| Topic Name: |
What Would You Change? |
| Message Name: |
Promote and squeeze |
| Date Posted: |
03/08/2006 |
| In Reply To: |
You are the chairman of the board of directors of a major global firm that just acquired Hewitt Associates. You have unlimited capital and resources at your disposal. You can change Hewitt any way you want; it's your company to do with as you please. What would you change? Sell Consulting to another firm? Keep Consulting but spin off HRO? Sell the whole company at its breakup value? Reorganize the firm? Buy another firm and merge its operations with Hewitt? Anything is fair game. It can be minor changes. Or, no changes at all. Maybe you'd take the firm in a whole new direction, starting a new line of business or something. Maybe you'd mix in insurance brokerage or investment management services. Maybe you'd go after smaller firms and move away from Fortune 500 firms. This is neither a pro-Hewitt or anti-Hewitt question; I'm sure we'd get equally interesting responses from both sides as well as from folks who are generally neutral about Hewitt. |
| Message: |
If I'm chairman and not CEO, I simply hold the CEO accountable for the results he or she promised. If I'm CEO, I 1) Promote the transaction like crazy. I bought Hewitt for its reputation and market leadership, and I want to win an even larger share of new sales. If I was already a big player in a broader space, I'd be all over my existing customers touting my new capabilities. I'd also be promoting like crazy internally, to existing employees and the "legacy Hewitt" employees. I'd be telling them that there are huge opportunities for the combined organization. I'd also tell them that we are going to need to achieve some savings but that, for the most part, it will be business as usual or better.
2) Eliminate redundancies. Mostly in SG&A. First, I'd lock up the top people running the lines of business before I even know their capabilities. I want existing clients and prospects to see stability. Then I'd cherry-pick the best of the finance, sales, and other support roles. Everybody else who is in a non revenue-producing role would be competing with my existing staff to keep their jobs, and the incumbents have a great advantage. I'm OK with this as I've delegated the process down pretty far by setting overall synergy savings goals and a timetable. I don't have time to take any personal interest in individual outcomes. I know that some people will be pissed at me, but I'm used to that -- it comes with the territory.
3) If there are parts of Hewitt I don't need, I tried not to buy them in the first place, or at least I didn't place much if any value on those parts in my offer. So, if I can find a buyer easily, I'll sell. Otherwise, I take a restructuring charge and just lay off the people in those businesses. I've already figured this into my purchase. It's no biggie.
4) I put my CFO in charge of making sure this transaction pays off and all of the operational people I assign to this know that the CFO is not to be disappointed.
5) I either believed that Hewitt's consulting capabilities were a competitive advantage or not, but I was really buying the outsourcing business. The consulting business gives me entree into a lot more organizations than does the outsourcing business alone. The relationships may not be that large, but it's probably good for at least some initial conversations. And, maybe we have some overlap that we can mine. If I don't really think I'm getting much on the consulting side, I either buy a cheaper consulting firm or form an alliance. I MIGHT entertain a partnership with a management-led buyout of the consulting business as long as I get some kind of value from it, like, say, a three-year exclusive.
6) I based a lot of my offer for Hewitt on access to the profits from maturing contracts. I am going to ensure that those contracts perform as anticipated or better. To that end, I am going to get a bit ruthless about staffing and productivity. If I have call centers, for example, that can deliver at a lower cost, I'm going to shift work there. If Hewitt's existing operations are better, I'm going to beef them up and shift some of my other work into them.
7) As soon as the Hewitt brand is no longer a competitive advantage, I'm going to stop promoting it and start assimilating all things formerly Hewitt into my own culture and processes.
8) Since I know there's a 65% failure rate in M&A, I'm going to have exit strategies out the wazoo. Assuming I was a much larger player to begin with, that's going to amount to obfuscating the impact of the transaction over time. If I was a smaller player and this was a "bet the farm" play, I'm going to make sure my parachute is very golden.
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