Whos Managing the Business If Your Managers Are Managing the Integration?

Ed Kozak Introduction part of the targets employees to assist in an easy transition. Be that as it may, it Lets face it, the integration of two has been documented that even companies into one is not an everyday collaborative mergers have resulted in occurrence, nor is it an easy one. Done poor performance. For these, data shows properly, a successful postthat while there might have been a great merger integration requires a large effort at negotiation and deal structuring, amount of dedicated time in order to there was poor post-merger integration. properly plan, execute, manage, and Poor post-merger follow-up, i.e. control it. With industry literature integration, is best understood when one telling us that 53% of mergers failed to considers that managing a merger is achieve their desired results (Merger vastly different from managing ongoing Integration: Delivering The Promise, business operations. Why is it then that Booz-Allen & Hamilton, 2001), its easy many organizations continue to manage to see that many companies, after their post-merger integrations as if they spending tens of millions of dollars on were ongoing operations? The skill set the transaction itself, did not dedicate the required to run a project successfully is resources, the planning, and/or the time vastly different from that required to required to make the integrations make someone an outstanding successful. This isnt to say that they operational manager. Moreover, how didnt apply all of the necessary are the operational managers, who are resources once the transaction was now tasked with managing the inked. Therein lies the problemmany integration as well as carrying on with of those acquisitions that failed to reach their daily operational activities, their desired strategic or financial expected to do both at the level to make outcomes did so because the post-merger both a success? Many times theyre integrations were reactive, not faced with a dilemmado they focus on proactive. While considerable financial leading the integration and take their and legal due diligence was performed, eyes off ongoing operations or do they it can be argued that integration due continue to focus on ongoing operations diligence was lacking. and divert their attention to the integration only when a crisis arises or It is understood that not every when time allows? Neither of these acquisition is performed concordantly; scenarios is optimal for an organization some are the results of corporate rescues, because the demands of the integration contested situations, and even raids, and the demands of ongoing leading to a lack of willingness on the operations are at odds with each other, Whos Managing The Business If Your Managers Are Managing The Integration? 1
Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.

each requiring full-time attention. The bottom line is that, unless an organization employs a formal project management approach to managing the post-merger integration, it can be virtually impossible to get through the integration without damaging the potential of the deal. One of the issues faced by companies in acquisition mode is the possible loss of existing clients. Most of the customer issues related to a merger involve ensuring that the correct level of service is maintained throughout the integration work. External customers are often suspicious of mergers and may use the changes as an excuse to buy elsewhere. This means that its extremely important to manage clients expectations during the transition. In one scenario, some clients might be unhappy with the service that they received from the acquired company prior to the merger and will expect an instant improvement immediately following the merger. In another scenario, customers who might have been happy with services before might be worried that the newlycombined organization may change for the worse, fearing that the new organization will be preoccupied with solving the problems of the acquired company rather than meeting their own needs. Meeting customer expectations during the transition must remain an important objective during the integration and so this places an even larger burden on the attention of operational managers. The last thing the acquiring organization wants to do is to provide customers with a reason for them to stop being customers.

a study reported by Savill and Wright (2002) it was found that companies that managed the process of integration on a fast track basis achieved higher levels of profitability, productivity, cash flow and gross margins and that during the course of the integration the concept of speed gains in importance for senior management. How can both of these be achieved throughout the full lifecycle of the integration at an optimal level if the organizations management team is expected to manage day-to-day operational activities and the integration? Simply put, it cant. Enter The Program Manager

Very few Parent companies conduct the type of work that would enable them to have a pool of project managers it could select from to use to manage their postmerger integration. Even if they did and there were some project managers free from managing other projects, a postmerger integration is not a simple project that any project manager is skilled at managing. It might require various aspects of HR, Accounting, Merchandising and Marketing, Sales/Call Center(s), Operations, IT, R&D/Product Development, Communications, Procurement (including Contracts, Purchasing, Supply Chain), or some other area to be integrated concurrently. In project management parlance, the post-merger integration would be considered a program which requires someone with solid program management experience. Programs are more complex in nature. Whereas a project is a set of interrelated tasks, all being conducted to reach a predetermined goal, a program is a set of Consider also the speed at which the interrelated projects, all being conducted post-merger integration is conducted. In to reach a predetermined goal. Each Whos Managing The Business If Your Managers Are Managing The Integration? 2
Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.

