OMD's Journal—Investing July '22: Constellation Software Annual Meeting Reflections
Better late by one day than never. Though, I should add it’s a holiday here for me so I consider today to be Sunday 2.0.
This month’s investing journal is a breakdown of the Constellation Software 2022 Annual Meeting. It’s a singular topic that spans various areas of company culture, M&A, Boards, etc.
Constellation 2022 Annual Meeting Notes
It took a couple of months but I made the time to read through the three hour meeting transcript. It wasn’t a difficult read. Rather, there was so much excitement reading the transcript that I was hit with stoppages whereby I needed to stop copy and pasting everything that was being said. Then came the need to think things through.
In case you need a refresher on what Constellation Software does, here it is:
"We buy nice businesses that are really good to their customers and really good to their employees, and we help them run the businesses a little bit better by sharing some best practices. And encouraging them to keep learning are growing and applying what they can learn from others inside the group.”—Mark Leonard, Founder
The annual meeting notes have been broken down into the following topics:
Trust Leads an Unprescribed Culture
A Place Where Founders Stay
Cross-pollination Between Leaders
A Common Sense Approach to Remote
Size
Acquiring Talent
M&A: Long-term + Pushed Down
Harmonized Values
Thoughts on the Future
Spin-outs
VMS VC Fund
On Boards
Trust Leads an Unprescribed Culture
Culture isn’t something that can be defined by specific parameters. It isn’t something for silly ESG metrics or any nonsense guideline that determines good or bad culture by ticking boxes. Further more, it isn’t something that can be pushed down and streamlined for “efficiency.”
CSU is a business made up of 1,000+ companies operating as autonomously as any company could throughout 125 countries. That means there isn’t just corporate culture from HQs but a thousand different cultures in each business within the parent. Underlying each of these businesses are the idiosyncratic cultures of religion, ethnicity, nationality, industry, etc. that would set out the foundation of each company culture.
This appreciation and humility towards realizing this bottom-up approach to business culture was evident in the early years of CSU’s expansion. When CSU bought its first Danish company, Mark Miller moved to Denmark and learned how different the day to day culture was in Denmark their offices in Arizona and Toronto. Culture is something that requires immersion. It needs to be breathed in and empathy requires this. It was amazing to hear such stories where leaders actually took action in the early years to set the tone for how the company was going to think about culture going forward.
I think that’s how CSU’s view that 'culture isn’t something that can be prescribed' formed. But the leadership can set the tone of what is important. This can be set out in values, a mission or some other priority that is reinforced over and over again.
For CSU, a value that was referenced over and over again was trust. It was mentioned as the biggest value that made its decentralized structure work. Trust is at the core of giving people autonomy but also part of the diligence process in determining who to bring on board.
“I think it's very important to understand, we are a culture of cultures. And it’s one of the reasons I think that our performance is what it is becasue we allow each of these businesses not to become part of Constellation, part of Volaris or any of our operating groups, but to still maintain their own culture and operate within their local country.”—Mark Miller, CEO of Volaris
A Place Where Founders Stay
It would be fair to assume most founders/CEOs who sell their software business to CSU would leave. However, according to Damian McKay at Vela Software, most founders stayed on after the acquisition and some even moved to become Portfolio Manager in the operating group.