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Human Factors Climate After Reorganisation

About six months ago, at a dinner party in a city in the U.S., I turned to the stranger on my right, and to start the conversation, said to him, "I understand that you work for Such-and-Such Airline". He replied: "Well, you could say that. Actually, I used to be with ABC Airlines" (a company that was taken over by Such-and-Such). He launched into a discussion of the differences between the two companies, and his comments ran something like this: "We were the older company. We were more profitable – we must have been doing something right, but they imposed their systems on us". And so on, all of his words clearly indicating a sense of loyalty to his old company rather than to the new entity and clearly indicating a feeling of having been done wrong. I was surprised and curious about his unprovoked comments. His feelings were quite strong. "When DID the merger take place?", I asked. "Five years ago", he said.

So for five years, he has failed to accept the merger and for five years the company has been deprived of his full commitment. Is he the only one in this company with his views? Probably not. Is management aware of this and doing something about it? Probably not.

You, too, may have a friend or acquaintance who has not put the past to bed on a merger in which he was a participant and you may be surprised by the tenacity with which he holds his views.

FAILURES

The fact is, most mergers fail to get the best value out of both companies. Mergers are conceived with high hopes and with visions of winning scenarios, and yet recent research shows that "the performance of most of the acquired companies deteriorated significantly after acquisition…. And AS MANY AS NINETY PERCENT OF THE MERGERS NEVER LIVE UP TO EXPECTATIONS". These are pretty shocking statistics. I quote from a recent article in the New York Times: "Why do these financial and strategic factors – purchase price, expected economies of scale and in the projected earning – that they examined in deciding whether to merge or acquire in the first place. Usually, the executives find some flaw in the initial assessment – a high price , say, or misestimated earnings. The problem is that these standard analyses have not improved the success of the combinations. For seasoned acquirers, as well as for novices, the disappointments remain high." The fact is that in most mergers, no time or expense is spared on financial and legal planning; potential market shares, balance sheets, benefits of technology, and the rationalisation of routes and staff and equipment are projected, BUT little or no attention is paid to the critical element which must make all of this work: the human infrastructure.

Indeed, PEOPLE are the root of most acquisition and merger failures. Or more accurately, management’s neglect of the people issues is the major cause of their company’s failure to perform. By poor handling of the people issues, management creates a set of winners and a set of losers. The perception is difficult to eradicate, and is a costly impediment to success.

CULTURE

Culture may be the most important single definer of success in a merger. And yet, not only is it rarely thoroughly explored, it is largely ignored.

Our company culture (like our national or family culture) is an environment in which we are immersed, from which we rarely distance ourselves enough to be analytical about it. We take it for granted. A friend of mine asks, "Does a fish know he is in water?" and yet our culture underlies the process we use for decision-making and for justifying our choices.

The importance of company culture was pointed out to me recently by an ex-military pilot, who worked for a company largely run by ex-military, and which merged with another company with a similar staffing pattern. Both were surprised to find that they had totally different ways of thinking in spite of their shared background. The fact is, employees take on their company culture.

The company culture defines the way in which problems are expected to be solved, whether management and employees see each other as antagonists, whether win-win solutions to conflict are expected or whether there is usually a loser, what is the quality of relationships with the unions, the degree to which employees control their own job, whether management is transparent or secretive, whether management decisions are driven by expediency or politics or decency, and so on and so forth. Clearly, if two companies have significantly different cultures, the merging of two groups will be extremely difficult. I believe that the usual approach to cultural differences – that is, to ignore them – is the main reason why resentments are found alive and well years after the legal and operational merger has been completed.

Imagine a company that sees itself as A Class Act, large, secure, influential. The takeover target is a company that sees itself as a plucky little contender. How to create a new self-image that will encompass the identity of both groups?

What if the survey suggest the two companies are incompatible? Just as in a marriage, if it looks as though it won’t work, it probably won’t.

THE TRIBE

Why are these people issues so sticky and so tenacious?

