As they emerge from the recession, many companies are gun shy when it comes to major transactions. But overall, your goal should be identifying cost savings mergers and acquisitions are the lifeblood of growth. Merging IT functions quickly and smoothly requires careful planning
and integration.
Although the dust has not yet settled from the recession, companies are, at last, looking ahead. As they begin to position themselves for the recovery, the word “growth” is reappearing in their vocabularies. Despite ongoing economic worries and lagging consumer confidence, the hardiest companies are taking steps toward mergers and acquisitions as they plan for 2010. Still others are considering divesting non-essential assets.
All are positive signs that strategic thinking and intelligent risk taking are on the rise. But mergers, acquisitions and divestitures are not to be entered into lightly. A truly successful transaction requires careful analysis and planning, particularly in the integration of IT functions.
Making Your Assessment
Consider the intricacies of virtually any organization’s IT function. Now imagine merging it with the equally complex environment of a separate organization. Each has its own unique platforms, applications, hardware configurations and data centers. Companies that approach such an integration hastily are often unpleasantly surprised by the complexity of the acquired company’s IT environment or the cost it will add to the transaction.
That is why the first step in an effective IT integration should be due diligence – working with the team that will be merging with you to conduct a thorough technology assessment. You’ll need a complete inventory of all the technology components, including the number of data centers and where that data resides. A critical component is ensuring the compatibility of platforms and the migration and efficiencies. By conducting portfolio analysis and rationalization, you will see how the acquiring company’s platforms and applications mesh with the owning company.
Are there redundancies? Determine if and how they can be eliminated.
It may well be that the company you’re acquiring has better technology, and you’ll find yourself shutting down your own platforms or technologies instead. Your assessment must therefore be bi-directional in nature. But it must also be open-minded to determine which entity’s technology is the best fit for the long term operation of the company.
Avoiding Redundancies
After deciding which technology is best, it’s time to dive deeper by looking at critical data from a higher level architectural perspective. A bi-directional view can help you see how data is organized. This approach ensures that you retain critical pieces without keeping things that are redundant or unnecessary. It also provides a common architecture for deploying and enhancing the existing data. You can eventually turn that data into actionable information around areas like financial reporting, customer insight and supply chain or manufacturing processes.
Addressing The Human Element
The last area to focus is the organization structure – merging the acquired team into the existing IT department or function. Unless the acquired company will be a stand- alone entity, most organizations will have only one leader, so it’s important to rationalize and identify synergies among staff.
Estimate how many people you will need incrementally on your team by assessing both skills and workloads. Keep in mind, there will be a period of time where retaining the acquired team will be critical.
Consider tools like retention bonuses, and if the time comes, severance packages, and outplacement programs.
Planning for Separation
Now let’s flip the coin. Each time you enter a merger or acquisition scenarios, it is equally important to think about how you might unplug any operation from your existing technology platforms and send it out as an independent organization. While there are no set ways of doing that, every organization should consider what would be required to spin off an operation.
Remember, if you divest a company that is completely hobbled from an IT perspective, it will likely affect the company’s valuation. So unless the acquiring company already knows how they would integrate that business into their existing platforms, reviewing various options is a valuable exercise. Consider what infrastructure would be required, what type and number of applications would be divested from the parent company, along with necessary people, data, hardware, technology, and data centers.
Whether you are going through a merger, acquisition or divestiture, also remember that communication is critical at every stage – from day one up until every old system is shut down. In fact, it’s best to over-communicate with the people who you will be working with – they are likely the people you will need to retain for a period of time. From a people perspective, you want this transaction to be a positive one, avoiding confrontation or negative feelings.
In the coming months, companies will likely be wary of risk and how they use cash. That puts added pressure on those handling major transactions. But mergers and acquisitions will always be a critical step on the path toward growth.
To ensure your organization’s success, focus on efficiency and simplicity. Consolidate where you can. Reduce complexity as quickly as possible and keep your applications and hardware footprint as small as possible. When you do, you’ll enjoy a smoother transition and a stronger position from which you can begin reaching your goals.
Maximize the Office of the CFO with a singular focus on accelerating business performance to create more value. Tatum provides human capital solutions to meet your needs with velocity.
