7 Secrets of Structured Synergy: Optimizing M&As, Alliances and Strategic Partnerships

Copyright 2020 by Dennis A. Romig

All Rights Reserved

Permission to reproduce or transmit in any form or by any means, electronic or mechanical, including photocopying and recording, or by any information storage and retrieval system must be obtained by writing to the publisher at the address below:

Performance Research Press

9506 San Diego Road

Austin, TX 78737

(512) 288-0416

www.sidebyside.com

Structured Synergy®, Side by Side Leadership®, Structured Teamwork®, and Side by Side® are registered trademarks of Side by Side, Inc.

Ordering information: To order additional copies call (512) 288-0416 (quantity discounts are available).

Library of Congress cataloging in publication data.

The author may be contacted at the following address:

Dennis A Romig

9506 San Diego Road

Austin, TX 78737

The author may be contacted at the following email:

[email protected]

Credits: Editors: Laurie J. Romig, Terrill Ross

Copy Editor: Deborah Costenbader

Proof Readers: Ross Iverson, Martha Romig, Deborah Brockman

Graphics and Cover Design: Bolea Creative [email protected]

Text Design: Suzanne Pustejovsky [email protected]

ISBN: 978-0-96723-503-5

eBook: 978-1-09835-694-1

To Beatrice and Eden and all my nieces and nephews,

who are part of one of

the best alliances ever, our family.

Acknowledgments

First, thank you, to my team who found and culled the best evidence-based research on M&As, alliances, and strategic partnerships: Hillary Roberts, Ellen Miller, and Dr. Glen Baumgart. Heartfelt gratitude to my family of experienced leaders: Jessica Romig, Michael Romig, David Romig, Martha Romig, James Romig, Terry Romig, and Jim Wilder (posthumous).

Robert Watt of Seattle provided continual encouragement and contributions from the beginning, as he has with my other discoveries. Terrill Ross recognized that 7 Secrets could help any organization optimize success of their M&As and alliances. Professor Robert Klitgaard encouraged me to describe as specifically as possible what the leaders of the successes did so that those practices could be replicated by other leaders.

Michael Bown helped me organize how to present the research and success stories in this book. Frank Staropoli saw the relevance of 7 Secrets for community partnerships. Dr. Paul Radde emphasized that leadership that achieves great results is different than management. And finally, I thank Stan Wenger for recognizing that his CEO, Don Stacy, and his organization, Amoco Canada, required a human culture merger to optimize their M&A.

Preface

For good reasons, the world in the 2020s is attempting more M&As, alliances, and strategic partnerships. The hope is that such collaborations will help us overcome the combined challenges of pandemic viruses, subsequent economic crises, and the search for racial justice.

Sadly, such collaborations reaped a 40-year track record of 50 to 80% failure rate. The high failure rate has persisted no matter how well meaning the effort.

The failures included various experts who supported the financial, legal, and business ingredients of the M&As and other collaborations. The missing, almost catastrophic, expertise was how to merge the different human organizational cultures.

Yet there is hope! When done properly, collaborations can produce geometrically better results. 1+1 can equal 3 or more. This book describes how the evidence-based practices to merge organizational cultures allow anyone to optimize their outcomes. Dr. Dennis Romig has discovered how to go beyond synergy in name only when pursuing M&As, alliances, and strategic partnerships. In the real-world, organizations using the seven practices of structured synergy achieved success at a rate of 90%. You can do this too!

— Robert Watt, past board chair of Group Health Cooperative, Casey Family Programs, and the Seattle Foundation

Contents

PART ONE

Mystery of M&A and Alliance Success

Chapter 1. A Failing M&A Finds a Path to Success

Chapter 2. The Seven Traps of MAP Failure

Trap 1. M&As and alliances are easy and mostly successful

Trap 2. Anticipated synergies automatically occur

Trap 3. After the deal is signed, everybody willingly works together

Trap 4. The purpose and goals are supported by all

Trap 5. Executives assume success is approaching

Trap 6. The leaders’ job is done when the deal is signed

Trap 7. The different organizational cultures will easily merge

Chapter 3. Organizational Benefits of M&As, Alliances, and Strategic Partnerships

