In good company
IT STARTS with a few whispers. Then it gradually builds into a low rumble. There's nothing official yet, but the mere hint of a merger or acquisition in the works is enough to set off a frenzy of speculation about what the new company will look like. Visions of doom and gloom cloud the air. And then, when it's actually a done deal, chaos erupts—bringing projects to a screeching halt.
There are, of course, some basic ways to avoid that unpleasant scenario. Establishing early and constant communication with team members and setting realistic expectations before, during and after a merger can go a long way toward securing goodwill and project progress.
Yet rarely does senior management make such an effort, says John C. Bruckman, Ph.D., managing director at Change Management Group, a consultancy in Ashland, Oregon, USA. “The lawyers and executives make the deal, then they think their job is done,” he says.
BY SARAH FISTER GALE * ILLUSTRATION BY DOUG ROSS
The lawyers and executives make the deal, then they think their job is done.
—JOHN C. BRUCKMAN, Ph.D.,
CHANGE MANAGEMENT GROUP,
ASHLAND, OREGON, USA
Executives tend to dramatically underestimate the time a merger takes to complete. “They expect it to be wrapped up in three to six months, when it actually takes an average of 18 to 24 months,” he says.
During that time, the financial teams and executives who drive the merger or acquisition are typically so focused on the end-goal that the day-to-day business flounders. And that has a ripple effect through the business, employees, customers—even the portfolio of projects.
NOT SO FAST
Genzyme, Cambridge, Massachusetts, USA, has had plenty of practice managing its acquisitions. Deals happen almost annually as the biotechnology company snaps up smaller firms to expand its expertise and product line.
“The nice thing about the way Genzyme does acquisitions is that the project managers are embedded in the business units, so it's rare that one unit will have to handle multiple acquisitions,” says Ellen Ridge, vice president of portfolio management. “However, since we are a relatively small organization, we make an effort to share our experiences and lessons learned.”
That knowledge-sharing has helped streamline the company's integration process for new acquisitions, with many project managers using the same tools Ms. Ridge developed several years ago.
When it kicks off a deal, Genzyme establishes teams of experts from both companies to transfer ongoing project information, establish roles, identify deliverables and communicate a sense of urgency about the impending change. “In the early phase, we plan in days and weeks,” she says.
A big part of that initial process is bringing the new company's products and projects into Genzyme's development path. “We begin by having a series of thorough up-front conversations with a cross-functional team of people from the new company so that we understand the plans they have already developed,” Ms. Ridge says. “It's easier to secure buy-in for the change if you show that you appreciate what they have already accomplished and let them know that you are invested in moving their work forward.”
Genzyme also initially relies on basic and familiar project tools. So instead of forcing the acquired company to embrace a custom software tool during the integration, Genzyme uses Excel spreadsheets and Word documents to set a baseline plan for near-term activities and puts all critical information into a neutral format.
Once the initial plan for integration is launched, the teams start to look months out, using the time to transfer knowledge and make any necessary layoffs. Only after the deal is closed does the company do long-range planning.
“The short-term approach helps us focus our people on the task at hand, and helps the people on the other side, who may still be in shock, start looking at their own future plans,” Ms. Ridge says.
Genzyme also provides incentives for key employees from the acquired company to continue working on their ongoing projects for a set amount of time. This is especially important if they're a part of a project that spurred the deal.
When Genzyme acquired AnorMED in November 2006, the biotech firm was in the late stages of developing Mozobil, a drug that aids in releasing stem cells into circulating blood where they can be collected for transplant. The project's core team was retained for a year and allowed to remain in its offices in British Columbia, Canada.
“Instead of making them come to us, Genzyme people spent three to four days a week in British Columbia for months to make this transition process easier,” Ms. Ridge says. “We knew a more gradual transition would ensure greater knowledge transfer, and it helped us feel more confident that the project would continue to advance in what we knew was going to be a tumultuous period.”
And it was indeed tumultuous.
“Acquisitions are nerve-wracking, and it was a contentious few months,” says Sherwin Sattarzadeh, principal associate for regulatory affairs for Mozobil, and one of those key players kept on the project.
One of the most difficult parts of the acquisition process for his team was stagnation on the Mozobil project, he says. Once the project team began considering an acquisition, AnorMED wasn't allowed to make any new decisions until the deal was set.
“We spent four months not getting anything done and taking a lot of long lunches,” Mr. Sattarzadeh says. Even after the purchase was final, the first two months were spent bringing the Genzyme teams up to speed, deciding who would be eliminated and creating new strategies and teams for the project's future. “Mozobil is in better hands now, but the delays could have been handled better if they hadn't laid off so many people so early on,” he says.
One of the biggest mistakes companies make in mergers and acquisitions is to eliminate key players before the transition is complete. This early housecleaning fosters resentment and usually leaves too few people with too many responsibilities.
Dramatic early layoffs can be shortsighted, says Josie Wilson, Ph.D, acting dean of the College of Arts & Sciences at Southern Oregon University, Ashland, Oregon, USA. She learned that lesson recently when the university merged three schools, combining 27 departments into 15—representing 75 percent of the university in terms of budget, students and faculty.
