Hardly the case.
Instead, Young became the highest level executive at CP Kelco of Chicago, a $480 million food additives company, to be retained after it was acquired by $1.8 billion chemical manufacturer J.M. Huber Corp. She kept the coveted CIO title at CP Kelco, which became a business unit of Havre de Grace, Md.-based J.M. Huber.
Young's new supervisor, Jerry Coughlin, vice president of supply chain and services for J.M. Huber, attributes Young's success to her ability to understand business strategy, along with an inner strength that allows her to make hard choices for the greater good of the new organization. For example, she recommended that J.M. Huber rip out an ERP system she had just spent eight months installing.
"She had the courage to open herself up to what would be the right decisions for this new company, and that was pretty important," says Coughlin. Young, like many CIOs, has found business savvy, leadership and management skills -- more so than technology chops --make CIOs valuable enough to create a future for themselves if their companies are acquired.
That's becoming more and more likely for companies of all sizes. Not only are big firms getting bigger--Oracle Corp.
Yet by the time an acquisition is announced, it's often too late for CIOs to take action to save their jobs. The groundwork is laid long before, in their relationships with business-side executives. They will be the ones to vouch emphatically for valued IT colleagues when the red pencils come out to crunch numbers and eliminate redundant positions.
Moving on Out
While many CIOs hope to hang on to their jobs following an acquisition, that's not always an option. And sometimes it's better to leave than to accept another position.
"Normally people want to move up in their career," says Gerry McNamara, senior partner at the Chicago-based IT recruiter Heidrick and Struggles International Inc. "If I was the CIO of an acquired company, I would do some soul searching."
Dan Heschle found himself in just that position. He was CIO of $800 million San Ramon, Calif.-based NestlÉ Ice Cream Co., a joint venture between NestlÉ SA and The Pillsbury Co. When NestlÉ bought a large stake in $1.5 billion Dreyer's Grand Ice Cream Holdings in 2003 and subsumed NestlÉ Ice Cream into Dreyer's, Heschle was caught in the crosshairs.
Within three months of the merger, Heschle says most of the top management of NestlÉ Ice Cream was let go. He was one of the few who survived--at least for the time being--to help in the integration and subsequent divestment of NestlÉ's distribution business. And after that? "I was realistic about what my chances were," says Heschle, adding that it was un-likely he'd retain his CIO title.
The transition period gave him time to consider his career goals while continuing to collect a paycheck. "I'm 42 years old," says Heschle. "I'd been the CIO, and that is where I really saw my goals and aspirations." He also didn't think that he would thrive in the new organization's culture. "It was much less structured than what I enjoy," Heschle says. "It was not a very good match for me."
In the end, Heschle decided that he was better off looking elsewhere for a new CIO position. Through his personal CIO network, he found and landed another job in the frozen dessert aisle. Heschle is now CIO of $360 million San Leandro, Calif.-based Otis Spunkmeyer Inc., maker of frozen cookie dough and other tasty treats.
"It was a little bit of a risk to leave the comfort and stability of NestlÉ and Dreyers and spread my wings a little bit," says Heschle. "But it's been a good move for me."
Strategic vantage point
Regardless of which side of the acquisition they are on, CIOs who've been involved in business strategy stand the best chance of success. As strategists who touch virtually every business unit, they're likely to be brought in on the ground floor when merger or acquisition talks begin. "Successful acquisition institutions tend to be those organizations that bring the CIO into the decision-making process," says Mark Silverman, managing partner with the banking strategy consulting practice of IBM Business Consulting Services.
That, in turn, can help CIOs carve out high-level jobs in the newly merged organization, says Robert Mack, an analyst at Stamford, Conn.-based research firm Gartner Inc. "To the degree that a CIO has solid business experience, he has a good chance of surviving and becoming part of the larger organization," Mack says.
When $808 million data storage company Quantum Corp. in San Jose, Calif., bought $225 million tape vendor Certance LLC of Costa Mesa, Calif., last January, Certance CIO Dave Carlson hoped his business knowledge would help him hang on to his job. Carlson's long career as an IT executive included a stint as CIO of Kmart, so he felt confident that he could find another job if things didn't work out. But he liked the looks of the new company and wanted to stay.
