Merger Pace Quickens; "People" Factor Often Overlooked

Newswise — Carefully crafted justifications aside, as many as 75 percent of merger deals do not achieve desired results. The main reason: lack of sound planning regarding the human and cultural aspects of the merging organizations. The merger market is back and healthy. Procter & Gamble-Gillette, Nextel-Sprint, SBC-ATT, Federated Department Stores-May and Oracle-Peoplesoft are just a few of the recent high profile, multi-billion transactions. Others are in the planning stages.

Despite the heady enthusiasm emanating from corporate offices, the reality is that nearly 75 percent of mergers and acquisitions fail to meet their financial or strategic goals, says Mitchell Marks, a San Francisco-based industrial-organizational psychologist and the author of "Joining Forces: Making One Plus One Equal Three in Mergers and Acquisitions."

Marks has been studying mergers and acquisitions for the past 20 years and has first hand experience in more than 100 corporate combinations and knows why they succeed and why they do not.

"Too often deals are made for the wrong reasons ranging from the egos of CEOs to fear of the competition," he says. The most often stated reasons to merge—improved efficiencies, better position in the marketplace, increased earnings and meshing strengths of the two organizations—don't usually pan out, Marks adds. Rather, the executives and bankers who broker the deals get caught up in the excitement of the transaction and do not pay attention to the details that often matter most—the people.

"In the end, it is the people involved who have the greatest bearing on the success or failure of a merger," says Marks. "More needs to be done in managing the people side of mergers because these events can be very traumatic to workers from both organizations."

And that's precisely the knowledge and expertise that industrial-organizational psychologists and HR specialists can bring to the table.

Marks and his colleagues have studied mergers and acquisitions for the past 20 years. They have developed scientific proof about their shortcomings. But what's more important, they can offer sound advice on how to handle the people-factors of a merger, which Marks maintains are keys to success.

Marks and other experts will be making two presentations about mergers at the annual conference April 15-17 of the Society for Industrial and Organizational Psychology in Los Angeles. "Considering all the merger activity that has taken place in recent months, this is an opportune time to analyze what has been happening and provide a different slant of thinking that, experience has shown, will make mergers be more rewarding," said Marks.

Every merger or takeover announcement, it seems, comes with the claim that thousands of jobs will be at risk. "That's not a positive for your work force and it immediately begins the rumor mill as employees wonder about their future," says Marks.

Industrial-organizational psychologists who have studied the effects of mergers say lowered morale, performance and other problems stemming from job reductions can have a negative impact that employers often underestimate. Studies show that CEO's who have been involved in mergers agree, with 20/20 hindsight, that the human and cultural issues turned out to be the major stumbling blocks of successful deals; issues they admit to having overlooked as deals were crafted.

One reason is that bankers and lawyers are the people that executives listen to during the deal negotiations and planning. Marks says too often experts who can deal with the human side of the company—human relations professionals and merger specialists—are brought in after the fact and given the difficult task of soothing the emotions of an upset workforce.

Editors Note: Marks will be involved in two presentations at the SIOP Conference April 15-17 at the Westin Bonaventure Hotel in Los Angeles. The first is entitled "Making Mergers & Acquisitions Work: A Twenty Year Perspective," and the second is "Managing Organizational Transitions: Going Beyond the Basics."

The Society for Industrial and Organizational Psychology (SIOP) is an international group of 6,000 industrial-organizational psychologists whose members study and apply scientific principles concerning people in the workplace. For more information about SIOP, including Media Resources, which lists nearly 2,000 experts in more than 100 topic areas, visit http://www.siop.org

From April 15-17, SIOP will be holding its annual meeting in Los Angeles, CA. More than 3,000 top workplace scientists and practitioners will attend and make some 800 presentations on emerging trends, developments and the way people function in the workplace.