project in a program has its own schedule, its own budget, its own risks, its own outcomes, its own resources, and its own requirements and these roll up to yield the total schedule, the total budget, the total risk profile, and the total output of the program. The stage must be set correctly for a successful post-merger integration and your program manager, more appropriately named the Integration Manager in this case, can do that. However, it must be performed early on in the process, during due diligence. IT, R&D (if appropriate), and other strategies need to be linked to the business strategy very early in the process before the M&A is publicly announced. This allows the IT and Portfolio Management strategies to be coordinated with the financial goals so that the proper framework of integration due diligence can be performed. Data compatibility needs to be assessed as early on as possible before the merger takes place so that a more realistic assessment of data conversion costs can be madeintegrating dissimilar computing environments can take 40% more effort than integrating similar systems. It also allows the two business cultures to be assessed for goodness of fit, as well as HR initiatives to be planned out to ensure that subject matter experts and other high-priority employees in the target company dont jump ship. Lets not forget also about the Targets commitments with respect to benefits and pension plans. One Parent that I worked with acquired a company that itself grew through acquisitions and ended up inheriting a number of defined-benefit plans on top of the many that it already was managing along with 7 disparate

payroll/management systems. The mapping, gap analysis, data cleansing, and consolidation of those systems into one platform, keeping in mind the specifics of the inherited benefit plans that the cleansing required that had to be hard-coded as test cases into the cleansing software, was a 60 personmonth endeavor in and of itself. Lastly, from an R&D perspective, the Target may have ongoing projects that align poorly with the Parents strategic objectives or might be redundant. The more quickly these are brought to a halt once the acquisition has been transacted, the larger a financial benefit there will be. A Stakeholder Analysis must be completed as well and this is a requirement of the Integration Manager to perform. In project/program management argot, a stakeholder is defined as anyone who might be positively or negatively impacted by the project. Certainly in an acquisition there are stakeholders on both sides. Politics must be taken into account as well as Cultural Differences (big vs. small, hierarchal vs. flat, bureaucratic vs. entrepreneurialnot necessarily U.S. vs. international). A Project Charter is a must and this will be documented by the Integration Manager with the assistance of Senior Management. The charter outlines the post-merger integration organizational structure and the reporting channels. It identifies the positions that will be used to coordinate the integration, and describes the roles and responsibilities of the parties in the integration.

The Integration Manager is also tasked with preparing the integration plan and Whos Managing The Business If Your Managers Are Managing The Integration? 3
Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.

detailing the scope of the integration. What systems need to be integrated? How will they be integrated (e.g. full integration, partial integration, delayed integration, upgrade, or left as is)? What is the cost of that integration and how does its budget impact the financial strategy of the acquisition? How the cost estimate was created, what is its accuracy, and what potential impacts to the financial objectives does the respective accuracy pose? What assumptions are being made with respect to the individual pieces to be integrated/left alone? What are the major milestones to be hit on the program and when will those be reached? How will issues be resolved? What is the risk management plan? How will the cultures be integrated and what will the deliverables be? Lastly, what will the progress measurement and feedback look like? Let me interject a caveat here. The idea is not to find some needle-in-the-haystack person with such broad experience and knowledge to be able to address each of these areas single-handedly. No one person exists. Rather, the Integration Managers responsibility for the integration plan would be that of a coordinator, working with the various subject matter experts on both sides of the acquisition, identifying and documenting.

risk management plan are all derived from itand yes, the Integration Manager will also be responsible for coordinating this activity. One other item that the Integration Manager must be responsible for is the Change Management Plan. No moving target is easy to hit and attempting to do so wastes money. Projects are dynamic; issues or opportunities may arise that require a change in the scope of the work. Other times, business leaders might want to change the direction certain aspects of the integration are moving in or even want the integrations to encompass more than originally desired. Its imperative that proposed changes are weighed to determine their necessities and priorities and to ensure that the positive and adverse effects to the individual projects, the whole program, and/or each stakeholder group are clearly thought out before a decision is made. A Change Management Plan is that document that is used to describe the method by which changes formally will be proposed, reviewed, decided upon, and acted upon. Summary

