Psychology and M&A with Dr. Shahrzad Nooravi

In this episode we are joined by Dr. Shahrzad Nooravi to discuss the psychology of mergers & acquisitions for businesses, management, employees and owners of the target and acquiring companies in a merger. Her deep experience as a business psychologist helps companies build a culture of success. She has experience counselling companies on both sides of a transaction, increasing the likelihood of a closing and a prosperous business post-closing.

Dr. Shahrzad Nooravi is a business psychologist, Master Certified Coach and Founder and CEO of Strategy Meets Performance, a business consulting firm that partners with leaders of mid-sized to Fortune 500 organizations to help them create engaging, innovative and productive cultures. Dr. Nooravi has been named “Trailblazer of the Year,” “Citizen of the Year,” and “A Voice to Listen to” for driving positive change in her community. Her new leadership book, "A Powerful Culture Starts with You" was rated as the #1 New Release in Workplace Culture and Best Seller in Business Coaching. Dr. Nooravi can be reached at shahrzad@strategymeetsperformance.com and strategymeetsperformance.com. Tools from her book can be downloaded at apowerfulculture.com

Selling a business is the American dream, the pot of gold at the end of the rainbow, the reward for years of hard work. Successful entrepreneurs make countless sacrifices in hopes that they would someday reap the benefits of their labor and live a new life of vacations, recreation, and prosperity.

You only exit your business once, so you should feel confident passing this milestone. A successful business exit reflects the preparation done beforehand. Failing to plan is planning to fail.

The owner of a privately held company has several alternatives on how to exit their business. In the absence of an exit strategy, events will inexorably dictate the final exit plan. A costly involuntary exit may be caused by death, disability, divorce, disagreement, or distress.

Selling Your Business with David King will help you take control of the sale process and make it positive one.

Transcript

Speaker 1:

Welcome back to selling your business with David King. I'm David King. And today we have the pleasure of being joined by Dr. Shaza Nora. Shaza welcome.

Speaker 2:

Thank you so much, Dave. Great to be here today.

Speaker 1:

It's good to see you. Shaza is gonna be educating us on the psychology of mergers and acquisitions and all of us who work in this field. We see it everywhere. We can't define it though. It's not our area of expertise. It, it permeates everything and it's something we always have to deal with. And we always just kind of look at it and say, okay, well, that's, you know what they're feeling at the moment, but boy, if we understood it a little bit better and could get some help with this sort of thing, it might help get a lot more deals across the finish line. So with that in mind here, why don't you tell us a little bit about your background, your education, your work experience, how you got, where you are today?

Speaker 2:

Sure. So I am a business psychologist. I have been in this field for two decades now and I work with company owners and leaders to create really strong, engaging workplace environments where people want to stay. They have plenty of other options, but they are so happy in your organization. They think it's a bad move to go even to get paid a third more and research shows that when people are really happy in their culture, they're not gonna take that risk. They don't know what's on the other side. Money is not everything. Culture is everything. And so I spend most of my days, David in executive coaching, really talented leaders on how to tap into their deepest potential for themselves and their companies. And I work on aligning senior teams so that everyone is hearing the same message and they are walking the talk and role modeling what they want to see. And I also do a lot of speaking.

Speaker 1:

So what inspired you to write your new book? A powerful culture starts with you

Speaker 2:

There.

Speaker 1:

It's

Speaker 2:

In. So it's in, it's on Kindle. It's a audio book and yes, it's my voice. I learned that one out of three readers, like to listen to their book. So that inspired me. Um, what inspired me to write this book? David is after years of working with, with bright, talented leaders and giving talks, one of the questions I would be asked all the time, they would say I get what a good culture is. I have a sense of what it looks like. I read a lot of articles. However, tell me where to start, tell me what to do. And I thought that was such a fair ask. It's such a authentic ask because there's so much around culture and you think, where do I even start? And so that was the inspiration for me and I wanted to simplify it. I wanted it to be exciting.

Speaker 2:

I wanted it to be something where people would realize that a good culture starts from the inside out. And the title is cultivated thriving workplace from the inside out. And I have a three approach model. First part of it is watch it and it's all acronyms. I have a knack for them and I think they're memorable. Watch it is a new way of looking at your culture with a fresh set of eyes. And I have four different checklists for things you could look at in your culture, drive it as a coaching model, where for each of the steps, I literally have questions that you can ask and you walk yourself or someone else at work, or even in your home or your community through these questions to help them realize what actions they could take to improve themselves or a situation. The third part of the model is walk it. And it's about how to create alignment with your senior team, how to walk the talk, how to make sure you're aligned, how to make sure you're integrating your values into everything you do. And everything that I'm mentioning, all of these tools are available on a powerful culture.com.

