Grand designs: Organisation Design for integrations and how to get it right

Organisation Design (OD) plays a key role in unlocking deal value for integrations; enabling you to achieve cost savings or accelerate growth plans for new products, services, or markets. Yet, it can be tricky! The ‘North Star’ vision and strategy of the combined organisation is usually unclear as OD kicks off, and OD teams must navigate changing operating models and politically motivated leadership disagreements on what the new structure will look like. To get it right, companies need to stand up a dedicated, central team to drive the process with the end goal for the integration in mind, whilst remaining focussed on steadying the ship for Day 1.

Why is it difficult?
 

When designing a newly combined organisation, you must prepare for the following challenges:

Leadership challenges: Leaders from both organisations often need to be involved in the design of the new structure, requiring strict governance on decision making and clarity on their roles and responsibilities when opinions differ. OD teams must navigate this politically charged environment, encouraging leaders to make strategic design decisions based on future business needs rather than maintaining power and influence.

Unclear operating model: The operating model for the combined organisation will evolve throughout the deal lifecycle as new leaders are appointed and priorities shift from Day 1 readiness to end-state integration. OD teams must proactively adapt design decisions to meet changing organisational needs, for example, the deployment of new systems or processes following Transition Service Agreement (TSA) exit, to ensure the organisation has the right capabilities, roles, and structure to operationalise business changes.

Constraints on headcount synergy targets: While achieving headcount synergies across various functions is a common integration goal, it presents unique challenges for OD. It should not be about creating a leaner structure in isolation, rather OD teams must consider the broader operating model implications, integration complexities and evolving business needs. This necessitates a phased approach to design, building interim structures to bridge the gap to the final leaner model. This can, however, lead to temporary dis-synergies. OD teams must proactively model these phases and diligently track costs to manage expectations around the synergy timeline. Additionally, downstream effects of the new design on role and team interfaces, decision-making processes and governance frameworks require careful realignment to ensure true synergy realisation.

Access to data: OD teams typically have limited access to employee data before Day 1, making it difficult to design the integrated structure at a detailed level. The lack of complete data requires OD teams to engage in scenario planning, developing multiple potential organisational structures based on reasonable assumptions about the combined workforce. This process can strain resources and may require significant adjustments once full data access is available. It therefore becomes important to establish clear baseline assumptions and a system to track changes and document any deviations or updates once full data access is available. 

How to get it right?
 

There are a few things you can do to counter some of these challenges:

Understand the end goal, whilst prioritising Day 1 execution: We often see OD teams jump straight into the design of the combined organisation, often looking at how to slot one organisation into the other, without connecting to the integration strategy and future operating model. This can often lead to design choices being made that do not factor in the capabilities and structure needed for the combined organisation. Working with the CEO and leadership team to understand the end goal whilst being practical about what can be achieved for Day 1 can help avoid this scenario. Developing an organisation design blueprint with key integration milestones for Day 1 and Post Day 1 is a helpful way to keep your teams on task.

Organise your data and agree on tooling: You will be dealing with two sets of employee data and access to data for the target company will be limited before Day 1. Some data will only be accessible via a clean room – a secure data repository for file sharing – and it is likely that the data will be incomplete and require a tidy up to harmonise data fields for analysis. Take the time to create a combined data set and use this as your baseline for analysis and update when new employee census information is shared. Managing data using spreadsheets is possible for smaller integrations, but with larger data sets it is recommended to select tools that are tailored to the needs of the integration. Tools specifically designed for managing data and tracking synergies in the context of M&A will make your life a lot easier.

Build a central team with functional arms and legs: Whether you are working on a mega deal or a smaller mid-market transaction, successful OD teams will define how to partner with each function and geography throughout the process and agree roles and responsibilities up front. Seasoned integrators will ensure there is central ‘air traffic control’ across the programme whilst partnering with functional experts to input into design decisions. Once your team is in formation, approach OD layer by layer, starting with the CEO-1 (Level 1) and work your way down.

Carefully consider the experience of leaders as you go through the design process: It is important to identify early on which leaders to involve in discussions and note any Non-Disclosure Agreement (NDA) restrictions that might limit access. As the design tent changes throughout the deal lifecycle, and more leaders are appointed into roles, it is important to recognise that dynamics will shift, and decision making may become politically motivated. Overcome this by establishing a clear approval matrix for design decisions and provide leading industry insights to sense-check decision-making, as well as engaging with external subject matter experts for unbiased insights.

Conclusion
 

Integrations presents a unique opportunity to use the momentum of M&A to change how your business operates and how people work together. Whilst there are leadership and operational challenges to overcome, OD teams can respond proactively to integration requirements as they evolve by having the right team, structure, and tooling in place.