As robust M&A (mergers & acquisitions) activity continues in the market, many business leaders in the process of completing a divestiture or acquisition find themselves operating organizations through states of high disruption and ambiguity. During these times, emphasis on speed and the day-to-day activity needed to complete a divestiture or acquisition often hides opportunities to unlock value and position an organization for strategic growth. One example of these potential value drivers: implementing an HCM (human capital management) cloud solution.
Given the fast-paced and fluid nature of M&A transactions, incorporating a cloud solution in that environment may seem daunting. The typical approach to a cloud transformation entails a multiyear implementation of a broad set of capabilities. In contrast, the common strategy in a separation environment is to implement less-extensive solutions and focus simply on getting to Day 1 with minimal risk. Yet, if business leaders and cloud vendors adjust implementation timelines and mentalities, it is possible to implement a streamlined HCM cloud solution and still meet accelerated divestiture timelines.
While the adjustments needed to accommodate the accelerated timeline of an M&A deal vary by enterprise size, deal complexity, and other factors, implementing a cloud technology provider during a transaction can add tremendous operational value to a newly stood-up organization. In addition, the employee experience can be enhanced with the introduction of new capabilities such as mobile apps and streamlined reporting. How does one decide if this is the right path for an organization? Business disposition, speed, new company size, and overall business strategy are all key to determining the right HR technology solution for newly established companies.
A key deterrent business leaders often cite is a lengthy vendor selection process and the costs associated with implementation. But M&A events provide a unique opportunity to tap into available investment dollars, specifically with a focus on functional integrations that increase efficiency through the cloud. In addition, in the M&A space we typically see vendor selection taking place in an accelerated time frame (4–6 weeks). The key accelerators to enable this shortened time frame are a strong governance process, limiting the number of primary solutions considered, incorporating information from due diligence into the selection process, and completing demos, Q&A, and executive alignment immediately after proposals are submitted. During this demo and alignment phase, it is critical that the contracting process is also in motion so that contracts can be signed immediately after a decision is made.
With this compressed timeline in mind, unique components of a separation provide additional focus areas to consider during the selection process, such as:
- What is the business disposition of the new organization?
- What is the time available (sign-to-close period) before Day 1?
- What is the estimated future company size?
In considering these focus areas, enterprise HCM cloud solutions all have proven capabilities to support complex global requirements, integrate efficiently with the broader IT ecosystem, and provide long-term scalability. Typically, a realistic timeline is a nine-month implementation, but this can be shortened or lengthened depending on the number of employees, countries, languages, modules, and localizations that are being implemented. Also, many HCM cloud solutions work with other vendors in order to manage the risk of cross-technology integrations that are required across HR, Finance, and IT during transition service agreements (TSAs) or other deal-specific periods.
These attributes are extremely valuable when considering solutions for companies anticipating future M&A activity, as the business can minimize disruption as the organization grows or shrinks. Even for those companies not considering future deals, establishing a cloud enterprise solution provides substantial opportunity for future optimization, including creating a shared services model, compensation & benefits harmonization, and incorporating robotics and artificial intelligence (AI).
In short, divestitures and carve-outs can serve as key opportunities to address technology disruption and transform an enterprise for the future. Yet, leaders often do not recognize this opportunity given the frenetic nature of an M&A transaction. But by working through the suggested approach above and incorporating key lessons learned, leaders can potentially accelerate value capture and position their organization for smoother growth in the future.
Below are a few tips for organization and project leaders that can help anticipate pain points and transition to a smooth Day 1 for HCM.
- Don’t underestimate design effort: Have a clear roadmap and ensure the governance model, quality team, project management rigor, and outcome accountability are in place to deliver against it.
- Maintain accurate data: Accurate data is critical; projects can spend an inordinate amount of time on issues related to poor data quality.
- Consider a third-party payroll provider: Relationships with payroll vendors can help to reduce the risk in an accelerated implementation, as well as provide additional staffing support through managed service models.
- Obtain executive sponsorship & alignment: Active and visible senior executive-level involvement is key, as the rest of the business is watching and will follow their lead. Sponsorship must come from HR and be closely aligned with business leaders and IT.
- Remain mindful of the speed and accuracy of decision making: Assign individuals who possess the required vision and experience as business leaders and empower them to make decisions. Implementations are often slowed by decision making—not the software.
- Spend time developing an adoption and training approach: Focus on preparing users for change—invest in effective communications and training. HCM cloud solutions typically provide a “game-changing” user interface: Be prepared to deploy change management practices to increase adoption of the solution.
While the disruptive times surrounding an M&A or divestiture may seem less than ideal to introduce still more change, HCM cloud’s potential value-add to the new organization and its people make it worth exploring. If you want to hit the ground running, why not start farther ahead?