Carlson and Quantum CIO Scott McIntyre were both considered for the top IT job by Quantum's chief operating officer. During the three-week process of choosing a new CIO, Carlson and McIntyre met for about a dozen hours a week, often over dinner, to map out an integration plan. They became friends. As integration efforts got under way, it was still unclear who would win the CIO title.
CIOs of acquired companies are underdogs, and indeed in this case, it was McIntyre who got the call from Quantum's COO at home one night, telling him that he'd be the new CIO. But Carlson didn't draw the short straw. McIntyre let his vice president of applications go in order to give Carlson that position, one that he describes as co-CIO. McIntyre lauds Carlson's compatible skills, openness and ambition about the prospects for the new company. But it was his deep knowledge of the business model and strong relationships with business unit leaders and McIntyre that won Carlson the new post. "The deciding factor was Dave's business-side relationships," says McIntyre. "I know if I walk into the office of one of the new division heads [from Certance], that Dave has a relationship there."
Of course, not every company treats IT as integral to the business. Organizations that use CIOs merely as IT caretakers usually dismiss them as commodities in an M&A situation. "Too often CIOs are not brought into the acquisition process until the formal announcement," says Kathy Burkle, principal of San Ramon, Calif.-based Mergers, Acquisitions & Divestments Information Technology Consultants. "They are told that it doesn't really have much to do with IT."
"In those companies where the CIO does not have a seat at the [executive] table, he or she has to deal with the acquisition in a reactionary mode," notes Gerry McNamara, senior partner at Chicago-based IT recruiting firm Heidrick and Struggles International Inc.
Once the deal goes through, however, systems integration affords senior IT execs the chance to prove their mettle -- and possibly save their jobs. The stakes are high for midmarket companies because, when handled poorly, integration can add significant costs to an acquisition. For example, some deals stipulate that IT systems be moved by a certain date, or penalties may result. Compliance issues may also surface once integration begins. And CIOs must make hard choices about how to align the integrated technologies with new business goals.
Patient Care Inc., a $110 million West Orange, N.J., home health care organization that has acquired two companies in the past 18 months, starts its process by reviewing what each system offers. "All of the IT systems are evaluated in terms of what it means to the business," says CIO Martin Howard. "If the financial systems are inadequate, or we don't like a certain technology, the question is, what are the costs to fix it?"
The organizations that Patient Care acquires are usually units of hospitals or large health care systems. Howard's job is to extract data and useful systems from the larger organization. He's found that hosted software gives him a leg up when it comes to integration. "When we roll out new software, we just send out the URL and don't worry about the platform or the LAN architecture or if they use a different version of Windows," he says. "We don't have to install software."
While technical challenges differ, one common element across all successful integration efforts is strong communication. When organizations define technical terms differently, when metrics must be chosen, when IT strategy must earn buy-in from business unit leaders, it is the CIO who must bring everyone together to hammer out the answers. "The real art and value in a CIO is being able to help people describe how they want the business to work and bringing them together across cultures," says J.M. Huber's Coughlin. "That is the real secret to pulling off a successful integration."
Kim Perdikou, CIO of $700 million Juniper Networks Inc., makes it a priority to talk with every member of the IT staff during an acquisition. In 2002, Sunnyvale, Calif.-based Juniper acquired Unisphere Networks Inc., a division of Siemens AG. Last year it acquired $245 million Netscreen Technologies Inc. In each case, Perdikou spent the first 30 days meeting with IT staffers, asking what their biggest challenges were, where they wanted to be in four years and what they would do if they were CIO. This allowed her to connect with everyone in the organization and also to learn about the new IT systems. "I gain insight into what challenges they have, and where the pain is in their solutions," Perdikou says.
