3 Keys to Successful Integration Projects

by Matthew Carmen on April 11, 2011

Integration Projects

When a company goes through a merger, acquisition, purchase of a business unit, a strategic partnership, etc, there are activities that need to take place to make multiple entities into one cohesive unit.  These activities include: reaching the stated financial goals of the combined new business through operational and departmental combination, the selection of ongoing IT systems, and cost cutting initiatives.  All of these tasks, that create the new company, are integration projects within the larger program.

According to research done by the consulting company NGTO, over 50% of mergers are considered failures and 60-70% of these failures are due to significant misses regarding financial goals tied to the merger.  For public companies – and these are the mergers that people hear and read about – the financial goals are the key.  The true goal of a company is to grow shareholder value, be those shareholders stockholders in a public company or partners in a private entity.  If shareholder value is not improved by acquisition or merger, then what truly was the point?

Further research done by my own firm Datacenter Trust shows that when failure occurs, it is most often due to the stoppage of the integration process after reaching a portion of the total goal; say the merger of business units or reaching the financial goal set by the companies upon announcement of a deal.  By stopping the integration process, the new entity never reaches the strategic state that it set out to accomplish through merger.  Without reaching this state, optimal shareholder value is either not attained (as happens in most cases) or takes much longer and is more costly than was originally estimated.

Mitigating Integration Failure

As a financial professional with nearly two decades of integration experience, I would love to tell you that all the keys to success are based on dollars saved vs. dollars spent, but this sadly would be a lie. If I said all integration projects are successful, this too would be untrue. What I can tell you is that communication is the largest factor in a successful integration project.  Communication is followed closely by understanding – meaning that the people who will be doing the work must understand what the future state of the new organization is meant to look like.  Finally, there is program management – empowering the community that will perform the integration projects while having clear leadership and participation from the executive suite to ensure the program is aligned with the overall strategic vision. Now, lets look at these 3 a bit more closely:

Communication

I cannot stress enough that communication is the largest factor in the mitigation of integration failure.  The executive leadership of the company must ensure that the execution team understands the goal and the look and feel of the future state organization.  Leadership also must make it clear that they are willing and active participants in the program being developed.  Leadership must serve as the sounding board and approvers of each project so as to ensure the entire integration program stays aligned with the evolving strategic vision.  Without communication, there is zero chance of successfully integrating the new organization as advertised to stockholders, employees and the public at large.

Understanding

Understanding is an offshoot of communication.  I would argue that if the execution team as a whole does not completely understand the job at hand, then the notion of communication was unsuccessful.  Also, there cannot be any weak links in the execution team; everyone from the project managers to the network and database administrators must fully understand how their role will ultimately lead to success.  Without understanding, members of the execution team will invoke their own decision rules (e.g. loudest demands, squeakiest wheel, bosses whim, least risk to job, easiest activity, etc.)  Allowing this type of behavior is asking for trouble.  Integration initiatives have a finite amount of time to be completed and must be with the utmost skill and timeliness.

Program Management

Finally we come to program management; the company needs to get the best program and project managers available for integration.  This might even mean going outside the company to contract with consultants specializing in these types of integration projects.  As stated above, the project needs to be completed on time, on budget, and most importantly it must succeed in meeting the goals.  Setting up a ‘program office’ to manage integration properly is an imperative.  The program office manages expectations both up the corporate ladder to the executive suite and down to all areas of the execution team.  Management of the individual project managers is an important area of the program office as well.  With a limited amount of resources, each member of the execution team needs to manage his/her time down to the minute (remember, these team members have regular jobs as well) as the ongoing operations of the company need to take place on a continuing basis.

Countless other activities will help an integration initiative to succeed, but those I’ve covered here are the main three.  In the end, there are many intangibles that come up on a minute-by-minute basis during the project engagement.  The real key is to keep in mind that great people always lead to better results:  Empower the execution team while managing the alignment of integration and the new corporate strategy, ask for external help if needed, ensure leadership is fully engaged, and you’ll be on the path to success.

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