M&A Challenges: The Case for Organizational Design Software

Transcription

1 M&A Challenges: The Case for Organizational Design Software Understanding the Trends, History, and Business Case The focus of this whitepaper is to help HR professionals, CFOs, and corporate executives understand how the challenges of integrating merger & acquisition projects can benefit from advanced organizational design solutions.

2 Table of Contents Overview 3 Trends and Challenges in the M&A Arena 4 Some key findings by leading analysts and consulting firms 4 Evolution of Organizational Management Tools 6 Early Stages 6 Expanding the HR Toolbox with HCM and HRIS 7 Enterprise-Class Organizational Design Software 7 Leveraging Advanced Organizational Solutions for M&A Success 9 Key Steps in the M&A Transformation Process 9 Maximizing Visibility, Collaboration, and Stakeholder Involvement 10 M&A Use-Case 12 Challenge #1: Visualizing the Current Organization 12 Challenge #2: Data Conversion 12 Challenge #3: Reporting to Leaders 12 Keys to Success 13 About Nakisa 14 Copyright 2018 Nakisa Inc. 2

3 Overview Chaos is order yet undeciphered. - Jose Saramago, Nobel Prize Winner Within today s dynamically changing business landscape, merger and acquisition activity has become an increasingly common route to rapid business growth. An effective option, but not an easy one. Bringing together separate organizations that currently operate in inconsistent ways, using different internal systems and processes, whilst maintaining productivity is chaotic to say the least! However, as would be expected through any major growth activity, this increase in M&A activity has created advanced optimization solutions to sort and streamline the process of organizational design, which not only bring order but can create a competitive advantage. M&A activity is not the only type of business change that can benefit from organizational design solutions. Business strategies often differ from focusing on organic growth to going through Reduction in Force (RIF) activity, or even reorganizing existing functions for better results may have significant day-to-day impact. In every case, strategic success depends on effectively aligning your organizational structure while achieving the overall business objectives. Some key organizational opportunity areas include: Creating and sustaining a skilled and motivated workforce Fostering engagement, communications, and collaboration Retaining valuable employees and minimizing unplanned turnover Defining skills-development, training, and development paths for employees Addressing the varied needs of a multi-generational workforce Nurturing workforce diversity, equity, and fairness Deploying analytics and systems to measure and improve the above goals Merging and streamlining multiple organizations for optimal efficiency and effectiveness Copyright 2018 Nakisa Inc. 3

4 Any business change requires extreme planning, preparation, and execution and in recent years there is an increasing pressure put on HR departments to provide these plans in a coherent, data-driven way. Capabilities for modeling, analyzing, and implementing defined strategies are now mandatory to allow for complete synergy business wide in these newly combined organizations. Trends and Challenges in the M&A Arena SIZE EXCEED THE LAST 12 MONTHS STAY THE SAME VOLUME CORPORATE PRIVATE EQUITY Industry analysts and research projects are clearly identifying the escalating trends toward more M&A projects, with larger investment amounts and more ambitious goals that are targeted to provide both strategic and tactical benefits across a widening range of industries. According to Deloitte s State of the Deal annual assessment of M&A trends, which is based on interviews with more than 1,000 corporate executives and private equity investors, both the size and the volume of deals will increase in Key findings from Deloitte include the following: 63% 63% of respondents anticipate the average enterprise size of transactions in the next 12 months will exceed those in the past year. Meanwhile, 34% of respondents expect that deal size will hold steady. OVER 1/3 More than a third (35%) of corporations with revenue in excess of $1 billion intend to pick up the pace on acquisitions, compared with 22% of smaller companies. At private equity firms investing more than $1 billion, 29% expect deal activity to step up significantly in the year ahead, compared with 12% among their smaller counterparts. Copyright 2018 Nakisa Inc. 4

5 You can see that acquiring technology assets now ranks number one as a strategic driver of M&A deals. 20% cite the acquisition of technology assets as the principal reason behind deals, up from 6% in the spring of Expanding customer bases in existing markets, and adding to product offerings or diversifying services, rank as the next two strategic imperatives. A new top 5 driver for M&A s is digital strategy in the #4 spot, with Talent Acquisition close behind at 9% having more than doubled in importance from the spring of 2016 when it sat at only 4%. This study also identifies the following strategic goals as the primary drivers for M&A activities: 20% Technology acquisition There are many key findings by leading analysts and consulting firms supporting the above conclusions. Gartner advises that M&A projects should follow a well-structured process: 19% Expanding customer base in existing markets M&A integration typically makes or breaks a merger or acquisition. Yet there is often a lack of cross-functional alignment to deal synergies and strategic drivers. Technology business unit leaders should apply a blueprint to improve success odds for this critical phase of M&A. 16% Diversifying products or services Regarding Tools & Technology, the Deloitte report observes: Almost two-thirds of respondents (63%) are going beyond the spreadsheet and using new M&A technology tools to assist with reporting and integration. Respondents say the tools help reduce conflicts, costs, and time likely key factors in making more deals work. 16% Digital strategy 9% Talent acquisition Copyright 2018 Nakisa Inc. 5

