Mergers & Acquisitions

Most of my practice is with technology transformations, and I rely on the Andreessen Horowitz podcast The a16z Show to stay current with emerging trends. Two weeks ago, a16z host David Haber spoke with Block's executive business leader Owen Jennings about their reorganization that was directly brought about by the integration of Artificial Intelligence capabilities and technologies.

We are likely to see much more of this, especially in technology focused businesses. Typically, firms will reorganize before M&A in order to make themselves a more attractive acquisition target or merger partner. Ultimately, the entities want to strengthen their negotiation position before the transaction. Those that do not undergo this often painful and disruptive reorg process in advance will likely be in a weaker position going into and it can be even more problematic for the future organization that is formed.

For this week's post, I'd like to hear the community's perspectives on how AI triggered reorganization can be managed before and after M&A activities. Owen Jennings describes the impact of AI on Block's operations, and how they navigated reorganization. 40% of their workforce was eliminated in one day. What impressed me was the clarity he had, all be it in hindsight, and the transparency Block adopted in their reorg. So often, organizational change is mired in a lack of open communication that's justified with the assumption that it's necessary for things to go well. In this interview, Jennings expresses a matter of fact assumption that transparency is the only, human way to reduce staff after they realized significant value from AI as a engineering partner.  IT was the follow-through on the cultural contract Block forged with all of their employees.

Everyone knew in advance, the announcement was made in a public meeting everyone was invited to, and all employees had access to their technology network throughout the weekend. Of course, smaller, startups, especially very successful ones, are going to have cultures more amenable to such radical transparency, however I feel this points to something more critical. The humanity and ethics of this strategy amazes me. When organizations make their cultures and people the primary consideration, once the reality of tech transformation makes reorg inevitable, everyone is able to navigate the process in a way that respects everyone's humanity and limits friction to only that necessary.

My question to you is, do you agree with how Block did their reorg, and do you believe this human strategy sets them up for growth as a separate entity, or in a stronger position for M&A transactions in the future? Secondly, for those whose jobs were eliminated, are they in a better position because they were treated in a respectful, humane way as the result of radical transparency?

Thank you for joining me as a thought partner as we explore the intersection of humanity, ethics, and organizational transformation. The link to the podcast is above and you can find it here: How to Reorg After AI Changes Everything | Block's Owen Jennings on the a16z Show

Thanks for sharing this and I'll have to add the podcast to my listen list. In the absence of listening to it, I have a few initial reactions:

• AI: There are many restructures and large-scale layoffs taking place in the name of AI. Companies do themselves a disservice when they share that layoffs are AI-driven. First, it erodes trust in leadership, who may not have been transparent about how AI is being used. Second, it erodes trust in AI and creates resistance to people potentially adopting it in the future due to fear of job losses. 
  • As an alternative, companies need to be open and transparent about how AI is being used in their business. They should not guarantee jobs or make sweeping claims like "AI will not replace you." They should highlight the importance of AI as a new skill akin to computer skills or the internet that people need to learn to augment their capabilities and better do their jobs. They should also highlight that the company is making an investment in both technology and in the people so that they can be upskilled for the future. AI needs to be positioned as an ally, not the enemy. 
• Human-Centered Approach: I've seen the fallout from less human-centered approaches where companies do layoffs in the name of efficiency and expediency rather than empathy. This has ripple effects as those who are not impacted directly see how those who were impacted were treated. This can lead to lower morale, greater uncertainty, and a lack of faith in leadership. Moreover, when not done in a human-centered way, the people impacted who may have been your ambassadors, advocates, consumers, and recruiters on the outside might become neutral at best or brand detractors at worst.
  • I'd advocate for more of what was described above. Having an open conversation, explaining the why behind the decision, having conversations with the people impacted and involving them in the next steps as they close out their formal employment with the company.  

Expediency and efficiency are too often done at the expense of empathy. I'd advocate for leaders taking the extra time to be transparent, have the courage to have the hard conversations, hear their impacted people out, and position them for success outside of their time with the company. 

Most of my practice is with technology transformations, and I rely on the Andreessen Horowitz podcast The a16z Show to stay current with emerging trends. Two weeks ago, a16z host David Haber spoke with Block's executive business leader Owen Jennings about their reorganization that was directly brought about by the integration of Artificial Intelligence capabilities and technologies.

We are likely to see much more of this, especially in technology focused businesses. Typically, firms will reorganize before M&A in order to make themselves a more attractive acquisition target or merger partner. Ultimately, the entities want to strengthen their negotiation position before the transaction. Those that do not undergo this often painful and disruptive reorg process in advance will likely be in a weaker position going into and it can be even more problematic for the future organization that is formed.

For this week's post, I'd like to hear the community's perspectives on how AI triggered reorganization can be managed before and after M&A activities. Owen Jennings describes the impact of AI on Block's operations, and how they navigated reorganization. 40% of their workforce was eliminated in one day. What impressed me was the clarity he had, all be it in hindsight, and the transparency Block adopted in their reorg. So often, organizational change is mired in a lack of open communication that's justified with the assumption that it's necessary for things to go well. In this interview, Jennings expresses a matter of fact assumption that transparency is the only, human way to reduce staff after they realized significant value from AI as a engineering partner.  IT was the follow-through on the cultural contract Block forged with all of their employees.

Everyone knew in advance, the announcement was made in a public meeting everyone was invited to, and all employees had access to their technology network throughout the weekend. Of course, smaller, startups, especially very successful ones, are going to have cultures more amenable to such radical transparency, however I feel this points to something more critical. The humanity and ethics of this strategy amazes me. When organizations make their cultures and people the primary consideration, once the reality of tech transformation makes reorg inevitable, everyone is able to navigate the process in a way that respects everyone's humanity and limits friction to only that necessary.

My question to you is, do you agree with how Block did their reorg, and do you believe this human strategy sets them up for growth as a separate entity, or in a stronger position for M&A transactions in the future? Secondly, for those whose jobs were eliminated, are they in a better position because they were treated in a respectful, humane way as the result of radical transparency?

Thank you for joining me as a thought partner as we explore the intersection of humanity, ethics, and organizational transformation. The link to the podcast is above and you can find it here: How to Reorg After AI Changes Everything | Block's Owen Jennings on the a16z Show