"When a couple gets married, they should not move into his home or hers; they should build a new home together."

Merger/acquisition integration and organizational consolidations such as moving decentralized groups into a shared-services organization involve a "marriage" of two organizations.

The way you handle the integration process is critical to gaining the intended savings and synergies, retaining talent, and continuing operations without interruptions.

Risks

Combining two organizations does not, in itself, gain much. Under a single umbrella, you have most of the same people delivering most of the same products and services to the same customers.

Sure, you might deliver some minor cost savings by eliminating some redundancies, combining some vendor relationships, and gaining some economies of scale. But simply jamming together two organizations doesn't improve the way either works -- it doesn't create synergies.

If you then try to extract cost savings, you'll simply reduce the quality and quantity of services that the combined organization delivers.

There are additional problems you'll create if you're not thoughtful about the process:

• Confusion among clients and staff

• Morale problems, turnover, lost talent and institutional knowledge

• Lost insights by forcing acquired staff into existing structures and processes (rather than best of both)

• Perceived failure due to expectations which are impossible to deliver in promised time frames

Definition of Success

On the other hand, a well-designed integration process delivers all the synergies of a single, integrated organization -- an organization capable of significantly higher levels of performance than any of its components.

Beyond just the best of both, the integration process presents an opportunity for change that can be transformational.

Specifically, the goals of a high-synergy integration process include the following:

1. Build a single, integrated organization, designed to meet the needs of the entire client community (the customers of all component organizations).

2. Use the integration process to build a new, high-performance organization, using knowledge of the past but not the designs of the past.

3. Merge all five systems within organizations: culture, structure, resource-governance processes, methods and tools, and metrics and rewards.

4. Treat everyone fairly, and put the best talent in each job regardless of origins, and motivate staff rather than chase key talent away.

Integration Strategy: C-I-O

An effective integration strategy comprises the following three steps:

1. Consolidate: Put the organizations together under a common boss, leaving their extant structures intact.

   Staff are moved into the organization to give its leader legitimate authority to engage them in the process. But groups are left intact during this phase, doing what they always did for their customers. Don't break anything!

   While this alone gains no synergies, it gives one executive the legitimate authority to lead the integration process.

   Note that at this step, no savings are produced.

2. Integrate: Integrate the organizations.

   Incoming staff are moved into the appropriate groups. Even at this phase, staff go on doing what they've been doing for their traditional customers.

   Even if savings are expected, it is important to go through this step without headcount cuts, to build a safe environment for participation and to keep the organization running since synergies have not yet been gained.

3. Optimize: Each manager optimizes his/her newly integrated group to produce synergies and cost savings. This part of the process is ongoing and continual.

   It's not until this step that the promised savings and synergies occur, typically many months after the initial consolidation. Any attempt to harvest savings sooner (before the real productivity gains have been realized) leads to an under-resourced function that delivers a lower quality of service; fails altogether at serving some customers; and antagonizes staff and chases away people with critical institutional knowledge.

Of course, this strategy requires patience; an effective process takes time. On the other hand, a rush to savings causes serious harm in the short- and long-term.

Organizational and Leadership Issues

At each step of the C-I-O process, there are factual tasks that need to be done. But in addition, there are organizational and leadership issues that can make or break the process.

By considering both kinds of issues, the process should be principle-based, equitable, and highly effective at building teamwork and a spirit of "one organization" from the disparate parts.

Resources

Coaching: It's helpful have someone to talk to -- an executive coach -- to ensure that you're considering the organizational and leadership issues alongside the factual at each step of the process.

Book: Principle-based Organizational Structure: a handbook to help you engineer entrepreneurial thinking and teamwork into organizations of any size

Leadership briefing: Decentralization Versus Shared Services: why the tug-of-war, and how to have your cake and eat it too