Seventy percent of mergers fail* to create value that is greater than the sum of the parts.

So how do you know if your merger is failing while there is still time to do something about it?

Watch for these signs:

The Goat Rodeo: A lack of executive alignment

Instead of

Months after the close the executive team is still arguing about whether the merger or acquisition is a good idea.

• People keep saying, “Tell me again, what was the purpose of the merger?”
• Everybody has a different thought about:
  • What pieces of the business to rationalize
  • Who the core customers are
  • What the product categories of the future are
  • How to go to market
• Executive staff meetings take forever!

Navel-gazing overdose

• Internal focus leads to a lack of attention to customers and suppliers:
• Nobody has been to see a customer in months.
• Key suppliers, the ones you thought were your “partners,” are missing deliveries or slipping in quality or complaining about being “squeezed dry by the accountants.”

Arterial bleeding: a talent exodus

Turnover is always an important measure that things have gone awry.  Look deeper.  Are you losing:

• Key executives or managers (the ones on the “must keep” lists)?
• R&D scientists or technicians?
• Long-term manufacturing process knowledge (Old Joe from Quality Testing who knows the releasers at your biggest customers)?
• Information systems people?

“Fiddle te de, I’ll think about that tomorrow”

Rosy view accounting or forecasting is indicated by:

• Lack of cash management focus; failure to meet cost-savings deadlines
• Failure to redeploy or lay off people in agreed duplicate roles
• Falling sales, which will “turn around next quarter”

(Note:  Someone will no doubt say, “Sales always go down the first year of a merger.” But then remember, most mergers fail, don’t they?)

Goliath coming over the hill: A change in the competitive landscape

Mergers are an aggressive competitive act.  Competitors will respond.  Watch for:

• Mergers that beget other mergers, joint ventures, and alliances. Horizontal integration that begets competitive vertical integration and vice versa.
• Competitors that respond by cutting prices, locking up supplies, flooding distribution with product, or in some way nobody has even thought of yet.
• Competitors are suddenly attacking your traditional strongholds and gaining ground.

Competitive response raises the bar for the merger or acquisition.  What started out as adding a product or increasing capacity becomes a life or death struggle.  If nothing else, it speeds up the optimum integration timeframe.  What could comfortably be done over eighteen months now has nine months before the board starts discussing divestitures.

Spaghetti code and GIGO: information systems breakdown

Information systems touch every aspect of the business. IT and the degree to which the two companies’ systems are combined are critical success factors.  During mergers, people make changes without considering implications for IT.  Programmers make integration-expedient choices without considering the business needs of users.  Sometimes that takes the form of patching two systems together in very arcane and complex ways (spaghetti code). Other times  that takes the form of poorly defined or monitored input data that produces inaccurate or uninterpretable output reports (garbage-in-garbage-out, or GIGO).

Symptoms include:

• You can’t get data at all or on time or the way you need it or the way you used to get it, and “nothing can be done about it.”
• The system “crashes” again.
• “The person who wrote that code left last month.”
• The IT people ask for overtime, and you give it to them, doubling your IT salary costs.

Best practice Armageddon

Cultural warfare is about whose way of doing things is better.  Some of this will go on no matter what you do.  Some people will fight on for years.  But if most of your organization is paralyzed, if most people are internally focused on the past (as opposed to externally on the future), then there is a crisis.  Symptoms include:

• A lack of experimentation
• A lack of innovation
• A plethora of war stories and anecdotes about the “reason we do it this way”
• “Stonewalling” implementation of decisions you thought were made months ago
• Lots of we/they, us/them, and “you don’t understand”
• More discussion about “whose fault it is” than there is about how to solve the problem

Low-grade fever and general malaise

People are just “worn out” with the stress of integration.  Change is tough.  Change in a merger is tougher.  Sometimes it gets so bad that everything grinds to a halt.  Most people aren’t having fun anymore.  Symptoms include:

• Organization climate survey scores are declining, “We’re moving too quickly!”
• Others say, “We’re not moving quickly enough!”
• Absenteeism and tardiness increase.
• Employees are taking vacations at critical delivery times.
• There is a lack of attendance at company social events.
• A greater than usual number of people are swearing uncontrollably.

If your merger or acquisition is experiencing one or more of these symptoms, it may be time for a restart.  If it is experiencing three or more, it is time for a turnaround.

Key steps of a restart:

1. Align executives first:

• Agree on purpose of the merger, and the vision and strategy.
• Agree on the values of the new organization.

2. Plan a new integration that:

• Utilizes a joint-team (from both firms) participative approach
• Creates a cadre of change agents from both companies

3. Make IT a critical-path stream.
4. Mobilize the entire organization to make the change, impassioned by a new sense of urgency.

* Source: ”The Big Idea: The New M&A Playbook” Clayton Christensen, Richard Alton, Curtis Rising, Andrew Waldek; Harvard Business Review, March 2011, Updated and revalidated March 2021

Leaders require followers

“If you think you’re a leader look over your shoulder. If there is no one there, you might just be delusional.”

