Tim Cowland, Client Services Director (Housing), Socitm Advisory
Mergers are back on the agenda in housing. We’ve seen a number of high-profile announcements in recent times – and sector analysts report that they’re only likely to become more frequent as Boards consider the future of their organisations and look to act in the best interest of their tenants and to create the financial capacity for housing growth in the face of rent caps and rising inflation.
Anyone who has lived through a merger knows they are complex processes – with IT, ways of working and cultural alignment often proving the most complicated, costly and time-consuming areas to consider.
Cultural change is enabled and embedded by introducing common ways of doing things – and this is only possible by merging processes, systems and data. This all needs to happen at a time when scrutiny from the regulator on how landlords manage their data is at its highest.
It’s not a trivial undertaking and it requires specialist skills and adequate time. Yet the magnitude of the task is often underestimated.
As leaders across the sector begin to sit around the table to plan their futures, we’ve developed this six-step guide to making mergers a success:
Many organisations bring in large international management consultancies to work on the business case and target operating model.
Post-merger, it often becomes clear that IT and change considerations have not always taken into account the level of detail needed to ensure accurate projections. Ultimately, it often costs more and takes longer than predicted – with new skills needing to be brought in to complete the work.
At Socitm Advisory we’re often called in to help unpick these challenges, providing pragmatism and clarity on next steps.
It is always prudent to consider investing in specialist IT support at the outset of a merger. That way you can get a detailed picture of the true state of your systems, processes and data and a properly quantified and costed roadmap for change.
The first step on any new organisation’s IT roadmap is to set out how you want the overall ‘system’ to work.
What data do you need to run the business? How will processes work? How will systems knit together to enable this? And what does all of that mean for the structure? Enterprise Architecture is a way of looking at all of these things in combination, ensuring that change is managed effectively.
Housing providers do this in different ways – some create ‘Design Committees’ and determine everything by consensus, bringing the best of each individual organisation’s processes together. This takes more time, but can increase buy in for change. The downside can be lowest common denominator processes that are not optimised for the future.
Others create a focused, multi-disciplinary team that works to deliver the most efficient model against a set of principles agreed by the Executive and Board, with input from real users, including staff and tenants.
Whatever your approach, it’s important to find a way that works within the culture you want to create.
The legal agreements in place with your existing suppliers will also require novating across to the resulting legal entity.
Areas of change and cost are likely to be in numbers of users, costs of contracts, notice periods and renewal fees/dates and cancellation fees. There are also going to be systems that will be decommissioned over a period of time that result in contractual negotiations, in particular the movement of 3rd party integrations.
Data and insight
Aside from the obvious need to ensure information is kept secure and only accessed by those that need to see it, the key challenges in merger situations are most likely to be the quality and differences in the existing data across the merging organisations.
Getting data right is an investment that isn’t often talked about upfront and yet can be a significant area of cost as it needs to be cleansed, archived, transformed to new structures and migrated to new systems.
Insight you gain from the data you hold is key to running an effective organisation. Once you understand what data you need to feed the insight you require, you can construct the detailed design of your systems, processes and underlying data structures to meet these needs. If you’re aiming for predictive analytics for example, it will be important that data is held in a way that enables this, and ensures accuracy. Plugging in Power BI and hoping for the best is not enough!
You will also need to consider the information needs at all levels of the organisation as well as those you engage with outside, including the Regulator.
With the rationalisation of your architecture, some systems will be retained, and others will be made redundant.
You will need to produce a roadmap to make sure that redundant systems are decommissioned safely, with relevant data migrated across to new or retained systems as well as any 3rd party integrations.
The end goal will be to have a rationalised infrastructure that requires the minimum amount of support and has the ability to grow to meet future demands.
The people factor
Finally – and most importantly, none of this change is possible without people – first to do it, and then to sustain it. IT and data is no longer the preserve of techies sat in a basement somewhere. Organisations needs to carefully consider the detail of their supporting structure and the skills and experience needed to ensure successful day-to-day delivery and strategic risk mitigation.
For more information about Socitm Advisory’s support to the sector, contact [email protected]