- Michael Rubenstein
SPEAKERS
Michael Rubenstein, Will Bachman
Will Bachman 00:02
Hello, and welcome to Unleashed. I’m your host Will Bachman. And I’m here today with Michael Rubenstein, who has experience as an operating partner within the private equity space. And he’s also lead companies. Michael, welcome to the show.
Michael Rubenstein 00:17
Thanks very much. Will, great to be here.
Will Bachman 00:19
So Michael, I know that you were, we’re going to talk today about organizational culture and that you’ve put together a culture playbook, you’ve done a lot of thinking about culture in the context of m&a. So, yeah, talk to me about, you know, when you’re doing m&a, how do you think about the cultural aspect?
Michael Rubenstein 00:39
Yeah, so, you know, first of all, very much a passion of mine, I, you know, I’ve always thought it’s the difference between between winning and losing organizations. So it is something that I look at as being important. And one of the things when we’re talking specifically about m&a, it’s often very overlooked as an aspect, people take a look at the industrial logic, the strategy of the company, they’re acquiring, et cetera, but they often overlook the cultural element, which, quite frankly, is very much often the difference between a successful integration and an one that’s not so you know, there’s a bunch of things that we we look at, when we look at an acquisition or things that, that I would recommend, strongly. And, you know, the first is really about identifying as a, as a joint unit, what you’re looking at in the future, for the combined the combined company, and then you know, there’s various diagnostic tools that will help you take a look at number one, here’s the, here’s the culture that you’re aspiring to have here is the culture elements of your current company. Here’s the culture elements of the target company, and see, you know, see where the gaps are. So develop a fact base, where you’re doing, you know, a self assessment, and then you’re doing an assessment of the target company, and see where, where the gaps are. And, you know, in some cases, the company that you’re acquiring is doing things that you aspire to do. So understanding where the gaps are, is very important. So it kind of tells you what the state of the nation with respect to culture is of the two companies, you know, many ways to get at, at diagnostic tools, conducting interviews with, with stakeholders, both, you know, leadership, and employees that both companies, customers, suppliers, try to do it 360, wherever, wherever possible, and take a look at you know, what are those critical issues that either are problematic based on these interviews and diagnostic tools? Or which could be, which could be problematic? Okay, you know, yeah, I
Will Bachman 03:15
would like to dive down about three orders of magnitude and talk about getting into the weeds, I want to get into like the, those little cells that absorb nitrogen from the soil, I want to I want to get down in there. So let’s assume that I am your engagement manager or associate, and you’re sending me off to do a culture diagnostic on some firmware. You’re the operating partner, you’re sending me off. And let’s say I have never done it. I don’t know what the word culture means. I have no idea. But I’m smart enough, I can follow directions. So let’s hope So walk me through exactly what you want me to do. What questions you want me to ask of this company? What you want me to write down? I have no idea what a culture diagnostic is. So walk me through exactly what I’m going to do. Yep.
Michael Rubenstein 04:06
So great, great question. Well, you know, I think, first of all, just in terms of defining what, what culture is, it’s kind of a nebulous term, that, you know, it’s something you can’t see, but you certainly can feel it’s almost like the oxygen that we breathe, we don’t see it, but if it’s not there, we definitely feel it. And you know, culture is all about, you know, the behaviors, the norms, the rituals of a given company, and it’s the thing that glue, if you will, that ties that ties a company together. So, you know, if you take a look at, you know, there’s various diagnostic tools out there. They ask a whole bunch of questions in terms of you know, how our decisions made here You know, is this a meritocracy? Do we? Do we promote people based on on different things? You know, what are the things that are important? The values that are important, in terms of the organization is a very customer driven is very operationally driven, you know, how two people work together as a very,
Will Bachman 05:25
you go on to fascinating Michael, here I am, I’m trying to take notes, right, you’re sending me off to go do this work for you, and report back in two weeks or something? So let’s go through these a little bit more. So decisions, how they’re made. Okay, break that down. For me, I’m a smart enough young associate, I got my MBA my is all shiny. What exactly should I ask to find out how decisions are made?
