Merger Integration Blog

Some four months have gone by since my last blog posting.  That’s way too long, but I have an excuse:  I’ve been working on the manuscript for a new handbook. 

The handbook is about you. 

Specifically, it’s about how to move through the new future you’re facing, a tomorrow full of disruption, uncertainty, and very different possibilities.  The message focuses on how to make friends with instability and unpredictability…how to live into unanswered questions…how to spot and capture the unexpected good that hides inside our uncertain times. 

Take a guess.  How many people in the U.S.—or in the far corners of the planet—have seen this headline from SFGate.com on Monday, June 6, 2011?

 AOL Insider:  Here Are 12 Reasons Why
The AOL-Huffington Post Merger Is Going Down In Flames

I guess you could say the story began way back in 1899.  That’s when Al North and Harry Hamilton incorporated The Pontiac Spring & Wagon Works in Pontiac, Michigan.  But these buggy makers could see the future, and by 1902 they were moving into automobiles.

Five years later along came Ed Murphy, another Michigan guy making the shift from horse-drawn carriages to motor car sales.  He formed the Oakland Motor Company and promptly merged with Pontiac Spring & Wagon Works, creating The Oakland Motor Car Company.

Some time back Harvard Business Review reported a study regarding how mergers impact people in the workforce.  The research, involving almost 1,000 senior and middle managers, found that 90% of them were psychologically unprepared for the changes in status and organizational structure they would encounter following their mergers.

If you’ve got a deal in the works, take a hard look at your organization. 

“Big Deals Roar Back as Spirits Rebound,” blared a front page headline in last week’s Wall Street Journal.

Hot damn!

We’re barely three months into 2011, but the paper said that already “companies around the world have announced $784.1 billion worth of deals.”  We’re told “a change in psyche” is pushing corporations to acquire and merge.  But then the Journal adds, “All this has happened while evidence mounts that mergers often fail.” 

The next time you see or read about a top executive announcing a merger/acquisition, pay close attention.  I’m betting the boss mismanages expectations by making at least one of these five common but wrong-headed remarks.

1.      “We don’t anticipate making any changes.”

Beware of the integration do-gooders. 

Chances are you have a few of these people scattered across the management ranks.  I’m talking about soft-hearted managers, those misguided souls who seem to think you can run an effective integration without upsetting anyone.  These are the folks who would sacrifice integration success in order not to disturb the organizational peace.  They’re nice people and generally well intentioned.  But here’s the irony:  Theirs is the cruelest approach.

I’m a book freak.  I even love the smell of bookstores. 

So Borders' high-profile failure bums me out.  But you could see it coming.

This was a Kmart deal, born in the blending of Waldenbooks (bought in 1984) with the 1992 purchase of Borders.  Granted, there were a few good years.  But the two booksellers never became fully integrated, and that was the chicken that eventually came home to roost.  Borders never succeeded in combining its computer inventory management systems with Walden’s.  The dual systems bogged down Borders’ operations, while Barnes & Noble and Amazon rocketed ahead with better technology.

What sort of push-back is predictable when a major change program gets under way?  How much resistance is “reasonable”?

If you have a reliable frame of reference, you can put things into perspective.  Knowing what’s “normal,” you’ll have a better feel for how you should react to the particular situation facing you.  So let’s look at the typical scenario.

We’re dealing in generalities here, but the breakout usually goes about like this.

Corporate culture often catches blame when integration efforts get scratchy.  But mergers produce an array of organizational problems that have nothing to do with culture conflict per se.

Every year more than 250,000 books are published in the U.S.  Some 11,000 of these are business books, and Zero-Sum Game is one of the very best.

Go buy a copy right now.  If you’re involved in the fast-growth game of M&A, this new release by Erika Olson should zip to the top of your need-to-read list.

It should. And it can.

I’ll explain how, but first let’s look at the problem.

The October 1, 2010, issue of CFO Magazine provides a troubling perspective.  In the article titled “Debating HR’s Role in Deal-Making,” finance executives heavily devalue the contribution made by Human Resources in M&A scenarios. (See chart below.)

A couple days ago I spent close to an hour on the phone talking mergers with Rick Corrado, host of The Independent Business Owners Show on VoiceAmerica. 

Corrado is an energetic, high-achieving, entrepreneurial guy who’s easy to talk to.  Our conversation hustled across an array of topics, hitting myriad aspects of M&A such as corporate culture, employee issues, and important leadership behaviors in the context of mergers. 

What if—as an individual—your genetic code suddenly changed by, say, 23%?

How different a person would you be?  If the change happened overnight, would you even recognize yourself the next morning?  What would it feel like…how would you behave?

A man walks into a bar and says, “Give me a beer before problems start!”  He downs it and orders another, saying, “Give me a beer before problems start!”  The bartender looks confused.  This goes on for a while and after the fifth beer, the bartender—now totally perplexed—asks the man, “When are you going to pay for these beers?”  The man says, “Ah, now the problems start.”

Of course, the trouble began with the first beer.  It was just a lot bigger problem by beer number five.

I’d bet a lot of money you’ve never heard of a guy named Robert Valentine Braddock.  He’s a big name in the world of country music, though, a living legend on Music Row in Nashville. 

Bobby is the only living songwriter who’s had at least one song reach the top of Billboard’s country chart in every decade for five decades running.  He has written some thirteen #1 hits, and was inducted as the youngest living member of the Songwriters Hall of Fame in 1981.

Dealmakers are on edge these days.  They’re dying for some action, but nobody can figure out where the boundary lines lie for this economy.  Predictability remains rottenly bad, and that means the risk needle is stuck in the red zone.

There’s a lot of money burning the pockets of cash-rich corporations and private equity players.  But the people I talk to say Washington has them too spooked to play the M&A game for now.

The title of this theatre production (the second-longest running Off Broadway musical) reminds me of the bait-and-switch experience that acquired companies often complain about.

Romanced by the dealmakers, and seduced into selling, they leave the merger courtship psychologically unprepared for the realities of corporate marriage.

Such naivete.  Why do grownups believe it when acquirers say things like “It will continue to be business as usual” ?     

Which do you believe is harder for people—dealing with uncertainty, or adapting to change?

Mergers confront people with both challenges.  But uncertainty arrives first, and it triggers problems well before actual integration begins. 

When employees pick up the scent that they might be acquired and merged, a cloud of ambiguity descends over the organization.  This produces a sense of uncertainty that fuzzes up priorities, interferes with decision-making, and breeds inertia.

How can you counter this business slowdown?