Mergers and acquisitions have the potential to affect practially every aspect of an organization. Morale and productivity often suffer. Work processes and quality control may be thrown out the window. Group and intergroup relationships may be damaged.
As a result, customer service and satisfaction drop, accompanied by damage to community standing and the company's reputation. Even so, relatively few top executives formally assess how the combination is succeeding or solicit systematic feedback from managers and employees.
Of course, most managers profess to have some awareness of what's going well and what isn't, but when they consult exclusively with their peers and direct reports, what they hear often is censored and self-serving. This gives them a distorted picture of progress, and false assurance that problems will pass, so long as they stay the present course. Months later, the picture is clearer: Transition trauma hits the bottom line and executives have no recourse but to move into damage control.
Why track change? The purpose of merger tracking is to assess how the combination is progressing. Do people understand why change is occurring and support it? What are early impressions of the combined company? How is implementation going and what's needed to improve things? How are people coping with stress? Are signs of commitment emerging? How is management perceived and evaluated? It's also important to monitor the impact of change in concrete terms: progress versus integration schedules, rates of turnover and grievances, changes in quality and productivity, and sales and profit margins, of course.
Many times executives downplay the relevance of a formal tracking system because, they say, "My people alert me to problems" or "I have an open-door policy." What we hear from managers and employees instead is, "Management doesn't want to hear this but...," "I wouldn't tell my boss this, but to be completely frank with you...," and "Senior management is shielded. They have no idea what's going on down here...."
This isn't an indictment of executives' receptivity, nor of their sensitivity to the human side of change. Even in companies having a good communication climate, a merger upsets normal methods of intelligence gathering and two-way information exchange. Executives are busy with planning and Managers are busy, too, and wary of loose talk. People at all levels become more cautious about the people to whom they talk and what they say. Trust has yet to develop between employees and the new leaders. Then there's always the risk, of course, that somebody will shoot the messenger.
Psychological factors also tend to interfere with effective and straightforward communication: Stress impairs perception and judgment. Wishful hearing often abounds. Even the best listeners can suffer from information overload.
In addition, receptive executives receive an abundance of bad news from the ranks. Staying alert to all of the ways combinations are having an affect on operations, customers, workers, and reputations taxes executives' cognitive capacities. As a result, important information often is overlooked or misinterpreted.
BENEFITS OF FORMAL TRACKING. A formal program to track the combination will determine whether the transition is proceeding according to plan or veering off course. It provides decision makers with feedback about how employees and the business are affected.
In one merger case, interviews revealed that unclear work charters, timetables and financial targets were preventing task forces from reaching decisions about the design of merging units. According to interviewees, the CEO was "observing the merger from 10,000 feet." When briefed on the problems, however, he met with each task force to clarify its situation.
In another case, cost savings in an acquisition were compromised by the hiring of ex-employees as consultants. By not monitoring placement activities, management had been unaware of the problem until it hit the profit-and-loss statement. …