Technology News & Innovation

Organizational Network Analysis: The Role of KĒS Analytics in Mergers and Acquisitions

(PRWEB) February 02, 2012

In a fall 2011 research report, MIT Sloan Management Review discusses how companies are achieving competitive advantage by using analytics to monitor, detect and anticipate events to understand the full range of organizational risks that can impact the business.* While analytics have become integrated into most disciplines in what MIT describes as Experienced and Transformed organizations, to date they have found little traction in human capital. This poses a dilemma because nearly 95 percent of organizations continue to make critical decisions using only observed or anecdotal information. In even the most sophisticated, “Transformed” companies, decisions involving people and culture, arguably two of the most vital components of an enterprise, are being based on what is essentially guesswork. Leathers Milligan & Associates’ KĒS Analytics reduces the risks and improves the outcomes of human capital decisions during the merger and acquisition process.

KĒS Analytics is a scientific process that applies Organizational Network Analysis (ONA) methodology to either entire organizations or specific business units. It uncovers the detail of the multiple layers of informal networks that exist in every organization. By engaging the applicable employee populations with a set of specific questions to be analyzed by this proprietary technology, hidden connections are discovered between individuals on each of the critical layers of informal networks that exist in every organizational culture. The analysis exposes the knowledge, experience and skills of the employees to identify emerging leaders, revealing how the organization actually functions, and suggest and implement solutions to organization challenges.

This process is summarized using graphs or “maps” that provide a visual representation of the connections within and across departments, branches or business units. KĒS Analytics establishes the foundation upon which Leathers Milligan staff work with leaders to develop targeted recommendations and create specific solutions to matters affecting the organization. It also incorporates predictive analytics to facilitate “what if” scenarios to help determine the outcomes of alternative actions.

Acquisitions can fail up to 70 percent of the time based on any or all of three axis—culture, strategy and economics. However, it is culture, or the people, that is most accountable for acquisition failure. Nonetheless, merger and acquisition strategy teams are generally so focused on the financial and legal due diligence that they forget there is another, at least equally crucial step to consider—workforce due diligence. It is commonly the integration process—how the people are managed after the closing—that ultimately determines success, realizes a profit and creates sustainable change.

Contact with people outside of the senior team during due diligence is generally limited and tightly controlled by the company’s leadership. There are any number of valid reasons, but the net effect is that the buyer/investor’s knowledge of the organization—how it works and who its key people are—is filtered by current leadership or based upon anecdotal information learned during acquisition due diligence. Because there is no factual foundation upon which to plan post-closing organizational restructurings, the buyer/investor is exposed to potentially catastrophic consequences if the subjective data upon which it based its decisions prove to be incorrect.

In every organization there are critical people that maintain or redirect the company’s culture. Using KĒS Analytics, we can identify these “key” cultural connectors. Less than 10 percent of this group are the key cultural connectors and just a fraction of that percent is the people who can actually hold on to change; that is, they can either impede or facilitate a change initiative. They are the critical, yet often nearly invisible employees. They control how the organization works and how it reacts to change. Sometimes they can be identified on the organization chart, more often they cannot.

Every organization develops informal human networks that are trust-based and define how work actually gets done. Where organization charts, processes and procedures offer a formal but theoretical view, the informal human networks identify the actual knowledge flow and the specific employees that provide vital linkages for the people that drive innovation and get things done. Interestingly, these people are not always the employees identified as the “high potentials.” During the merger and acquisition process or other change event, they are the change agents critical to successful integration or change implementation. They are also the problem solvers that will help mitigate risk during transition.

Dr. Jacob Moreno, the father of group psychotherapy, is also credited with the creation of sociograms, the diagrams of the structure and patterns of group interactions that can be used to analyze choices or preferences within a group. Sociograms are the charts or tools used to find the sociometry, the quantitative method for measuring social relationships within a social space. Administering a uniform set of questions to a closed group can produce graphic relationships between individual group members. Interpersonal relationships will vary dependent upon the subject the question addresses. The more the interactions are bi-directional between specific individuals, then the greater the bond, or trust, between those individuals and the greater the validity of the sociogram.

Network analysis software has enhanced the value of the sociogram by providing the ability to sample a larger universe of individuals or data points, improving the ability to analyze data through graphic or numeric presentation and facilitating predictive analysis. This has led to the development of many different applications created to address the unique characteristics of specific segments—diseases, customers, governments, social groups and organizations to name a few.

KĒS Analytics scientifically identifies the informal networks such as strategy, innovation, work and individuals that develop within organizations. These and the other informal networks in concert with the entity’s organization chart define the DNA of the culture and identify the top percentage of its people in their roles as Hubs, Gatekeepers, Climate Monitors or Boundary Spanners. These key people only become visible through KĒS Analytics.