Speaker 1:

And I assume you also can provide for the slower learners. You can provide consulting services and help them walk through these things and make sure they get it well.

Speaker 2:

Yeah. So here's the thing. The book is something that helps you understand the mindset that it takes and common culture stressors that you will face and you think, oh my gosh, she's talking about me and getting to that realization is the most important thing. And when you have a trained professional, helping you alongside with you, coaching you and your senior team and your organization, you could be part of the change. You're not people ask me, oh my God, how did you know how to do this? And I say to the person, how did you know how to start your company? How do you know your background? You know, it's part of my training and my job is to make your job easier. My job is to help you achieve success. So you have more freedom, more free time, more joy and employees who stay with you. So when you have the skills and the tools you need in someone with you, it just makes the whole process so much easier.

Speaker 1:

Now in, in the, in the business setting, so many people are focused. We wanna go out there, we wanna sell more products. We wanna get our bottom line, build revenues, be profitable. That that is kind of the, the focus here, more production. And, and then these softer skills, this, these intangibles that are gonna make a business more valuable and hang onto your workforce, uh, is, is it usually kind of a, a bad set of events that wakes people up to the reality of, of the need for, for an investment in this type of work?

Speaker 2:

Great question. So there are two types of, um, scenarios where I come in. One is there's some growing pains. And as you grow quickly in your organization, as you acquire new locations and realize we are not <laugh>, we're things are a little messy here. We are not being our best as we serve our customers and our people are complaining. This is messy. So oftentimes if there's a change in leadership, if there's an acquisition or merger and the communication is not that great, sorry, one second. I thought I had a sneeze, but it went away <laugh> um, and, and so oftentimes it's growing pains. Other times it's companies that are doing well. And as they're growing, they realize, okay, we need someone to facilitate our strategic sessions. We need someone to help us make sure that we are fit. We've been hearing some feedback. And so it's either, there's a, there's a challenge or there's a desire to really stay strong through growth.

Speaker 1:

Mm-hmm <affirmative> now the segue into the mergers and acquisitions, uh, arena here. This is obviously we got company a that's going along. It's, let's say they've been a good job developing the culture of the workplace. People like who they work for. They like their colleagues, they enjoy their jobs. And then company B is going to come along and acquire them. Now for the owners of company, a this is a great thing. They they're going to have a very, you know, big windfall from this transaction, from the members of management and, and people further down the line. This has gotta be a pretty big, uh, source of stress. How do you approach a big project like this? What are the first things you start to work with?

Speaker 2:

Sure. So what, one thing I've done in the past, which has been really helpful, there's two things I'll share with you. One thing I've done, which has been helpful for the owner of company a and for the employees of company a is to prepare them for this transition. And I had a situation where the owner, what had decided to sell it was happening. And he had his 24 managers show up for a retreat. They did not know what it was about. And there I was with the COO, the owner didn't show up the first day and he made the announcement and my team, and I worked with these 24 managers to help them process the fact that there's going to be a big change. And, uh, a part of it was, it was a very family oriented organization. They were all close to the owner and now they were gonna be working in this bigger organization, which of course comes with so many benefits and opportunities.

Speaker 2:

And in those couple days, we worked with them to really prepare for this change and to grieve what has been, because a part of change that's really important to do is take time to allow people to process that the change is happening and to release it. And when you are able to do that in a safe space, and we had one on one conversations and group conversations, we talked about change models and things you could do to really show up as your best self and be prepared and got them through that shock. And the, by the time we had the new old owners come in and meet all of them, they were fresh and ready. And imagine if it was just done right away without that time to process and prepare. So that was on the side of the person selling that was very kind of him to do that.

Speaker 2:

And it doesn't happen very often. Mm-hmm <affirmative> on the side of the people buying the organization or merging the two. It's so important that you bring this organization in, in a way where they feel welcomed, where they understand the bigger vision, the values who everyone is. And oftentimes that part is neglected. Or, you know, if it's an organization you're gonna run completely independently of the bigger one, that's one thing. But if you are trying to fold it into the larger organization, it's so important to get everyone on the same page. And I've had many times where the organization had acquired, let's say five or six locations throughout the country. And I worked with the senior team to get them aligned the new senior team, right? Because now we have leaders from the organizations that have been acquired and get them all on the same page on what is the vision?

