Acquisitions aren’t easy, but they don’t have to be miserable. Here’s a guide for anyone at a company being acquired (most applies to acquirers as well).
Last week James Home and Marcy Swenson hosted a core conversation at SXSW on How to Be Acquired and Stay Happy. Wonderful smart people generously participated, sharing their experiences of what worked and didn’t in both sides of dozens of acquisitions of tech startups. (In a future post, we’ll summarize the unique issues for founders and the executive team leading up to acquisition.) With the market shift in startup exits from IPOs to acquisitions, learning to do it well and happily is important to anyone at a startup.
Interestingly, the entire conversation focused not on business integration or strategy but on human integration. We think the strategy may be less important than the people and how they run with it.
We’re seeing a new type of entrepreneur starting companies lately; they are approaching their company culture with almost as much passion as the business idea itself, with the goal of creating the type of organization that they will be most happy being a part of.
Over the past several months, I’ve been working with my colleague and fellow business coach Dale Larson to try to describe this phenomenon. We’ve tested it out with a variety of entrepreneurs, VCs and journalists in meetings and at parties, and heard lots of yes. Here is our first formal presentation of these ideas.
Asked about the importance of culture in making an acquisition, he didn’t hesitate for a second. Guido Jouret, Cisco’s CTO of Emerging Technology, said “We pass on acquisitions if the culture isn’t right. If it isn’t right, nothing else matters.”
Jouret is responsible for incubating Cisco’s future billion-dollar businesses, so I asked him after he gave the keynote at last week’s Plug and Play Expo what he thought the critical qualities in a startup’s culture that he looked for in acquisition. I shouldn’t have been surprised that he’d rattle off four things instantly…
I was at the Chomp Tastemakers party this week, and ended up chatting with @Scobleizer about Startup Happiness. My question to him was: “What makes a happy startup?” He didn’t even pause to take a breath before he answered emphatically “No assholes!”
Robert Scoble talks to founders and CEOs all the time, so he’s working from a huge set of sample data, in addition to his own personal experience. He explained that once you have even one asshole working at your company, it introduces politics in a way that wasn’t there previously. We didn’t drill down into the definition of asshole, but from my experience, an asshole is either someone who is more interested in their own personal success than in the success of the company and their colleagues, or someone who makes mean-spirited attacks on others, or both.
Assholes introduce the concept of “blame” at a company. If you know that you are in danger of being blamed for making a mistake, then it introduces a whole new level of anxiety into decisionmaking that is counterproductive. Of course you want people to make the best choices they can, and take the responsibility very seriously, but knowing that you can pitch an idea, and have it be wrong, or try doing something and fail, and still be accepted as a valued member of the team is one of the things that encourages the innovation and creativity that is the lifeblood of entrepreneurs and startups.
If all of the people on the team are focused on being succeeding *together*, then it matters a lot less who had the idea that worked, or that didn’t work. They have the shared belief that we’re all in this together, if we made a mistake, then we need to improve the process of making decisions, but not so-and-so is individually responsible, and therefore they’re a bad person. An asshole has the belief that there is someone we can find to blame for this, and it’s worth spending the time and energy to do so. They are thinking about the team in a completely different way! And they are interested in convincing other people that their belief is right…
Also, an asshole makes it dangerous to take responsibility for making a mistake. Here, I’ll lean on Agile software development as an example. Agile has the concept of weekly sprints, where a team bites off a chunk of work, mows through as much of it as they can, and then have an end-of-interaction review when it’s done. The end-of-iteration review is a chance to look at what went well, and what went wrong. It’s often a time when someone will step up and say “well, I thought that doing XYZ would work really well, but when we went to do it, it turned out to be not such a good idea after all. Next time I’d do it differently.”
Agile software development allows the team to discuss mistakes and learn from them. But if there is even *one* asshole who is part of an end-of-iteration review, then it’s no longer safe to admit you made a mistake, because you that the asshole on the team is either going to lambast you in the moment for doing it wrong, or stockpile the information to use against you and ding your credibility in a future meeting. What happy startups have is a culture of trying new things, assessing what worked and what didn’t, and making constant improvements. An asshole that’s lurking on your team is going to wrench that process so it’s less effective, or perhaps not even possible.
The best way to avoid this is to not hire assholes in the first place. Your hiring process should include ways to assess how an individual works on a team, how they think about decisions and mistakes, and interviews with people they’ve worked with. When I was at Critical Path, a crucial part of the late-stage hiring process was for me to take the candidate to a long dinner. I could tell fairly easily at the end of a few hours of social time what someone’s worldview was, and I wasn’t willing to hire someone who I didn’t trust deeply and enjoy on a personal as well as professional level. Life is too short to spend working with assholes!
We’re not all lucky enough to start from scratch building a team; sometimes we inherit the people we work with. But having zero tolerance for these behaviors on your team will go a long way toward making a great work environment.
In a perfect world, it would be easy to confront someone who is acting like an asshole, and change their behavior. In reality, some people are open to change, and will respond to a conversation with a manager, or work with a coach, and some people are not interested in changing, and will need to be let go. A great leader is willing to invest the time and energy to find out which is which, and to fire an asshole who is unwilling to change. If you allow assholes to remain on your team without any intervention, you are risking the very culture of innovation and collaboration that you’ve worked hard to foster.
