M&A Integration: Tired of Rolling the Dice on Management Talent?

Evaluating Management Talent During Due Diligence

Guest Post: Katy Mitchell

How do you evaluate management talent in your due diligence process? Is it systematic and objective or do you tend to evaluate on “gut feel?” Evaluating hard skills, education and experience can be relatively straightforward. However, those skills only account for part of the success managing and running a business.

“Soft skills,” such as leadership qualities and interpersonal communications, are harder to evaluate during interviews. Yet, soft skills have a significant impact on the success of an organization. Failing to evaluate the soft skills of management talent can directly impact the success of your investment.

During the due diligence process, many buyers typically make significant investments in accountants, attorneys, brokers, and other professionals to evaluate the financials and operations in the due diligence process. Less time and effort typically go into a thorough assessment of current talent.

What is a Selection Assessment?

Selection assessments are a standard part of the hiring process at many organizations. There is a good reason.

The selection assessment process typically includes cognitive and well-validated psychological assessments that can help the hiring organization gauge how someone is going to behave on the job when they are out of interview mode.

Assessment factors include thinking processes, decision-making preferences, interpersonal skills, and work styles. These are personality traits that will either support success or become an obstacle to success.

Selection assessment can also map out a team’s strengths and challenges giving you greater insight into the team functioning as a whole.

Diversity of thought and skills can create strong teams with more thorough decision-making. Or, diversity of thought and skills can be a recipe for conflict depending on the mix of personalities and culture. Assessments can highlight which type of team performance you might expect.

How Does a Selection Assessment Work?

The process can vary, but it typically includes:

• An individual interview with the leadership and key managers.
• Cognitive assessments and psychological tests to understand strengths, limitations, and preferences.
• A report summarizing the individual assessment data and a team profile, when applicable.
• A review conversation that explains the data and informs your due diligence process.

How Change Disrupts Performance

An employee’s strengths and limitations are dependent on the context and their role. When you purchase or invest in a business, that context changes.

If the founder continues working in the organization, he or she now needs to share authority and decision-making power. Maybe the previous number two manager is now number one. Maybe one peer out of the group gets picked as the new leader. Or an outside leader comes into the business.

Any of these changes cause a ripple effect that can impact employee success and team functioning. And frankly, these changes affect profitability.

Coaching and Team Development

Once an organization is part of your portfolio, assessments and coaching can be leveraged to stabilize the system and align people to the goals.

For example, many entrepreneurial organizations attract managers and employees who thrive with ample autonomy and independence in less structured work environments. Outside ownership often requires new accountability, oversight, and structure within the system. That is not an easy adjustment for managers or employees.

The other scenario I see is that employees get used to an owner who tends to micro-manage and has his or her fingers in everything. As a manager, if you are used to making very few final decisions, it is a significant shift to be fully responsible for the decision-making in your department.

Coaching can be helpful in the following scenarios:

• Support the needed behavior changes for each individual to be successful in the new context.
• Facilitate a smooth transition between an exiting leader and the heir apparent.
• Work through natural tension that arises with shifting roles and responsibilities.
• Increase clarity, collaboration, and trust within the team.

The bottom-line is coaching, assessments, and team development can maximize productivity and profitability.