Lesson Learned — The governance structure should include Project Management Office (PMO) functions (e.g., regular progress reporting, issue identification/escalation/resolution procedures) and incorporate executive and management sponsorship and participation to ensure that workplan execution stays on track.
Some form of the governance structure should remain in place for as long as the synergy savings will be tracked and reported, which may be long after the merger or acquisition has closed. Visibility and accountability are vital in maintaining focus in this area over the long term. Holly made effective use of this critical element for the JDSU acquisition of Acterna, where he reported results directly to the CEO. This level of visibility helped ensure that everyone responsible maintained motivation to report synergy savings in an accurate and timely manner.
Oftentimes, it is beneficial to leverage the approaches, methodologies, processes, tools and templates currently in place for executing SCM projects. Key options include:
- Adopt the practices of one of the legacy companies. This allows for a completely uniform approach across all project teams, but forces the staff of one legacy company to learn a new approach.
- Allow both legacy company approaches to be used. Here, staff from both legacy companies are allowed to use the approach with which they are most familiar, but this does not ensure uniformity across all project teams. Also, portions of teams with a mix of staff from both legacy companies will still need to adopt a new approach.
- Develop a single, hybrid approach, leveraging best practices from both legacy companies. Creating a new, common approach across all project teams fully leverages best practices, but requires all staff to learn a modified version of their approach (it also requires investment to do the analysis necessary to develop the hybrid approach).
"It's important in the decision making process to have consensus. If it looks like one side 'won' and one side 'lost' there will be detrimental impacts on morale and the cultural integration that needs to occur," says Holly.
Big Savings Come From a Dedicated Program
Mergers and acquisitions are opportunities for SCM organizations to drive savings by demonstrating the value that a structured synergy capture and sourcing process can bring to the enterprise.
"A merger or acquisition is an opportunity for the supply chain management organization to prove the value that synergy savings efforts deliver and to get executive-level attention and respect," says Carter.
While a successful synergy savings effort represents an extensive commitment of resources, SCM can deliver significant value to the business by producing high leverage resources. An average $150,000 per year in employee resource commitments from SCM can produce multi-million dollar synergies.
But successful execution also requires a strong partnership between SCM and the business, particularly if achieving significant synergy savings requires some sacrifice on the part of the business. SCM must be seen as a trusted business partner, not merely an after-the-fact contracting function. It is important to understand that if SCM takes ownership of the external vendor spend synergy capture program, SCM will also be held accountable for actually realizing aggressive synergy forecasts, so it is imperative to have a well-constructed plan in place to ensure SCM follows through and meets its commitments.
About the Authors: Andy Sealock and Marc Tanowitz are both principals at strategic sourcing, supply chain and outsourcing advisory firm Pace Harmon. On the Web at www.paceharmon.com.