Wednesday, August 18, 2010
Tuesday, August 10, 2010
Responsible Growth in an Uncertain Economy
Few in the business community were reluctant to bid farewell to 2009. Most companies have taken their hits from the recession and are glad to close the books on this difficult chapter in our history. As more positive indicators appear on the horizon many business leaders have begun to shift thinking away from the recession and towards planning for growth.
The initial stages of the recovery present many opportunities, particularly for organizations that are poised to take advantage of the good times, when they roll again. The companies that will succeed are those who come out of the starting gate strong – but not so fast and furious as to make hasty strategic decisions.
The key to success this year is responsible growth – balancing the need to invest in growth with financial caution. This critical balancing act puts serious pressure on the C-suite to set the stage properly in an environment with little margin for error.
Is your organization positioned to take advantage of emerging opportunities in these uncertain times? How will you grow with the recovery?
Responsible growth in today’s economic climate requires a thoughtful approach and a laser focus on three key areas of improvement: Learning to grow “lean”.
1. Learning to grow “lean”. Do you have flexibility to pursue opportunities without incurring permanent overhead? Investing too heavily too soon could accelerate risk, and an atmosphere of persistent risk doesn’t offer room for error.
2. Developing a capital strategy married to your growth strategy. In a capital-constrained marketplace, any discussion of growth must include a pragmatic approach to capital to fund each stage of growth.
3. Building organizational insight to increase responsiveness in uncertain times. One of the lessons of the recession for many companies was that all too often, visibility into the drivers of cash flow and profits is inadequate. Management teams are often “flying blind” regarding what actions to take in order to adjust to changing market conditions.
Growing "Lean"
Any seasoned leader can cite examples of growth through aggressive investment. Consider the “.com” boom of the late 1990s, in which money was freely invested and cash “burn rates” were accepted as an investment in potentially massive future profits. The private equity boom of the 2006-2008 period was similar in spirit, often investing staggering amounts of money in order to build market share, quickly achieve a financial goal and profitably exit the investment.
Those days are over. The rules have changed, possibly forever.
In response to market imperatives since late 2008, companies from the largest to the smallest scaled back across the board. Many made cuts at lightning speed in order to survive. A December 2009 research study conducted by CFO Research Services revealed that 79% of companies reduced their workforce in 2009, and most will not reverse that action in 2010. Companies also cut back on marketing and advertising and delayed investment opportunities. Nearly half of the companies surveyed believe these actions may reduce their future prospects and expose them to greater risk.
Now that the worst of the recession appears to be behind us, businesses must determine how to proceed with strategic growth initiatives with a leaner structure – without returning to former levels of overhead spending. So what are pragmatic steps to growing lean? Two of the keys are rethinking strategic resources and intelligently using strategic partnerships.
79% of companies reduced their workforce in 2009;
84% said they were not likely to reverse those cuts in 2010.
Flexible Strategic Resources
In the example of the “.com” era, companies took an idea and immediately hired people to build it, manage it, sell it and support it. This approach ensures focus and speed, but also ensures“cash burn.” Today’s business leaders identify ideas that need to be explored and validated with a sound business strategy prior to infusing capital.
Unfortunately, the people most qualified to accomplish the vetting of ideas and the building of business strategies to capitalize on opportunities are already drowning in demands of countless operational issues that must be addressed with reduced staffs.
Happily, the same recession that created the lean organization has created an emerging trend in the use of flexible strategic resources at the highest levels of an organization. The C-suite today can bring in a temporary team of resources with experience tailored to the activity at hand, be it considering an acquisition or preparing for an initial public offering or another critical strategic imperative.
Responsible growth requires a nimble strategy that addresses any potential source of capital, including internal, external and non-traditional sources to pursue organic growth or strategic acquisitions. Find that tipping point where systems and flexible staffing needs meet, without necessarily investing in headcount. That may mean bringing in the expertise you need to make the right strategic moves for your organization. Looking into 2010 and beyond, your C-suite may have little room for error, but by keeping focused on both stability and opportunity, your organization can regain its footing and advance to the next stage in your growth trajectory.
The initial stages of the recovery present many opportunities, particularly for organizations that are poised to take advantage of the good times, when they roll again. The companies that will succeed are those who come out of the starting gate strong – but not so fast and furious as to make hasty strategic decisions.
