Practice management | Full integration is the measure of success for any merger

The continuing economic slump has already seen a spate of law firms in administration and with little optimism for a change in fortune, the outlook is becoming increasingly bleak for many mid and lower-tier law firms. Industry commentators predict a rise in merger and acquisition activity in the sector, with the need to exploit economies of scale and greater efficiency key drivers in the hunt ?for profitability.

But in the rush to join forces to survive, finding the right target for a merger or acquisition is only half the story. The majority of firms will find the real difficulty comes in ensuring a quick and successful integration of the two businesses.

Once the target has been identified and the deal done, it's easy to relax and believe the hard work is over. For most firms, however, this is where the problems start. It is important to remember that the decisions taken at the beginning of the project will determine the success or otherwise of the integration. Get it right from the start or integration is going to be a long and difficult journey.

It is essential that the ultimate responsibility for the project lies at the top of the firm. It will require someone with the authority of the executive board to make decisions and manage the departments and people that need motivating, cajoling, or indeed pushing. This responsibility at the top gives the project the necessary ?gravitas and demonstrates the importance of this initiative compared to other ?business priorities.

Business integration projects impact all departments and require department heads to lead the project streams, with no over representation of those responsible for the delivery of legal services. Team heads will often be high-ranking, confident partners, who will want to retain their status ?and influence. This will create issues ?across departments.

There are important reasons why the governance of the integration project must sit at the highest level, as part of the operational or executive board:

? Significant decisions will be made by department heads and these must be shared at executive level.

? Many cross-departmental issues will need resolving and the managing partner or senior partner can chair these meetings.

? The integration project will generate reasons to communicate to employee groups and these messages need to be prioritised and agreed at board level.

? Ultimately these streams transition into day-to-day management and this board will be home to any outstanding actions.

The final phase in setting up the integration project is agreeing a consistent method of managing it. While the board can start designing and delivering the project, energetic team leaders will be keen to get on with building and organising their enlarged departments. But this energy must be applied with a 'light-touch' to ensure ?a consistent pace of change with ?other departments.

Building the plan

Having established the ownership of the project, building a plan that fully describes all the required activities to complete the integration and deliver the stated benefits is the next step.

The Gantt chart not only lays out all the activities, top left to bottom right, but shares understanding of all the required actions and engenders buy-in from those responsible for delivering a successful and well-managed project.

The phases of an integration project should always be the same, across all departments: people, propositions, process and systems. This ensures the most critical and often most difficult element, the people, is addressed first.

The people aspect of any integration is the one that typically yields the highest synergy savings, due to reduced headcount costs. Failure to get this right at the start will ensure the new business carries the burden of this extra cost.

Adopting a consistent approach to departmental plans will ensure firm-wide initiatives are distilled from the plans. This could include:

? Building an organisational structure that really works for all departments.

? Communications to stakeholders and most importantly employees. These must be regular and often.

? Implement new business processes, which can be a point of tension, like adopting a single case management system.

? Integrate IT systems - often a significant project in its own right.

The finished departmental plans will need validating to ensure they contain all the actions required for a successful integration and will deliver the expected synergy savings. This validation should be undertaken by someone with relevant experience of a major integration project.

Despite the temptation, this is no

time for an amateur to 'muddle' through and if the necessary experience cannot be found within the firm, they should seek external support.

Allow enough time

The time that will be needed to build the single organisational structure, should not be underestimated. Merging two businesses will throw up complications, particularly when comparing roles and experience across both businesses.

Rationalising terms and conditions across complicated and disparate businesses is another lengthy process, but one that should be done in the early people phase of the integration. Setting clear pay-scales that are easily understood and comparable is critical. There will have been a provision for 'buying out' terms from employees to get everyone to accept a standard set of terms - this will eradicate the unusual exceptions like parking or travel allowances.

In simple terms, the people stream should be the first area of focus for the new business. Get this right and the team will not only accept the integration, but be enthusiastic facilitators.

If the firms have special interest groups, these are an excellent driver for integration. The new business needs to design a single way of working and these groups are an excellent way of facilitating the thinking, design and compliance. It is quite surprising how two businesses in the same industry can take radically different approaches to the same business activity.

Managing the integration

It will generally take several weeks for all the departments to build their plans, much longer and alarm bells should be ringing for the project sponsor. A review cycle for the project should be established to help flush out blockages preventing progress, inter-departmental issues and threats to the expected synergy savings.

This regular, often weekly, review ensures the management has a live summary of the project and forces progress thanks to the competitive nature of departments and their heads wanting to deliver against set targets or be seen failing - powerful incentives.

This competitive spirit is important. The pace at which departments complete their activities must be the same, as a project always slows to the speed of the slowest department. Any announcement about the new organisational structure cannot be made if a particular department is lagging behind its more prompt stablemates.

Lines of communication

Once the plans are finalised and the acquisition or merger is at the point of announcement, the following must be addressed with a consistent, structured approach in this order:

? Staff - senior managers must ? personally visit staff at all the offices, make the presentation and leave everyone with something that explains what is happening and why in more detail. This offers everyone the opportunity to read through the plans when they are over the initial shock.

? Customers - key clients should be told in person or over the phone, with an email to all others.

? Suppliers - key suppliers should be told in person or on the phone, with an email to all others.

? Everyone else - websites for all impacted businesses should have updates, prepared in advance, ready to go once initial contacts have been made.

Integration is exciting

While the prospect of integration is exciting for the leaders of the business, it is unsettling for the rest of the business and any likely impact, good or bad, needs to be communicated quickly.

The early stages of reviewing the organisational structure requires the senior board to listen carefully to employees and understand their issues as they will be feeling a loss of control. This is the time when decisive action and clear communication will put minds at rest about the future. And although some will choose to leave, the majority will need to understand what benefits the future of the integrated business holds for them personally. Forget the big picture and address the very personal issues and concerns that will arise.

Experience has proven that the management team can deliver a comprehensive communication presentation to all employees and the only slide remembered is the one where the employees name appeared. This is why it is best practice to hand out copies of all slide material during communication sessions.

The most commonly voiced failing of integration projects is lack of communication, with gossip and misunderstanding filtering back to the management team. This is often true for both internal and external communications, with each causing its own set of issues.

Unexpected attrition rates among employees is a sure sign the integration is failing, as is a lessening of interest from those responsible for delivering integration. There are plenty of project tourists, who turn up for the early meetings, have a look around, make notes then contribute nothing - keep a close eye out for these.

However, a sure sign things are working is cross-selling each other's propositions to each client base. It's obvious, but it's the whole point of the planning and the pain.

While many law firms might consider integration as just another internal project, more are seeking external expertise, recognising the benefits this delivers. External integration project managers have no aspirations of career longevity within the business, enabling tough performance based decisions to be made that challenge long-held views and opinions.