6 Evolution of Organizational Management Tools Before expanding on how the newest generation of advanced organizational management solutions can help optimize M&A results, it is useful to take a brief look at the evolution of HR tools and methods. Early Stages For decades, most organizational management and HR processes were primarily handled through a jigsaw puzzle of disjointed applications including spreadsheets, physical files, and ad hoc analysis projects. Not only did the use of multiple standalone processes and applications limit each company s ability to see the big picture, they also significantly hampered HR productivity and impeded timely decision-making. Barely able to keep up with routine organizational changes, this disparate set of tools was virtually useless for managing complex M&A programs. It s important to recognize that many organizations still use these outdated ways of working when it comes to M&A s and are subject to the resulting avoidable challenges. Copyright 2018 Nakisa Inc. 6

7 Expanding the HR Toolbox with HCM and HRIS The next evolutionary step in organization management was the emergence of Human Capital Management (HCM) and Human Resource Information Systems (HRIS) applications. Typically, built around application-specific data structures, these systems have generally focused on providing functionality such as: Core HR functions, including payroll, benefits administration, maintenance of employee records, compliance management, etc. Workforce management functions, such as time records, workforce planning, labor scheduling, budgeting, etc. Talent management functions, such as recruiting and retaining employees, training programs, compensation policies, succession planning, etc. Employee-facing portals such as HR help desks and self-service functions for employees and managers. Shift toward leveraging cloud-based technologies to extend, enhance, and streamline users access to data and applications Although these platforms have significantly improved companies ability to manage their workforce and employee data, because they are focused primarily on people management, HCM applications have not been particularly helpful for handling major organizational change projects such as merger and acquisition activity. In addition, since most companies have tended to custom tailor their HCM environments to their specific requirements, it can be problematic to try and combine this data across multiple companies, as is needed to support M&A projects. Enterprise-Class Organizational Design Software In contrast, the newest generation of Organizational Design and Change solutions are purposebuilt for maximum visibility across multiple organizations along with advanced modeling, analytic, and collaboration capabilities to support business and growth critical projects including M&A s. Copyright 2018 Nakisa Inc. 7

8 Key capabilities of these new comprehensive platforms include: Cloud-based architecture for accelerated user adoption, consistency of interface, scalable performance, and future-proof compatibility Unification of HR & business data sources with simple user-friendly tools to view and maintain core structures Flexible and customizable analytics, with outof-the-box metrics for fast start-up and nextgeneration predictive analytics Design capabilities with M&A modeling support allowing for what-if scenarios Visualize data from multiple scenarios through side-by-side views Secure and collaborative sharing of metrics, designs, and dashboards As far as functionality is concerned, we re seeing a shift from descriptive analytics to more predictive and prescriptive types Flexible and adaptive analytics is a critical element of these new Organizational Design software solutions. According to the 2016/2017 Strategic Workforce Planning and Analytics Tech Trends Report from Lighthouse Research and Advisory Built-in storyboarding capabilities to integrate and present plans and metrics Unification of data within a single-source-oftruth Ability to audit, normalize, and validate data from multiple HCM solutions Copyright 2018 Nakisa Inc. 8

9 Leveraging Advanced Organizational Solutions for M&A Success So how does all this apply to real-world M&A projects? It s now a fact of life that M&A activity is a part of the landscape of challenges that HR professionals need to be prepared to address. M&A can yield excellent results for accelerating growth, expanding markets, and leveraging new organizational synergies especially when the process is well managed. By leveraging modern organizational design platforms, HR leadership can make the difference between M&A projects that fall short and those that meet and surpass expectations. Key Steps in the M&A Transformation Process As with any complex journey, achieving transformative success through M&A depends on key factors: 1. Clearly understanding your starting point (current organizational structures) 2. Defining your destination (organizational goals for the M&A project) 3. Assessing the alternatives (modeling various organizational design changes) 4. Monitoring progress throughout the M&A process (feedback loops and change management) 5. Tracking change and effectiveness of change (Dynamic, coherent analytics and reports) 6. Measiring goal achievement (productivity, communications, employee engagement, etc.) Copyright 2018 Nakisa Inc. 9

10 Maximizing Visibility, Collaboration, and Stakeholder Involvement PENDING SCREENSHOT With the ability to unify all the data in a single platform, the team managing the M&A can proceed with visualizing and modeling a variety of different combinations, org structures, and reporting relationships that could be implemented for the new organization. This comprehensive design and modeling process needs to consider a wide range of factors including talents, skills, roles, and geographic locations to create a clear picture of the organizational alternatives. This is a very important step on the path to M&A success and cannot be overlooked or short changed. To find the optimal solution, you must flexibly explore and analyze several different approaches and compare the strengths and weaknesses before deciding on the best path forward. Timely modeling and analysis becomes critical as delays in determining the best way forward can unintentionally lead to the loss of key performers who may not be willing to wait and see where they end up in the merged organization. PENDING SCREENSHOT Even the best M&A plan is at risk of failure if it is not clearly communicated and understood by all stakeholders including top executives, line management, and employees. It s critically important that all the steps outlined above be carried out in a manner that also sets the stage for communicating the plans and engaging everyone who is involved with implementing them. Copyright 2018 Nakisa Inc. 10