Michael Rubenstein 05:50
So you know, as much as possible, it is about asking open, open ended questions. Typically, on the diagnostic tool, you may have a continuum. So for argument’s sake, is this a command and control type organization where, you know, instructions come from the top of the organization or the top of, of a function and people turn left, turn right, accordingly? Or is it an organization that’s more empowered? Where we say, you know, here are the objectives? This is what we’re trying to do, we have confidence in you as, as a team member to do the right things and make things happen, according to that to get the results. So is there some, you know, more of autonomy, with respect to the job and getting things done? Or, you know, is this an organization where in order to make a decision, six people have to get together and debate things in order to make a decision? Or are people playing left wing, right wing, they know what they need to do. They need that they know how to put the pucks in the net, and everyone understands their roles. So those would be the type of questions.
Will Bachman 07:09
Okay, so you talked about culture is behaviors, norms, and rituals. So within the category of behaviors, what are the five or eight or six categories of behavior that I as your associate should be paying attention to? So,
Michael Rubenstein 07:28
you know, if you look at behaviors, it’s all about, you know, are people working together? Are people collaborating? Are people hiding information from from each other? Is there really, you know, a united, you know, is everyone doing something for the greater good? Or are they doing things for their, for their own good? It’s those type of contrasting things.
Will Bachman 08:01
Okay. What about norms? I don’t know, how are norms different than behaviors? And what sorts of categories of norms
Michael Rubenstein 08:08
Am I looking so. So normally, you know, norms would be, you know, things that were, you know, standards that we hold ourselves accountable to, in terms of values, you know, I’ve seen some organizations where, you know, the language in the office is, is not really for public consumption, others are more buttoned up, and it’s a lot more professional communication. It’s about, you know, self integrity, and how we hold ourselves within an organization. So it’s all about the things that are accepted, or not accepted, it could be things like, Do you wear a suit and tie to work? Or is it a more casual environment, there are certain norms with respect to dress code to how you show up to how you communicate with people, to how you interact with, with teams, it could be about, you know, this is an organization that’s very collaborative. So before we embark on a major project, we’re gonna get together, define it together, et cetera. So those are some of the norms that you that you would look at.
Will Bachman 09:24
Okay, what about rituals? How are those different from behaviors and norms? And what kind of rituals should I look for? You know, so
Michael Rubenstein 09:30
rituals and rituals are super important, and they often are the subject matter of stories and stories are very important. So rituals could be a you know what, every every Friday, we get together, we order pizza, and we have a discussion about, you know, how the week went. What are some of the things we could do differently, preparing for the following week, et cetera, becomes kind of a more in formal, you know, opportunity for people to bounce things off of each other, some informal type of brainstorming, et cetera. But it’s something that people count on. Every week, you know, I’ve seen certain organizations where, you know, with this hybrid environment that most of us are exposed to, you know, Friday is a day they get together, don’t quote, unquote, to do work. But it’s an opportunity to do networking, to get to see some of their colleagues, they haven’t seen, talk to them about what they’re working on sharing different practices, etc. So that becomes a ritual again, that people often look forward to.
Will Bachman 10:44
Okay, cool. So, when I bring back my diagnostic, I’m very proud of it, I put it on your right in front of you, or I email you the PDF, walk me through what you are expecting to see what sort like, specifically, what did the pages what kind of insights and content are on the pages, I don’t know what an organizational diagnostic should contain.
Michael Rubenstein 11:13
So if you take, you know, take a look at a visual of it, it’s going to look very much like an echocardiogram, if you will, you know, typically, you know, there’s a scale that could be a scale of one to 10 in terms of a continuum. And then you’ll see, you know, various scores for each of the elements. And you’ll see that for your desired state, for the current organization, and in the case of an acquisition, for the target acquisition company. And right away, you’ll see in a very visual way, where there are gaps, and, you know, gaps sometimes are not, are not important, but they could be important. So in other words, if you see that the company you’re looking to acquire is perhaps more advanced than you are in terms of, let’s say, collaboration, and that’s closer to the desired state that you’re looking for. It lets you probe and say, Well, what are they doing differently than we’ve been doing? And what are some of the things that we need to put in place to move the needle there? So when we’re a combined company, we’re looking smelling acting as as one company and not two companies.
