For employees, a merger or acquisition is a lot like The Brady Bunch:
- In The Brady Bunch, the kids had to get used to a new parent having authority. In a merger or acquisition, managers from the other company now have authority.
- In The Brady Bunch, kids who didn’t used to be brothers and sisters were suddenly siblings. In a merger or acquisition, people who used to be competitors are now fellow employees.
- Every household has its ways of doing things. In The Brady Bunch everyone had to figure out the ways of doing things for the new, combined household. In a merger or acquisition, the unwritten rules of how things get done around here aren’t the unwritten rules any more. Or else they are, but just for employees of one of the two companies involved.
- In The Brady Bunch, a laugh track told everyone what was supposed to be funny, even when it wasn’t. In a merger or acquisition, employees are supposed to pretend everything is great even when it isn’t.
Okay, it’s a reach. You try coming up with a brilliant lead every week. It’s a lot like having to write a new sitcom script … oh, never mind.
When it comes to mergers and acquisitions, the easiest approach is to operate a holding company, as was mentioned last week. In the extreme case this looks a lot like a mutual fund: The parent company owns a portfolio of businesses, which it mostly leaves alone.
Warren Buffet’s Berkshire Hathaway operates like this. It works. It just isn’t very interesting. In Brady terms, it’s sort of like the backstory of when Mike Brady and Carol Tyler were dating — the Bradys and Tylers were separate households, with all that implies (or implied in the late 1960s and early ’70s).
So let’s skip that part and go to the sort of merger or acquisition that serves a strategic, competitive purpose — one that fills out a product line, provides access to a new set of customers, adds production capacity … that sort of thing. What factors, beyond the usual textbook stuff, determine the success or failure of this sort of merger or acquisition?
One of the most important is both the easiest to understand and the hardest to accomplish: Changing what “we” means. Interestingly enough, the better-led the pre-M&A company, the harder this is.
In companies with excellent leadership, employees feel a strong sense of attachment to their employer. They have an equally strong sense that they personally own the company’s brand, defined as the expectation customers have regarding what it’s like to do business with the company in question.
Imagine a fine company like this … being brand mavens we’ll give it the snappy name Tyler, Inc. … is acquired by the marketplace behemoth The Brady Company.
Brady being what it is, and this being an acquisition, the combined businesses will retain the Brady monicker. Think Tyler’s employees will celebrate their new corporate affiliation?
Of course not. Their loyalty is to the Tyler brand. They identify with it. They live it. And it isn’t the same brand that Brady has — a difference that goes well beyond the name change.
See, Tyler prided itself in the tailored, customized service it gave all of its customers. It encouraged its employees to innovate — to improvise if that’s what made the most sense, so long as the result was something the customer in question would value, and so long as it was profitable, too.
That was the essence of Tyler’s brand, and its customers were happy to pay a premium price for the they-take-great-care-of-me sense of security that went with it.
Brady, in contrast, is all about finely tuned, highly efficient processes built to support standardized products and services. It also encourages employees to innovate — it has an Innovation Committee, in fact, to which its employees are encouraged to submit their ideas, which the IC screens, assesses, ranks, and prioritizes in its quarterly Innovation Planning Meetings.
Think the Tylers will all be happy about becoming Bradys? Of course not.
The sad thing about our mythical scenario is that Brady’s executives acquired Tyler specifically to gain its ability to provide premium service to its customers. What they haven’t done is figure out how exactly they’re going to accomplish this within their signature high-efficiency, product/service standardization practices.
And it gets worse as we look beyond the executive suite, because with increasing distance from the whole point of the acquisition comes an entirely natural attitude:
“We bought them, so of course they have to adapt to our way of doing things.”
* * *
In case you have a suspicious nature and think I’m writing about Dell’s coming acquisition of EMC, or NTT DATA’s coming acquisition of Dell Services, nothing could be further from the truth.
Among the reasons: I have no involvement in the former and as far as the latter is concerned I’m just a passenger on that train — I don’t know anything more about either transaction than you do.
Good analogy!
I like the Brady Bunch analogy, but it glosses over an important distinction: Mike and Carol had primary loyalties to each other and were committed to each other’s success, which is rare in a merger.
People also have organizational loyalties, which become critical when multiple offices or plants within a single company start merging together. People tend to be identified by where they were before the consolidation, not by what they do, which is also true in mergers. The only time I’ve seen leadership successfully fix this was by letting it all come to a head and then giving a brief speech along the lines of “We are now one organization, not two, and most of us are going to work hard to make this business successful. The rest of you, who aren’t willing to commit to this, should go to HR right now and let them know this is your last day. Either become part of the solution, or quit, but get out of the way of fixing this problem. Deciding to stay will be taken as a commitment to working hard to succeed, and your coworkers will expect you to keep your word.”
I would love to see this analogy applied to centralizing IT. I can picture it in my head, I just can’t write it as eloquently.
I’ve been through several of these. The amount of change is inversely proportional to the statements uttered by the conquerors first tour of your office. If they say, “we not planning to make any changes”, that’s your first clue to update your resume and make sure your suitcase is always packed.
I recently went through a merger of “equals” of course it was anything but that. The larger of the two companies made it clear from the outset that they “won”. We were both owned by a larger company who basically purchased the two major competitors. We went through all the training and read the books about merger survival and how to prosper. Problem is, the larger of the two companies simply had enough management in place to insure that what ended up was the larger of the two companies with almost no one left of the smaller company nor any recognition of the innovations we had made in the industry.
This was my second merger of this kind. In both cases there are clear winners and losers. The larger wins, and the entrepreneurs of the smaller companies almost always are removed, it may take two years but it happens. The time line I have developed follows this pattern:
Merger: 0-6mos, nothing really changes except to make sure all know who is in charge
6-12mos management changes take place at high levels, personell assessments begin in earnest 12-18mos structural changes take place, the winner moves their people in place and determine who will survive from the smaller company 18-24 mos, the final changes, corporate identity are solidified and the final management changes are made, redundant management is eliminated and the real structure of the company is laid out at the end of the 24 mos. If you survive the 24 months you are either absorbed into the larger organization or reassigned so as to limit your input while you completely recalibrate your input and personality to fit the new corporate structure. Everyone else is removed by attrition, layoff, or retirement.
This has held true in mulitiple events that I have either been involved with or observed.
This last time I was in a position to retire but watched it play out almost exactly on the timeline. I think there are unpublished documents that lay all this out!
Amazon acquiring Zappos came to my mind.