“I get what you’re saying, but. . .”

I was delivering leadership development; it wasn’t really training per se. Oh we did apply some new knowledge and practice some skills, but the real purpose was to communicate to a  group of middle managers that their corporation was undergoing tremendous change and they would need to step up and lead the change for their people.

I did my simplified differentiation between management and leadership:

• Managers are accountable for getting the work done, and developing their people to ensure that. They often work in a relatively steady state environment.
• Leaders work in abnormal circumstances. The military often talks about leadership because what could be more abnormal than war. In business abnormal circumstances are emergencies and times of change. Then leaders are accountable for direction and attracting followers. “Hey -this way -follow me!”

I went on to tell the participants that they had both responsibilities, but that the new circumstances required their leadership and emphasized the importance of followers and made my little quip about looking over your should to be sure people were following. It was a laugh line and it got some chuckles, but it also produced a  “. . .but.”

From a workshop point of view this “but” was terrific. (“Oh good a discussion.” I said to myself). It was a rich discussion and it went on a little longer than I thought it would. The inquisitive manager kept interjecting his signature phrase, “I get what you’re saying, but. . .”

Finally someone interrupted him, “Bob, don’t be a but-head!” The group exploded in laughter.

I was perplexed and they explained to me that they were echoing some training in another class, (Diversity? Creativity?) They had been advised to replace the word “But” with the word “And” and to remind them the facilitator. had said “Don’t be a but-head.”

I’ve heard this advice many times since, and this was the first time I’d heard it. We continued the discussion, making some points relevant to the leaders need followers point.

• But divides the conversation whereas And joins it
• Leaders need to promote unity among followers
• Either / or choices are sometimes necessary; more often Both / And is a more appropriate way to draw in more followers.

We moved on in the workshop, and the “Don’t be a but-head” comment became a running joke over the week. I was amazed how such a simple concept had captured the imagination of the group and had many applications to leading change.

Don’t be a but-head

But and And are both conjunctions, grammatically they join two ideas. And pulls two ideas together. But separates the two ideas. I was told by a co-worker early in my career how to get through performance appraisals.

“Listen for the ‘But” everything before the ‘but’ is B.S. What follows the ‘But’ is what they want you to pay attention to.”

I took this to heart and probably missed a lot of positive feedback over the years. It probably added mass to the chip on my shoulder toward managers and anyone with authority over me.

Imagine the change in effect of:

“Alan you get things done, and bring in projects on time and on budget, and I want you to work on ensuring that an editor goes over your writing before we go live.”

 

“I love the creativity of this approach. I think it will make a huge difference to the client, and I want you to gather more feedback about possible downsides.

So a leader might avoid saying “But” when there are two very valid points to communicate and you want both to be heard equally.

Another circumstance to avoid “But” is in any kind of divergent thinking. When we are trying to expand thinking or increase the quantity of information or ideas “Buts” get in the way. The most obvious example is brainstorming. “Great idea, but. . .” has the effect of shutting down idea generation.

In any discovery discussions, as when you are gather data about customer needs or the causes of an accident “And. . ?” says “Tell me more;” “But says stop and change your information,” or “I disagree with you.”

When anyone says to me “I hear what you’re saying, but. . .” I expect a counter argument. If someone were to say “I see what you’re saying and. . .” I’d expect agreement and perhaps action toward a solution.”

When but-heads are needed

Someone in the class made the leap that managers were ‘but-head’ but leaders were “and heads.” I said I didn’t know that that was true and I could think of times when the division of the “but” was really necessary in times of change.

Anytime a group is doing convergent thinking, testing a plan, searching for risks or unintended consequences, a but-head mentality shines.

“I see from the sales projections that this product will experience a thirty percent increase in sales in year four, but what is that projection actually based upon?”

 

“I see that we are increasing gas production four-fold by a combination multiple well drilling, an water injection into the reservoir, but have we tested the stability of the limestone barrier that separates the reservoir from the aquifer?”

 

“I understand that we can speed nuclear missile response time with an autonomous AI response system based upon satellite imagery of enemy silo launch, but exactly how confident are we in the accuracy of the satellite imaging system this is based upon?”

 

“I know our truck customer survey data indicates strong buying intentions for electric vehicles, but have we mapped customers by region vs. the availability of 220 volt lines on the existing grid and the density of new charging stations?”

 

So is being a but-head a matter of timing? Maybe. It is definitely a skillset that is more useful at the end of an innovation process. I think it may be more about the purpose of your communication.

Are you trying to improve quality, weed out the uncommitted, test for risk, including bias, or unintended consequences? Maybe saying “But” and uncoupling two somewhat unlike ideas is a good idea.

Are you trying to bring people on board as followers? Are you trying to generate ideas, or discover fact and opinion, ensure that all data has been looked at?

Then “Don’t be a but-head.”