If your company is planning to merge with or acquire another company, you may be tasked with integrating the new company’s HR system into SAP ERP Human Capital Management (SAP ERP HCM). While this process may seem straightforward at first — simply adding new profiles and employee data — it is in fact riddled with challenges that can haunt an unprepared project manager.

Satish Badgi, a senior manager at Accenture and an expert on SAP ERP HCM and merger projects, says there are several obstacles to a successful merger of an outside HR system into SAP ERP HCM. He shares his thoughts on some of those challenges and offers guidance for project managers tasked with a merger project.

The Challenges

There are two likely scenarios for rolling a new company or division’s HR system into SAP ERP HCM. You will either integrate another SAP ERP HCM system or a different vendor’s system, such as PeopleSoft, into your existing SAP ERP HCM application.

Integrating PeopleSoft is the more common scenario, Badgi says, but both examples present multiple challenges. Even if the acquired company runs on an SAP system, several steps are necessary to ensure that the implementations can be merged without causing significant disruptions to the system or the organization.

These challenges can be grouped broadly into technical challenges and organizational and cultural challenges.

Technical Challenges

While the overarching goal of the merger into SAP ERP HCM is straightforward, the project itself will consist of multiple smaller projects running concurrently, says Badgi. For example, consider a project manager tasked with merging two separate Payroll applications onto SAP ERP HCM. Merging more than 1,000 earnings and deduction codes (the wage type catalog) at the newly acquired company into the SAP ERP HCM system requires special attention to the relationship between those codes and other applications.

As another example, a tremendous amount of effort is required to consolidate a PeopleSoft system split into four different bi-weekly payrolls into a single payroll schedule in SAP ERP HCM, says Badgi.

“That has an impact on data conversion, parallel testing, and resourcing for the project,” he says.

One of the central challenges for project managers, Badgi says, is to be equally adept at managing the small details while keeping the big picture in mind.

“There may be multiple projects happening at once, but some projects are so specific that project managers need to keep close tabs on what’s happening at the technical level — while at the same time monitoring what’s happening at the PMO (project management office) level,” he says.

Organizational and Cultural Challenges

While the technical aspects of an HR system merger are daunting enough, Badgi warns project managers not to overlook the cultural challenges of the project. Getting the acquired company on the same page as the project team may require more effort than estimated.

“For example, someone implementing SAP in Europe has a different approach to resource planning, a different philosophy about customizing applications, and a different way of handling user experience with product than an American company would,” says Badgi.

Even if both companies are based in the United States, there may be subtle differences in corporate culture that can have a huge impact on user adoption, training, and other key aspects of a project’s success.

If the acquired company used PeopleSoft for HR, users who were previously allowed to create their own queries easily may complain that SAP ERP HCM is too inflexible — a complaint project managers will want to be prepared to handle. Badgi says these complaints can be minimized by using standard SAP reports such as wage type reports or flex reports, or by downloading standard SAP list viewer (ALV) reports into Microsoft Excel documents. Project managers should also explain that SAP is built to offer tighter controls over who gets to access data in the SAP ERP HCM application.

Other organizational challenges include acquiring a company based in a geographically distant country — which poses not only cultural obstacles but also time zone issues, regulatory concerns, and other challenges.

Overcoming Project Challenges

Badgi suggests several keys for overcoming the obstacles associated with merging an acquired HR system into SAP ERP HCM.

Perform a Thorough Impact Analysis

While an impact analysis is a necessity for any project, it is especially important for merging HR systems onto SAP ERP HCM. This is because most HR requirements are highly tailored to the company’s specific needs. While some SAP ERP customers implement standard out-of-the-box solutions, the rest customize and modify the delivered functionality. Even if they adopt standards and best-of-breed business processes, these companies still end up with modified processes or systems.

A good project manager will consider the impact of the project from four different perspectives — applications, project management, change management, and custom objects — to determine the effect of the project on the company and the people using both systems. The impact analysis should then serve as a guide for coaching the project team and users at the acquired company through the process of the merger.

The most critical aspect, Badgi says, is to provide an accurate accountof all customized objects in the system and assess the impact of moving them to the SAP system.

“Application customization is a majority of the work in these projects, so people need to be prepared,” he says. “For example, if a customer’s PeopleSoft system includes custom panels and they’re moving that system into SAP, you have to communicate that they must now use the standard infotypes in SAP HR.”

When creating the impact analysis, Badgi warns project managers not to overlook the satellite applications that are not part of the core HR system. Many companies have attached best-of-breed applications for compensation, travel expenses, workflow, manager self-service, and other areas that must be inventoried when planning the transition to SAP ERP HCM.

A useful tool for assessing the overall project impact and your planning needs is to map the business view of the acquisition with the IT components that will be affected (Figure 1). This way the project team has a clear idea of how the technical pieces should fit together to benefit the business.

