How to scale your business at pace – de-risking growth
In the second in our blog series on managing growth, Paul Ridden examines why many mergers and acquisitions fail. He discusses the importance of how culture and having robust systems and processes in place can help smooth the path for integration.
While you might employ more people as you get new service contracts to grow your business, for truly rapid growth mergers and acquisitions provide a very effective route. A smart acquisition can provide immediate access to new clients, locations, products, technologies, talent and intellectual property. Yet analysts and studies claim that 60% to 70% of mergers and acquisitionsi reportedly do not deliver the promised riches.
There are many views on why this number is so high and why integrating businesses frequently fail. According to most analysts, it is the systems and culture of the businesses which are often underestimated.
Good structure provides the foundations for growth
Both organic and acquisitional growth rely on having good systems in place. It’s also important that the management team are aware of the tools that they have at their disposal, and the capability that they offer. From supporting daily admin processes, such as managing working hours and payroll, to providing reports that can give insights into the business.
For a business to run profitably and be able to scale by acquiring other companies, a strong structure with robust operating systems must be in place to be able to absorb extra work. It is maintaining such a model that is challenging when bringing in different company clients and ways of working.
Often companies are run using historical management practices that are based on a leader’s personal style. However, in a merger situation, an idiosyncratic leadership style may not easily be integrated, so is worth thinking about and addressing in advance of any planned acquisition activity. These aspects, ‘cultural fit’, are cited as critical to the success of integration by 95% of executives (McKinsey), yet 25% cite that a lack of cultural cohesion and alignment is the primary reason integration efforts fail.ii
In the service industries the business is only as good as its people. You may have found good people to lead your company and operate the business for you. Or you may be a self-starting entrepreneur who has successfully grown a business from the ground up. However, the danger is that all the great business knowledge is in their head (or yours). This can result in a dependency on one person which can leave the business – and its people - vulnerable. A situation often seen when the head of the company says they can’t take a holiday!
The way to avoid this scenario is to deploy systems that take care of the detail and routine tasks for daily operations. Workforce management software can systemise and reduce repetitive, routine tasks, to increase efficiencies and free up staff to focus on more valuable, proactive work, such as customer liaison or planning. It can retain the ‘knowledge’ and allows clear thinking, away from the detail. It also provides a strong platform for growth.
Success means making choices
Success from an acquisition means being able to take the good parts out of that business that complement your own company and still keep it profitable. It’s important to assess the other company’s capacity to integrate and build upon the larger business. Questions to consider might be: can your existing resources accommodate or integrate new work? If so, can the new services be managed with existing processes? If you have systems in place, how easily can they scale up?
As well as your business systems, company culture, mentioned earlier, is integral to success. For example, the company you are considering merging with may have very high transactional relationships with customers, with regular calls and meetings.
Conversely, you may just check in with customers annually to review service level agreements or contracts, relying on automated reports to keep customers informed. Such different ways of working may mean that some customers may not be profitable if they cannot adjust to your business’ way of working.
At SmartTask, we have worked with clients that have achieved successful growth and have invested during that process in systems that help to standardise working practices. If you would like to learn more about how workforce management system could help you grow your business, contact us.
i https://hbr.org/2020/03/dont-make-this-common-ma-mistake
ii https://www.investopedia.com/articles/investing/111014/top-reasons-why-ma-deals-fail.asp