Will Bachman 12:39
Okay. So how would you then do an assessment you have, maybe you can walk through a case example from your experience, sanitizing it, of course, but talk to me about a case where the cultures were a mismatch? And and then, if the transaction proceeded, what happened? What was the impact of
Michael Rubenstein 13:02
that? You know, what, and I very much I’ve been fortunate in my career, I’ve lived on both sides of that very successful, large merger, and then a very unsuccessful merger. And I would again, call it point to culture as the reason that the first was successful. And the second wasn’t specifically you wanted to know about, you know, one that didn’t work. It was positioned as a merger of, of equals. And the acquiring company, basically didn’t take anything from the acquisition target, where, you know, the the other one that I referenced that was highly successful, it really was all about taking the best people, best processes, best models. And making that work and having like a fork of people from from both organizations, they literally told all of us in both organizations, you don’t have a job, you’re now going to apply for a job. And there was a very deliberate intent and execution around taking the best. So the best people in the best places, the best models, the best processes, and it was really walking the talk in terms of what the senior leadership talked about at the outset. The second one, which was unfortunately a failure. Although the talk was all about doing something similar, the actual actions were nothing like that, you know, basically all the people in the senior positions came from In the acquiring organization, all of the processes etc came from the acquiring organization. The irony around all of this as you identify a company that you want to buy, and you’re, you’re you’re wanting to buy them, because you see some things in them that have value that can make your company a better company. And then you end up ignoring that. And what happened in this particular case, it was a 10s of billion dollar acquisition, and within a five year period, the entirety of what they paid for the acquisition was written off. Wow, so yeah, so even though you know, culture is often looked at as something that’s nebulous, that’s in the purview of HR, and people, you know, pay more attention to strategy and other things that people think are more concrete. But you really ignore culture at your peril, I would say,
Will Bachman 16:02
Okay. What would you say are some ways? Let’s say that there are you noticed some differences between the culture? What are some things that you can do to be proactive to work to knit them together in a harmonious future state, maybe worst case example, where you’ve seen that that happened successfully? Yep.
Michael Rubenstein 16:25
So So again, you know, the first thing is really about assessing the gap. So you identify the gaps, see, if there’s things that are, are positive, that some, some of the gaps could be positive, and then send a question of alignment. And take a look, if there’s anything that could be really problematic, or even a showstopper, because it’s a real culture, culture, shock, if you will, but assuming that you’re kind of within a norm, it’s about right away, creating a sense of of one. And, you know, very quickly stomping out language like, like them, you know, there’s no longer a BAM, it’s, it’s now in us those, although those things seem to be things that may be sound unimportant, the language we use is incredibly important. And I think, you know, it’s all about number one soliciting input from all of the stakeholders about how to create the future state. And you can use this opportunity in terms of this alignment really, to create the what I’ll call a cultural strategic weapon. I mean, one of the one of the reasons that I think culture is so important is because it’s the only thing you do or have that can’t be duplicated by your competitor, your culture, at the end of the day is very unique, anything else, whether it’s a process, whether it’s equipment, whether it’s a product can be duplicated. It’s also, you know, from an alignment perspective, really important to think about, you know, what is the potential messaging for both internal and external stakeholders? What are you trying to do? What are you trying to communicate, get people to understand why we’re looking for this, this alignment, so it’s really about using a culture lens to frame you know, people processes and tools. And then you could start building initiatives around that and being very deliberate about what you’re doing even, you know, the type of people you’re putting in, in certain places, things like talent management, compensation plans, what you’re looking for, in the leadership of tomorrow, but it’s really important to get buy in from some of the key stakeholders, so soliciting input from them, gets them on board. And really, you know, then it’s about also kind of the case for change, you know, whether you’re talking about an acquisition, or you’re talking about taking a look at, you know, migrating your culture. If you don’t get the buy into the case for change, you know, forget step two, three and 82. It just won’t work. You know, don’t move off from that until people get why we’re going to be changing.
Will Bachman 19:30
Okay. So, Michael, this was a fantastic overview of thinking about culture, in the context of m&a for listeners that want to, you know, follow up with you. Maybe just give us a minute. Tell us about your practice now and about how people can reach out to you and follow up. Yep,
Michael Rubenstein 19:53
thanks so well, so is currently I have a boutique advisory firm. I’m doing better Use things across various industries, no matter what I’m working on culture is always at the back of my mind, because those are the things that are either going to facilitate or kill any other initiative. So whether we’re talking about strategy or change change management or a continuous improvement model or or anything, you know, culture is the thing that’s either going to help facilitate that or, or get it off track. So, you know, those are things that I think are really important no matter what, what topic you’re looking at in an organization. I could be reached at [email protected]. And welcome any inquiries or anyone who wants to just talk a little bit about culture or any other topic.
Will Bachman 21:06
Fantastic. Michael, thank you so much for joining today.
Michael Rubenstein 21:09
Super, thank you very much. Well,