Figure 1

Mapping the IT components with the business components of a merger or acquisition

Once you have mapped the acquisition view to the HR view, you can begin to map the SAP components you will need to use to the organizational entities that will require them. This will give you a good idea of which elements of the project are likely to be most challenging (Figure 2).

Figure 2

Mapping the complexity of the project

“Now you come back and see which core modules within SAP HR you are going to use. The more of them there are, and the more lines of business they touch, the more complex the task will be,” says Badgi. “If you acquire a consumer products or pharmaceutical company, you might acquire multiple lines of business from the new company. Therefore, you need to translate that into SAP HR structures across all these modules. The complexity goes up substantially.”

Don’t Skimp on the Budget

Badgi says many project managers assume that merging an acquired HR system into SAP ERP HCM will be easier than it is, and fail to secure proper funding and resources.

“It almost sounds like a no-brainer, but most of the time people underestimate the costs,” he says. “If they have SAP already, they think they can just use their current configuration and add the new data — and they underestimate all the effort required to make that work.”

For example, just updating the wage type catalog in SAP ERP HCM requires a thorough cleansing of the wage data from the acquired company — an effort similar to that required for an upgrade or new implementation project. An accurate impact analysis should give project managers the tools they need to accurately budget for the project.

Don’t Roll Out New Functionality While Merging

Funding for HR merger projects is typically not an issue, since it is often carved out of the massive M&A budget most companies build into the deal for a merger or acquisition. However, Badgi warns against using the available money to take on too much at once. Using the merger project as an excuse to add or roll out new functionality within SAP ERP HCM can be a costly mistake, he says.

“You already have many challenges for this project — now if you try to add a new module or functionality, those challenges double,” says Badgi.

Change management is a major reason for this. You will already need to help a new company or division adapt to your existing SAP system. Rolling out a new module or functionality means you will have an equal task among your existing users on top of that.

“People get tempted because they have some money to play with, but they should realize that once things settle down you can always tackle that project later,” says Badgi.

Similarly, Badgi cautions against merging HR systems while your company is in the middle of a major SAP upgrade. Many companies choose to allow the newly acquired or merged company to continue using its PeopleSoft or other system until the SAP upgrade is complete. Then they execute the merger project.

Identify Champions in the New Organization

Winning the hearts and minds of the newly acquired company will be critical to the success of the merger into SAP ERP HCM. To do so, Badgi emphasizes the importance of seeking out “champions” in the acquired organization who can help the merger along.

These champions don’t need to be experienced in SAP, either. In fact, Badgi says, they may be the functional workers with the closest ties to the old system. If the acquired company runs a PeopleSoft HR system, project managers should recruit those who know the system inside and out — for example, those who have made changes to the PeopleSoft system or are familiar with all custom objects — to become champions for the merger into the SAP system.

“If you bring these people in as champions in the SAP world, that helps in multiple ways,” says Badgi. “There is always respect for these people in that organization, because these are typically the go-to people.”

Securing buy-in from these champions is a good way to motivate the rest of the users to follow along, and gives project managers valuable allies for user training and adoption initiatives.

Create a PMO

While the project management office (PMO) is more often a theory than a reality at many companies, the complexity of an HR merger often requires guidance from a high-level source. Badgi says a key success factor of an HR merger project is the ability to help the project team prioritize its work and keep an eye on who is responsible for completing each task.

Even if the PMO consists of only one person (with support from junior level resources), it is important to follow proven methodologies and a structured approach to project and program management.

Treat the HR Merger Like an Implementation

Because of the complexity of an HR merger onto SAP ERM HCM, project managers should treat it in much the same way as a new, full-blown implementation, says Badgi. That means adhering to a rigorous schedule of major deliverables that includes a thorough impact analysis template and other documentation that falls in line with the ASAP methodology for SAP implementations.

Communication is Vital

Organizational change is a key element of any merger or acquisition, and if not handled properly can have a negative impact on employees on both sides. Project managers must always keep that in mind, and consider the transition and change management elements of every decision throughout the project.

The way to do this, Badgi says, is to keep the information flowing through newsletters, lunch-and-learn sessions, and other efforts.

“Another key is to have solid help desk support and local mentors available to hold users’ hands after go-live,” he says.

Practice Reusability

For many companies, mergers and acquisitions are a key strategic focus in a bad economy. If this is the case at your company, Badgi recommends documenting and formalizing your processes, testing methodologies, and issue resolution strategies in order to create a template for future mergers. Systems integration vendors offer systems consolidation toolsets that may aid in this effort.

Davin Wilfrid

Davin Wilfrid was a writer and editor for SAPinsider and SAP Experts. He contributed case studies and research projects aimed at helping the SAP ecosystem get the most out of their existing technology investments.

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