Organizational Issues of Mergers and Acquisitions - Part 3

Procedural Imperatives

Merging two or more organizations into one will require the integration of technology between the groups. Chances are many of the same business objectives are achieved utilizing different hardware and software platforms; in order to make similar business units function as one they must have the technology in place to enable their systems to communicate at the machine level.

The easiest way to achieve this is the migration of one group's functionalities to the same technology platform as the other. Selecting the best platform to use, however, transcends the possible technological superiority of one system over another. More importantly, there are organizational considerations to keep in mind. As an example, one group may use Oracle as their primary accounting database, the other may use SAP. Without getting into the relative merits of either platform, the main focus should be on the ease of transition from one system to the other from the perspectives of process, procedure, and organizational structure. It may, in fact, be easier to transition larger groups of individuals to a new platform. A large part of this decision will be based on the nature of the merger or acquisition, and which group bears the responsibility for corporate level activity.

Another very important aspect to consider is the anticipated procedural changes that will take place as a result of the integration of systems and business units. One author suggests that the traditional marketing mix of product, price, place, and promotion, there should be two more "p's" added: people and process. While it may seem like a radical idea to apply marketing principles to functions that are not readily visible to the outside world, the concept goes hand-in-hand with the convention of treating other business units within the enterprise as customers. (Boar, 2001)

Regardless of where the lines are drawn, integrating system functionalities between enterprises is an important aspect of standardizing process and procedure, and culturally integrating diverse organizations.

Technological Obstacles

There will be numerous technological issues to be faced when dealing with the question of systems integration or migration of a business unit's functionalities from one platform to another. Do the different systems use compatible communications protocols? Can alternate software applications run on the current hardware? Can the database entries from one system be transferred to the other without tedious manual entry?

...true integration is different from simply connecting different applications or computers together via standard network interfaces. True integration means integrating the organization's business data and business processes into a single logical representation, or "blueprint", so it is clear how everything fits or integrates together. (Orthner, 2002, p. 1).

From a management perspective, the decision of which platform to use will depend on software licensing costs, hardware and software life cycles, and the total cost of migration in each direction. Because of the complex nature of information systems and the level of interaction with a variety of hardware and software platforms, as well as the diversity of the user community, it is wise to expect the unexpected. It is virtually impossible to anticipate all of the obstacles that will be encountered during the course of a major systems integration project; budgeting for unforeseen technical problems will ease the pain and lessen the total impact to the project.

Communicating Change

In a perfect world, introducing a new or unfamiliar system into the workplace would involve detailed analyses of various platforms, manufacturers, and vendors, and the gathering of information about existing process and procedure from the user community to ensure the best fit. Systems integration in a post M & A environment is undoubtedly the furthest from perfect that will be encountered in the world of information technology. The decision of which technology to use will be primarily based on economic considerations, and the choices will be limited to systems currently in use regardless of the potential availability in the marketplace of the ideal platform to use in the newly created environment.

This does not mean that the principles of change management should be ignored in these situations. On the contrary, effective change management will become the most important tool that an IT staff can use to ensure a smooth transition from one system to another. Advance notification of the impending change and input from the user community will pinpoint areas that need to be addressed in the areas of procedural transition, training, scheduling, and the implementation process.

Fundamental to successful communication is the concept of procedural justice. Procedural justice is the extent to which the dynamics of a process are judged to be fair by those who have to implement the actions and, even more importantly, by those who are affected by the actions. (Boar, 2001, p. 306)

It is also important to keep in mind that a functional group comprises only one variable in a complex calculation. For example, changes in process and procedure in the accounts payable arena will most likely have an effect on the daily routines of shipping and receiving, materials procurement, inventory control, etc. As much as humanly possible, these effects must be anticipated and taken into account when planning a system implementation.

"Any discussion of systems involves the notion of interdependence. Simply stated, interdependence suggests that a mutual dependence exists among components or units of a system. A change in one component brings about changes in every other component." (Pace & Faules, 1994, p. 43).

The potential effects of changes to process and procedure must be taken into consideration and analyzed carefully during the planning stages of any implementation project. In addition, post-implementation reviews should be conducted to ensure that any unforeseen side effects are examined and resolved quickly.

The Learning Curve

As users become more familiar with new systems, their rate of knowledge absorption will increase in an exponential versus a linear fashion. Hardware platforms are, for the most part, invisible to the average end user; the applications interface for any system comprises the bulk of the training regimen that needs to be addressed by the transition team. For this reason it is important to plan and execute a realistic training program, which should begin with an assessment of the current knowledge level of the user community. While it is impossible to tailor an educational program to each user, a realistic evaluation of a group's general comprehension of technology will be of tremendous significance when preparing an instruction agenda.

The user training process should also be an educational vehicle for the transition team itself. As the user community is introduced to and trained on different systems, the groups responsible for teaching the users should be cognizant of the learning opportunities related to the process and procedure of instruction. Effective teaching is a combination of science and art; both of which rest on a foundation built from successful communication practices. The measurement of a good training system is the knowledge and ability the user can display when the instruction is thought to be complete. Implementation and training methods should be constantly reviewed, revised where deemed appropriate, and knowledge must be shared between team members and groups to achieve the maximum benefit from shared experiences.

...most large enterprises have hundreds of applications, dozens of hardware and software platforms, and an elusive goal of meshing them together into a single enterprise-wide information resource.

Ironically, integration projects themselves often follow (a) siloed approach, (which) can be successful for a one-off project, but for multiple projects, it's almost always a costly and labor-intensive option. (Fryman & Polly, 2004)

The salient point to consider in a post M & A scenario is that the educational experience should be viewed as an enterprise-wide, multi-directional process. Only in this manner can a corporation gain the greatest value from the considerable efforts expended to create a cohesive whole from many disparate elements.

References:

Boar, B. (2001). The art of strategic planning for information technology (2nd). New York: John Wiley & Sons.

Orthner, R. (2002, August 15). Have you been satisfied with your integration efforts? Retrieved September 5, 2004, from http://comment.cio.com/weighin/081502.html

Pace, W. R., & Faules, D. F. (1994). Organizational communication (3rd ed.). Englewood Cliffs, NJ: Prentic-Hall.

Fryman, H., & Polly, M. (2004, July). Introduction to Integration Competency Centers. Retrieved August 14, 2004, from http://www.darwinmag.com/read/070104/integration.html