Recently my son, a budding biologist, asked ‘Mum, why do only the same type of birds flock together? All birds can fly, so why don’t they do it together and then be able to fly even further and be better at finding food, shelter and protecting themselves from predators.’
Good question, son. I guess different birds have different wing spans and fly at different speeds. They communicate in different ways. They have different needs- they like different foods and live in different places. It would probably be very hard to implement a cross-species flock.
This is similar to the implementation challenges being faced by organisations attempting growth through cross-sector mergers and acquisitions.
Two years ago, a successful company CEO announced “We’ve purchased a new business ( lets call it ACME) at a discount to the value of its assets. The acquisition is a bargain and will enable expansion of current core services and offers for our customers. We look forward to the acquired synergies leading to significant business growth over time”.
Today, that same organisation is facing liquidity problems. Why? The purchase did not deliver the expected benefits, as happens in more than 70% of cross-sector mergers and acquisitions. In other words, implementation failed. The company didn’t integrate across culture, processes, technology and systems. They weren’t successful in flocking together to take flight.
Here are three things companies can do to ensure M&A integration reaps promised benefits:
1.Identify and fund for the real cost of change implementation, before the deal is done:
The original purchase of ACME did not factor in all the necessary costs to integrate across complex technology, systems, processes and most of all, people.
There are often enormous pressures faced by staff during implementation. Subject matter experts and other identified project leads are expected to deliver change while continuing to perform their day job. End users are expected to adjust to new ways of working, deal with duplicated processes, adopt new routines and adapt to new organisational structures and leaders, while continuing to keep customers happy. Executives are expected to sponsor a a variety of in-flight initiatives and be readily available to make timely decisions, while continuing to lead the organisation.
As levels of stress heighten under increased workloads and uncertainty, fear mounts…leading to a range of poor behaviours…leading to further distress, staff turnover, illness,litigation…and corresponding declines in customer service, reputation and market share.
Therefore, an appropriate implementation strategy that considers the real cost of implementation needs to be tabled up front, agreed by executives and funded for before the deal is done. This strategy should include back-fill and stress relief options for staff and other solutions that will ensure implementation is successful.
2. Create an enterprise-wide governance model to monitor the total portfolio of implementation work:
There will be plenty of additional decisions and activity needing attention as the organisation moves towards full integration. This will lead to a range of additional projects and work streams, requiring management as a portfolio of initiatives sharing scarce resources, risks and dependancies. A best-practice governance model, with bi-monthly executive reviews of project delivery and change collision maps*, aligned decision making and regular input from delivery teams will help to drive success.
3. Slow Down to Speed Up: The temptation is to implement as quickly as possible, however this can lead to chaos as scarce funding, project resources and end- user capacity is exceeded. The sequencing of implementation is therefore critical, even if it means slowing down activity in some areas. Consider this tennis ball analogy:
Imagine that I can purchase a tennis ball for $2 and earn $10 every time I get you to catch one of my throws. I have $40 to spend. What decision will I make?
Well, its likely that I will choose to purchase 20 balls with my $40, in the hope that I can get you to catch all of them and make myself a quick $200 revenue, or $160 profit.
However, if I throw all the balls to you at once, at most I will make $20, because you only have two hands. I will waste the other 18 balls, costing $36 and generating an overall loss of $16. Not only that, but its even more likely that Ill make no revenue at all as you become too overwhelmed with the pace at which balls are being thrown to be able to catch anything!
So, Its better to take longer in order to ensure that all initiatives are successfully adopted and embedded by the organisation, otherwise funding and resources will be wasted and other costs of capacity strain will occur.
Implementation and change is messy, chaotic and risky. However, enlisting the support of an implementation and change expert, to advise on the real price of change before any acquisition deal is done , help establish an enterprise implementation governance model and advise on sequencing of delivery is crucial for the success of corporate mergers and acquisitions.
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