top10 integrationmistakes whitaker&co_2013
TRANSCRIPT
Copyright © 2013, Whitaker & Company, Inc.
Top 10 Integration
Mistakes and How to
Avoid Them
Introduction
Integrations are disruptive. Period.
Expect your integration to disrupt operations and hamper business continuity.
Do not underestimate the preparation and work required to manage a
successful integration-they can be ugly, time consuming, and contentious.
Prepare for the worst, and expect the best as they say.
The following paper outlines 10 fairly typical mistakes and provides some
advice on how to avoid them.
# 1: Lack of Pre-Planning
Lack of adequate pre-planning is one of the leading causes of poorly executed
integrations. When integrations fall short of their objectives, 70% of the shortfall is
linked to inadequate integration planning & execution
Symptoms and Signs
No formal integration oversight authority or responsibility established
Limited or no risk assessment activities completed
Incomplete due-diligence documentation
No confirmed closing date
Confusion and anxiety among employees
Potential Outcomes
Integration gets off to a slow start and never recovers
Failure to deliver on synergy targets
Employee morale and retention issues
Customer defections
Major disruption to business continuity
Establish Integration Management Office (IMO) at least 30 days prior to deal close
Draft integration strategy to help prioritize workstreams
Complete operational and cultural risk assessments
Secure access to due-diligence documents
Draft integration charter and confirm governance (IMO should report into C-suite executive)
Confirm talent assessment process (if required) and get documents completed by Day 0
Steps to Address
# 2: No Formal Integration Strategy
Integration managers must ensure alignment between a company’s operating
strategy and the integration strategy to make sure your team is “integrating with
the end in mind”
Symptoms and Signs
NewCo operating model still in flux or undefined
Organizational structure still TBD
Integration objectives undefined or nonexistent
No executive support for integration resources
Potential Outcomes
Integration efforts may be incongruent with operating strategy
Limited to no ability for functional leads to prioritize integration workstreams
Integration will take longer than expected, and may even require a “do over”
Inability to deliver on synergy targets
Complete integration strategy strawman to help solidify direction and secure buy-in from executives
Complete integration risk assessments to inform strategy
Develop integration workstream prioritization framework
Establish Integration Management office (IMO)
If needed, help clarify business objectives to inform integration strategy
Steps to Address
# 3: Failure to Prioritize Workstreams
Without workstream prioritization, every functional integration plan and workstream
will be considered as important as the next, and it will be difficult to focus on high
priority workstreams that can deliver the most business value
Symptoms and Signs
Integration work feels overwhelming to most functional leads
Functional leads continually requesting more info on integration strategy and objectives
Senior management anxious regarding integration progress
Too many “low value” workstreams
Potential Outcomes
“Low value” workstreams dominate activity
Integration milestones slip
Synergy realization negatively impacted
Functional leads get frustrated and deprioritize integration work
Senior management becomes frustrated with integration progress
Ensure integration strategy, objectives and timetables have been communicated
Create integration workstream prioritization framework to assist functional leads
Where applicable, assign specific synergy or business benefit values to high priority workstreams
Make sure IMO office reporting output for senior mgmt focuses on high priority workstreams
When necessary, deprioritize medium/low priority workstreams if functional leads are having difficulty managing their workload
Have IMO office personnel assist with functional workstreams
Steps to Address
# 4: Senior Leadership Void
Integration Management Office and leaders need to report into a C-level executive
to ensure consistent focus and accountability. Also, IMO offices frequently need an
expedient escalation and issue resolution method to manage conflicts
Symptoms and Signs
Integration managers or IMO office reporting into a single function like HR or Finance
Confusion at senior executive level as to who “owns” the integration work
No sense of urgency among integration leads
Fluid post close organizational structure may mean senior executives are still “TBD”
Potential Outcomes
Integration work is deprioritized among functional leads
Negative impact on communication planning as no central office can be used as a pivot point for integration updates
Failure to achieve synergy targets within the specified timeframe
Lack of “quick wins” and success stories
Accelerate post close organizational planning to solidify leadership structure
Establish charter and governance from C-level office during pre-planning
Establish IMO as transparent extension of designated C-level executive’s office
Create issue escalation and decision making framework for senior executive team to ensure high priority issues get “moved up the chain” quickly
Steps to Address
# 5: Poor Communication Planning
Frequent communication to all stakeholder audiences is one of the hallmarks of a
sound integration plan. Poor communication planning can negatively impact
morale and even slow your integration down as people clamor for information
Symptoms and Signs
Executive communication reactive vs. proactive
Lack of established communication vehicles for acquiring organization
Limited risk assessment prework to determine high priority communication needs
Information sharing to date on as “as needed basis”
Potential Outcomes
Employee morale negatively impacted as they are “kept in the dark”
Customers confused as to next steps become prime targets of competitors
Employee defections (good people leave when they feel they are not valued)
Integration energy spent on reactive issues and putting out fires
Solidify key messages for each key stakeholder audience in advance of Day 0
Create communication plan matrix for Day 0 thru 90 days
Establish communication channels and vehicles (if needed-create new ones to support the integration)
Draft communications for senior executives to speed execution
Create simple but effective “rolling FAQ log” that can be updated weekly and shared with affected employees
Steps to Address
# 6: Poor Synergy Program Management
Synergies are typically one of the most important reasons why companies
undertake mergers and acquisitions in the first place, but companies fail to achieve
projected synergies over 50% of the time!
