Using Project Management to Improve ROI Day 1 Event
Using Project Management To
Day One Event
November 6, 2012
• On the whole, acquirers have < 50% chance of being
• Just 23% of acquisitions earn their cost of capital
• Synergies projected for M&A deals are not achieved within
70% of cases.
• In the first 4-8 months following a deal, productivity may be
reduced by up to 50%.
• A number of factors give rise to these statistics: poor
fit, incomplete due diligence, and ineffectively
Integrating one business into another is
• Target companies are strategically sought but follow-up acts are
• The structuring, financing, and closing of a deal are only
preliminary steps. The real work comes after the deal is signed.
• Too many companies make the mistake of separating the major
phases of a deal (i.e. due diligence, agreement, integration)
• These phases themselves need to be integrated.
• They need to be orchestrated under a single management
• This management structure needs to be in place early—at the time
due diligence begins.
• Companies that have effective policies in place for managing
the post-merger period can improve their odds of success by as
much as 50%.
• Companies that have strong integration plans, by contrast with
those that have weak ones, have produced shareholder returns
above industry average.
• A faster integration process yields better results than a slower
one, resulting in speed to market, technological process,
employee commitment, stable focus on customers
Integration Management Structure
• Managing an acquisition, regardless of size, is distinctly different from
managing an operation.
• Monitoring & Control
• This requires more than a rudimentary integration plan, constant
vigilance, regular governance, and clear communication, both
horizontal as well as vertical
• => If your leadership team is spending the necessary time to manage
the integration, who’s managing the operations,
• Which of these 2 are you willing to give up?
Program Management of the PMI
• The integration needs to be set up in a “projectized”
• A department-like structure that exists for the duration of the
• Focusing purely on the integration
• Directly reports to Senior Leadership (Governance Board)
Program Management of the PMI
• Treat the transition period like a special program
comprised of a number of projects
• Integration manager is the program manager
• Ensures all work is “process-ized”
• Monitors the “mini-integrations”
• Ensures adherence to progress against the schedule and
• Ensures focus on value & priorities
• Ensures proper risk management
• Helps to preserve the potential of the deal
Why is this necessary?
• Program management provides a needed structure and
• Integration (Program) manager 100% focused on integration
• Ensures consistent progress
• Ensures risk mitigation and management throughout
• Keeps focus on the integration, schedule, costs, and ROI
• Ensures that the integration remains a priority
• Lets management concentrate on daily operations
• Lack of adherence to this leads to schedule overruns, cost
overruns, overabundance of issues, resource drains, loss of
focus, erosion of ROI.
Typical Program Structure
Business Unit 1
Business Unit 2
Business Unit 3
Integration Management as Change Agents
• Integration management needs to consider the
immense requirement for change management
• Ensure that the WIIFM issues are addressed
• Ensure that buy-in is achieved
• Ensure that clearly-defined leadership roles exist
• Ensure that extensive, ongoing communication exists
• Ensure focus on the customers
• Ensure that decisions are made, even the tough ones
• Ensure that focused initiatives are created
• Ensure that resistance at all levels is recognized and
Part II: Day One Plus One
Using Project Management To Further Enhance
Post PMI Factors to Consider
• Project Budgeting
• Risk Tracking & Quality Management
• Work Sold & Translation Into Actionable Items
• Scope & Schedule Management
Why a repeatable methodology is necessary
• A project management methodology—something that
is enforced from the top down and is used
consistently throughout the organization—certainly
will have some upfront costs associated with it.
• When used correctly, however, it can save an
organization up to hundreds of thousands of dollars a
year in above the line costs.
• The profitability of the organization begins with the
project budget estimates themselves.
• If an organization has to make a choice to fund only
one or two projects NPV, IRR, MIRR, etc will be used
as a financial metric.
• What does it mean if the project’s budget estimate
was never estimated correctly?
Poor Estimates Leads to Poor Project
• Lower estimate
• Typical of projects where estimators pull numbers out of air,
didn’t consider all tasks needed to be done, didn’t correctly
estimate task durations
• project investment will be artificially lower than the actual cost
• project will have an artificially higher value for NPV, IRR, or MIRR
• It can get selected over projects that actually give a better ROI.
• Higher estimate
• Typical of projects whose estimates are “padded”, (estimator
arbitrarily adds money to the estimate “just in case”)
• Required investment for the project will be higher
• Financial metrics will be artificially lower
• Different, less profitable project can get selected.
• Organizations need a connection between Operations and
• There needs to be structured, consistent and meaningful flow of
information between these two groups.
• Project health
• Actuals vs. estimates
• Business Priorities
• Change management
• Lack of proper governance leads to objectives not being
communicated to the project groups or not being interpreted
correctly by the project groups. As a result, measurements
made by the project groups cannot be related to these
• Development of standards and practices
• directed at the effective execution of projects and the
attainment of schedule, cost, scope, and quality objectives,
• Communication of enterprise-level objectives to the
• Communication of project information to
• Efforts are efficient and effective
• Projects are still the best ones to support strategic objectives
• Whether there are performance issues associated with
The Biggest Impact
• The organization is highly fragmented and functional in nature,
with difficulty coordinating all the team activities.