The key to success this year is responsible growth – balancing the need to invest in growth with financial caution. This critical balancing act puts serious pressure on the C-suite to set the stage properly in an environment with little margin for error.
Is your organization positioned to take advantage of emerging opportunities in these uncertain times? How will you grow with the recovery?
Responsible growth in today’s economic climate requires a thoughtful approach and a laser focus on three key areas of improvement: Learning to grow “lean”.
1. Learning to grow “lean”. Do you have flexibility to pursue opportunities without incurring permanent overhead? Investing too heavily too soon could accelerate risk, and an atmosphere of persistent risk doesn’t offer room for error.
2. Developing a capital strategy married to your growth strategy. In a capital-constrained marketplace, any discussion of growth must include a pragmatic approach to capital to fund each stage of growth.
3. Building organizational insight to increase responsiveness in uncertain times. One of the lessons of the recession for many companies was that all too often, visibility into the drivers of cash flow and profits is inadequate. Management teams are often “flying blind” regarding what actions to take in order to adjust to changing market conditions.
Growing "Lean"
Any seasoned leader can cite examples of growth through aggressive investment. Consider the “.com” boom of the late 1990s, in which money was freely invested and cash “burn rates” were accepted as an investment in potentially massive future profits. The private equity boom of the 2006-2008 period was similar in spirit, often investing staggering amounts of money in order to build market share, quickly achieve a financial goal and profitably exit the investment.
Those days are over. The rules have changed, possibly forever.
In response to market imperatives since late 2008, companies from the largest to the smallest scaled back across the board. Many made cuts at lightning speed in order to survive. A December 2009 research study conducted by CFO Research Services revealed that 79% of companies reduced their workforce in 2009, and most will not reverse that action in 2010. Companies also cut back on marketing and advertising and delayed investment opportunities. Nearly half of the companies surveyed believe these actions may reduce their future prospects and expose them to greater risk.
Now that the worst of the recession appears to be behind us, businesses must determine how to proceed with strategic growth initiatives with a leaner structure – without returning to former levels of overhead spending. So what are pragmatic steps to growing lean? Two of the keys are rethinking strategic resources and intelligently using strategic partnerships.
79% of companies reduced their workforce in 2009;
84% said they were not likely to reverse those cuts in 2010.
Flexible Strategic Resources
In the example of the “.com” era, companies took an idea and immediately hired people to build it, manage it, sell it and support it. This approach ensures focus and speed, but also ensures“cash burn.” Today’s business leaders identify ideas that need to be explored and validated with a sound business strategy prior to infusing capital.
Unfortunately, the people most qualified to accomplish the vetting of ideas and the building of business strategies to capitalize on opportunities are already drowning in demands of countless operational issues that must be addressed with reduced staffs.
Happily, the same recession that created the lean organization has created an emerging trend in the use of flexible strategic resources at the highest levels of an organization. The C-suite today can bring in a temporary team of resources with experience tailored to the activity at hand, be it considering an acquisition or preparing for an initial public offering or another critical strategic imperative.
Responsible growth requires a nimble strategy that addresses any potential source of capital, including internal, external and non-traditional sources to pursue organic growth or strategic acquisitions. Find that tipping point where systems and flexible staffing needs meet, without necessarily investing in headcount. That may mean bringing in the expertise you need to make the right strategic moves for your organization. Looking into 2010 and beyond, your C-suite may have little room for error, but by keeping focused on both stability and opportunity, your organization can regain its footing and advance to the next stage in your growth trajectory.
Tuesday, August 3, 2010
Flexible Leadership for Uncertain Times
Management guru and longtime GE CEO Jack Welch once said, “When the rate of changes outside the company exceeds the rate of change inside the company, the end is near.” This year this observation is truer than ever before.
At your organization’s birth, it probably had a more limited scope than it does today. Focusing on the service or product that buyers wanted was how the company became successful. As companies grow they spend an increasing amount of focus on building and improving infrastructure like IT, HR and other support services.
As it becomes more challenging to maintain high standards in all functions while still focusing on core competencies that drive growth, seeking outside help becomes an attractive option. So when should you outsource services? The answer is not black and white – it continues to evolve.
