Merger Lesson from a Nobel Prize-Winning Psychologist
Daniel Kahneman is the shrink. Funny thing is, he won the Nobel not in psychology, but in economic sciences.
People describe Dr. Kahneman as “One of the greatest psychologists and deepest thinkers of our time”…”An intellectual giant”…”Among the most influential psychologists in history and certainly the most important psychologist alive today.”
His latest book,Thinking Fast and Slow, is a bestseller. And it’s worth your thirty bucks. Scattered through the 500 pages you’ll find big surprises about you. Many of these insights also will help you understand why people act the way they do during merger integration.
Here’s an example from the book, in my words: Employees are lots more troubled by what they might lose in a merger than excited by what they might gain due to the deal.
In Kahneman’s words, “When directly compared or weighted against each other, losses loom larger than gains.”
He says, “You can measure the extent of your aversion to losses by asking yourself a question: What is the smallest gain that I need to balance an equal chance to lose $100? For many people the answer is about $200, twice as much as the loss. The ‘loss aversion ratio’ has been estimated in several experiments and is usually in the range of 1.5 to 2.5.”
their careers might get damaged. Opportunities must be very bright and shiny, say twice as good as the risk of losing, for people to be upbeat and excited.
This helps explain why selling the merger to your work force can be a pretty tough job.