Many managers have an excruciatingly hard time confronting bad behavior. They hope that a problem will just go away on its own, or that other team members won’t notice, and won’t be affected by it. But the long-term ROI of having a team with no assholes is ridiculously high. The best and brightest people in our industry (like Robert Scoble!) have a very low tolerance for working with assholes. Your most valuable asset as a leader is a high-functioning team of A+ performers. If you spend the time and energy to insure that this behavior isn’t tolerated, then you have a much higher likelihood of building and keeping the A+ team that you’ll need to succeed.
One of the news stories circulating on the Internet today is about a girl who quit her job as an executive assistant, and outed her boss as a sexist Farmville addict (story here). She now has a Facebook page that’s asking fans to nominate her to be a Playboy model, which makes me wonder if the story is a hoax, or if she’s just capitalizing on the viral nature of her whiteboard photo series and really did quit. (Update #1: My friend Andy points out that the FB page is created with an edited photo from the original site, so anyone could have created it. Update #2: AllThingsD says the entire stunt is a hoax).
The two primary things she “outs” about her manager is that he’s sexist (he calls her a HOPA, or “hot piece of ass” on the phone), and that he spends 19.7 hours per week on Farmville, in addition to time spent on Scottrade (4 hrs) and TechCrunch (5.3 hrs). We don’t know that any of this is true; although the fact that she wrote it on a whiteboard and stood in the photos makes it *feel* far more credible. We’re used to doubting words more than pictures.
Humor is one of the things that makes lots of stories enticing to circulate, but this has something else that makes it fascinating: a subordinate standing up to her boss in a very public way about his (alleged) bad behavior. She supposedly uses monitoring software that was already running on all the computers in the office to track his website use, and then email to insure that her story will arrive in everyone’s inbox before the boss had a chance to do anything about it. Kind of brilliant, if what you want to do is burn your boss and expose yourself as someone who puts your own interests above your company’s.
(warning: Mad Men spoiler ahead) Most companies would toss her resume as soon as they connected her with this stunt. And 60 years ago, this kind of thing would have seemed pretty much inconceivable. When Don Draper sleeps with his assistant on a recent episode of Mad Men, you never think for a second that she’ll write about that experience, photocopy it, and put it on everyone’s desk for them to read in the morning.
But nowadays, there may be companies that would consider her chutzpah and creativity to be an asset. Will someone end up hiring her *because* she created something viral? To me, her getting hired because of this seems more likely to happen now than it would have 10 years ago. Social media has made information sharing more free, and it may make the punishment for this type of sharing less harsh – the jury’s out. In fact, I notice that the comments on TheChive are trending generally in favor of her choice, with a smattering of further sexist comments, and a few negative ones (although one presumes that there are less leaders leaving comments than rank and file employees).
All this made me think of @CharleneLi‘s book “Open Leadership“. The thesis of the book is that information about your company, your employees, and your customers is going to continue to be more and more public, whether you’re excited about that, or not. The first chapter is called “Why Giving up Control is Inevitable”, and the first bullet point in the New Rules is “Respect that your customers and employees have power.”
I’m thinking that this exposes one of guiding principles that makes happy startups: their leaders behave with integrity, even when they think no one’s watching. That doesn’t guarantee that leaders always do the right thing, or even that they never play Farmville. (Everyone likes to blow off steam, and maybe Farmville is the new golf?)
But the behavior of leaders is more important than ever, because in addition to the staff watching, there are more and more ways for people to share information widely and anonymously. Mark Twain said “Dance like nobody’s watching”, but I’d add to that “Lead like everyone’s watching”.
I was reading an interview with Tony Hsieh (Zappos CEO) yesterday, and it had an interesting hidden gem. Zappos has a very customer and employee-centric culture; it’s one of the things that makes people fanatical about the company.
One of the things Tony talked about early in the interview was that his former company, LinkExchange, was sold because he was *unhappy* there. Apparently as they were hiring, they didn’t pay much attention to the culture, and as a result, they ended up with a mishmosh of staff that didn’t particularly get along, even though everyone could do their jobs just fine. So, the founders sold to Microsoft so that they could stop working there.
It’s not everyone that can sell their company for US$265 million and walk away when they’re unhappy, but it’s an interesting reflection on what makes entrepreneurs tick: happiness *matters*.
Here’s the actual quote from an interview with Tony on BigThink: “From the outside, the first company, LinkExchange, that I co-founded seemed like a success. It was actually a pretty sad thing selling the company. Most people don’t actually know the reason why we ended up selling the company. It’s because the company culture just went completely downhill. I remember when it was just five or 10 of us; it was kind of like your typical dot-com back in the day. This was 1996, and we were working around the clock, sleeping under a desk, had no idea what day of the week it was, but it was a lot of fun. But we didn’t know any better to pay attention to company culture.
“So, by the time we got to 100 people, we hired all the people with the right skill sets and experiences, but not all of them were culture fits. And when we got to 100 people, I remember I myself dreaded getting out of bed in the morning to go to the office. And that was kind of a weird feeling because this was a company that I co-founded and if I felt that way, then I wondered how all the other employees must have felt. So, we ended up selling the company.”
Wow. He’s essentially saying “we sold it because we hated working there.” Now, it may be that it was the perfect time in the marketplace to sell LinkExchange anyway, or it may be that that they sold earlier than they needed to, but having the bad company culture force your hand isn’t something that most entrepreneurs or investors want.