Consequences of Inadequate Strategic Framework for M&A Integration

Mark Herndon headshot
By Mark Herndon
Chairman, M&A Leadership Council
Jul 29, 2017

Have you ever heard the phrase “put the moose on the table?” That’s a humorous way of saying it’s time for a group to finally deal with the big, hairy issue everyone’s been putting off. A consultant friend and mentor of mine has an even better way of making that same point -- “let’s get the skunk on the table.” And today, that’s exactly what we are going to do by looking at the hard, stinking truth about what happens when executives fail to provide adequate strategic directional guidance prior to launching integration.

Before commiserating on the bad news, however, I have to make my viewpoint and motives clear. I’m a positive guy. I believe the right thing will generally prevail based on clear thinking, hard work and divine providence. If you’ve followed our previous discussions of the findings of our survey,  The State of M&A Integration Effectiveness Survey, I hope you’ve seen the positive and constructive aspects we’ve explored by analyzing successes and highlighting specific integration best practices proven to help you become even more successful – rather than focusing on bad outcomes and failure factors. 

"If your integration is floundering, perhaps your executive team should be looking themselves in the mirror..."

But the data is what the data is, and today, I was struck by two questions that we had almost forgotten. Both questions were “follow-up questions” or “branching questions” that were only asked to a subset of respondents based on how they answered the baseline question. In this case, the baseline question was essentially “Does your executive team develop a comprehensive integration strategy framework before launching the integration planning process?”

To us, the term “integration strategy framework” is a defined term. It means something specific, and we have discussed this mission critical aspect of integration success in a few prior blog posts including Bridging the Gap and Game Day Integration Strategy Summit, among others. Not surprisingly, survey results from The State of M&A Integration Effectiveness Survey indicated that establishing a comprehensive integration strategy framework prior to launching the integration planning process produced some of the greatest percentage differentials in success of any best practice in the survey. These findings have been featured in our recent webinar, Integration Practices That ‘Move the Needle’ on Business Results, and a few recent blog posts including Integration Practices That Drive Maximum SynergiesMinimizing Value Erosion During M&A Integration, and Keys to Achieve the Optimal Pace of Integration.

But what happens when you don’t do that? What happens when you take a "ready, fire aim" approach to integration, by failing to ensure clarity and executive alignment on the most important decisions, issues and risks needed to provide your integration effort fast traction on what matters most? That’s what hit me right between the eyes today. We’ve been so focused on emphasizing the upside of doing it right, that we almost forgot to caution about the down-side when it doesn't happen. So, let’s get that skunk on that table!

Today’s downloadable resource, Consequences of Inadequate Strategic Guidance for Integration, sheds light on this uncomfortable reality. Both questions listed on the attached slides were only asked to those survey respondents who answered the baseline question, “no” or “somewhat,” meaning that, by and large, their executive team did not establish a comprehensive integration strategy framework. In these follow-up questions, multiple responses were permitted based on the instruction to select all alternatives that applied. Respondents could also fill in additional descriptive comments.

Question 11 asked, “…what is the impact of not having adequate directional guidance on major integration issues?” 

Key findings included the following:

  • Decisions are made, but then changed, causing a lot of frustration and rework. (76%)
  • We make assumptions without knowing if those assumptions are valid. (71%)
  • Executives make decisions individually, but collectively there is no alignment. (57%)
  • Integration planning is delayed while we wait for answers. (52%)
  • We appear to the target company not to know what we are doing. (52%)

Question 12 asked, “…what categories of directional guidance are typically NOT provided when needed?” 

Key findings included the following:

  • Resolution of specific priority conflicts or resource constraints due to other projects already underway (60%)
  • Identification of specific goals, outcomes or results that must be achieved to call this deal a success (45%)
  • Commissioning of specific integration roles, responsibilities, timelines and milestones (43%)
  • Major strategic decisions that are needed before adequate integration planning can begin (38%)
  • Communication messages for customers, employees and other key stakeholder groups (35%)

If you’ve experienced any of these outcomes in the past, you certainly don’t need any editorializing from me to rub salt in the wound. But a couple of key application principles may help.

First, remember that strategic directional guidance is an iterative process. As many respondents pointed out, their goal was to provide as much insight and direction as possible, as early as possible, given the level of access and data that was possible at that particular stage of the transaction. Detailed working assumptions are often made and clearly communicated during the early stages of integration, and teams are challenged to further validate or upgrade working assumptions. More detailed strategic guidance is provided throughout the process, leading to more clearly defined plans with minimal delay, rework or course-corrections.

Finally, as we often coach in our workshops, integration success is ultimately a top-down, strategy-led exercise that requires superb, bottom-up execution. Many times, organizations can implement faster than they can decide. If your integration is floundering, perhaps your executive team should be looking themselves in the mirror rather than pointing out teams or milestones that are off-plan.

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