One is: “Don’t include ‘nice-to-have’”
By Paul Schaus, president, CCG Catalyst,
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Based in Phoenix, the company provides strategic guidance for banks, and other financial services organizations. It specializes in conducting strategic planning and implementing recommended solutions. www.ccg-catalyst.com
No Fear Eight steps to a smoother systems merger
Congratulations (and condolences)! You just won a bid to acquire a failed institution. Or perhaps the friendly acquisition of an institution has just been announced by executive management. Either way, you’ve been given a directive to get the two organizations marching to the same beat on the same platform as soon as possible.
It’s a daunting task.
There are several things that to consider and things to put into place to help ease the hard work of integrating two organizations. Think of them as integration do’s and don’ts. Here are eight of them—applicable to any size bank.
DON’T attempt a “merger of equals”
Some mergers will be billed by management as MOEs. But as far as IT is concerned, you want to create one bank, not two. The “Best of Both Worlds” strategy is often the worst strategy and brings traumatic destabilization to both banks. An overly democratic process usually inhibits team reconstruction and significantly stretches the timeline as decision making takes too long. Make it crystal clear that someone is in charge and decisions once made are final, as the next point discusses in more detail. Culture change should be guided by where the new, combined bank needs to go, not where it has been.
DO establish leadership and governance
Someone has to be in charge or the project will flounder. As challenging as it is to get the timing right, sorting out the competing needs of separate and powerful interest groups can be even tougher. Too often banks simply relinquish control to the technical specialists in IT. Not surprisingly, tech specialists focus on the best solutions from an IT perspective. Important business decisions defining the combined bank’s products and services may be based on the ease or difficulty of the technical implementation.
In contrast, when business units take the lead, the approach may become overly protective of customers, existing products, or business practices by limiting changes that affect them. This may incur enormous technology costs and use up significant time while just maintaining two status quos.
A bank that establishes a strong and active Steering Committee has a high probability of success. This committee directly oversees the creation of a merged bank vision and approves the strategy to achieve this vision. The group makes final decisions on budgets, products, and project scope. To unite the efforts of various constituencies, the Steering Committee includes management representatives from all key stakeholders: business units, product teams, operations, and the technology team.
A second group does the day-to-day work of running and managing the project. This is the Integration Team. This group is typically made up of line managers from the business units, product specialists, operations, project managers, and technical specialists. The team will debate every issue, every gap, and every routine to develop and implement the proposed migration. It will make recommendations to the Steering Committee on options for issues that need executive-level resolution.
Successful integration projects have a single manager responsible for the overall project who reports to the Steering Committee on a regular schedule. He or she is the point person for communications and problem resolution. Many banks also retain a consulting firm that specializes in post-merger integration projects.
DO choose a system platform
At the beginning of the integration project, a discussion of which platform survives is the critical decision point. By default, the acquirer’s technology platform is the platform of choice, but it could be the acquired technology platform that survives. In making the decision, the teams must determine which system platform best supports the combined product set and planned new products. The selected platform must have technology that not only is sustainable over the long term, but can handle the expanded customer base the migration brings, and fits into the merged bank’s overall system architecture. At the same time, the platform must not be so complex that the bank will lack the necessary resources and skills to support it.
Essential to these decisions is how risk will be minimized and how the impact on customers will be controlled. The integrated platform must also take into account the needs of the business units while being deliverable within the overall time lines for the merger.
A mix of systems is normally not the best plan due to the level of complexity. The risk is high as system knowledge is not with one party. It increases the effort involved with testing and training while raising the visibility to employees—you want transparency. And let’s not forget the customer.
The mantra for a merger project should be K.I.S.S—Keep It Simple and Straightforward. An integration is hard enough without adding unneeded complexity.
DON’T include “nice-to-have”
Migration seems like a good time to invest in best-practice systems and services, perhaps by replacing existing systems with more efficient or modern ones as gaps are uncovered.
Resist the temptation.
Such an effort distracts management from the already demanding requirements of the merger and significantly increases the risks to the project. The merged bank should choose the better of the two existing systems and implement it. If there are ‘best of breed’ solutions that are not included in the selected system, set up a ‘parking lot’ for implementation after the initial merger integration project is complete. There are always follow-on projects after a merger. Do not try to put everything into one project. It will overwhelm the implementation team and the employees and become a project train wreck.
DO test, test, test
Testing is the one way that you can assure yourself that the merger will go as well as possible. Problems are unavoidable when consolidating banks and dealing with people issues. Problems will seem to pop up from everywhere—often as a total surprise—and they happen at the worst time. Testing will bring those problems out before they become a disaster.
There is no such thing as an error-free plan. Even when the overall strategy is correct and right, you must be willing to live with some less-than-perfect results, some mistakes, and some outright foul-ups. If you think that you can pull off a major change without a serious shake-up, you are kidding yourself.
When errors are made, candidly admit to the mistake and address them. Mid-course corrections are a fundamental part of working through all of the changes. Testing is a key component of the process of finding the errors and correcting them.
DON’T skimp on training
A merger always rocks the status quo of both banks. It is more than just a system change. You cannot naively assume a teller can be a teller on any system. Problems and upheavals are unavoidable when one considers the underlying challenges: resistance to change, divided loyalties, blurred roles and responsibilities, unclear reporting relationships, lack of communication, power shifts, turf battles, job insecurity, employee turnover, policy and procedural changes … the list goes on and on.
Acquired employees need training not only on the technical aspects of the new system, but also on all the aspects of the culture they are moving into. There are new procedures, protocols, and policies that need to be communicated.
When you push to implement change, the organization will start pushing back or simply ignore them. Open training sessions that enable people to ask questions as well as to learn new processes will speed the staff integration of the acquired bank.
DO communicate
A tremendous amount of high-quality communication is required to create a culture change. If you do not regularly update staff, they will fill in the blanks and rumors will feed the grapevine. In times like these, even no news is news. Clearly and emphatically state and restate your objectives regarding standards of performance. Pull no punches when explaining what the new cultural reality must be.
Quickly act to clarify roles and responsibilities for each employee and manager. Employees cannot perform effectively until they know exactly what is expected. Do not leave people to figure out things on their own. Eliminate ambiguity—make clear every person’s responsibilities with precision. Check to make sure each person understands their role, responsibilities, and the team’s purpose.
DO stay focused
A merger is among the toughest projects you will ever work on. Therefore, stay focused on getting through it as quickly and painlessly as possible. Look at your Do’s and Don’ts list every time you make a decision to see how it fits in the overall scheme. If it doesn’t fit, then rethink the decision. BJ
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj1009/index.php?startid=46
Trackback(0)
|
TrackBack URI for this entry
Subscribe to this comment's feed