• There is a lack of any connection between Management and
project groups along with no structured, consistent and
meaningful flow of information between these two groups.
• Senior management is not able to properly prioritize the
• Historically, projects have not been aligned with strategic
objectives to ensure that projects are contributing to growth,
competitive advantage, revenue, cash flow, or other objectives
of the organization
• There is a lack of full-time oversight for and across all projects
that includes monitoring against established criteria and
advising Management of status and issues that would affect the
planned benefits of projects.
Biggest Impact, continued
• There is a need to ensure that standards are
established, communicated, and enforced on an
enterprise-wide basis so that project governance can
be conducted relative to strategic goals.
• There has been a failure of management to establish
cross-departmental coordination toward goals for
products, services, and customers.
• No one can predict all of the negative events that might occur on
• Project risk management brings the team as close to that as one
• Project team isn’t caught off-guard by threats that occur
• Time and labor aren’t taken away from critical path activities.
• If the team had to stop planned activities in order to put out fires all the
• the project schedule would slip
• the budget would be overrun
• quality could suffer
• Financial benefits might not be realized
• windows of opportunity might be missed
• Profitability is effected
Further Benefits of Risk Management
• When one uses risk management the price for the
project doesn’t have to be artificially inflated, or
padded, to cover some unknown occurrence
• Create a task-by-task contingency account to cover pre-
• Money released once threat is no longer valid
• Manages Parkinson’s syndrome
Translating Work Sold Into Actionable Items
• Rework quickly erodes project profits
• Rework results from a lack of managing quality into
the end product (service)
• Unrealistic commitments made by Sales
• A lack on the project team’s part to completely identify the
end-users’ requirements and needs
• Misunderstanding between the end-users and your team of
what the end users’ requirements are
• Not having a well-constructed scope sets projects up
for failure before they begin
• Scope is a delineation of both what is considered to
be a part of the project and what is not considered to
be part of the project
• The more vague the scope is, the more rework will occur
• The more vague the scope is, the more the work will grow
without a proportional change in budget (Scope Creep,
• Missed deadlines
• Cost overages
Schedule & Cost Management
• Constant vigilance is required to keep the project on
budget and on schedule.
• Cost and time estimates must be broken on a task-by-task
basis and a month-by-month basis
• Guarantees efficient comparisons of estimated planned
expenditures against actual expenditures.
• Regular cost and schedule monitoring is espoused by
project management governing organizations
• Catch the project when it has varied slightly from cost and/or
• This allows corrective action to be taken.
Portfolio Management (PPM)
• Identifying opportunities and needs
• Selecting which projects are to be undertaken to best meet
objectives and needs
• Selecting which projects are to be terminated or deferred due to
performance issues or non-compliance with objectives
• Establishing project priorities
• Projecting revenue and effect on cash flow
• Resource Prioritization
• Aligning projects with strategic objectives to ensure that projects
are contributing to growth, competitive advantage, revenue,
cash flow, or other objectives of the organization
• Evaluating the value and benefits of projects to the organization
• Evaluating project benefits vis-a-vis predicted risks
• Ensuring balance among projects in the portfolio to provide the
optimal mix to protect and enhance the organization’s future
• Organizations need discipline to ensure that its teams
implement only changes that are worth pursuing
• Politics, pet ideas
• This prevents unnecessary or overly costly changes from
• A rigorous process needs to be established and managed to
evaluate the impact of changes before implementing them.
• Many changes that initially sound like good ideas will get thrown out
once the true cost of the change is known.
• The enterprise impact needs to be understood. A project change
that might be beneficial to one SBU might be detrimental to
• If the benefit of the change is worth the cost, the change is
added to the scope. Otherwise, it’s deferred or rejected
• Research from Gartner, Inc. suggests that organizations who
establish enterprise standards for project management,
including a project office with suitable governance, will
experience half as many major project cost overruns, delays
and cancellations as those that fail to do so (M. Light, T. Berg,
“The Project Office: Teams, Processes and Tools,” Gartner
Strategic Analysis Report, 1 August 2000).
• The only way to ensure that standards are established,
communicated, and enforced on an enterprise-wide basis so
that project governance can be conducted relative to strategic
goals is to elevate project management to the strategic level.
This also reduces the failure of management to establish cross
departmental coordination toward goals for products, services
and customers which appears to be the major hurdle with many
• Projects should be profit generators and not financial burdens
• Risks and quality should never be unknowns
• Budgets and schedules shouldn’t be stabs in the dark, arbitrary,
or general guidelines.
• Running successful projects isn’t magic or luck.
• SPFL sets up the right infrastructure and methodology to follow
• Provide senior-level oversight and governance (VirtualPMOTM)
• Linkage between LT and project teams
• Ensure consistency, drive toward continuous improvement
• Bottom line results