Speaker 2:

Who do we want to be? What are the values we want to operate by? And I've had retreats where the leaders of all the locations came together and they got a chance to learn about the bigger organization and also have a chance to innovate with people from their particular positions that were spread out across the country. So a lot of, of course, relationship building came, but a lot of knowledge sharing, a lot of collective wisdom, a lot of new ideas and things they were going to do as a result. And these types of things make people feel like they're part of the bigger organization that their voices matter. And that continuous improvement is a positive thing that's encouraged.

Speaker 1:

And so you mentioned one thing that, that numerous leaders of, of, of the original constituent organizations and pardon me here, cuz this is, this is just kind of a colloquial expression and it's a, it's a reference to, uh, native Americans and not to your, uh, husband's family here that, that, that type of too many chiefs and not enough AMS. We've now got all of these commanders here who have now got a one they've gotta work together. And two, some of them are gonna be moving down the totem pole a bit. I would imagine. Do you have to work through a lot of that with people in terms of now you're gonna report to someone?

Speaker 2:

Yeah, no, that's a great point because that person was the head person in their location. The main chef, we could also use restaurant metaphors and now is being told you're gonna be the, uh, second person, the sous chef, right? You're gonna be the second person in charge and you need to kind of integrate into this larger organization. And executive coaching really helps the person understand what they are doing well, what they've been doing well, and what are some new ways of showing up and having credibility and having your voice heard in this new organization, it's a whole new world. And, and sometimes when that confidential, um, environment is not created, then issues happen that didn't have to happen, right? People need. So it's, there's a lot of changes happening at the same time when your organization merges with another one, the roles change, how you work, changes, how you work with this new team changes. And a lot of people question their identity and they don't speak up as much, or they just say, I'm going with the flow and they're not sharing their voice or agency. And, and what the organization wants is the best of them is for them to move forward. And sometimes it requires some assistance when going through that transition.

Speaker 1:

So you are working through a delicate balance here because of yeah. With the larger organizations, big companies, they merge, heck they'll announce it on CNBC. That they've announced that they they're gonna merge well, great, but the closing's not gonna be for 180 days. So there's gonna be a lot of work. And the deal may never close smaller businesses, middle market companies that aren't quite so big that the ownership is concentrated. The management is concentrated. And a lot of these people who you would otherwise be working with, they're never gonna find out until the tail end of the situation. So I would imagine that there's a certain size of company that you're working with, that, that, that this is more ideal. And do you kind of gradually roll it out to, to different levels of management?

Speaker 2:

Definitely the middle market, medium size organizations. Mm-hmm <affirmative> that have been around, could be a couple, few decades.

Speaker 1:

Yeah. Right.

Speaker 2:

And <laugh> when this big change is happening, people are, uh, the first reaction is panic. They're saying, well, I lose my job. What's going to happen. And it's so important when if there are going to be changes like that, to do it in a way that is compassionate and provides resources for people to transition and have coaching and ways to, you know, be able to carry on. And a lot of them I've seen, have not done a ton of that, that a lot of flu people have stayed in place and there needs to be a really clear communication strategy around it. And as you know, people depend on their supervisor as the first point of contact for what's really going on. And so how do you make sure you are creating clear communications with, uh, these managers who are gonna talk to their people? How do you create clear communication about the vision and why this is happening, how this is gonna benefit the organization and the customers, how this is going to result in more innovation and, um, just a more powerful organization. So a lot of that is often not shared and, um, it's not celebrated. I think there there's much to celebrate when you are right. Think about it, adding new family members.

Speaker 1:

Mm-hmm <affirmative> well, and, and a lot of times word of a business combination gets out, you know, no matter how much upper level management and the ownership tries to control it, people find out and then it just becomes a whisper campaign where things can just really get outta control. And the, the organizations will be much better suited to get control over this communication. What's going on? What do we know today? What do, what do people need to do today? Would you work with them to help get a coherent message and assuage people's concerns?

