More talk, less action

The arguments in favour of corporate mergers and acquisitions are well known. We are familiar with cost cutting, improved efficiency, greater global reach, extra buying clout, synergies and added value.

We also know that the real motivations are more likely to be the desire to save management jobs, to put off an inevitable decline or to see off upstarts through defensive consolidation.

Not surprisingly, then, the merger mania continues. According to research published last week, there were nearly 23,000 deals worth a total of more than $2,400bn (pounds 1,500bn) last year, while in the UK alone there were 1,340 worth pounds 115bn.

But it is also acknowledged that few of these deals achieve their ambitions. Studies reckon that as many as three quarters fail to hit financial targets alone.

Why is the success rate so poor? There are various reasons, ranging from insufficient attention on the part of managers, to the transactions being ill-conceived in the first place. But it is increasingly clear that people issues play an important role.

A study by Right Management Consultants found that most companies have great difficulty with these issues, with fewer than a third claiming success in such areas as communication, cultural integration and employee retention. Moreover, it found that achieving business objectives is highly correlated with workforce issues.

The corporate and brand reputation specialist Dragon suggests that communication issues are at the top of factors contributing to a lack of success in mergers, corporate restructurings and other "change programmes".

The problem appears to be that organisations put a great deal of effort into "selling" the benefits of an initiative to the press and shareholders - presumably on the basis that without the support of investors, in particular, whatever is being proposed will not happen - but fail to replicate this internally.

Dragon's Keith Wells stresses that nobody is expecting organisations to inform employees of the mergers or other initiatives when they are still at early stage in the planning process. But he does believe that organisations would fare better if they communicated with their workforces in an open way once announcements had been made. Simply informing employees of progress is not enough.

More fundamentally, the persistence of "need-to-know" communication seriously undermines all that talk of people being companies' greatest assets.

Mr Wells points out that it is preferable for managers to talk about the issues as they occur on the basis that people are likely to feel more involved that way.

Of course, opening up in such a way requires confidence - and, if senior executives had that in abundance, they might be less inclined to jump on the merger bandwagon anyway.

As Mr Wells says, organisations - when they are linking up with each other - go to great lengths to investigate financial details. So why do they not extend this to the people side?

In particular, he says, they should be finding out about what motivates their own employees and those of the organisations with which they are planning to link.

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