Seth Sternberg
When Seth Sternberg’s Honor Technology bought Home Instead, their initial thinking was to keep the two businesses separate. They quickly realized they needed to integrate the two entities to optimize learning, systems and impact.
It was a critical realization as the 83% of mergers and acquisitions that fail generally fail because of i) poor strategic focus, ii) poor cultural integration, and/or iii) poor delivery of synergies.
In the Honor Technology case, the original acquisition premise was that “Honor’s technology and operations platform, paired with Home Instead’s leading global network, training leadership and relationship-based care, will serve as a foundation for a dramatic increase in innovation to benefit caregivers and clients through expanded offerings.”
Their strategy was to combine Honor’s technology layer and centralized operations with Home Instead’s local leadership to deliver more personalized care to older adults through “Care Pros” treated with respect and given the tools they need to succeed. As Sternberg put it, “We know that if we care for our caregivers, they’ll in turn provide even better care for our parents.”
The heart of Honor’s technology layer has been its Honor Care App, which “enables care professionals to be matched with the right client and prepares them to provide best-in-class care in the home by updating care plans in real time and offering ongoing training. The app also allows caregivers to have full autonomy and control over their schedule, presenting them with opportunities that fit their skills.”
Paul and Lori Hogan spent 27 years building Home Instead’s network of in-home care providers and local leadership to 90,000 caregivers serving clients at 1,200 franchise locations throughout the U.S. and 14 additional countries.
So, they had the technology layer and local leadership. Cost synergies would come from centralizing operations.
Initial Choice
Sternberg told me that he knows “integration is the great challenge” in an acquisition. He sees three options:
1) Operate as separate “arms-length” entities.
2) Integrate partly – (Almost always a bad, “middle way” choice.)
3) Completely integrate.
Honor already had customers that was using its platform as a “managed service network.” Sternberg thought they could run the same model, essentially putting Home Instead’s franchisees on the Honor platform, skipping the integration and associated risk – except for legal and HR as integrating them was just “good hygiene.”
The Realization
Sternberg quickly realized that they were missing opportunities in knowledge transfer, system-wide transformation and reducing complexity.
- Knowledge. Home Instead’s franchise owners wanted to take full advantage of Honor’s knowledge and understanding and Honor’s people wanted to learn from the franchise owners.
- Transformation. Honor’s platform “really does transform the back-end of how home care is delivered.” Sternberg went on to tell me that they needed to integrate the HQ teams, marketing, customer service and the like to combine the two organization’s knowledge.
- Complexity. The number of parallel, redundant teams made them more complicated to work with than necessary.
Integration
The keys to the integration were organization, enrollment and communication.
- Organization. The combined Honor and Home Instead leadership looked at the work being done at the heart of the organization. They reorganized into four divisions focused on delivering healthcare, driving growth, building technology, and building the brand.
- Enrollment. They enrolled key leaders by spending a lot of time together in “deep conversations,” ratcheting up their best current thinking and then “hashing out” the nuances. Once those reporting to Sternberg were aligned on direction, they brought in the next level of leaders – about 30 people – to work through how it would really work.
- Communication. Sternberg pushed to do this quickly. He knows that once you start talking about reorganizing, everyone is thrown off balance until you’ve answered their only question: “What does this mean for me?” Thus, once decisions were made, they communicated the full change to all their employees, all the franchise owners, and their other managed service network customers.
The bottom line is that you can’t possibly realize synergies out of separate organizations. Synergies must be created together by teams looking beyond themselves to new problems they can solve in new ways together for others. This is why a deliberate and detailed integration plan that spans across organizational, operational, strategic, and cultural issues is essential.
Click here to request a free executive summary of The M&A Leader’s Playbook book.
Click here for a list of my Forbes articles (of which this is #788) and a summary of my book on executive onboarding: The New Leader’s 100-Day Action Plan.