Working with two other deans and a few staff members, Dr. Wilson was in charge of the team evaluating and managing key tasks, such as defining a centralized way to store files and determining which schools and departments should be combined.
“Initially it felt overwhelming,” Dr. Wilson says.
The situation became even more intense when the two other deans on the team lost their positions in administration as the schools merged. At the same time, key supporting staff left or were reassigned.
“It would have been helpful if the core team had been able to remain in their positions through this process,” Dr. Wilson says.
To avoid such chaos, executives should move slowly when planning layoffs and think carefully about the impact of their decisions. Senior managers should also realize they're usually better mentally prepared than the rest of the staff during a merger because they've been planning it for months.
“Everyone on the ground is burned out and emotionally exhausted, and the administration doesn't realize it,” she says.
PICK AND CHOOSE
Project stagnation is a common problem many executives don't plan for, says Mitchell Marks, Ph.D., founder of joiningforces.org, a change management consultancy in San Francisco, California, USA, and a professor in the college of business at San Francisco State University. Senior management assumes it will be business as usual for both companies. But even in the best-case scenarios, ongoing projects will struggle while a merger or acquisition is pushed through.
“It's unrealistic to expect to keep everything going as it was,” he says. “A more realistic approach is looking at how to minimize the downside.”
That means taking a good, long look at which projects or milestones should be pushed forward, which can be put on the back burner and which ones should be given up all together.
The project management offices on both sides should reassess the rationale behind each project decision in light of the merger and adjust accordingly, Dr. Marks advises. Critical projects, such as new products, should continue, while others, such as information systems upgrades, should probably be shelved until the deal is complete.
“Leaders need to bring their teams together to prioritize work on ongoing projects, and they should communicate expectations for the coming months,” Dr. Marks says. “Even if all you can say is, ‘It's going to be a rocky road,’ it's a good way to manage the stress that people will be under.”
Project managers are typically at the mercy of the acquiring company when it comes to project management methodology. The dominant organization may have its own way of doing things or it may want to embrace some or all of the new company's methodologies, he says.
By embracing some of our methods and learning Spanish, [SKM shows] their respect for us, and that's very good.
—JORGE NEMIÑA, PMP,
SINCLAIR KNIGHT MERZ (SKM) CONSULTING,
“It's important not to focus on who's right or wrong, but rather to define the project charter as specifically as possible as you move forward,” Dr. Marks says.
And sometimes a merger or acquisition can be an excellent opportunity to evaluate project management methods in both companies, says Mark Gray, PMP, senior project manager at NXP Semiconductors, Caen, France. After its latest acquisition of Silicon Labs in Austin, Texas, USA, the company is looking at what it can learn from its new colleagues and how it can help them integrate with NXP culture, as well as how methodologies can be improved on both sides.
“This is an informal exercise at this stage, reaching out rather than forcing,” he says. “We are using the merger as a trigger to do some spring cleaning in the existing NXP methodologies and processes.”
Whatever side of a merger project leaders land on, the most important thing they can do is be open and honest with the team and protect it from the turbulence as well as they can, Mr. Gray says.
“Be willing to defend what you consider best practices by selling them to the new organization. Reject any negative thinking and have an open approach to sharing information,” he advises. “The upper management has made the decision to merge these organizations and is having some difficulties. So the various team members should stop complaining about it and turn it to their advantage.”
Cultural and language issues can also cause strife during mergers—particularly when the companies are based in two different countries, says Jorge Nemiña, PMP, project control manager for Sinclair Knight Merz (SKM) Consulting in Santiago, Chile. He's still dealing with the fallout from the 2005 acquisition of his former employer Minmetal, a Chilean mining consultancy, by SKM, a global project delivery organization based in Sydney, Australia. “SKM brought a new system, a new culture and a new language,” he says. “There were a lot of problems.”
The most obvious challenge was the fact that the Minmetal staff spoke Spanish and the SKM teams spoke English. “That continues to be a barrier for us,” Mr. Nemiña says.
To combat the problem, SKM now supports English-language training for all employees and encourages English speakers to take Spanish.
But even when they're speaking the same language, the two companies have different definitions for key project management terms. For example, Mr. Nemiña's teams describe work in progress in terms of the earned value up-to-date, while SKM teams define it in terms of the income associated to dollars spent.
Mr. Nemiña urges any company going through a merger to clearly define a set of business terms for both teams as a way to avoid confusion.
Fundamental cultural differences have also caused problems in the way the two groups manage projects. “In Chile, we start using project management methods once a project begins, while the SKM teams believe the client requires project management support during the decision-making process,” he says.
Although it has been a rocky road, Mr. Nemiña reports the SKM teams have been appreciative of what Minmetal brought to the table, and that has helped his people support the transition. “SKM bought us because we are successful and we help make SKM a unique company,” he says. “By embracing some of our methods and learning Spanish, they show their respect for us, and that's very good.” PM
PM NETWORK MARCH 2008 WWW.PMI.ORG
MARCH 2008 PM NETWORK