Amplify Human Talent – Uncultivated Factors for Post M&A Success

What if I told you we have a proprietary method of cultural alignment and development for organizations that is compatible with any industry anywhere in the world? We all know that the “human element” is vital for the success of any organization. I don't know any experts who would argue otherwise. Why then are “human” or “cultural” factors so often cited as the most difficult barrier to overcome in organizational transformation, M&A, or simply running the day-to-day operations of a business?

While everyone seems to recognize the importance of human and cultural capital, almost no one seems to agree on a reliable approach for predicting cultural metrics, let alone methods of fostering positive development in these areas. I am making it my mission to help in this area—a scientific and reliable approach based on my work with dozens of successful organizations around the world. In this article, I will provide an overview of my approach.

Long Overdue Due Diligence for Investors

According to the Harvard Business Review, almost two-thirds of companies lose market share in the first quarter after a merger, and 90% lose market share after the third quarter. They attribute this to stagnation of decisions and losses of productivity resulting from misalignment. These are fundamentally human issues that are all too often overlooked in the due diligence process of M&A. I have come across these issues many times when working with clients, and I have a reliable system to remedy such problems by cultivating organizational cultures. In fact, the human element in organizational success is the primary topic of mine and @Toshihiko Miura's Shingo Award winning book True Kaizen: Management’s Role in Improving Work Climate and Culture.

The Organizational Performance Equation

In my book and in my work with partners and clients, I define the “human factor” based on a series of straightforward equations. What is called the Organizational Performance Equation it is complex in layers of detail, but this highlights our superior playbook for total performance. I hope you can see here the reasonable logical value.

Far too often, due diligence efforts focus only on the resources, even if they try to define “human resources.” As you can see from the equations above, human performance is based on a number of cultural traits: knowledge, skill, attitude, and situation. We have a specific evaluation tool set that applies a current coefficient factor to the firm’s performance as it is today. We look at the cultural traits and assign specific values to those traits to come up with a current performance level which we evaluate against the optimal value possible in the future—the optimal coefficient. 

This kind of model, which I highlight in my book, takes us to the concept of motivation and human performance. We are not talking at all about financial factors or operational factors. Our perspective is far broader than the typical lenses of business; our lenses focus on soft characteristics such as self-esteem, confidence, and appreciation. This is where investors and capital partners are able to quantify the current performance level based on unconventional measures of value while we provide a solution and know what the results will be. We know what specific solutions and resources are needed to unlock and cultivate more value department by department function by function. We do not harvest; we cultivate. We install our systems post acquisition for everyone's benefit.

Without addressing these factors, human due diligence is not possible. I am sure you understand due diligence of operations, add-ons, strategic markets, positioning, and growth strategies. What we provide is the additional value of contributing to the performance of the organization from where it is currently to where it will be in the future, and we measure ourselves against that playbook. The major question that is typically asked by those attempting human due diligence is whether or not the acquired company will retain its leadership structures or incorporate new cultural influences from the buyer or their consultants. In the case of a merger, the question is often which organization’s culture will remain after the two become one. But this is like comparing apples to oranges, and even when the prevailing culture is known, most find it difficult to maintain the company culture that existed before the transition. Instead we are able to apply our native IP as we amplify everyone’s talents so we do not need the fruit at all.

We disrupt the layers of management and stagnation that naturally form in a normal business by using our IP and native technology to create more and more layers of self-management so the culture defines itself without the limitation of remaining an ‘apple’ or an ‘orange.’ Instead of comparing apples to oranges, you need to look at the signs of value that are universal beyond one fruit or the other, or in this case, one organizational culture or the other. This allows you to not only analyze the potential of a company but enhance that potential through the M&A process and beyond, developing a new kind of organization which performs in a higher and more meaningful manner.

A Better Way to Assess and Optimize Investments

My company, Enna Capital Partners, has developed unparalleled IP to assess and address the human element (mindset) in coordination with management processes and technology. We use this method to make sure that all people are personally benefiting from the new alignments at all levels and departments to achieve the new goals of the organization. From there, we leverage both IT and simple yet sophisticated practical solutions to create a technical and cultural structure that goes beyond improvement. The cultural infrastructure we foster ensures that the company’s people will be able to self-develop continuously from the frontlines to top leadership. This cultivates higher short-term and long-term ROIs.

We essentially increase the profitability curve quicker and higher while providing more direct benefits to everyone in the business. Investors, managers, and employees make more money due to their success while the customer gets a better product/service in a timelier manner. Everyone wins. This is how I define profit: ‘reward by the customer for our good service.’ We make sure all motivations are transparent and aligned with the delivery of good service to the customer.

Companies who incorporate our Kaizen cultural methodology exceed conventional expectations for sustainability and growth. Investors who only rely on conventional due diligence will greatly undervalue potential investments, running into success rates that are normal at best. As a result, investors who recognize and can foster our holistic approach to organizational reform can acquire companies at a discount while reducing their post-sale risk. Even if conventional wisdom says a company is overvalued, we are able to provide a process and native technologies that take out the management of work itself so that people can self-manage, get more connected to their customers, and create more value for the owner’s who believed in their natural talent. We simply have a method that amplifies that for everyone’s benefit and happiness.

Of course, developing this ability to uncover human potential is complex. Private equity and investments bankers cannot acquire this ability overnight. That’s why my team at Enna Capital is partnering with business owners, private equity, and investment bankers to bring this untapped value to their investments and clients. We want to share or native IP and methodologies to contribute to a greater society for all. You can learn more about our unrivaled approach to human capital, IP, and technology by visiting us at capital.enna.com