11 M&A Use-Case The following sections illustrate some key issues faced by most large companies as they work through major M&A projects and posit how the use of Organizational Design Software can ease implementation. Typically, with tens of thousands of employees in the existing and acquired organizations, these projects require a high degree of scalability and flexibility. As anyone who has participated in such M&A projects can attest, the process can quickly become overwhelmed by an endless stream of unformatted data and unstructured information flowing from the acquisition without proper monitoring and controls. Challenge #1: Visualizing the Current Organization The first challenge is to fully understand the current reality of the organization. This typically is beyond the capabilities of in-house solutions that can t provide sufficient visibility. Organizational models need to be segmented, such as by division, by region, and by business unit, to understand and support operational objectives and available resources. The M&A effort needs a foundation to create a comprehensive plan based on existing realities, such as optimal spans of control, headcount, and department resource requirements. Challenge #2: Data Conversion The second challenge involves conversion of all the data from the merger or acquisition to meet the identified company s standards. This immensely complex process includes adaptation of codes, conversion of classifications, and significant formatting to ensure accurate mapping to existing conventions. Data conversion is a big challenge because it is often a moving target. If both businesses are fully functioning, things are continually changing. Therefore, in-house solutions that use a manual, labor-intensive process simply cannot keep up. Any M&A transition platform needs to provide a unified single-source-of-truth to reconcile and analyze the merged information. Challenge #3: Reporting to Leaders The third challenge is providing timely information and reports to business leaders. In most M&A projects, various stakeholders have different requirements so the M&A team needs to regularly extract leader-specific reports. Unless the solution is designed to efficiently extract a variety of information from throughout both organizations, this challenge can become overwhelming. The overall pace of change can often result in inconsistent reports based on fluctuating data. The ability to provide real-time, user-specific data from within the organizational transformation platform, greatly improves the effectiveness and speed of overall project management, reporting, and decision-making. Copyright 2018 Nakisa Inc. 11

12 According to one M&A team leader in reference to their specific experience: Above all, we needed to easily and accurately blend the organization into ours, but this translated into a very comprehensive set of requirements. The requirements they identified were: Visualize the new structure, pre-integration Continuously synchronize the acquisition s data to incorporate the constant changes Perform side-by-side comparisons of incoming and existing organizations then blend the two In-depth reporting and analytics on proposed organizations and structures to better align with stakeholders and decision-makers Support for stakeholder review and approvals Collaboration functionality to allow for streamlined communication of key actions with the business units, regions, and business partners Dynamic write-back of completed models to HRIS systems without manual intervention Blended together, all these capabilities enabled this company to visualize multiple M&A entities and to efficiently build-out new optimal organizational structures with speed and accuracy. The result of this M&A team leader using advanced Organizational Design software was: We were able to visualize the structure so clearly and see simple sideby-sides of the potential future and existing structures, in a single view. In addition, the solution had export features and natively supported collaboration with dispersed teams, including the ability to share reports, views, and models. This type of collaboration support was exactly what our team needed to support the iterations with the business partners and allow them to easily approve proposed structures and adjustments. Copyright 2018 Nakisa Inc. 12

13 Keys to Success Looking ahead, as the pace of M&A activity continues to accelerate, companies that have established well-disciplined M&A processes will have a significant advantage. As with any complex task, formulating a structured and adaptable methodology helps to make subsequent projects more efficient while also providing the ability to leverage the unique aspects of each M&A opportunity. The face of HR, including the trend towards increased M&A activity and the complexity of combining large organizations, means that traditional tools and processes no longer meet the challenges before the industry. Planning for success in all scenarios means having the tools to cover every aspect of the M&A process in a smooth and comprehensive way. The bottom line is that future competitive success will more often depend on becoming proficient at identifying, executing, and optimizing M&A opportunities. A key distinguishing characteristic will be agility, through a nimble but comprehensive approach to M&A implementation so that the projected payoffs from mergers and acquisitions are realized as fast and as fully as possible. Companies that recognize this reality and proactively plan for getting the most out of their M&A activities will ultimately be the winners in the global race to succeed. Copyright 2018 Nakisa Inc. 13

14 About Us A global leader in cloud business solutions for Organization Transformation and Accounting & Compliance, Nakisa delivers innovative, forward-thinking and robust human resource and financial management solutions that advance your business strategies. Nakisa serves 800+ enterprise customers and over 4 million subscribers in 24 industries. Nakisa is proud to work with some of the world s most renowned brands Contact Us Please visit for more information or info@nakisa.com to arrange a consultation with a member of our team. info@nakisa.com Tel: Copyright 2018 Nakisa Inc. 14