Pardon me while I point out the elephant in the room. Providing adequate integration project staffing is a challenge whose time has come.
This year’s surge in M&A activity has spotlighted a previously existing weak point in most acquirers’ internal M&A capabilities. Namely, how do you get the integration project resourcing component right? How do you ensure adequate integration project staffing with the right experience level, the right amount of resources and duration of assignment? How do you ensure both the functional skills and the integration project leadership and management expertise? Perhaps most critically, how in the world do you strike the right balance of time allocation between each person’s normal “day job” and their very demanding integration work?
"Surely this is at least one fundamental reason why so many deals continue to underperform. "
The complexities of answering these questions explain why the importance of adequate integration staffing / resourcing was cited in two different aspects in our recent survey, The State of M&A Integration Effectiveness 2014. When asked, “What is your most important breakthrough or best practice with integration?” and “What is your greatest remaining obstacle that you must overcome to achieve more consistent integration success?,” adequate staffing with experienced integration resources was the #1 answer to both questions!
To help you get some leverage on this important issue, you’ve got to check out Business Impact of a Best Practices Integration Staffing Model. The first chart in this resource indicates the basic frequency responses when we asked, in essence, “Describe your typical approach to staffing an integration project team.”
It will come as no surprise to us weary warriors most likely to read this blog, that a full 60% of survey respondents replied “Do Both,” meaning that integration work is expected to be done in addition to your normal day-to-day job. Other response options included: Prioritize and Backfill (21%); Interim Project Resources (12%); and Permanent M&A Resources (7%).
So what do you think is the business impact of the "Do Both" staffing approach on your ability to achieve your integration priorities and synergies? On customers? On legacy and ongoing business priorities? On your staff? On your ability to respond to new strategic opportunities or internal priorities?
Is it just me, or is it just downright silly to spend hundreds of millions – or potentially billions – on a strategically important acquisition, but then fail to provide adequate brainpower and muscle needed to actually accomplish the intended value proposition of the deal? Surely this is at least one fundamental reason why so many deals continue to under-perform.
We believe we can now shed some light on this topic in a way that will help support your case for providing adequate integration staff resources.
While we haven’t formally published the full results of our survey yet, I’m so intrigued with the results, I’m letting you in on as much early data as I can. With the help of the University of Texas at Dallas, and a leading PhD statistician, we recently completed a round of additional statistical analysis including regression analysis and predictive modeling to help us determine the specific integration processes, best practices and skills that are highly correlated to substantial improvements in essential business results. In many cases, we found a 50%, 75%, even 100% or more performance differential between those organizations that apply these best practices and those that do not.
The second chart in this week’s downloadable resource shows the “top ten” most improved business results directly linked with a “best practices integration staffing model.” To provide context, let me explain just a little about our analysis methodology to help you interpret these findings.
What do we mean by the term, “a best-practices integration staffing model?” It comes down to what our statistician called the “dead or alive analysis.” In this view, we isolated all respondents into one of two buckets. First, what most acquirers do today (e.g. “Do Both”), and second, ANY and ALL of the other responses (e.g. “Prioritize & Backfill; Interim Project Resources; or, Permanent M&A Resources.”) Our logic was really complex. You ready for this? Our thinking was, “OK, anything has to be better than THAT!” – i.e., the old “Do Both” model. With me so far?
Then the real fun began. The next step was to conduct a regression analysis of the “dead or alive” buckets, against the 20 or so “business result outcome” variables that we chose to capture in our survey. Remember our goal in this was to determine which specific integration processes, best practices and skills were directly linked to improved business and integration performance, and by how much.
Back to the second chart. Based on this regression analysis, what this indicates is the percentage improvement in each of the business result outcome variables listed on the vertical axis. There were others, but these were the “top ten,” and in this case, this effectively captures major findings on this specific “input variable” of integration staffing.
I’ll point out more about our regression analysis methodology in the future, but for now, let me headline it this way. We compared only “success to success.” In other words, our principal focus was just that portion of the data where respondents said they “typically meet or exceed” their business result outcomes, such as those listed on the vertical axis of chart 2. The key finding is the percentage differential between whether integration best practices were used or not.
For example, look at the first line on the bar chart “minimize value erosion.” In sum, and based on this data set, this analysis indicates that if you adopt ANY of the staffing models other than “Do Both,” you will be 69% more likely to minimize value erosion than those organizations that only staff with the “Do Both” model. Other results are equally impressive, with a 38% improvement in overall business results; a 38% improvement in achievement of cost synergies; and a 35% improvement in managing with the appropriate pace of integration.
Now that’s what I call stacking the deck for success!