Merge people - not companies
By Dr J?rgen Thorsell, Executive Vice President, Mannaz

Why are more than 60% of all mergers total failures? Why are only 20% recognized as successes? Most mergers fail in the integration phase. They fail during the period where each and everybody in the two organisations should work together and achieve the "golden" synergies. The day we can deal effectively with the people issues, from the start throughout the merger process, we shall be considerably more successful in merging organisations.

Mergers and business psychology
During the last year Mannaz has addressed the important issue of "people" in mergers. An international Merging People Taskforce was established to develop concrete approaches on how to lead people through mergers. The Taskforce included highly experienced business leaders, leadership coaches, and a Ph.D. research fellow.

The Ph.D. fellow undertook a separate "real time survey" with a top management group observing them around the clock during the first four months of a merger.

In the Merging People Taskforce there was a representative from a large Danish industrial group with extensive international merger experience. The Taskforce also included people with first hand experiences from a major European merger which had failed with dramatic consequences.

The Taskforce took a radically different approach to mergers:

• They placed themselves in the situation of those who were being merged - the "victims" of mergers.
  
• They viewed mergers from the "grass roots" of the organisation.
  
• They developed new approaches to make mergers succeed.
  
• They focussed on the softer issues such as understanding the meaning of the merger, insecurity, chaos, and the importance of leadership.
  

Making Sense of Mergers
Often a merger makes good business sense to top management, to shareholders, to market strategists, to financial analysts, to legal advisors, and to all who are involved in the initial strategic considerations. It became clear to the Taskforce that most of the decision makers in the early merger stages put little or no emphasis on people issues. They possess strong competencies in merging companies, but much less understanding of how to merge people.

Nor did they know how to engage with people to buy into a new reality, to retain key people, or deal with softer issues during a merger process. They found it difficult to handle lay offs, to address chaotic situations full of surprises, and to communicate convincingly. These are some of the merging people competencies, which the Taskforce identified as crucial to making mergers work.

The Merger Lab
Next the Taskforce developed a "People Merger Laboratory". This is a laboratory where all important stakeholders in a merger are confronted with the people aspects of a merger on an experiential base. Not only do they experience being merged through eye opening exercises, they also receive 360 degree feedback on their own merging people competencies. In addition a practical tailored log is created and provided to guide them in their next people merger.

The People Merger Laboratory can be used to achieve improvements in merging people competencies and thus provide a valuable preparation for the future mergers. It can be a great advantage to use the laboratory in the very early days of an actual merger, enabling both parties to participate together. The laboratory helps them create a common understanding of how to address the important people issues.

Leading through times of chaos
Mergers should always be carefully planned. However, even with the best planning, experience tells us that "chaos" is to be expected during hectic periods, when unexpected events result in systems, structures, and people being in flux. During those periods strong leadership is essential as mergers can also fail because of power struggles and personal agendas.

Experienced business psychologists are equipped to create room for conflict resolution, crisis support, and paralysis avoidance. They know how to deal with management concerns and with uncertainty and ambiguity in the entire organisation. The Mannaz Taskforce recommends that top management draws on the know-how within business psychology to ensure effective leadership through times of change and great uncertainty.

There is strong evidence that "processes" facilitated by leadership coaches can lead to more solid decisions, and much greater commitment from amongst the decision makers. Likewise, input from a third party with objective expertise, can accelerate the formation and integration of management groups and deliver sustainable frameworks, systems and processes to support the merger.

The Merger Barometer
Often top management cannot be aware or see everything that takes place during important periods of a merger. They do not have systems in place to monitor the progress of the integration of people. They hear about successful parts of the merger. They may know of some difficulties or spots of resistance, but they are unlikely to be fully knowledgeable about everything.

The Merging People Taskforce created a simple model - a tailored electronic survey tool, which enables top management to measure "people issues" such as the level of uncertainty. Other matters including the satisfaction with available information, the meaning, involvement and relevance of the merger to the individual, and the effect on management performance are also measured. A Merger Barometer can be conducted at any desired time and then provide valid information about progress and areas of blockages and concern.

The Merger Barometer can also operate as an "early warning system". For example reduced employee motivation often creates poor performance and mistakes in customer care, which later result in dips in sales and the bottom line.

Involve and inform
Information and communication have long been acknowledged to be vital to the success of mergers. We also know that information should be timely and communication should be dialogue based. However, neither timely information nor personal communication will be entirely sufficient.

From the experiences in the Merging People Taskforce real commitment to a merger is achieved through involvement. It is acknowledged that if people are involved they automatically feel more ownership and responsibility. Merged organisations should be built on everybody"s commitment and not just on the commitment of top management.

The Taskforce produced a series of models and processes to optimise the commitment people can experience in a merger. Large group processes will build involvement for many at the same time whilst individuals in smaller groups can be helped to identify themselves in the new reality. This often means creating a new common vision and synergies in a new organisation, thus finding new sources of energy.

Avoid the dip
Marriage is a merger of just two people. The honeymoon is unforgettable. The future expectations are great. However, the honeymoon comes to an end and the future becomes today. It is in the daily business life that a merger must prove itself. It is after the great merger declaration that the best people must stay "on board" and be fully committed. It is in the months and years afterwards that customers must be retained and valued, and not be hijacked by competitors, because of inside chaos or post merger difficulties. Then the bottom line results will blossom.

According to the Merging People Taskforce the greatest factor in successful mergers is to merge people not just companies.

About the author
Jørgen Thorsell is Executive Vice President responsible for international activities at Mannaz. He has been with Mannaz since 1984 with a break from 1987 to 1990 when he earned his Doctorate degree in corporate strategy in the US. He has extensive experience in designing and implementing leadership and management programmes.

Read more about Merging People
You can get more information about Merging Organisations through Merging People and the merging people building blocks.

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