Symptoms and Signs
Synergy estimates are inflated, overly optimistic, and/or lack costs to achieve budgets
Timeframe to achieve is unrealistic
No formal executive or functional ownership of synergy targets
No connection between synergy targets and integration workstreams
Potential Outcomes
Deal fails to deliver on targeted value
Cost overruns due to poor estimates for CTA (costs to achieve)
Delayed integration timeframe
Synergy targets get dispersed among functions and become impossible to properly monitor and track
“Stress test” synergy targets during due-diligence to confirm projections and rework if necessary
Confirm cost to achieve (CTA) budgets
Confirm which synergy targets are the responsibility of the Integration Management Office
Confirm frequency and source of synergy reporting updates and coordinate delivery with IMO
Make sure synergy workstreams are clearly accounted for in functional workstreams
Ensure synergy related workstreams are always marked high priority
Steps to Address
# 7: Inadequate Resourcing
Integrations require dedicated time and resources, and poorly resourced
integrations and take longer, cost more, delay synergy realization and can burn
good people out
Symptoms and Signs
No formal scope or governance to guide resource planning and set expectations
Integration work treated as “second priority”, and everyone’s “day job” overwhelms integration work
No air cover from senior executives to support the need for dedicated resources
Good people avoiding integration work
Potential Outcomes
Delayed integration timeframe
“Revolving door” for functional integration leads
Burnout and resentment of integration work
Failure to achieve synergy targets
Failure to establish reliable resourcing requirements baseline for next integration
Create integration charter with formalized functional resource expectations and timing
Create job description summaries for functional leads
Scope and prioritize integration workstreams so functional leaders have a solid understanding of the level of effort and time required to complete integration work
Secure external resources to offload special projects and other integration work
Document time and resource expenditures to establish baseline and set expectations for next integration effort
Steps to Address
#8: Lack of “End State” Transition
Every integration needs to have an end. Planning for your end state is just as
important as planning the integration itself
Symptoms and Signs
Functional “end state” is undefined, confusing and functional leads are frustrated
No formal end date where bulk of integration activity should be concluding
Integration work and regular work is intermingled-making “end state” an impossible thing to define in the first place
Potential Outcomes
Delayed integration timeframe
Integration work becomes functional work and vice versa…meaning integration workstreams get deprioritized
Open ended integration workstreams become huge headaches for functional leads
Develop formal end state transition process with anticipated timing and clarified roles and responsibilities
Document deadlines and deliverables associated with the remaining open items
Make sure open integration workstreams are documented and handed off to functional leads via a formalized transition
Provide a full understanding of what has to be done, by when, and by whom. Make sure people have an understanding of the negative implications should the project get delayed
Steps to Address
#9: Poor Organizational Planning
Organizational design is a critical part of any “Newco” merger scenario, and poorly
planned and executed transitions can have adverse affects on the new entity
Symptoms and Signs
Competing business models and priorities linger well after merger closes
Too many executives and key leaders unsure of eventual role and responsibilities
Poor communication to rank and file regarding Newco organizational design and leadership structure
Potential Outcomes
“A” Players depart as they become frustrated with dysfunction and lack of communication
Temporary business strategies and practices become “hard coated” due to delays in solidifying new org design and leadership
Employees become demotivated and morale suffers due to fear of the unknown
Clarify Newco business strategy and operating principles as soon as possible
Accelerate organizational design and the “naming” of key executives-making it a high priority workstream
Make leaders aware of risks and side affects of delays-keep them informed and updated as to the consequences of delayed decision making
Make decisions on workforce reductions early and expedite the position elimination process so affected employees can quickly return to focusing on their work, or transitioning out of the company
Steps to Address
#10: No Formal Measurements
Collecting feedback from all stakeholder groups to continually optimize your
integration process is critical for making integration a core competency in any
organization
Symptoms and Signs
Information on previous integrations is confusing, hard to locate, and/or non-existent
“Feedback” is all via rumor mill and informal communication channels
No established process to address and correct poor practices
Potential Outcomes
Integration competency becomes “static”, never improving and most often getting worse
Employees feel they have no voice in helping improve execution and become passive
Acquiring company gets reputation as being insensitive and irresponsive to employee concerns
At day 100, initiate a formal process to collect feedback from Integration Manager participants and acquired company employees
Do a employee survey developed and administered through HR and implemented after any downsizing or RIFs (reductions in force)
Be sure to include a sample from: Senior management, Integration office (IMO) team members, Employees (from both companies), Consultants involved in project (if applicable)
Make sure the Integration Manager facilitates a “Lessons Learned” meeting with Integration Manager participants and functional leads to create an after action review document
Steps to Address
Whitaker & Company Overview
Whitaker & Company is an Atlanta-based consulting firm
specializing in post merger & acquisition integration.
Since 2005, Whitaker and & Company has been involved in
merger integration engagements totaling over more than $25
billion for both domestic and international companies. We help
companies realize the full value of their mergers and
acquisitions via a full array of solutions and services
Whitaker & Company President Scott C. Whitaker is an
accomplished executive with expertise in corporate strategy
and operations with Fortune 500 companies, and is the author
of Mergers & Acquisitions Integration Handbook: Helping
Companies Realize The Full Value of Acquisitions, a
comprehensive resource to help companies create a scalable
post merger or acquisition integration process that accelerates
operating and business benefit goal realization.
For more information contact [email protected]