Today, it’s generally accepted that organizations use a mix of internal and external services, even at the highest levels. As the economy has created a sustained era of uncertainty, many companies have turned to a new approach to investing at the highest levels of the organization: flexible leadership capacity. Simply stated, flexible leadership is bringing in operating executives on an as-needed basis to take on targeted management initiatives without incurring permanent overhead.
In-sourcing is also a decision
As you look at your organization’s needs, remember the famous words of Jack Welch cited above: outsourcing offers a way to remain nimble in a high-risk, rapidly changing business environment. At the support service level, outsourcing is a way to minimize resources devoted to non-core activities. At higher levels, it can help you complete an important initiative that you would otherwise lack either the capacity or technical expertise to handle. It can also help you accelerate progress toward strategic goals.
When considering flexible leadership, you must retain ultimate responsibility for the initiatives by overseeing the service provider to ensure they are fulfilling the services contracted for and are helping you adapt those services to your changing needs. The executive still spends time on the initiative, but the time required is vastly reduced by having a seasoned resource to manage the daily minutia.
Remember, deciding to manage every aspect of the business with internal management is also a decision. Complete in-sourcing means you are deciding to incur top salary talent on a permanent basis with a defined capacity that can only be expanded with the risk of executive turnover. The implication is that you accept certain constraints on leadership capacity and the inability to dramatically accelerate progress because of those constraints.
Budgets remain tight and business conditions are still too uncertain to warrant rehiring.
Deploying flexible leadership
The economic roller-coaster is old news but budgets are still tight, and business conditions are still too uncertain to warrant rehiring. These now chronic conditions have left many companies with a talent void – especially in staff capable of managing strategic projects. The answer for these uncertain times is flexible management capacity from an outside provider. These specialized firms can deliver highly experienced operating executives on-demand to integrate immediately into your management team.
Flexible leadership sits outside the domain of traditional outsourcing, addressing core initiatives and programs. It deploys extremely experienced executives whose level of expertise enables them to hold interim roles as “seated” executives for companies experiencing executive turnover. This level of skill enables a resource, or a team, to quickly understand and manage a critical initiative for a C-level executive who has too many priorities due to reduced internal staffing.
Competitive pressures haven’t reduced simply because our organizations became leaner; executives are under pressure to accomplish more objectives, priorities and initiatives than they can realistically deliver. At the same time, they cannot risk failure or a cost over-run and must make time to work with the Board, CEO and other top executives on mission-critical issues.
Getting started
When looking for an interim executive, look for operating experience – a “been there; done that,” capability. They should have previously been in the same role (CFO, CIO, etc.) as the executive being served so they will be able to offer an objective viewpoint on what resources will be needed to meet your goals. This level of experience should enable the flex leader to quickly see the “big picture” but execute at a highly detailed level.
Like a baseball “utility infielder” who can play a number of different positions, a “flex” leadership provider can take on an entire set of projects, managing inter-dependencies between them to efficiently deploy resources. The interim executive specifies what they need from your organization, making assumptions and inter-dependencies explicit. This makes it easier for them to achieve results with minimal demands on management’s time. This approach is an extension of the Program Management Organization concept, a mechanism for overseeing IT projects that has become familiar in recent years.
Flexible leadership deploys extremely experienced executives whose level of expertise enables them to quickly see the “big picture” but execute at a highly detailed level.
Among today’s forward-looking organizations, the model of on-demand, high velocity, flexible management capacity is an ever more popular option. These early adopters have achieved some impressive successes with this approach. “Fast follower” companies are starting to emulate them. This new model may well become the next “big idea” for results-oriented companies seeking to minimize fixed costs and maximize flexibility in an increasingly complex business environment.
Perhaps the lawyers are smarter than the rest of us
Flexible leadership is not a new idea in one key area of corporate life: legal. Legal is often one of the smallest departments in an organization because they don’t add internal staff to handle specialties like intellectual property and litigation. The person who manages daily operations also manages the specialist who goes to court. This is more effective management than assuming the role of Superman and personally tackling every area of law, no matter how time-consuming or technically demanding.
At your organization’s birth, it probably had a more limited scope than it does today. Focusing on the service or product that buyers wanted was how the company became successful. As companies grow they spend an increasing amount of focus on building and improving infrastructure like IT, HR and other support services.
