posted 2 Feb 2007 in Volume 10 Issue 5
Grab the wheel
Mergers and acquisitions are much like bumper car rides – chaotic and over all too quickly.
By Jerry Ash
Typical mergers and acquisitions work something like bumper cars at an amusement park. You wait in line, pay-up and when you finally get permission to board the car all hell breaks loose. Next thing you know, the ride’s over.
The phases of a corporate merger are even more chaotic than a bumper car ride. First, it’s a big deal, but management has to proceed secretly until the all-clear sign is given by regulators. Then, once cleared, there is a hurry to consummate the agreement and make the announcement.
Following the deal, the cat’s out of the bag and the first decision is to either integrate or maintain separate business units. It’s a strategic choice that will have a practical impact on employees not in the loop, who are not considered a major reason for the merger and who themselves will be speculating on their professional futures.
Some companies merge to increase market share or achieve economies of scale. Others are simply buying the other’s customers, products or markets. If both companies are in the same business, then the root purpose is to reduce competition, maybe becoming the 800-pound guerrilla of the sector. Sometimes, the aim is to diversify. Sometimes, it’s to acquire complementary business lines. Rarely is the primary purpose to gain access to best practices or best people.
If the choice is to maintain both businesses as usual, then the changes are less threatening to employees but will still be worrisome. If integration is the decision, then there is usually a mad 100-day dash to restructure. Too often the staff role is limited to 100 days of personal anguish – “Will I have a job? Will they cut off my project? Will they change the way we do business around here?”
Speed is considered essential to integration, which often forces the architects to focus mostly on structure, even though teams may be formed to examine the strengths and weaknesses of both organisations.
Often, though, the purchaser doesn’t really know what has been bought until after basic structural decisions have been made. Valuable programmes and people are often lost. Numerous knowledge management (KM) programmes have been victims of such mergers and acquisitions. During the 100-day dash they easily fall under the radar as ‘non-essential’. KM – being relatively new on the organisational chart – isn’t in the same value class as the old stand-bys of accounting, legal, human resources, research and development, marketing, sales and others.
So, how can KM not only preserve itself but also gain respect and ground during the chaotic period of integration?
Grab the wheel – assist in a better merger.
The best way to justify KM is to demonstrate its mettle. An environment where organisational change is an imperative provides fertile ground for knowledge management. KM’s experience in fostering a spirit of shared knowledge and values through the creation of communities of practice provides the best possible platform for human as well as structural integration.
Unfortunately, recruiting members to new communities and encouraging open knowledge sharing at the time of merger is fraught with problems of disruption, unfamiliarity, lack of trust when people are thrown together simply because companies have come together.
When people are unsure of where the company is headed – and whether they themselves will be on board for the journey – only those with a high sense of commitment or bravery volunteer. Martin Dugage, in our case report on the impact of the APC/Schneider Electric merger, page 20, believes collaboration will happen more quickly if the sponsors of those communities follow the lead of a CEO a few years ago who challenged a working group in charge of solving a difficult IT situation:
Ladies and gentlemen, I am counting on you to propose a workable plan to the company. If you cannot agree within ‘so many’ weeks, I will hand it over to the consultants. But if you do, you have my word that none of you will lose your present job.
Perhaps so, but Dugage may not be seeing the statement as the two-sided sword it is – both a threat and a promise – ‘share or risk loosing your job’. People who already feel at risk don’t need to hear management verify their worst fears and there is no evidence that people can be ‘scared collaborative’.
Arthur Shelley (see Inside Knowledge, October 2006), while recently moderating an AOK STAR Series Dialogue, lamented that it is unfortunate that a positive employee-employer relationship is often not allowed to develop during many mergers and takeovers. “The problem of knowledge loss occurs where management does not involve the right people in the detailed assessment of what the human assets are. The merger is just seen as a financial case.”
Too often, Shelley said, the architects of the merger will use terms such as ‘leveraging of assets’ and ‘reduction of replicated resources’ – impersonal terms designed to keep human factors ‘clean and separate’, with the purpose of keeping decision-making “clear, objective and based on headcounts rather than what’s in the heads”.
Results are tragic – immeasurable loss of knowledge, a chilling start for a new relationship, a loss of trust that will take years, if ever, to earn back. Statistics show only 25 to 50 per cent of the goals of mergers and acquisitions is ever achieved, disproving the theory that the value is in the traditional assets.
With knowledge management well-established at Schneider and vigorously launched at APC, there is hope that KM will be at the wheel during the merger to prevent this from being another episode of “bumper cars.” Perhaps, then, the outcome won’t be one more fender-bender.
Jerry Ash is KM coach, founder of the Association of Knowledgework, http://www.kwork.org, and special correspondent to Inside Knowledge. He is the author of the ARK Group’s latest major reports, Next Generation Knowledge Management and Next Generation Knowledge Management II. To order either of these, contact Adam Scrimshire at firstname.lastname@example.org. Jerry Ash can be reached at email@example.com.