“Pollyanna” is a best-selling novel written by Eleanor H. Porter in 1913 whose title character had an optimistic outlook no matter how dire the circumstance. Whenever Pollyanna found herself in a negative situation, she played the glad game and found something good in it. Companies commonly have a Pollyanna-like outlook when an integration is announced.
The integration glad game starts immediately.
The buyer convinces involved parties the integration will be simple because both companies use similar systems, share accounting practices, and have similar cultures. Enthusiastically touted are new opportunities to cross sell, the prospect of sharing a highly motivated sales force, and the potential cost savings associated with a smaller back office staff.
The buyer tends to look for the positives without planning for the real issues.
Reality is much different. Synergies are overestimated and pro-forma financials are rarely achieved. Companies find surprises once the acquisition or merger takes hold:
1. Customers may not continue to do business as expected
Customers often perceive doing business with a company in the middle of a merger as difficult. Interaction with sales, operations, and accounting can be confusing as those organizations are integrated. Familiar faces are replaced and relationships need to be rebuilt.
Loyalty is especially tenuous when customers perceive quality differences in the brands for similar items. Customers will assume the lowest common quality denominator.
The integration team should develop and implement a strategy to ensure customer interaction remains transparent and positive.
2. Financial incentives are not enough to keep the best and brightest from leaving
Competitors will be eager to poach high performing sales and operations staff from both companies. Recruiters highlight the confusion that will stem from integration activities and play on fears that one organization or the other will win out from a staffing perspective.
Offering retention bonuses to high performers is not enough. Rumors need to be addressed immediately. High performing employees should be involved in the integration activities, and their future role within the merged organization should be clearly defined and shared. Poor performing employees should be terminated as quickly as possible.
3. Aligning systems and data is more difficult than expected
No two companies share the same systems with the same configurations, and most integration advantages will not be seen if the companies remain on separate systems. Getting an accurate view of inventory or sales would be difficult at best. Even if both companies have the same software, data is never clean or ready to convert.
Arguments break out in defense of each system, and re-implementation is often required. A well-defined system implementation approach with a realistic budget should be developed and included in the integration plan. Initially, the two companies will need to run separately with manual financial consolidation. But once integration efforts are well underway, the new system should be implemented.
4. Organizational roles differ more than expected
Buyers assume the easiest integration efforts will be around the back office. But no two companies structure or run back office functions the same way.
Accounts Receivable in one company is responsible for handling claims, but Sales takes on that role in the other. And the list goes on. Tension between organizations will rise as responsibilities are reassigned. Customer service will suffer as employees focus on protecting their turf.
A clearly defined organization chart with roles and accountabilities needs to be developed and deployed. New, fit-for-purpose processes, policies, and procedures should be shared across the new organization.
While we do advocate positivity and optimism, we also know how to plan for reality. Trenegy helps companies successfully manage integration and realize the expected profits by establishing an Integration Management Office and developing and communicating a clear vision for the future state. We help our clients prepare for growth and change quickly and relatively painlessly.