jones partner leadership series bob hoskisson jim hackett rice universitychairman & ceo

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Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice University Chairman & CEO Anadarko Petroleum Corporation January 20, 2011

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Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO Anadarko Petroleum Corporation January 20, 2011. Acquisition Decision Making and Business Integration. 1. Reasons for Acquisitions. 2. Reduce Costs Gain Market Power Increase Growth - PowerPoint PPT Presentation

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Page 1: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Jones Partner Leadership Series

Bob Hoskisson Jim HackettRice University Chairman & CEO

Anadarko Petroleum Corporation

January 20, 2011

Page 2: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

2

Acquisition Decision Making and Business Integration

Page 3: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Reasons for Acquisitions

Reduce Costs

Gain Market Power

Increase Growth

Learn to Build Capabilities

Manage Risk and Other Financial Objectives

3

Page 4: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Integration Success

More likely when an integration team, including employees from the acquiring firm and the acquired firm, is formed and charged with full responsibility to integrate the two companies to create value

Opportunities for increased growth as learning occurs

Leverage the capabilities of both firms to create value

Page 5: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Pitfalls and Prevention

Because combined firms often lose key target firm managers, it is important to retain valuable human capital

Overconfidence and paying too much

Managerial escalation of commitment Need governance checks and balances

Excessive debt

Over-diversification

Page 6: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

6

The Six Determinants of Merger Success

Source: The Determinants and Evaluation of Merger Success (Epstein)

Page 7: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

7

Leadership in M&A

Have a good strategic sense of business environment

Be willing to do M&A when weak or strong

Be ready to give up your job for the right cause

Page 8: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

8

Leadership in M&A

Expect that every deal will be different and difficult

Be adaptable but also willing to walk away

Practiced at negotiating/due diligence/selling a deal – don’t learn as CEO

Good CFO and attorneys essential

Relationships and building trust with counterparts, industry, investors, and Board

Page 9: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

9

Leadership in M&A

Get right people in charge at top right away – within six months

Take integration very seriously: conflict management, quick decisions

Courage of convictions

Candor at almost any cost with employees (handy with counterparties as well)

Over-communication is impossible

Page 10: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Leadership in M&A: The Role of Authenticity during Integration

One way firms uphold and violate psychological contracts with employees is the level of organizational authenticity demonstrated

That is, does the firm live up to the values it espouses during the merger integration process

Page 11: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

An Employee View of Leadership

M&A Integration

PsychologicalContract

Opportunities to honor or

breach

Opportunities to honor or

breach

EmployeeProductivity

Stock Performanc

e

Authenticity: consistency between

what the firm says and what it does

Authenticity: consistency between

what the firm says and what it does

• Change • Upheaval• Politics• Uncertainty• P&L pressure

• Change • Upheaval• Politics• Uncertainty• P&L pressure

Page 12: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Some Examples

Value Category Espoused (CATA) Realized (survey)

Employee development

“We invest in education and training”

Skills retraining programs offered

Fairness “…using objectivity in the decision process”

Integration applied consistent decision processes

Employee empowerment

“Our management style is participative…”“This responsive, decentralized organization”

Participation of members of both organizations and at various levels

Accountability “We followed through on our commitments”“…as we work to deliver on our promises…”

Promise keeping

Page 13: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Authenticity: Effects on Productivity

Productivity is high when espoused values ≈ realized values Either strong or weak Trust is reinforced

Minimized when espoused are misaligned with realized Worst when espoused > realized Also low when espoused <

realized

It is the joint effects that drive employee productivity

Espoused Values Weak Strong

Re

aliz

ed V

alu

es

S

tron

g

Wea

k

Best

RunnerUp

Third

Worst

Page 14: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Shareholder Value

Employee productivity is positively related to shareholder value

Employee attitudes and behavior affect post-merger integration performance Productivity Shareholder value

Managers may be well-advised to match reality to rhetoric

Page 15: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

15

Leadership in M&A

“Sixth” of six determinants of success plays a huge role

Economy, competition, etc.

Duke/PanEnergy

SGO/OEI

APC/KMG/WGR

DCX

Use scenario planningso you don’t rely on luck!

Customers and shareholdersdon’t listen to excuses

Page 16: Jones Partner Leadership Series Bob Hoskisson Jim Hackett Rice UniversityChairman & CEO

Jones Partner Leadership Series