As it becomes more challenging to maintain high standards in all functions while still focusing on core competencies that drive growth, seeking outside help becomes an attractive option. So when should you outsource services? The answer is not black and white – it continues to evolve.
Today, it’s generally accepted that organizations use a mix of internal and external services, even at the highest levels. As the economy has created a sustained era of uncertainty, many companies have turned to a new approach to investing at the highest levels of the organization: flexible leadership capacity. Simply stated, flexible leadership is bringing in operating executives on an as-needed basis to take on targeted management initiatives without incurring permanent overhead.
In-sourcing is also a decision
As you look at your organization’s needs, remember the famous words of Jack Welch cited above: outsourcing offers a way to remain nimble in a high-risk, rapidly changing business environment. At the support service level, outsourcing is a way to minimize resources devoted to non-core activities. At higher levels, it can help you complete an important initiative that you would otherwise lack either the capacity or technical expertise to handle. It can also help you accelerate progress toward strategic goals.
When considering flexible leadership, you must retain ultimate responsibility for the initiatives by overseeing the service provider to ensure they are fulfilling the services contracted for and are helping you adapt those services to your changing needs. The executive still spends time on the initiative, but the time required is vastly reduced by having a seasoned resource to manage the daily minutia.
Remember, deciding to manage every aspect of the business with internal management is also a decision. Complete in-sourcing means you are deciding to incur top salary talent on a permanent basis with a defined capacity that can only be expanded with the risk of executive turnover. The implication is that you accept certain constraints on leadership capacity and the inability to dramatically accelerate progress because of those constraints.
Budgets remain tight and business conditions are still too uncertain to warrant rehiring.
Deploying flexible leadership
The economic roller-coaster is old news but budgets are still tight, and business conditions are still too uncertain to warrant rehiring. These now chronic conditions have left many companies with a talent void – especially in staff capable of managing strategic projects. The answer for these uncertain times is flexible management capacity from an outside provider. These specialized firms can deliver highly experienced operating executives on-demand to integrate immediately into your management team.
Flexible leadership sits outside the domain of traditional outsourcing, addressing core initiatives and programs. It deploys extremely experienced executives whose level of expertise enables them to hold interim roles as “seated” executives for companies experiencing executive turnover. This level of skill enables a resource, or a team, to quickly understand and manage a critical initiative for a C-level executive who has too many priorities due to reduced internal staffing.
Competitive pressures haven’t reduced simply because our organizations became leaner; executives are under pressure to accomplish more objectives, priorities and initiatives than they can realistically deliver. At the same time, they cannot risk failure or a cost over-run and must make time to work with the Board, CEO and other top executives on mission-critical issues.
Getting started
When looking for an interim executive, look for operating experience – a “been there; done that,” capability. They should have previously been in the same role (CFO, CIO, etc.) as the executive being served so they will be able to offer an objective viewpoint on what resources will be needed to meet your goals. This level of experience should enable the flex leader to quickly see the “big picture” but execute at a highly detailed level.
Like a baseball “utility infielder” who can play a number of different positions, a “flex” leadership provider can take on an entire set of projects, managing inter-dependencies between them to efficiently deploy resources. The interim executive specifies what they need from your organization, making assumptions and inter-dependencies explicit. This makes it easier for them to achieve results with minimal demands on management’s time. This approach is an extension of the Program Management Organization concept, a mechanism for overseeing IT projects that has become familiar in recent years.
Flexible leadership deploys extremely experienced executives whose level of expertise enables them to quickly see the “big picture” but execute at a highly detailed level.
Among today’s forward-looking organizations, the model of on-demand, high velocity, flexible management capacity is an ever more popular option. These early adopters have achieved some impressive successes with this approach. “Fast follower” companies are starting to emulate them. This new model may well become the next “big idea” for results-oriented companies seeking to minimize fixed costs and maximize flexibility in an increasingly complex business environment.
Perhaps the lawyers are smarter than the rest of us
Flexible leadership is not a new idea in one key area of corporate life: legal. Legal is often one of the smallest departments in an organization because they don’t add internal staff to handle specialties like intellectual property and litigation. The person who manages daily operations also manages the specialist who goes to court. This is more effective management than assuming the role of Superman and personally tackling every area of law, no matter how time-consuming or technically demanding.
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