How to Determine Appropriate Performance Measures During Mergers (cont'd)
In sum, the merger scorecard may look something like this:
| Perspective | Measure | Target | Actual | Comments |
| Financial | Reporting system integration vs plan | 45% | 60% | 6 weeks behind time line |
| Gross revenue (1,000's) | $900 | $840 | ||
| Operating expense (1,000's) | $750 | $865 | Unforeseen space limitations | |
| New service commission revenue | $50 | $15 | Processes not sufficiently developed | |
| Cross sell revenue | $30 | $5 | Education in product synergy needed | |
| Customer | Customer mapping completion vs plan | 100% | 100% | All key relationships defined |
| Segmentation development vs plan | 100% | 100% | Key needs identified | |
| Merger-related advertising $ spent | $250 | $275 | Spent more than intended; deemed necessary | |
| Survey design / implementation vs plan | 50% | 0% | Haven't started; 6 weeks behind | |
| Critical product market share | 24% | 14% | Sales training insufficient | |
| New product units sold | 500 | 150 | Sales unaware of product capabilities | |
| Process | Best practice implementation vs plan | 20% | 25% | Still 18 months from 100% completion |
| On-time error-free service delivery | 80% | 40% | Reengineering needed | |
| Product development time | 90 days | N/A | No products developed this month | |
| Key service transaction speed | < 1 day | 3 day average | Reengineering needed | |
| Learning & Growth | Skills inventory development vs plan | 100% | 100% | Measure complete; will drop off next card |
| Org structure design vs plan | 20% | 0% | First team meeting next week | |
| Personnel evaluation vs plan | 0% | 0% | Scheduled to begin May 15 | |
| Employee satisfaction | 75% | 40% | Survey completed 1/15; repeat due in June | |
| Systems integration vs plan | 40% | 40% | On target | |
| # of e-commerce transactions | 1,500 | 0 | Systems not developed yet | |
| Communication plan implementation vs plan | 50% | 65% | Ahead of target; will finish in six weeks |
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This is a basic example of a card that would be issued on a regular basis throughout the course of a merger. Frequency of issue would obviously be dependent on both the types of measures selected and the complexity / length of time required to complete the merger. Note that targets exist for both financial and non-financial measures. This is meant to ensure the proper attention gets paid to the detail work necessary to drive positive financial performance in the future. The comments are critical; any supporting statistical tools / charts can be referenced in this column. This enables the user to get more detail on measures of particular interest. Once the merger has been completed the strategic planning process for the combined entity will begin anew. A traditional balanced scorecard will then typically be created to track strategic progress. The merger card can serve as a foundation for the permanent card. While the planning-based measures will run their course and fade away, the balance of the categories will be prime candidates for permanent measures. In closing, performance measurement can help lend a bit of sanity to the chaos that ordinarily accompanies a merger. Attacking a merger with no performance measurement is like going on a diet without a scale; there is no hard and fast way to know the things you are doing are the things that will make you successful. The proper measures enable the leadership team (and everyone else involved) to stay on top of key integration activity. The merger scorecard is the key to making it happen. |
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