Two similar stats jumped out at me recently: About 70% of all mergers fail to achieve their goals. And about 70% of all blended marriages end in divorce. Coincidence? I don’t think so.
The story of a merger is a lot like the story of two people making a commitment to each other, each bringing children into the marriage:
“Two (parents/CEOs) are excited by the possibilities of doing life together, inspired by dreams of (happily ever after/the market value of the deal.) Emotions are high and the wine flows as they celebrate the (marriage/merger), but then they wake up and realize, “How are we going to deal with all these different (kids/employees)?”
Whether it’s “Yours Mine and Ours,” “The Brady Bunch,” or “Cheaper by the Dozen,” the story of blending families (and companies) gets complicated! The issues parents of blended families deal with echo many of the problems we need to solve during a merger:
o Where are we going to live? (Will we consolidate offices and factories?)
o Why do we have to do it that way? (How are we going to integrate all these different IT systems and processes?)
o Why is my allowance different than hers? (How are we going to fairly calibrate
sales compensation, benefits, and HR policies?)
o Why do we have to share a room? (Which products and departments will be
consolidated or eliminated?)
o Does our name change? (Will our brand change? Will an acquired firm’s name just disappear?)
o Who makes decisions now, Mom or Dad? (Which leaders will end up with key roles and power in the merged organization?)
And while not always spoken out loud, both kids and employees worry:
o Why did you do this? Nobody asked me if this was a good idea!
o How do I fit in now? Do you still love me?
A merger is a high-stakes strategy. Expectations are high, the timelines are tight, and there’s a lot on the line. Success requires everyone is clear and aligned on the goals and the value to be captured. There are a lot of decisions to be made about this new “family” as you shape a new culture and way of working for the NewCo.
Unfortunately, many leaders aren’t ready to lead during a merger. Many have never been through a complex transaction like this before. And often the priority of the C-Suite is on getting the deal done, thinking that equipping people for the realities of integration is a “nice to do” to be addressed down the road.
The result can be serious: a slowdown in decision-making, productivity, and a negative impact on deal value. In fact, Global PMI Partners, experts in post-merger integration, observed there’s often a productivity slump right after a merger, “a dip in performance that can lead up to a 50% profit loss.” Sobering.
In my own experience implementing and consulting with clients going through mergers, I’ve found that there IS a way to lead better.
If you can focus on answering just FOUR practical questions FAST, you can lead more effectively and help speed results during a merger or joint venture:
1. “WHY?“( What problems will this new organization be focused on solving? )
While Simon Sinek guides all of us to “Start with Why” to inspire people to join our efforts, this is even more crucial during a merger. Answering this question will help people align more quickly and work together for a common purpose. But “Why” also helps address one of the biggest risks to a merger: attrition of key talent. Research by Bain & Company revealed that #1 contributor to keeping key talent through a merger is “defining a compelling vision for the newly merged company.” Ensuring everyone understands the purpose of this merged organization will also help guide and provide context for hundreds of smaller decisions that need to be made across the organization, as people have to make little tradeoffs every day throughout the integration that aren’t even visible at the top.
2. “WHY YOU — NOW?”
Whether you are merging a company or a nonprofit, a large part of the value thesis of a merger is going to be revenue growth. But revenue growth assumes that you’ve got happy customers and donors, and the mere fact that you’ve merged causes confusion and skepticism!
Customers and donors want to know: “Why should I choose you — now?” When I work with clients to clarify and accelerate their merger strategy, we work hard on getting the differentiation clear. We draft an initial “Why You” statement tapping the brain trust of senior leaders across functions from both organizations. But we don’t stop there. Front-line employees and customers are both more likely to believe what makes the newly merged organization unique when they hear the stories of what you do well and your successes. So ask your employees from across the merged companies to share what do that they are proudest of! Let them brag about their successes and stories of making a difference. You’ll bring proof points of your differentiation to life faster while starting to build pride in this newly merged organization. “Every family has a story to tell—blended families just have more chapters”- Anonymous.
3. “WHY ME?”
Bain’s research also showed that the #2 contributor to keeping key talent through a merger is “defining clear roles for employees in the new organization.” Clarifying who does what as soon as possible will improve productivity and calm fears. If people are confused about where they fit and don’t see a role for themselves or people they respect, they’ll start slow-rolling their work, and some will start heading for the doors. (The flip side is true as well. If you really will not have a role for someone after a merger, instead of awkwardly ignoring them, and keeping them in the dark, be honest about the situation and communicate with respect. Give them a graceful exit and help them leave knowing they are still respected and have made a difference while they were there. The faster you step up and make the hard decisions of whether there’s a fit, the faster you — and they — can move forward.)
4. “HOW DO WE DO THINGS -– NOW?”
During one merger integration effort, I remember a highly talented but very frustrated employee suddenly saying, “Look, I don’t care if it’s your way or our way. But just tell me the way we DO it here now so I can stop wasting time and get my job done!” Of course, there are a lot of open issues to work through during a merger, but I find managers can exacerbate the confusion by being overly cautious about what the new bosses say, and unable to get things done because of changes rumored to be coming.
You can keep the business running more smoothly throughout the integration by providing clear guidance about what to do every day while there are still so many open issues. I recommend this guidance: “If you did it yesterday — and it was legal and good for the customer! — keep doing it until you hear otherwise.” Providing a central hotline for questions can also give visibility to issues and speed decisions, especially when first-line supervisors and managers are just as much in the dark as front-line employees. Somehow, getting a quick “Yes/No” or “No change for now” or even “Good point, we hadn’t thought of that! We’ll get back to you when we have an answer” helps people feel heard and provides clarity that helps keep the momentum.
The bottom line: During uncertain times, leadership is a gift. Whether you’re the CEO, part of a merger integration team, or simply a leader who cares about your people when times get confusing, I encourage you to focus quickly on getting these four answers right. Working with your team to come up with even “good enough” answers will help people feel a sense of certainty and calm as you write the story together and shape your newly blended organization.
I look forward to hearing your thoughts:)
–Susan Schramm
This article is part of my newsletter, which equips and energizes leaders with practical ways to move forward, whether leading a new strategy or getting one back on track. Subscribe if you’d like insights like this one or twice a month.
Explore my website, www.gotomarketimpact.com, to learn more about my upcoming book, “FastTrack Your Big Idea!” as well as my offerings to help you and your team clarify your strategy and get results faster. Or let’s connect! Contact me at susan.schramm@gotomarketimpact.com.
