Determining the Speed of Integration

Senior executive teams consistently underestimate the time and energy required to identify, assess, and address the many decisions that arise when two complex organizations combine in a merger or acquisition. More than a few CEOs have done the glamour work of negotiating a deal and thereupon handed off the dirty work of meshing structures, systems, and procedures to operations managers. In successful combinations, by contrast, CEOs play an active role in the integration process and keep space available on their calendars for the many public and private activities required to steward a major organizational change. “We established integration as the number one priority for the year,” recalled the chief operating officer in a large mutual fund merger, “We made it very clear in our words and actions that this attention could be placed in no more important area.”

Balancing “Speed” with “Care”

How fast should the combination proceed? On the one hand, most involved want to move forward quickly—executives to capture synergies, managers to get refocused, and employees to get on with it or at least learn of their personal fate. Corporate staffers who prepare time projections for integration invariably overestimate the ease of combining operations and underestimate the costs and time involved. Indeed, one management consulting firm recommends to its clients that all employees be assigned new jobs or “sent home” within forty-eight hours of a combination announcement. This is nonsense.

Contrast that advice with the experience of a consumer products merger veteran: “You can come in and say, ‘you stay and you go,’ or you can be more careful. The careful model is much more time-intensive and stressful, but well worth the investment.” Or listen to a CEO who, midway through a combination, surmised, “I’ve learned to not move too quickly on integration decisions, because once you alleviate one concern you create another. So, I don’t rush.”

The senior executive has the choice of insisting upon quick combination decisions—and living with the consequences—or of directing executives to take the time to make more careful choices. Realistic timetables take into account the many tasks involved in the combination phase:

  • Validate the “real” versus “theoretic” synergies in the combination
  • Keep suppliers, customers, and other stakeholders informed and on your side
  • Develop integration and transition plans for all functions
  • Identify the best talent, systems, and procedures
  • Help people work through the Merger Syndrome
  • Address the ‘culture clash’
  • Handle appointments, departures, and layoffs
  • Train people on new systems
  • Learn from mistakes and disseminate the learnings

And all this while continuing to run the two businesses effectively and efficiently!

Realistic timetables also consider what is going on in the partner organizations aside from the combination. Is a crucial new product launch or an important industry event scheduled during the integration period? Is a significant upgrade to IT or implementation of a major change like a reengineering project anticipated? If so, the time and resources allocated to these events detract from managing the combination and should be reflected in expected timing.

Focusing and Prioritizing Executive Attention

The enormous number of decisions to be made in a combination can be overwhelming. I have worked with several companies to sort and prioritize integration issues in based on two dimensions—(1) their value to synergies and savings versus (2) the riskiness of integration:

  • Do It.  My counsel is to move quickly in areas that yield real synergies but are relatively easy to combine. Actions here do not require extensive analysis and debate; instead, you can put energy into developing and executing implementation plans.
  • Study It.  Areas that have the potential to produce high synergies and savings but are relatively difficult to combine require careful up-front study and should be the focus of transition task forces.
  • Get Around to It.  Areas that have relatively minor impact on synergy and savings, but are somewhat easy to combine, can be addressed less urgently.
  • Forget It.  Finally, areas that produce little gain in synergies or savings and are difficult to combine should be dropped from consideration; they are too fraught with conflict and there are too many other issues competing for (and more worthy of) attention.

Combination Success is a Non-Linear Process

Winning combinations follow a course of two steps forward and one step backward. With so much to do and so much at stake, progress in a journey from conceiving a deal to making it succeed inevitably produces some backtracking. Decisions have a way of coming undone, thoughtful actions can have unintended consequences, and changes in the business environment often necessitate midcourse corrections.

The most successful combinations I have witnessed are characterized by flexibility as the speed of integration is balanced with the risks of integration.  As the months of combination planning and implementation ensue, it is likely that conditions will change within the organization and that competitive pressures will change outside the organization.  However, knowing where leadership stands on the combination’s vision—and the principles and priorities that matter in getting there—builds employee confidence in the deal’s prospects and in their leadership in attaining.  And, it creates the context required for the transition teams to generate high quality integration planning and decision making.

Photo:  cloudave.com

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About the Author: Mitchell Lee Marks is a member of the faculty of the College of Business at San Francisco State University and leads the change management consulting firm JoiningForces.org. Over the past 25 years, he has been involved in over 100 mergers and acquisitions as a researcher or advisor. He is the author of six books on organizational change; most recently “Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions and Alliances” with Philip H. Mirvis. Dr. Marks is a member of the Advisory Board of the M&A Leadership Council. He can be reached at [email protected].