by Terry Bragg

Merger mania abounds. Mergers are risky and many fail. Although you cannot avoid problems with mergers, you can predict the types of problems that will occur. With any merger, you must address these 10 underlying problems. Any one of these problems has the potential of derailing your merger’s success.

1) Resistance to change. 
Systems strive for stability. Employees resist change because they fear negative consequences. Change, surprise and the unknown cause fear. Expect resistance at all levels until people determine how the merger affects them.

Resistance to change does not mean workers do not support the merger. Instead, resistance may indicate that workers do not understand the merger and how it affects them personally. They worry about the merger penalizing them or causing them to suffer.

2) Unclear responsibilities and roles.
Roles and responsibilities change when companies merge. It may not be clear who is in charge, who makes decisions and what authority people have. Aggressive types seize the opportunity and assume they are better off asking for forgiveness than for permission. Passive types wait until someone in authority clears the confusion. Without clear roles and responsibilities, productivity suffers as people postpone work until they know who is supposed to do it.

3) Communication breakdowns.
Frequently, merging companies have different cultures for communicating. Rumors flow, speculation and hearsay increases. Sometimes communication by management stops while they try to figure out what they are doing. The merger puts middle management in the middle. Their staffs look to them to clarify policies, procedures and responsibilities before upper management decides those matters.

4) Divided loyalties.
Employees believe they must choose between taking care of themselves and supporting the company. They may also have loyalties to specific people in their company. Managers try to protect their people and their departments.

5) Policy and procedure changes.
What policies will management continue? Which policies will they change? Business as usual never happens. Will the acquiring company impose its policies and procedures on the acquired company? Or will the companies try to take the best of both worlds?

Inevitably, things will be done differently. Workers may see the other company’s policies as arbitrary, unreasonable or less effective than their own policies. All organizations have formal and informal policies. During a merger, these policies and procedures compete and often conflict. A battle may follow over which policies survive. For example, conflict may arise over procurement procedures, issuing paychecks and billing procedures.

6) Job insecurity.
A merger threatens workers’ jobs. Downsizing and consolidation of workforces are normal after mergers, as management tries to eliminate redundancy. Because the merger threatens their careers and jobs, workers worry about their future.

It also affects their family and social lives. People often attach their identities to their jobs. When faced with loss of employment, they may suffer identity crises. The prospect of loss of employment, relocation, demotion and career changes puts stress on the family, and can tear apart a weak family structure. Consequently, some workers view the merger as a catastrophic event.

7) Increased employee turnover.
Employees bail out for many reasons. They may choose the certainty of a new job over the uncertainty of staying with the merged organization. They may fear losing their jobs, professional status or income. They may leave because they feel betrayed. Whatever the reasons, expect employee turnover to rise.

The irony is that better employees are the ones that leave because they can find other jobs easier. The deadwood often stay because they don’t have other employment options. This increases the danger of turnover within the organization. It may represent a deterioration in the quality of workers.

8) Power plays.
A merger can signal the start of a battle for control and authority. If the takeover is hostile, power struggles take the form of warfare. Even with friendly mergers, workers and managers jockey for position and advantage. Management within the merged organizations may try to usurp power over employees from the other company.

A merger is an opportunity for advancement for workers who show the right stuff and shine above others. Lower level workers exercise power by delaying or not doing their jobs. For example, paperwork can conveniently get lost.

9) Vague reporting structures.
Who works for whom is vague in the aftermath of a merger. Even if the organizational structures remain independent, the relationship between top management in the respective companies becomes unclear.

10) Conflict.
Hidden agendas, egos and personality clashes produce conflict. A merger is like a marriage and produces similar fights over responsibilities, spending and priorities. Conflict between merging companies can resemble parents arguing over how to raise their kids. Integrating two organizations creates tension between the two systems and management structures. Initially, the two systems compete for viability.

Expect problems with mergers and be proactive in keeping the problems small. Respond quickly to problems as they arise. Left unattended, the predictable problems can derail your merger.

Terry Bragg is president of Peacemakers Training in Salt Lake City, Utah. Reach him via e-mail at tbragg@aros.net.

This article originally appeared in the September/October '99 issue of Progressive Distributor. Copyright 1999.

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