    Hubs rapidly disseminate information and centralize work processes. They are highly social and know how to connect with most people.
    Gatekeepers emerge on critical pathways because they create or loosen bottlenecks. They live by the “less is more” rule and make it their business to know the “right” people.
    Climate Monitors reside behind the scenes. They are the people in between and unseen, but who are connected to almost everyone via indirect routes. They know the people who know the right people.
    Boundary Spanners are key people that are on the edges of the network but often ready to make a bridge or link to another group or department.

KĒS Analytics eliminates the risks associated with intuitive decision making by presenting accurate and objective data obtained directly from the target population base to unlock the mystery of these informal human networks. It provides investors and leaders with a visual presentation that displays the culture of the organization, including where trust resides, as well as how the organization really functions. The analysis yields a logically derived foundation upon which to make successful decisions about organization structure and the implementation of change initiatives. Succession, restructuring and “right-sizing” decisions for example, can be made with confidence.

Ideally, KĒS Analytics should be completed for the companies on both sides of a transaction to present a comparison of cultures that will reveal major differences, identify the key influencers in each organization, define how best to set priorities and make recommendations. KĒS Analytics reduces integration time and minimizes the unforeseen issues that inevitably occur in and around M&A events. Designing integration plans from a KĒS Analytics foundation will substantially reduce decreases in productivity and increases in voluntary turnover that are common byproducts of both routine change initiatives and changes in control. However, KĒS Analytics plays a critical role even if only one of the entities can be analyzed. It provides a visual display of the culture of the organization that identifies what part strategy and innovation plays, how decision-making occurs, and how socially connected the people are within the organization. As the cornerstone of workforce and organizational due diligence, KĒS Analytics will:

    Name the organization’s key influencers and demonstrate their effect on the organization.
    Identify the employees necessary to engage to mitigate change disruptions and increase probabilities for a successful integration or cultural change initiative.
    Create a subset of the top influencers that can be used for communication, negotiation and outsourcing purposes.
    Facilitate predictive analysis of the impact of proposed personnel moves or organizational restructurings by conducting “what if” scenarios.
    Accurately identify the key emerging leaders and mentors to include as integration team members to facilitate the onboarding and integration of new staff acquired as a part of the transaction.
    Provide a consistent, scientifically validated method to measure the impact of change over time.
    Increase employee engagement and minimize market disruptions through a more successful and rapid cultural integration.
    Provide a cultural assessment to identify trust, organization opportunities and gaps.

KĒS Analytics is the leading organizational diagnostic and provides a systematically validated foundation for decisions in and around organizations and their individual members. In addition to its function in M&A strategy and other change of control events, KĒS Analytics plays a critical role in:

    Organizational restructuring
    Divestitures
    Succession planning/leadership development
    Knowledge succession (development, retention, promotion)
    Coaching/mentoring
    Onboarding of new hires
    Development of metrics for collaboration and social and human capital
    Team development
    Monitoring organizational change over time
    Workplace planning and design
    Workforce development
    Implementing timely and successful cultural change
    Talent identification (as apart from succession planning)

KĒS Analytics identifies the key people that create the culture of the organization helping leadership identify the emerging or “shadow” leaders, mentors, change agents, problem solvers and holders of key know-how—all critical elements of mergers, acquisitions or other change events. These informal or “unofficial” networks are the social capital of an organization; they can adapt to or resist change, transmit or withhold information and enhance or stifle collaboration and innovation. In short, these invisible social networks are often the determiner of the ultimate success or failure of mergers and acquisitions. Unlike other approaches, the data employed in KĒS Analytics are scientifically derived and identify the causes of organizational issues, not simply their symptoms; they replace intuitive supposition with scientific fact. KĒS Analytics provides leadership with recommendations based on acquisition research to make informed decisions and implement effective solutions that will reduce risks and produce significant gains in business outcomes.

About the authors:

Dr. Deborah Peck is a senior adjunct consultant with Leathers Milligan & Associates. She holds both a Master’s and a Ph.D. in organizational psychology and is a recognized expert in organization network analysis. She has broad leadership experience in business, management and data network engineering in companies ranging from start-up to the Fortune 100. Dr. Peck has created numerous processes and services related to leadership development, organization change management, organizational effectiveness, and employee satisfaction, development, and engagement.

Dick Lippert is chairman and chief executive officer of Leathers Milligan & Associates. His over 30 years of executive management experience includes leading global enterprises, engaging venture capital partners to successfully develop high-growth businesses, and leading mergers and acquisitions. He has achieved notable success building top-performing organizations through his focus on developing people with ethics and integrity to lead and succeed in today’s complex environment. Lippert holds degrees in political science and economics.

About Leathers Milligan:

Leathers Milligan & Associates is a Phoenix-based global human capital management consulting company specializing in the organizational and employee life-cycle needs of both corporate and government entities. The company provides integrated solutions that include, but are not limited to talent acquisition; executive assessment; executive coaching; organizational analytics; organization and talent development; and workforce transition and outplacement services. For additional information, please visit http://www.leathersmilligan.com.

*Analytics: The Widening Divide, MIT Sloan Management Review Research Report Fall 2011

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