Integration Insights: Q&A with Howard Lance, CEO of MacDonald, Dettwiler and Associates
Since being named CEO of MacDonald, Dettwiler and Associates (MDA) in May 2016, Howard Lance has been busy. In February 2017, he led the global communications and information company in the $2.4 billion-dollar acquisition of DigitalGlobe, a leader in Earth imagery, information, and analytics.
We were able to catch up with Mr. Lance for a brief interview to discuss his thoughts on integration.
Q: What are key integration success factors? What are critical integration risks and mitigations?
A: I’ve found several factors to be important for a deal to be successful. First, make sure that both companies stay focused on successful execution on their current business and make their numbers. You have to ensure people don’t get too distracted by integration planning and they keep their eye on the ball. Keep the integration planning team small with 90% or 95% of the organization focused on running the business. Second, I follow the philosophy of “do no harm” when integrating a company. In many failed deals that I’ve seen, the acquiring company has made decisions without sufficiently understanding the impact on the acquired company. Third, the integration process needs to be streamlined, decision oriented and focused on the key areas of value generation. You can’t get bogged down trying to manage every detail or get caught up in running through checklists and lose track of what’s most important for the integration to be a success. It’s also important to ensure those sources of value - whether it’s cost reduction, new product development, performance improvement, or other factors – are tracked and included in business and personal incentives. Fourth, it’s critical to retain key talent. Acquisitions create tremendous disruption and uncertainty at the individual level and talented people have options. It’s important to communicate with them, understand their desires and concerns, and make sure you don’t lose them. Finally, you need to really focus on communication. Be transparent and tell people both what you know and what you don’t know. People understand that you won’t have all of the answers right away, but they need to know when decisions are going to be made. It’s impossible to over communicate.
Q: What are significant roles in an integration (what players do you need to have on the field)?
A: I’ve often used a three-level process with an integration steering committee, an integration management office and a set of working teams to plan the integration details. The steering committee will typically include senior executives from both companies to guide integration planning and post-close execution in a collaborative way. The integration management office is the day-to-day “air traffic controller” to ensure planning is on track, decisions are made, and issues are escalated. Working teams prepare for Day 1, develop plans to capture synergies, and determine how the company will operate after the deal closes.
From a “who” standpoint, it’s important to get “A” players involved in the integration, and they need to devote a significant amount of their time to it. General Managers will understandably be reluctant to lose top talent to integration planning but if you put people in key integration planning roles because they are not in demand elsewhere, or if you have an army of people spending 10% of their time on integration planning, you aren’t setting yourself up for success.
Q: What are some likely cultural challenges one will encounter during an integration? How might you recommend overcoming these challenges?
A: In every integration it’s important to understand where there are differences in cultures and to determine how to manage those differences. I’ve seen cultural challenges in two areas. The first involves differences in values and priorities between the two companies. For example, one company may be very bottom line focused while the other may be more focused on values such as supporting customer mission requirements, and financial benefits flow from that. If the differences are great enough, the best approach may be to run the acquired company as a separate business unit so it can retain a separate culture. If integration of the companies is necessary to create value, a major difference in values and priorities may be a good reason to walk away from the deal. Changing the values and priorities of an organization is difficult, and even when done successfully it can takes years. The second set of cultural challenges involves how people work on a day-to-day basis: things like whether decisions are made by consensus or centrally, or whether the organization is more hierarchical or flat. The key is to be clear about how you want the combined organization to operate in the future, communicate that, have the executive team model that behavior, and create incentives and rewards to make it happen.
Q: How do you assess company compatibility from an integration standpoint?
A: Every deal and every company is different. In order to determine whether a company is compatible for integration, you have to start with the deal thesis. How are you going to generate value from integrating the acquired company? Once you understand that, you can decide where the companies need to be compatible. For example, if the companies have overlapping lines of business where value will be created by combining operations to increase scale, then organizational culture, capabilities, systems and processes need to be compatible. If they’re not, the risk of a failed integration goes up. If the companies have complimentary product lines and value will be created by cross-selling and developing new integrated products and services, then a culture of collaboration and shared incentives to encourage it are important.
About Howard Lance
Mr. Lance was named President, and CEO of MDA as of May 16, 2016. He previously served as Executive Advisor at The Blackstone Group from 2012-2016, focusing on strategy, acquisitions, operations, and organizational development of certain holdings.
Previously, Mr. Lance was the Chairman, President, and CEO of Harris Corporation from 2003-2011, President and COO of NCR Corporation from 2001-2002, and Executive Vice President at Emerson Electric Co. from 1984-2001.
Mr. Lance holds an M.S. in Management from the Krannert Graduate School of Management at Purdue University and a B.S. in Industrial Engineering from Bradley University.