Successful integration defines any merger or acquisition. Stuart Crowther explains.
2013 is expected to be a busy year for company mergers and acquisitions, with many businesses recognising the need to grow to survive. But once the ink is dry on the deal, the real difficulty begins. A quick and efficient integration of the businesses is essential for the long term success of the new entity.
To give a merger the necessary gravitas and demonstrate the importance of the initiative compared to other business priorities, the ultimate responsibility for the integration must rest at the top. It is an understandable mistake for senior management to delegate the responsibility further down the management structure, but the constant need from subordinates for ratification of major decisions, can slow the whole process and stall the integration.
Putting people first
The phases of an integration project should always be the same, across all departments: people; propositions; process; and systems. This ensures the most critical and often most difficult element, the people, is addressed first.
The most important early milestone in the integration is the creation of a new “organisation chart”. From the outset, this has to have all departments listed with names against each of the positions, or it will be meaningless. If each team member understands their role, they will support the integration project more readily.
Experience has shown that despite a comprehensive communication presentation being delivered to all employees, the only slide each employee remembers is the one with their name on. And that’s why it is best practice to hand out copies of all slide material during these communication sessions.
The time needed to build a single, comprehensive organisation structure as described should not be underestimated, as merging two businesses often uncovers unforeseen complications when roles and experience are compared across both businesses.
It was a simple job title that caused a major issue in the recent merger of two large house-builders. Although titles described the role, surveyor, estimator, QS, commercial manager etc, each was then sub-divided based on experience. This breakdown to assistant surveyor, surveyor, managing surveyor etc not only caused an issue between the two companies, but surprisingly between regions within the same legacy business. Until the merger there had been no reason for absolute comparisons.
Expect the unexpected
Another process that will require more time than expected is rationalising “terms and conditions” across very different businesses. To be successful,
it should be done in the early “people” phase of the integration. Setting clear pay scales that are easily understood and comparable is critical. There will need to be a provision for “buying out” terms from employees to get everyone to accept a standard set of terms. This removes unusual exceptions such as the West Country “welly allowance”.
It is the “people” aspect of any integration that can typically bring the most savings, as the headcount can be reduced. Failure to get this right at the start will mean the company will have to carry the burden of extra staff costs.
Special interest groups within the business are excellent drivers for the integration. The new business needs to design a single way of working and these groups are an excellent way of facilitating the thinking, design and compliance. It is always surprising to see how radically different approaches to the same business activity can be taken by two businesses in the same Industry.
It will take weeks for all the departments to build their plans – significantly longer indicates a problem. A review cycle for the project must be established from the start. It is this frequent, often weekly, review of the plans that will help flush out blockages preventing progress, inter-departmental issues and threats to synergy savings.
The regular review not only ensures the management has a live summary of the project, but it forces progress. This is due to the competitive nature of departments and their desire to deliver expected targets or be seen failing to do so. But the pace at which departments complete their activities must be the same, as integration will run at the pace of the slowest department.
Although exciting for the business leaders, integration is unsettling for the rest of the business and any likely impact, good or bad, needs to be communicated quickly.
Not just another project
Many businesses still consider integration as just another internal project, but a growing number are discovering the advantages external expertise can deliver. External integration project managers have no aspirations of career longevity within the business, enabling tough performance-based decisions to be made that can challenge long-held views and opinions.
Stuart Crowther is managing director of Specific People, a consultant dedicated to helping businesses work through all aspects of integration and organisational change.
