As Tim Kardish sees it, the composition of the post-acquisition leadership team is often overlooked. And that’s an oversight that could be costly.
“You really have to map out the strategy,” Kardish says. “What team members do you need around the table to realize that strategy and make sure that you're either making plans to enhance the skills of folks around leadership team or, where appropriate, make the necessary upgrades in areas that need to be upgraded without wasting a lot of energy.”
Kardish, who could be considered a turnaround guy, has had to assess the leadership fitness of incoming teams after acquisitions. The CEO of Sussex Wire joined the manufacturer in 2012, shortly after Argosy Private Equity acquired a majority state in the business. And he was there when the company acquired Marox Corp., a manufacturer of machined orthopedic implants and aerospace components, to diversify its capabilities. Before Sussex, Kardish was CEO of APS Novastar where he led a successful turnaround before exiting to a strategic buyer, and president of Labsphere, an X-Rite company that was acquired by Halma, plc.
To figure out who’s the right fit, Kardish relies not on gut instinct, but contemporary tools designed to assess the skillset, expertise and adaptability of the leadership team. The assessment isn’t looking to determine how they fit in their pre-acquisition roles, but how they’re likely to fit in a different, possibly accelerated growth environment. Having the right fit could be the difference between realizing the strategy, whatever it might be, or not.
People can be opaque, which makes judging character a more difficult task than doing a market analysis — the latter being no less of an important factor in a deal assessment. But the human capital aspect is integral to the realization of the exit enterprise value buyers predict in their models.
When it comes time for Kardish to roll up his sleeves and dig into the human capital aspect, he has a few tried-and-true tools. Among them is Predictive Index, which offers an assessment of the instinctive behavioral drivers of individuals. It can be coupled with a profile of the role to determine if there’s appropriate alignment. There's also The Caliper Profile, which bills itself as an assessment of an individual’s personality characteristics and motivations in order to predict on-the-job behaviors and potential. He also uses Wonderlic tests, which assess learning and problem-solving, among other things, within a range of occupations.
Typically he starts by having the members of the leadership team do a Predictive Index assessment. He and an external professional work with each leader on a leadership team development exercise, which is a practice that embodies Stephen Covey’s Habit No. 5: Seek first to understand, then to be understood.
The exercise is meant to help leaders recognize that different roles require different instinctual and behavioral drivers, and that their colleagues have appreciably different instincts than their own predictive index because they’re in a completely different role, one that requires unique and sometimes opposing skillsets.
“And as a result, what typically happens is the light bulb goes on and folks begin to understand why they may have had either conflict or confrontation between roles, because they understand that the role that the individual is in has a very different set of instinctive drivers,” Kardish says. “And they tend to trust each other a little more easily and communicate more effectively.”
These personality assessments and their results aren’t just the darlings of dedicated HR enthusiasts looking to perk up a gloomy culture. The results can influence whether or not a deal is executed.
“If there is a sufficient disparity between what we believe is required for the next evolution of enterprise value enhancement — if we don’t have the right people at the table and it’s sufficiently disparate — we may make a decision that that's not a business that is appropriate to acquire, just like we make financial statement decisions, we make market decisions, we make competitive landscape decisions,” Kardish says. “We would choose to potentially not go forward with an acquisition if there's too much disparity between what's really required for the next evolution of enterprise value creation.”
That’s why the tools are so important. And also because people overestimate their ability to determine who's right for the job and who's not, relying too much on “gut feeling.”
“Generally, people are drawn to people that are just like them, and they can associate and assimilate with people that are just like them,” he says. “The challenge with that is, if the role that you need doesn't need somebody just like you, you potentially could be making a hiring decision mistake.”