The history of mega-mergers is strewn with numerous examples of mismanagement, where the parties involved focus too heavily on systems and processes at the expense of people and culture. Martin Saville, Director of Roffey Park’s Organisational Development Practitioners Programme, explores how companies can better prepare to walk up the aisle together.
The business pages have been buzzing recently with reports of a potential merger between UK finance powerhouse Barclays and Dutch banking giant ABN Amro worth an eye watering €63 billion. Amid the rumours that inevitably accompany any significant merger, there is much comment on potential horse-trading and bargaining over the various corporate entities that make up each company. There is also much scepticism about the wisdom of trying to combine two global companies that employ in excess of 210,000 people in 60+ countries.
This is because history is littered with mergers that have been undertaken hastily and without due attention to crucial human requirements. Typically, the focus has been on combining product lines and services rather than people and culture. Such mergers can foment resentment, lead to higher levels of staff churn and undermine the new company’s performance. When Vodafone bought Mannesman in 1999 – at the time, the largest corporate merger in history – it was accompanied by bitter negotiations, claims and counterclaims in a bidding battle that mixed big business with union uproar.
This raises the question: How can companies prepare better for such a momentous undertaking?
It is my experience that developing and implementing a comprehensive Organisational Development (OD) strategy can play a vital role in making the merger go as smoothly – and quickly – as possible. The Organisational Development approach ensures that human and cultural needs and changes are taken into account – and it is these factors that can prove critical in the success or failure of potential mergers.
The most common pitfall faced at the outset by most companies preparing for a major strategic shift such as a merger is that they focus solely on the two organisations as rational, operational machines. Systems are scrutinised, processes are pored over and resources are researched with a view to integrating them as tightly as possible. This is both sensible and necessary but it must not be undertaken in a vacuum.
The impact of informal, human systems should also be taken into consideration and this is where OD can make such a crucial difference. OD is absolutely focused on performance and output but is grounded in humanistic values and the cultural context. It also taps into the notion of the ‘wisdom of the many’. This means it becomes a collaborative process that takes into account the feelings and motivations of the many, not just the few – a ‘doing with’ experience as opposed to a ‘doing to’ one. In the context of a contentious merger, this sense of inclusiveness is key because people are more likely to buy into something that they themselves have helped create.
Also key, is the way in which OD’s systemic approach looks not just at individual parts but at the relationship between them and how these relationships affect the nature of the components. As a holistic discipline, it takes account of the entire environment in a way that traditional change management philosophies do not.
Let’s take an example – perhaps somewhat facetious but demonstrative of the way companies can work outside traditional hierarchical structures. It’s known as the smoking phenomenon whereby employees of all levels tend to congregate and mix openly over their shared habit. This breaks down accepted chains of command and can reflect a much truer, more organic vision of an organisation. It is anomalies such as this – and to a lesser extent the ‘watercooler effect’ –that are not usually taken into account by traditional methodologies. To an extent, these places are where business is done – outside the politics of the conventional workplace.
Another factor which is usually considered as an afterthought is the impact that a merger or similarly significant upheaval can have on staff. I would liken the emotional effect of a merger to that of bereavement and, as such, it takes stakeholders time to ‘grieve’ and adjust. All too often, this is pushed into second place by the senior team obsessing with spreadsheets. For many, these logistics represent a form of security and even displacement that enable them to block out the human ramifications.
A final consideration is speed. For many, the quicker the merger takes place, the better; it reduces anxiety, uncertainty, demonstrates confidence – and pleases the stock market. Forcing a complex procedure through too quickly alienates too many people and limits any form of wider consultation. In mergers, as in so much else, the adage holds true : more haste, less speed. By putting in the right OD groundwork upfront, the merger will ultimately bear fruit much more rapidly, and the people involved will flourish.
Ultimately, those contemplating a merger need to develop a panoramic perspective, canvass opinions broadly and – most of all – listen carefully, giving equal weight to the human, cultural elements as well as the operational ones. Doing so will make the entire process smoother and more successful for everyone involved.
In the late eighties, four of the leading financial services businesses in South Africa took the decision to merge. Despite a six month process of synchronising processes and training staff, when the merger took effect – literally ‘switched on’ over a weekend – most employees were utterly cut adrift. Moreover, there was a great deal of internal competition with rival factions fighting over clients. To quote one former employee, the combined organisation was on the brink of implosion. After two years, the company decided to revisit the entire approach to the merger and put people, not processes, front and centre. By creating a set of cultural values and encouraging participation at all levels, the company gradually began to come together as a coherent whole entity. The Organisational Development approach fostered a feeling of accountability, responsibility and shared goals that enabled the merged company to overcome its turbulent formation and make genuine progress in its new guise.