Chapter 4. The 7 Secrets of Structured Synergy Boost Performance

PART TWO

The Skills and Tools of Structured Synergy

Secret 1

Optimize Your Culture to Streamline Needed Change

Chapter 5. Validate the Organization’s Culture Values

Chapter 6. Build Organizational Support with Two-Way Alignment

Secret 2

Select the Best Collaboration Partner

Chapter 7. Choose the Best Partner for Culture and Strategic Compatibility

Chapter 8. Ethical Partners Increase Collaboration Success

Secret 3

Overcome Urgent Shared Challenges

Chapter 9. Kick-Off Meetings Accelerate Cooperation

Chapter 10. Overcoming Shared Challenges Creates the Best in the World

Secret 4

Share Leadership

Chapter 11. Top-Down Leaders Struggle with MAPs

Chapter 12. Shared Leadership Ignites Performance Improvement

Secret 5

Instill Structured Team Skills

Chapter 13. Beyond Teams In Name Only

Chapter 14. Organizational Synergy Requires Team Skills

Secret 6

Set Shared Visionary Goals

Chapter 15. Develop Visionary Goals, Strategies, and Action Plans

Chapter 16. The One, Two, Three of Organizational Support

Secret 7

Implement the Most Valuable Synergies

Chapter 17. How Synergy’s Aims Are Realized

Chapter 18. Successful Synergy with Scientists and Engineers

About the Author

References

PART ONE

Mystery of M&A

and

Alliance Success

Chapter 1

A Failing M&A Finds a Path to Success

After T. Don Stacy retired from Amoco as chairman and president of Amoco Eurasia Petroleum Co., we met at his comfortable, suburban Houston, Texas, home. Don wanted to reflect on how together we turned Amoco’s failing M&A with Dome Petroleum from failure to success. Together with his leaders we achieved rapid progress in just 12 months. The combined companies went from a $440 million loss to a $223 million profit while paying down the debt for the merger. I recalled our first meeting.

Amoco Canada energy company’s headquarters loomed above the city of Calgary, a tall granite-and-glass encased skyscraper. I nervously entered the CEO’s large, plushy-carpeted office.

T. Don Stacy, the CEO, stood up from behind his desk. Almost as tall as my six-foot-six frame, he warmly shook my hand. In a soft southern drawl, he said, Let’s get more comfortable. He motioned toward a couch at the end of his office by a window. His gentle voice and politeness disarmed my nervousness.

He asked me to refer to him as Don, and we exchanged some pleasantries about how he had lived a long time in Houston, Texas, while I lived in Austin.

He voiced his major concern. "Dennis, Amoco is a financially conservative and successful energy company. Three years ago, Amoco merged with Dome Petroleum, an entrepreneurial fly-by-the-seat-of-the-pants Canadian company. This should have been a match made in heaven. Amoco’s stable financial balance sheets offset Dome’s weaknesses. Dome’s strengths in creative energy projects should have propelled Amoco’s stable assets and well-trained managers.

"Instead of synergy and progress on our goals we have daily conflicts. Dome Petroleum executives and managers refer to the way work was done in their former company. They challenge Amoco management decisions and work processes by saying, ‘At Dome we did things this way.’ There are endless meetings with no resolution or forward momentum.

Also, when a problem emerges, people conceal it from the other group. Bottom line, our financial results stink, he lamented.

We completed the financial merger and the legal merger. What we need now is a human culture merger! he concluded."

I replied, Maybe we can try some leadership practices that optimized a Westinghouse-ABB merger.

I had also recently trained the Amoco Canada’s operations vice president’s team that had included both Amoco and Dome leaders. Their structured team skills workshops were a complete success. During the first workshop they merged their two different organizational cultures strengths. They made important decisions faster and solved complex business problems.

Don nodded his head and indicated he had heard something about those training sessions.

The Amoco operations division teams took 16 hours to complete the training. Don’s Human Resources Vice President thought Don and his executive team could complete the training in half the time, eight hours, because of their experience.

Don laughed and said, I don’t know about that. If anything, my executive team and I may need double the amount of training as everyone else.

We agreed to have his team go through the structured team-skills workshops in the same amount of time as everyone else. Don wisely noted that this would demonstrate to the rest the organization that he and his executives from both Dome and Amoco were committed to the training to unify the two cultures and achieve the required synergy.

Under Don’s leadership, the Amoco Canada executive team participated in the training. During the team decision-making skills training, they practiced pro/con analysis skills and made a decision that saved the company millions of dollars. These skills work! the executives enthused.

All the Amoco Canada and former Dome managers, supervisors, and other leaders received training in team communication skills, structured brainstorming, team goal setting and action planning, as well as in team decision-making.

Every department applied the structured team skills to streamline and combine the best practices from each company’s work processes and procedures.

