seen the talent on the acquiring team and over a longer period of time to understand whether or not you’re getting the right combination of team but it does require, just like any sport to coach a football coach or even a baseball coach, understanding the team you have and the talent gaps you have and so that’s new space for a lot of CIOs. When you think about strategically planning your workforce, knowing where you have gaps in your current team and where you got to fill your gaps, and whether the team you’re acquiring has those skill sets or not and so it’s a balance.

Karen Porter-Wolf [00:49:17]:
It’s always about understanding where you have gaps in the expertise you have today and where you’re going to be able to acquire some new skills in some regard. It’s a leap of faith. You have to take the best due diligence effort with those leaders that you’re acquiring and make sure that what you’re getting will fit into that corporate culture and now you get into building the culture of the combined team, the definite part from the old team and if you really are naive enough to believe that you’re just going to acquire a company and insert them into your culture, you’re short guiding yourself because you might actually get some good skills and some good talent, some good competencies in the acquiring entity that really enhance the team you have. And so I have like five or six things that I look for. I look for that business savvy people who understand how to have a conversation with a business leader, understand how the company makes money, ability to communicate, ability to influence, collaborate and not do it in a way that’s all technology feat but truly from a business capability, business value, conversation, ability to negotiate, there’s always going to be trade off you don’t have to have. You might like the technology you have because you know it, but it doesn’t mean that it’s better than the technology that that we need to acquire or replace with.

Karen Porter-Wolf [00:50:33]:
And then those leaders have to absolutely be able to pick good leaders. So if you can’t build a bench of talent, you’re really a deficit, at least to me because now I’m trying to compensate for that gap on your skills.

Sanjog Aul [00:50:49]:
One last question, what is your message and top three sets of advice if you will, which you can share with the leaders who are venturing into this area and that’s their first time.

Karen Porter-Wolf [00:51:04]:
Top three. Not one size fits all. Find good leaders to help you do the job and set the tone. The whole job of CEOs today are around communicating and ensuring that their leadership team is doing what needs to be done to meet the strategy. Same thing’s true for CIOs. You can’t do the job yourself if you come from a technology background and that’s your first love. It’s easy to see how some CIOs would start to lean towards compensating with their technology knowledge but at the end of the day, CIOs are running a business and it’s the biggest investment of most companies and so the ability to communicate, the ability to find good leaders to run the organization are critical to the success of the overall company.

Sanjog Aul [00:51:48]:
On behalf of the show and our listeners, thank you so much Karen for sharing your thoughts on how organizations can actually work in a planned fashion to come up with the right strategies and execution outlined for them to have a good looking IT integration plan and then of course be able to realize.

Karen Porter-Wolf [00:52:09]:
Thanks been a pleasure. Hope could share some lessons learned and provide some insight on mergers and acquisition.

Sanjog Aul [00:52:14]:
Thank you so much again and listeners Please like us on Facebook, search for Seattle Talk Radio and follow us on Twitter. Thank you again for listening to CIO Talk Radio. This is Sanjog Aul your talk show host. Till next week take care and god bless.

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