In today’s complicated and congested corporate and nonprofit communities, mergers, alliances, and collaborations are taking center stage. Everyone from funders, donors and volunteers to investment bankers and business consultants are advising their clients – from large and small-to-mid-sized corporations to nonprofit organizations – to consider the power and advantages of merging.
It makes sense for leaders to embrace this advice and seriously think about a merger or even a collaborative arrangement. This is smart for a variety of reasons, including creating some obvious opportunities such as strengthening the future of an organization by bolstering its financial standing through a combination with another, more profitable, entity; expanding the scope of services by aligning with an organization that has a broader menu of services and products or a different geographic or demographic footprint; or even ensuring a seamless succession by combining an aging organization with one that has a concentration of younger, next generation leaders.
Whatever the reason for the merger, there are some steps that leaders on both sides should consider.
It is fairly simple to identify the reasons for entering into a merger discussion, but it is much more difficult to actually participate in a merger.
Whenever a company or a nonprofit decides to explore a merger, they likely focus on the benefits that will result. This positive and optimistic outlook may get in the way of reality. Not all mergers work out over time despite good intentions.
Personal experience demonstrates that one of the greatest obstacles to a merger’s ultimate successful integration is not found in the legal documents nor is it likely to be discovered during the due diligence process. That is because the obstacle is the resistance that is in the hearts of the employees and the communities they serve.
After years or decades of building a name, a solid reputation and a meaningful legacy, the concept of merging is (at least initially) hard to accept. Who doesn’t recall a trip to the airport when United and Continental airlines originally merged, only to hear the Continental gate agents say, “It’s not our fault – it’s them,” when something went wrong with your flight reservation! The deep pride that the Continental employees had invested in the company’s culture literally “flew” right out the window when the brand name all but disappeared. The resentment between the two teams ran deep. Even though the airport signage was unveiled and the new logos graced the planes, the merger was years away from being accepted by those most affected by the deal.
It is no less impactful when a merger of two companies or nonprofits that are of lesser status than global giants like Continental and United takes place. By the time leaders call their staff together to finalize the big announcement, it has been rumored for months. They promise a brighter future together, they say there will be few operations changes, they laud a common goal, philosophy and culture and they confidently predict the merger will help them reach their strategic objectives.
But we know that much of this is either untrue or cannot easily be accomplished. Employees are skeptical and for good reason. The guarantee that ‘nothing will change’ morphs into ‘everything will change’ pretty quickly.
What can leaders do differently?
First, company or nonprofit leaders can take control of the timing. Rather than fanning rumors – founded and unfounded – which only serve to raise concerns and create havoc, leaders must keep everyone informed of the merger progress as quickly as possible. When employees are not informed of the facts in as timely and direct was, it is easy for them to create a parallel universe of unsubstantiated news. Leaders believe their merger conversations are confidential but the reality is that leaks occur. Not much escapes the employees. Before the leaders bite the bullet and call an official meeting the news has already been discussed in the parking lots and at the water cooler.
Secondly, leaders have to be honest and transparent. The employees and community deserve the truth. Once they know what is coming, they can react appropriately and, perhaps, ultimately enthusiastically. There is little that is as frightening as the unknown. Recognizing that their leaders have presented the facts as they know them helps employees feel less resentful and more in control of their decisions and their own careers.
Thirdly, there needs to be some team building and special training. Again, this is often overlooked or downplayed. The two sets of employees cannot integrate on their own and typically their companies do little to help them along. Middle market companies and nonprofits can host small, intimate parlor meetings, hold off-site social gatherings, and host seminars on both the potential perils and terrific benefits of the merger. Larger corporations can blend some face time and some online training, encouraging interaction when possible but also using technology to introduce people who may be hundreds of thousands of miles apart.
When management takes the lead and sets an example of being sensitive to the issues facing all employees from both organizations, their behavior and code of conduct will encourage the employees to be more aware of, and sensitive to, each other. It is not uncommon to think that employees from the ‘other side’ are not facing the same scary situation! A little awareness building can help dispel that myth and open the doors to sincere communication.
Leaders must also be available for frank discussions and mentoring for employees at every level. Receptionists, administrative staff, and front line providers all drive the profitability and successful culture of the company. To assume that only the management team needs coaching and support during a stressful time, such as a merger, is foolhardy.
Ignoring the role of the staff after the merger is risky.
Distributing a press release regarding the merger and filling the media with details does not result in the full integration of the two organizations. While the public announcement might seem like the culmination of weeks or months of hard work to get both parties to an agreement, it is actually only the first stage of the real work of merging which lies ahead.
A merger is defined as, “an agreement that unites two existing companies or nonprofits into one new entity.” The agreement portion is the beginning, but the unification takes place across many years as the two parties knit together to produce one seamless environment.
This is where company leaders and nonprofit directors may take their eye off the ball.
After the buzz and flurry of activity regarding the merger there is the hard work being done behind the scenes to get the two groups to work together efficiently as one. This takes much more than a few days or weeks and, in fact, is an ongoing process that can spread over years. Using the tactics for blending and unifying the employees as discussed above, while adding other ideas that can address the characteristics unique to a specific merger, leaders will be able to build the bridges and overcome the gaps that support a sustainable merger.
Investing in the mix of different initiatives that are necessary over the long term to create a truly combined entity will yield the return that reflects the value of the merger!