During their training workshops, teams identified and implemented efficiencies in the following areas: The drilling management team reduced the usual contractor process from 20 steps to 8 and cut the time it required in half. The petroleum engineers reduced the number of engineering workdays necessary to produce the annual revenue forecast and work plan from 119 person-days per year to 29 person-days per year!

Additionally, a combined Amoco-Dome team of oil field workers and their district supervisor had struggled to reduce their operating expenses. Their costs were the same as what a barrel of oil sold for at the time. Because their production costs were so high, they faced the real possibility of losing their jobs. As a result of working together, the team reduced their costs from $13/barrel to a phenomenal $3/barrel.

Many other teams worked together and improved efficiency and reduced costs even as they were going through the team-skills workshops. Everyone started using the pronoun we instead of us and them.

On the next page summarizes the major ways Don Stacy and the leaders of Amoco Canada achieved their match made in heaven by aligning and leveraging Amoco and Dome’s strengths.

In the first year after the structured team-skills workshops, Amoco Canada/Dome turned around a $440 million loss to a $223 million profit while paying down the debt for the merger. Don Stacy was right. All the right talents and resources were available for synergy. There just needed to be a structured process and the skills to build one culture.

A Road Map for Successful Collaborations

After Amoco Canada achieved a broad range of positive results, I considered Don Stacy’s initial plight of the missing piece in the world of Mergers and Acquisitions (M&As), Alliances, Partnerships (or MAPs), and Collaborations.

Leaders were already using the following resources:

Financial experts to help with the financing of the merger

Legal experts to facilitate the legal aspect; and

Business experts to advise on possible business synergies

But there were no proven experts, processes, or methodologies to assist with the human culture merger of M&As and alliances. Our company, Side by Side, Inc., became the go to expert to fill that gap.

Over time my training and consulting firm proved the value of structured team skills and six additional collaboration practices. These seven practices, when combined, built synergy and merged the organizational cultures. Twenty eight out of 30 M&As, alliances, and strategic partnerships succeeded. One example of success was market capitalization increasing by 300% in five years.

The two failures also validated the seven practices of structured synergy since those managers did not implement them. The executives in the two failures especially did not support the team skills training workshops.

If you are a leader like Don Stacy who needs to close the human culture gap of your M&As and Alliances, this book is for you! If you are an organizational facilitator like me and want to help the corporate leaders of the world succeed, then this is your Road Map and tool kit of successful practices.

Development of Successful Leadership Practices

In 2003, I read a Business Week article that reported that 50% of all M&As and alliances failed. I thought the statistic was an exaggeration by Business Week to sell more magazines. At the time my training company had moved on from our success with Amoco Canada, working with 28 MAPs to achieve a 90% success rate by applying 7 structured synergy practices with 28 MAPs.

To disprove the reported 50% failure statistic, I collected and reviewed scholarly research articles on the actual success of M&As and alliances. The truth was surprising. Business Week was wrong. It turned out the failure rate was higher than 50%, more like 70 to 80%!

I challenged myself and my team to find the best research on all cross-organizational collaboration ventures including M&As, alliances, and partnerships. Our review of the best 600 studies validated seven organizational practices that leaders of successful MAPs used. The M&A and alliance failure rate was so high that I concluded that these seven practices were in fact 7 Secrets because, so few organizations were successful. Using the 7 Secrets, leaders have collaborated across multiple organizations to achieve visionary levels of success.

Along the way, the research revealed that M&As, alliances, and strategic partnerships shared important characteristics:

They all currently had similarly high failure rates (70 to 80%).

They failed due to the same human culture traps.

They all succeeded when they used seven similar cultural leadership practices.

These important similarities between Mergers and acquisitions, Alliances, and strategic Partnerships revealed a useful acronym, MAP, when describing the failure or success of all cross-organizational collaborations.

Definitions of Terms

The term M&A is the abbreviation of mergers and acquisitions. At the far end of the continuum of legal and financial ownership, M&As involve combining two organizations into one organizational operating structure. It is the 100% transfer of legal ownership of one organization to another. Recent M&As include the 2017 acquisition of the organic grocery store chain Whole Foods Market, Inc. by Amazon.com, Inc., and IBM’s M&A with Red Hat, Inc., a large software, and cloud computing company.

Strategic alliances, or simply alliances for short, are collaborations of two or more organizations in which they share employees and other resources with each other to achieve mutual goals. There is no separate legal or financial entity formed. There are letters of agreement or contracts that outline the general purpose of the alliance and the responsibilities of each company.

Strategic partnerships are like alliances but are tied together in customer-supply chains and are more enduring. Resources are shared, and services and products are delivered to