Speaker 2:

That's just the tip of the iceberg, right? Yeah. I mean, look, people, if you share with them, the rationale for something are generally logical and understanding. I think the challenge is when, uh, after you have the ability to share in more depth, who, who are the, who is this company? Who are these people, how are we, how will we fold them into who we are and welcome them? What are our shared values, right? When you don't do that, it just leaves people feeling some kind of way where they just don't understand what's going on. People want to understand what's going on and they want to support it. And a lot of the challenges come when they aren't given that opportunity.

Speaker 1:

Mm-hmm <affirmative> so on, on the target side, the company that's gonna be acquired into the bigger one here. Some people just necessarily go by the wayside. Um, big companies don't need two ch chief financial officers. There's gonna be one. So update your resume. I, I would imagine you give it a little bit softer <laugh>, you know, terms than that, but on this, the, you know, the selling side, the company that's gonna be acquired, do you have to spend a lot of time working with the, those managers, those owners to get them comfortable with, you know, life after being the, you know, commander in chief of this organization. And they're either gonna have a reduced role or they're gonna have a reduced role for a while, and then eventually no role at all. You're just helping them move into another stage.

Speaker 2:

Yeah. It depends on where the organization is going to bring that person. Right. So if they, if that role is going to be redundant because it already exists and it's at a much higher level, I recommend the transition coaching to help the person and it's, and for very large companies, there are companies that that's all they do. And I recommend that because then people have, um, someone coaching them on their resume, their presence, their online presence, how they interview and helping them transition on. So I think that is a compassionate and noble thing to do when you can do that. And then if there are leaders who are going to stay on, if they are able to get coaching, it becomes a part of culture setting where through this coaching, they're getting feedback on how they could show up to be able to role model the current culture.

Speaker 2:

And especially if the current culture is working really well. If they've gone to the point where they're merging and acquiring organizations there, things are going well. And if there's certain behaviors, you want a part of how you could do that is have people from the original organization working in their visiting regularly culture setting, but also to have a safe one-on-one confidential coaching, where the person could process and learn techniques. There may be ways of showing up that they've never had to do, whether it is working with a senior executive team, whether it's presenting, whether it's managing a broader team and they may have had just a small team, right. And the same people for a long time. So it's quite a stretch as they grow into this new role and getting support is what will make them really successful in a much quicker amount of time.

Speaker 1:

So that's a great point that you raised that, that on the acquiring side and, you know, we found a company they've got good fundamentals, they're profitable, but, uh, most of us don't like to return for supper with, with friends who are dysfunctional family and, and get into an argument every night, they have us over you, you find out that, that the company's, uh, you know, internal organization has some dysfunctionality to it. You know, this, this culture really needs somehow. How can a company kind of do its due diligence, cultural due diligence to figure out, you know, is this a viable company to acquire? Is this, you know, or are there things that we're just gonna be able to change here with enough work over time, you work with them on those sorts of things?

Speaker 2:

Yes, certainly. So there, there are things you'll see that, uh, could be deal breakers and most things. Uh, you know, if you see, uh, you're doing a culture assessment, you're interviewing a sample of people, formal and informal leaders, and you hear about some of the issues. Well, a lot of those issues are there because of the current management style. You know, there are obviously things that went well because the company is at this point, but there are things that would, you know, you'll hear that aren't going well about how the senior team works together, how they make decisions together, how they work with customers. And yes, it might make you, uh, feel a little bit scared off. However, if you, as an organization are operating in a way where you have your systems and processes and methodologies, you know, that you could bring that new company up to speed, that you can train those managers, that you can change those processes. So even when you hear things that aren't going so well, it, so many of it can be fixed or even leaders who are high performers and they could be better with their staff that if that person is open, they could be coached up and they just never have been. It's just been okay to be like that.

Speaker 1:

And, and I'd imagine you've seen situations where you just have to fill a void that's gonna be created because say the, the, the senior, the, the CEO of the target company very well in tuned with creating a good culture, benevolent leadership, you know, builds loyalty among the team. But, but down below, there may be a bit more of a technocrat type. They, that are rated doing their jobs, but the culture has largely circled around the, you know, maybe one, maybe two good leaders are you, you've obviously gotta train some other folks to kind of step into that void so that everyone else feels comfortable.

Speaker 2:

I mean, that's a part of succession planning as you are interviewing everyone. Um, first thing, is there a talent management plan? Are there people you've identified as high performers who have the right skill sets and are living by the company's values and should they not have that? That's gonna be part of your discovery process to uncover what talent is there that maybe they have it uncovered that you can coach up to really jump into the next role after the acquisition has happened.

