Mergers are so spooky!

Volume 15 Letter 10

What is the mystery behind a successful merger? Optimistic estimates place the odds of a merger being successful at about 40%. What’s going wrong and is there a better way to execute one?

Let’s start by dispelling the notion that it’s a merger – most often it’s a takeover which generally says “we won and now we’ll all do business our way”. No matter how welcoming the merging partner is, the attitude of ‘to the victor goes the spoils’ results in talented people leaving the company. Quaker and Snapple, Daimler – Benz and Chrysler and Merrill Lynch and Bank of America are just three examples of thousands of mergers that have destroyed the acquired value faster than Usain Bolt runs the 100m. Clearly there has to be a better way!

Roadway Express is a transportation company that merged with a similar company called Yellow. As part of the merger Roadway’s goal was to drive down costs and swiftly increase business. Sounds familiar so far but in an industry where profit margins are less than 5%, Roadway wanted each of its employees to take on leadership responsibilities at each dock and in each truck. To accomplish this, Roadway held a series of summits where they invited dock workers, truck drivers and all levels of management to join senior management. The goal of the summit was to ensure that each group walked away with a win.

The summit started with everyone learning everything about running a delivery company from the economics of package delivery to the role of the unions. Next, the group was broken up to work out solutions to problems previously considered un-solvable. In these summits union leaders, drivers and management worked together helping each other get their wins. The results have been more than impressive. Every financial measure has rocketed skyward but, as importantly, other measures of trust, employee moral and commitment have also soared.

In any merger structural differences are be expected but it’s the uncertainty that kills the deal. To remove uncertainty good communication is paramount; but therein lies the rub. How do you effectively communicate with hundreds if not thousands of employees with differing mind sets and develop a common market strategy?

Peter Drucker once said “Results are obtained by exploiting opportunities, not by solving (today’s) problems”. With this in mind a process called Appreciative Inquiry (AI) has been developed to bring together the whole system of internal and external stakeholders (in some cases including suppliers and customers) to work on a task of high strategic value. These meetings are called ‘summits’ and at these summits everyone shares leadership and takes ownership for making the future successful. “The goal is to build the ties of trust and confidence needed to take decisive action”. [1] So how does this work?

An Appreciative Inquiry summit is broken into three phases: Pre-summit, Summit and Post-summit. The Pre-summit phase is about framing the goal in a positive light stating the desired outcome rather than the problem to be solved. This is important and may sound trivial but research has shown that framing the outcome in a positive statement has huge implications on the eventual outcome.

The second phase is the Summit where the stakeholders, CEO, management, union reps, suppliers and customers physically meet. It may seem fanciful that a large group of people could come to any consensus in a two or three day summit but that’s exactly what happens. Summit groups at Roadway, for example, developed system-wide strategies to solve issues for which solutions heretofore seemed impossible. The goal is to develop a win / win / win solution that satisfies all communities.

Post Summit is the third and important phase of follow through that results in sustainable change.

The greatest outcome of an AI summit is how the experience brings out the best in people by removing the adversarial barriers to communication so often present when a corporate merger takes place. All parties come together to develop new business strategies that ensure each group achieves its goals. How are you going to manage your next merger or re-org?

To read more on this topic:
1. The Positive Arc of Systemic Strengths How Appreciative Inquiry and Sustainable Designing Can Bring Out the Best in Human Systems paper by David L. Cooperrider Case Western Reserve University, USA Michelle McQuaid University of Melbourne, Australia

2. Appreciative Inquiry A positive revolution in change D. Copper Rider, D Whitney 2005 Berrett-Koehler Publishers

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