Mergers, globalization, consolidation: I’ve heard all about it. Time to tell me something new. Is that your feeling?
Then let’s talk about post-merger leadership, and what you could actually do to make a difference if the seemingly-inevitable comes to pass.
For starters, the state of the art in corporate-land is fairly highly refined at this point. As McKinsey puts it, integrating two firms following a merger has become a "sophisticated exercise in recent years. Businesses are more disciplined
and systematic about identifying and capturing the available synergies.
Project tools and techniques are now more subtle and refined." Moreover, senior management is less concerned about wildly overpaying or about ignoring the fundamentals of integration.
The problem is that even mergers that look smart and savvy in the short term—providing real complementary reinforcing strengths, and cost savings—can end up leading to professional defections and eroding client loyalty in the longer run. McKinsey decided to study the problem, and, McKinsey-esque, undertook research:
"Our research, involving a detailed survey of 167 deals and in-depth conversations with nearly 30 CEOs who are veterans of the merger scene, has convinced us that what’s often missing is a well-defined, imaginative, energetic, and outward-looking role for the CEO and senior managers."
Permit me to reiterate that point: "a well-defined,
imaginative, energetic, and outward-looking role for the CEO and senior
managers."
In other words, you matter.
And how, precisely, can you "matter"? What separates the winners from the losers, after the initial cheering has died down and the integration teams have gone back to their day jobs, are rising to these challenges:
- Building—fast—a new senior management team (not to be confused with the short half-life integration teams)
- Crafting and delivering a believable and inspiring "story," since we human beings respond to stories viscerally, and to facts and figures only intellectually
- Insisting on and reinforcing a performance-oriented culture (to avoid the temptation to engage in a period of internal navel-gazing that is death in these circumstances)
- As a complement to the external performance focus, stressing the importance and benefits of the merger to clients, prospective clients, and recruits
- And lastly, and perhaps most subtly, striking the magic balance between speed of execution in integration and lasting time to develop the wisdom to reflect on the value of the newly created entity.
Exhausted yet? Well, guess what: You have no choice but to step up to this particular plate.
Isn’t that obvious, however? Perhaps surprisingly, even though it should be blisteringly obvious, in McKinsey’s experience with post-merger integration "senior managers so often fail to define a high-impact role for themselves" that they actually had struggle to understand why.
The "most fundamental" reason is that too many senior managers simply don’t understand what they can contribute to add real value. The complexity of the task seems overwhelming, and faced with what feels like managing through cotton batting in a fog, these un-visionary managers preoccupy themselves with attending steering committee meetings and dealing with the ad-hoc’cracies as they arise. This begs the question: Why did we think this was such a spiffy idea to begin with?
A second cause of failing to articulate "the vision thing" can be arrogance—most corrosively, arrogance towards your very merger partner. (In which case, look for it to be promptly reciprocated.)
Finally, you can view the post-merger integration as "merely" a technical challenge, best delegated to people lower down the food chain in HR, IT, finance, facilities management, and so forth, who are familiar with all the messy details and protect you from having to get your hands dirty or finding yourself in a position where operational-level ignorance might be exposed.
I personally will never forget the near-scarring experience of asking the two CIO’s (jointly, by the way) of two AmLaw 100 firms in the process of a merger what "strategic direction" they had received from the top in terms of what the combined IT infrastructure should look like, and being greeted with a near facsimile of the quizzical and bewildered look portrayed by your faithful dog when you’ve just said something incomprehensible, but which clearly calls for action on their part. And when the answer inevitably came, of course, it was "no guidance whatsoever."
Job 1, therefore, is to establish a crystal-clear definition of who will be calling the shots at the top, even before the task of implementing the integration begins. This can, let’s face it, be the toughest part, but you can brook no indecision or lack of clarity: Ruffle feathers if you must, and get it over with, or else you’ll find your firm(s) at sea several months down the road, and not only those who needed to be given bad news will be unhappy, the rest of your partners will be as well.
Real integration cannot be superficial, and differences cannot be glossed over. Again, address them unblinkingly now or face corrosion from the inside later. As one (un-named) manager who’d been through this put it later with chagrin: “For months we were really two teams and we knew it. But we just didn’t want to deal with it, so no one raised the issue.” And as hard as this can be at the top, the genuine integration needs to go all the way down. Experience seems to demonstrate that the best way to deal with this is to turn people’s focus from the internal issues to the external: Clients.
Your indispensable ally in this campaign will be the compelling, unmistakable, logic of the merger itself. ("What?!," you say, "it might not be obvious"? Back to Square One.)
"As UBS president Peter Wuffli (whose global bank has grown on the back of a string of acquisitions) observes, “One of our criteria for a deal was that it had to be strategically obvious—not just explainable but obvious.”"
Assuming—perhaps an heroic assumption—that the overriding logic of the combination speaks for itself, your next task is to build a new, and unified, "performance culture." This over-used phrase
is, however, something you cannot avoid. Since you already have a vision of why the new organization should exist (you do have that, don’t you?), focus everyone’s attention on that goal:
- Avoid us vs. them; it’s not about who won and who lost, or who was the acquirer and who the acquiree.
- "Survival of the fittest," or defaulting to what you think is "best of breed," mixing and matching essentially unchanged Lego blocks from each firm, is rarely the answer either
- Your true focus, again, needs to be external, on clients and delivering unparalleled service.
And it starts with you and the senior team. As the CEO of Suncorp puts it:
“You can’t just stand up there and tell people what the new culture is going to be. You have to define in your own mind what you want the new culture to stand for, do it for a little while, and then talk about what you have done.”
Above all, it cannot be reiterated too often, focus on your clients. Navel-gazing just invites competitors to start poaching. Here’s a wonderful phrase that encapsulates it:
As 3Com’s Eric Benhamou cautioned, “‘Acquiring customers’ is a very arrogant phrase. The customer has to want to be acquired.”
Which puts us back where we began. Focus on these things, and win merger integration war:
- Your top team
- The story
- A performance culture
- Clients, and
- Learning through the integration itself.
And bonne chance.