While a great effort is performed by most Parent companies to try to validate The Integration Manager is also financial and legal information prior to responsible for preparing the Program acquiring a target company, research Work Breakdown Structure (WBS). indicates that the same cannot be said This is the roadmap that the program about planning and validating the will followed in order to get from two integration of the two. Perhaps those companies in transition to one company companies have had good reason to take providing enhanced customer value, a wait-and-see approach in determining capturing synergies, and hitting financial what to integrate and when to do it. and strategic targets. The WBS is one of Perhaps the legal and financial due the most important program documents diligence, as well as structuring the offer since the schedule, budget estimate, and itself, take up so much time and so much Whos Managing The Business If Your Managers Are Managing The Integration? 4
Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.

focus that the aspects of the integration are given a lower priority until the transaction has been completed. Whatever the reason, the resulting scenario is that the Parent and its personnel are forced to go from the transaction directly into the immediate crisis of getting the transaction to work, or even worse, force-fitting it to try to make it work. This doesnt need to occur. With proper planning done much earlier in the stages of an acquisition, the acquisition can make a smoother transition from the purchase to the postmerger integration to the ultimate success of achieving the desired strategic and/or financial goals, and with a dedicated Integration Manager onboard, the Parents Management team doesnt need to take its eyes off of what they do bestmanaging the business. About the Author Ed Kozak, M.S., M.B.A., PMP is President/CEO of Successful Projects For Leaders, international project and program management consultants providing businesses with post-merger integration management, Chief Project Officer services, project turnaround/rescue services, and project management process improvement, allowing organizations to realize the financial and strategic benefits they set out to achieve.

companies in this category successfully meet with budget, schedule, or end-user goals. Successful Projects For Leaders helps these companies improve their profitability by cutting wasteful project costs (sometimes even by 50% or more) and improving their overall management of projects in order to reduce risk, schedule slippage, and product rework. As a result their clients are able to exert more control over their projects; improve target schedule performance; monitor and control cost performance better; increase their successes at hitting budget estimates; improve quality and satisfaction; and recognize the substantial financial benefits that come along with that. Successful Projects For Leaders is hired as project turnaround experts and is brought in on critical projects that are having budget, schedule and/or quality issues, or projects that are plagued by one problem after another. They analyze and correct the problems, set a new budget and schedule, and work with the incumbent project management team to bring the project to completion.

Successful Projects For Leaders also provides Corporate-wide project governance, strengthening companies Management teams by assuming the role of Chief Project Officer. In this role our qualified staff provides the link between Management and the project teams, The staff of Successful Projects For developing standards and practices Leaders works with organizations that, directed at the effective execution of as part of their core business activities, projects and the attainment of schedule, dont conduct projects for their clients. cost, scope, and quality objectives, as These same organizations yet face the well as ensuring that enterprise-level burden of conducting projects internally objectives are consistently upgrades, installations, product communicated to the respective project development, acquisitions, etc. It is groups in the most-appropriate way for estimated that as little as 20% of them to follow and that project Whos Managing The Business If Your Managers Are Managing The Integration? 5
Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.

information is communicated to Management in business terms so that Management may determine if efforts are efficient and effective, if projects are still the best ones to support strategic objectives, whether there are performance issues associated with meeting objectives. In this role Successful Projects For Leaders assists organizations in Identifying opportunities and needs; Project Selection & Gating; Project prioritization; Resource Prioritization; Aligning projects with strategic objectives; Evaluating project value and benefits; Evaluating project risks; Maintaining a balanced project portfolio; Providing oversight for projects; and Project manager mentoring Ed has over 23 years of experience as a project/program manager in the private and Government sectors and includes the management of multi-year, multimillion dollar programs for his clients in fields such as IT, healthcare, research & development, and manufacturing. His expertise includes the re-organization of underperforming project management departments. Ed also has over 14 years of corporate management experience.

Whos Managing The Business If Your Managers Are Managing The Integration? Successful Projects For Leaders. No portion of this document may be copied or distributed without the expressed written consent of the author.