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Mergers and acquisitions systems thinking strategies, part 2

Toby Elwin, mergers and acquisitions, systems, thinking, organization behavior, culture

“as a result of this merger we expect the senior management to evolve … “

Many mergers and acquisitions fail to understand the full impact of what systems are truly encompassed.  When evaluating merger integration risk the reality is true integration risk identification can only happen with an evaluation of systems integration.

However, systems strategy discussions frequently devolve into information technology systems strategies.

As much as the information technology needs an integration roadmap, without front-end, due diligence on human capital integration then too often the deal becomes a post-merger write-off.

The result:  wasted opportunity, multiples on paper only, and synergies left back on the deal table or with the executive hand-shake.

The opportunity lost in mergers and acquisitions strategies thinking is that rarely enough deals throw appropriate weight behind intangible, human asset system integration strategies.

Relation and Arrangement

System theory focuses on the relation and the arrangements of parts that, in turn, come to create a whole. ¬†Systems, as a theory, was first proposed in the 1940’s by a biologist, not an engineer or computer science professional.

Here is a bit of a drill-down on systems thinking:

Systems exist at every scale of size and are often arranged in some kind of hierarchical fashion. Large systems are often composed of one or more smaller systems working within its various elements. Processes within these smaller systems can often be connected directly or indirectly to processes found in the larger system.Most systems share the same common characteristics. These common characteristics include the following:

  1. Systems have a structure that is defined by its parts and processes.
  2. Systems are generalizations of reality.
  3. Systems tend to function in the same way. This involves the inputs and outputs of material (energy and/or matter) that is then processed causing it to change in some way.
  4. The various parts of a system have functional as well as structural relationships between each other.
  5. The fact that functional relationships exist between the parts suggests the flow and transfer of some type of energy and/or matter.
  6. Systems often exchange energy and/or matter beyond their defined boundary with the outside environment, and other systems, through various input and output processes.
  7. Functional relationships can only occur because of the presence of a driving force.
  8. The parts that make up a system show some degree of integration – in other words the parts work well together.*

Real systems interact with environments.  As systems emerge, systems integrate and can acquire new qualitative properties.   The result(s) of new system properties creates the environment for constant system evolution.  Merging 2 (or more) companies is the merger of environments.

 Systems Fallout of Mergers and Acquisitions Systems

Presenting the opportunities and challenges of systems thinking strategies within these blogs comes about from a paper called Consequences of and Prospects for Systems Thinking in Organizational Change published in the book Systems Theory for Organization Development, edited by Thomas G. Cummings [the book is out of print but you can find it on Amazon for ~$4].

Where the prior blog presented positive results from systems thinking strategies this blog presents the ‘fallout’ from systems thinking taken from¬†the same paper. ¬†I‚Äôve added bold to some sections:

  1. Systems thinking has been used primarily for systems of tangible, physical objects.  The design of engineering hardware systems constitutes the paramount example of systems thinking.  Other areas, most notably human organizations, have been relatively neglected.
  2. Even in the field of engineering hardware systems, the emphasis has been on design control and operation.  Systems thinking has been converted to systems analysis, sacrificing some of the holistic, synthesizing power of systems thinking.  Consequently many of the hardware systems often seem to take on a synergistic life of their own beyond the cognizance of the systems analyst.
  3. Systems thinking has also been widely used for model building, as in the case for computerized simulation models. ¬†A representational system, comprised of¬†variables and relationships between variables, is set up to explore the overall properties of the model. ¬†The danger has been that sometimes the assumption structure of the model becomes forgotten and reification sets in. ¬†The model gets confused with reality or as Korzbyski says, ‘the map is not the territory‘. ¬†Reification constitutes a constant threat in the use of relational models.
  4. Successes with systems thinking in the realm of hardware systems and rational model-building has lead to a false sense of certainty and control, and to a belief in some quarters that human organizational systems can be dealt with just as easily or in similar fashion.  The belief that human organizations are basically social engineering problems is likely to produce some costly large-scale disasters.  [emphasis added]

In the next blog I’ll present of mix of what can be done to improve systems integration as well as look at the responsible partner for systems integration; and it is not the IT department, but more in line with the CFO responsibility.


Systems Theory Series:

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