CP Kelco's Young says her communication skills helped her in a sticky situation. She was aware her company was up for sale two weeks before it was announced, and she was in the awkward position of having to head off a pending deal with an integration partner without tipping off her staff. Many staff were angry when she canceled the deal, and then felt betrayed when they later found out why. Once the sale was announced, she did her best to be open with her staff and encouraged them to stay. "I try to be as honest as I possibly can and tell them everything that I know," she says. (Some staff did leave immediately, but more decided to stay.)
Poor communication skills can certainly sabotage a CIO's best efforts, like when a CIO jumps into an integration plan without fully understanding the new business' priorities, says Burkle. "The biggest mistake CIOs can make in their valiant effort to be proactive and manage costs is to jump the gun without being fully aligned," she says. That can lead to costly integration efforts that head off in the wrong direction or new technology choices that don't support the merged organization's business goals.
Pride only hurts
No one envies the CIO of a company that has just been bought. The new owner often keeps most or all of its own IT staff, while many employees of the acquired firm are shown the door. The new owner's technology often takes precedence, and the owner's CIO is more likely to retain the top spot. At acquired companies, the senior IT executives often feel helpless as their work, their employees and their IT systems are scrutinized, criticized and perhaps discarded.
Many CIOs in this position react emotionally. But pride needs to be checked at the door. When Certance was acquired, Carlson was very proud of the work that he and his team had done, but he was determined not to let that color his assessment of the value those IT systems might bring to the new organization. "The danger with pride is that it becomes arrogance," he says. "Scott [McIntyre] and I have a wonderful chemistry of trust and respect. Hopefully, pride will stay within reasonable boundaries."
Emotion must be kept out of the picture, agrees Allen Gula, former CIO of $245 million Franklin Templeton Investor Services LLC in San Mateo, Calif., and now a CIO consultant. He's worked on many acquisitions and knows that CIOs must put all of their energies into bettering the new organization, even if their own future in that company is in question. "Understand the acquirer and try to help the new company make the right decisions," says Gula.
The ability to see clearly and make recommendations based on strategy rather than emotion is part of the reason Young believes she was retained at CP Kelco. After the acquisition, she found herself faced with a CIO's worst case scenario. Her organization had spent years implementing SAP, and the technology was finally starting to show benefits. But acquiring company J.M. Huber was an Oracle shop. After considering the complexities and cost of managing two ERP systems, Young set aside her pride and recommended that CP Kelco migrate to Oracle. The company ultimately decided to stick with SAP, however, given the risk involved in converting the company's far-flung locations to Oracle.
The visionary factor
CIOs may also be judged on their ability to visualize and articulate the IT future of a new entity. Business priorities may change, such that IT no longer aligns with them. So business leaders particularly value CIOs who can envision how IT can help--or lead--those new business directions.
But the CIO also needs to be willing to slow down and make careful decisions. Sometimes "forward-thinking" means building in contingency plans and hedging bets. Consider Young's ERP decision, where one system had to be chosen over the other. Whichever system wins, some of the IT staff are likely to resent it and leave, costing the organization valuable talent. Some CIOs in this situation choose to run two instances of an ERP system for a while, as they evaluate which one better suits the combined company's needs.
That's what Quantum did. It retained two Oracle systems -- Certance's Oracle 11.5.9, plus Quantum's own Oracle 11.5.8 -- to stay flexible while it addressed different legacy customer issues. Since running two systems creates expensive redundancies, McIntyre and Carlson plan to migrate the core ERP system to Oracle 11.5.10. The waiting period helped to show the best direction to take.
IT staffing is another area where visionary CIOs can help. It's easy to fall into the trap of agreeing to significant cuts in IT staff, which can be a mistake in the long run, says Burkle. CIOs must first evaluate staff from both organizations to make sure they retain the most talented employees.
Former CIO Gula says he went into staffing discussions aware of the weak links in his organization and expected the same from the CIO of an acquired firm. "The key is to create a staff that supports the new organization," he says.
Surviving an M&A situation may well be the biggest challenge of a CIO's career, and success often calls for redefining the role itself. At CP Kelco, for example, Young is expected to know the technology cold but also to understand the nuances of the merged business as she now plays a central role in mapping out its future. "It's more than just about the business that IT supports," she says. "It's about being a leader in the company."