Dealing with structural change, by PIPC’s Bernie Levins

For many captains of industry, the last year must have seemed like attempting to steer a vessel in a storm only to find the navigational maps out of date and no shoreline in sight. For those in banking especially, business activities were transformed beyond precedent; previously revered institutions were bankrupted, while those that survived – with or without government intervention – have faced calls for wholesale change.

Such structural changes are likely to be driven as much by politics as by market forces and will stretch many banks already working at full capacity just to keep the show on the road. Regulatory change will undoubtedly account for a great deal of time and attention from senior management as will mergers and separations – in part a result of some clever business deals, but also instigated as a consequence of the European Commission’s desire to see smaller, less powerful commercial interests in the financial services sector.

Acquisitions and divestments can be exciting, but there’s a danger inherent in these deals, of which all those involved should be aware. Over half of mergers fail to bring the anticipated benefits and they require substantial hard work in planning and execution to ensure they’re successful.

During the deal-making phase, planning for the post-acquisition is often an inconvenient after-thought rather than a key consideration. This is a huge mistake. Typically present at the deal-making phase are any number of advisors - bankers and legal counsel to name just two. However, such advisors are usually incentivised on doing the deal not on the downstream success of integration.

Once through the deal-making process, the hard work really begins. Should your business be faced with such change and you find yourself involved, there are five simple principles that will give you a far greater chance of success.

1) Have a clear and well-architected design as to what the end state will look like

Sounds simple, but this factor is often the root cause of integration difficulties, resulting in a tortuous technical process to knit together disparate systems and data structures. The Target Operating Model must be decided upon logically and without prolonged debate in an attempt to achieve consensus within the business - a consensus that will almost certainly never be accomplished. There may be good reasons why certain systems and processes are better than others, leading the business to adopt a ‘mix and match’ route in order to achieve a utopian ‘end state’ design. However, such a state rarely exists in this world and trying to achieve it via integration will probably result in prevarication around decision making, an unachievable end state design (given time/cost pressures) and a heightened operational risk profile that the enlarged organisation cannot afford.

2) Integration/separation versus optimisation should be no contest!

The post-acquisition period is a time that business expectation for IT-enabled change must be managed effectively - with a need to look towards other, more business oriented, avenues to drive revenue growth. Integration must be the priority. It must only be eclipsed by keeping the show on the road or mandatory imposed change, with the priorities of the enlarged organisation clearly set on driving integration success and not adding unnecessary change to drive business performance. This is not the time for fixing every operational issue en route or pandering to internal pressures to add additional functionality to the business operating model. This is a time to look at ways to take complexity (and change) out of the plan not add unnecessary change to it.

3) Do not strive for planning perfection: it will never be achieved

Aiming to create an integration plan that answers all of the questions before the organisation moves into the execution phase will just result in integration delays, not a perfect plan. Events will occur that no amount of planning will foresee. The art of successful integration will be in how the organisation navigates through these points of pain as the layers are peeled back one by one.

Having a clear 30/60/90 day planning cycle will be vital to driving this crucial post-acquisition stage, during which it is anticipated that an audit of the acquired IT platform will be completed, target architecture assumptions confirmed, core workstreams initiated, decisions made about the high priority IT systems, and executive approval for detailed plans obtained.

4) Single accountability and dedicated focus on delivering Integration

Of crucial importance to the effective transition from concept into actual implementation – creating the momentum to succeed – will be the importance that an organisation places on the integration activities and the team that it mobilises. Managing the delivery of a successful integration (or, for that matter, any major change programme) is not a part time activity, nor is it for the uninitiated. A dedicated, experienced programme management team needs to be appointed, with firm hands-on executive sponsorship being vital to create the momentum to succeed, inject speed to decision making and create the relentless focus on achieving the desired ‘end state’.

An organisation must avoid falling into the trap of interleafing integration activities with business as usual and assuming good people within the business or IT function will slip seamlessly into programme/project management roles to drive forward a complex integration programme.

5) Manage the market and communicate like mad!

Restructuring operations creates uncertainty in both the external market and with employees in both organisations. Work hard to constantly communicate the logic of the acquisition, the integration or separation plan, and the progress being made against it. The importance of this cannot be overstated.

In conclusion, there is by no means a one-size-fits-all model to follow when it comes down to integrating two businesses, whether as a result of a full-blown merger or acquisition or following the divestment of a business unit. However, success can be heavily influenced by not losing sight of the above principles; setting the right direction, creating the momentum, and ultimately getting the IT and business organisations fully engaged at the right time to prepare for the task ahead.

Bernie Levins is Head of Financial Services consulting at PIPC, a leading project and programme management consultancy responsible for some of the largest business transformations and post-acquisition integrations in corporate history. Founded in 1992, the firm operates globally from 14 international offices across over 25 countries. www.pipc.com