Focus on the "Vital Few"

Mark Herndon headshot
By Mark Herndon
Chairman, M&A Leadership Council
Jan 18, 2017

During a client engagement a few years ago, we presented the company’s executive staff with the rationale and strategy for a comprehensive process for tracking and measuring integration results. After the meeting, the vice president in charge of merger integration teased us for “messing up a pretty comfortable arrangement.” “Until now,” he explained, “our executive team and I have had a ‘don’t ask, don’t tell’ policy between us….I don’t ask what the next deal will be and they don’t ask me how this one is going.” Here’s a toast to simpler times – may the memories be pleasant. Now, onward to more effective ways to keep both the business and integration effort focused on key results during the heavy lift of integration!

"The “vital few” must be limited to no more than a handful of essential strategic, financial or operational outcomes of the acquisition required to call this deal a success.”

Most corporate integrators do a pretty good job of identifying a slate of integration metrics that help monitor the overall effectiveness or status of the integration process. After all, this is a core integration leadership and management office (IMO) function. Representative integration measures would typically include items such as synergies achieved; perception feedback collected from acquired staff and customers; on-time completion of tasks, or perhaps overall percentage of completion of the integration plan; integration budget variances; and the like. We would also advocate tracking against integration process objectives such as talent retention; customer retention; understanding of cultural and strategic imperatives; or other alignment and onboarding related measures.

Likewise, skilled acquirers typically know to highlight a variety of direct business measures as well as key proxy, or representative, measures to keep the integration effort focused on the overall stabilization and performance of the underlying businesses. In addition to the key financial measures, we would advocate identifying key internal business process effectiveness measures to highlight potential backlogs, adverse impact or delays that need immediate attention to mitigate potential value erosion.

Generally speaking, however, we routinely see one of the most important integration measurement tactics entirely overlooked or severely slighted. What tends to get overlooked? None other than the measurement of stated deal value-drivers, the actions required to achieve them and the results of accomplishing them. Years ago, my friend and colleague Don Robinson coined the phrase “integration-complete dashboard” to illustrate the fact that unless and until we accomplish these mission-critical outcomes, we’re not done!

To keep your integration team and combined organizations focused on what really matters, we’ve illustrated a version of value-driver metrics through an integration complete dashboard in Keep Focused on the Vital Few.

As the headline suggests, the “vital few” must be limited to no more than a handful of essential strategic, financial or operational outcomes of the acquisition required to call this deal a success. The vital few must be drawn directly from the deal’s value-proposition, business case or investment analysis. They must reflect the specific “deal-type DNA” of each individual transaction, and even in heavy consolidation-oriented deals, cost synergies are typically only one of the several vital few outcome objectives.

Once agreed and quantified by the executive staff, each major outcome objective should be directly linked to a handful of key tasks or sub-projects required to complete this outcome objective and staffed as special initiatives or “value capture teams” within the integration. Project status (i.e. “red, yellow, green”), accountabilities and timelines are tracked and reported to the executive staff as would normally be expected.

What’s different is that this slate of vital few objectives is what primarily gets used to focus, align and drive the overall integration effort, not the detailed functional checklists. These are clearly important, and no doubt represent essential dependencies for the success of the integration complete dashboard, but by and large won’t necessarily get your integration effort to the winner’s circle.

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