Speaker 1:

I think that's a great thing that, that all of us now that work in this field can add to our due diligence checklist. We've got, you know, sales concentration. Let's say that the owner of the business for years has been able, and they've got the book of business that is, you know, it's too much though. You don't want too much to be reliant on one person, but also cultural concentration is this person, the whole culture of the business. And once they're gone, you've kind of got chaos. That's definitely something that all acquirers ought to look at going forward. What creating a, a post merge merger vision for a company, what, what do you typically try to help companies do in terms of, you know, how they're gonna blend these two cultures together?

Speaker 2:

Sure. So just as you have onboarding for new staff, and if we talk about the best practices of onboarding you get there the first day, or you log in because so many jobs have stayed virtual and you have the tools and resources you need, you have meetings set up with people from other functions to get to know the entire business. You have meetings with customers. It's the same thing. When you have, um, merge with another company, how are you bringing them on board and, uh, doing it in a way that <laugh>, that's not overwhelming where they can understand the organization, they can meet, have meetings prepared where they can meet people and really understand the bigger vision and strategy. And if this is someone who is going to be part of that larger team, how does that senior team welcome the person in? And or if it's a group and it's a new, uh, two groups together coming together now, how do you create a new team dynamic, a new environment, get to know for the senior team to get to know one another, how they operate, help them update the strategy and the vision and the values to make sense for where the organization is today, that needs to be revisited every couple of years as the industry changes, as technology changes, as things happen in the world.

Speaker 2:

And so, so much of it is bringing them in and bringing them along and making sure that they are sharing their wisdom as well.

Speaker 1:

One, one final point here, and you brought it up nicely, this zoom environment that we've been going through, which has been great from facilitating business through COVID here, but you may have organizations where a lot of these people haven't seen each other face to face in quite a while. Do we have a bit of a cultural reintroduction of people?

Speaker 2:

Uh, well, what I think is ideal in a virtual environment is whenever possible to bring together, bring people together and help them build relationships in person. And I used to say this all the time, years before the pandemic, and I always believed it's great. This technology we have is amazing. It's a, we're in a time in history where business not only continued, but thrived, however, humans, when they're able to spend time together and build relationships will thrive further.

Speaker 1:

So we were talking about reintroducing people after they've been separated for a while, and especially in the context of a, you know, a major situation like a merger,

Speaker 2:

Uh, refresh my memory separated for a while. Meaning,

Speaker 1:

Well, zoom, uh, COVID there haven't been separated physically together.

Speaker 2:

We're never together in the first place. Yes.

Speaker 1:

Right? Yeah. You,

Speaker 2:

So I have always been a big believer that it is worth the investment to bring people together in person and provide opportunities, not just to learn about the company's vision and strategy and tactics, but to build relationships. And when you do that, the people are able to understand each other and know each other. And all of the wonderful technology we have becomes easier to use. I have seen it where a location was in Tajuana and the sales organization was in San Diego and they had so many problems. And I asked, has the, have the two teams met each other? No, it's very easy to ignore people. You've not built relationships with. And bringing people together is so important. And in our virtual environment, creating opportunities, um, where people can come in and spend time together is great and will only result in better cross collaboration and results.

Speaker 1:

Well, za, thank you so much for your time this morning. This is, it really adds to the diversity of the issues that we've covered on this podcast, but it's so crucial. And it's something that every professional in this field agrees, permeates every transaction and that if they just had a better handle on it, our success rate at getting these deals closed, we can put something together that on, on paper looks great. Uh, the numbers add up, but if the people don't jive, it's gonna be a lot harder to get the deal done

Speaker 2:

And to sustain that success that you'd worked so hard for. That's exactly right.

Speaker 1:

Right. The post merger company and how well is it actually going to do so I certainly, I hope you can find time to come back on again. I think we can drill down on some more specific issues and, and really give people a lot of help with this.

Speaker 2:

I would love too, David.

Speaker 1:

Okay. Well, thanks again. And you have a lovely time at, at the wedding vacation. I, I hope you enjoy Chicago. I hope you have a nice weather there.

Speaker 2:

Thank you so much, David, talk to me.

Speaker 1:

Okay. Take care. And everyone, thank you for joining us. And we'll see you next time on selling your business with David King.