We are tribal animals. We identify with our tribe. We find our tribe in our families, in our friends, in our employers. Even the rebellious loner finds his tribe among other mavericks. If our tribe is maligned, we feel the insult personally; if our tribe is conquered, we experience its shame. If our tribe is scattered, we experience confusion and vulnerability. The pilot telling me about his ABC Company was really telling me about his tribe to which he still belongs, although for all practical purposes, it is now extinct. "My tribe", he says, "was more noble and more ancient than theirs. But they did not respect our wisdom and our traditions." For five years – and likely until he retires – the company will continue to squander the enthusiasm, the commitment, the problem-solving contributions this good man might be making – and likely, is unwittingly sending out invitations to him and to numerous others for malicious compliance.

You are perhaps thinking that he is being ridiculous. After all, the merger is a fair accompli, he can’t turn back the clock. Five years have gone by. "Not only that", his boss will say, "but the idiot should be grateful that he has kept his job and he should be working his butt off to make the company a success". Of course. That is a perfectly rational view of the situation. It’s also totally irrelevant since it overlooks the key element, the emotional response, a profound and powerful part of human beings. AVIATION’S ACHILLES HEEL REMAINS, ITS MANAGERS’ DOGGED RESISTANCE TO GIVING DUE IMPORTANCE TO EMOTIONS IN THE WORKPLACE. What would you think of a captain in the cockpit saying to himself and to his First Officer, "I don’t understand the stuff presented by that display and I am not really comfortable with it, so I intend to just ignore it. Don’t worry about it, things will fall into place"? Yet that is too frequently the attitude of management towards critical aspects of human factors. They don’t quite understand because they’ve never taken the trouble to learn, and of course, they’re comfortable with what they don’t understand, so they avoid it.

In my experience, problems in aviation groups are rarely related to competence. They are almost invariably related to psychological issues the impact of which management tenaciously refuses to address seriously.

The critical role of management in a merger, then, is to devote time, thought, energy to create a new tribe – a tribe which incorporates the best features of both partners, a new tribe to which members of both original tribes will be proud to belong. This is the most difficult demand made on leadership at the time of a merger and it separates the sheep from the goats. As the English politician said, "Great empires are seldom the outcome of small minds".

MANAGEMENT, CURE THYSELF

For a solid foundation to be laid for the new entity, management has first of all to get its own act together. Who constitutes this new team? What difference are there in their view of the world? Are they prepared to respect each other? To despise each other? Do they share a common vision of the new organisation? What resentments, angers, guilt’s does each member of that group have to resolve before really getting on board?

Bear in mind that quite often the two groups were competitors. They may have previously seen each other as enemies. The smaller company may have, for years, measured its success by "victories" against the bigger one. It’s a bitter pill to swallow. "We lost …" might be their conclusion. Whether or not the employees feel that they have been sold out or betrayed by their own management, the management of the smaller firm may indeed feel that they have failed the people who depended on them.

Members of management, too, bring to the partnership their own feelings, beliefs, values and personal quirks; if these are dealt with early, the group can come to a smoother, more collaborative transition that is conductive to real synergy. The pay-off in establishing this early is enormous.

There may even have been a certain amount of denomination – as there is in war – ascribing to "them" (quite normal human beings) characteristics more appropriate to serial killers of the Marquis de Sade. These perceptions of self and others have to made to surface and have to be resolved.

How to do this?

Once the new team has been selected, team-building should be the first priority. This intervention should not be a task-oriented exercise – task comes later. It targets the psychological issues. In other words, the focus is not WHAT are we going to do? But rather, HOW are we going to work together?

At the risk of sounding as though I am preaching for my parish, I must tell you that I believe that it is essential to have outside help in the form of consultants or counsellors to accomplish this. By definition, management is part of the problem. They belong to one side or the other. Their view is clouded by their own culture, their own values, their own way of doing things and, as I have said elsewhere, by their Hurry Up which may be chewing at their heels. Outsiders or consultants must be involved who (a) have solid experience in intergroup conflict resolution, (b) bring an objective viewpoint to what can frequently be highly emotional decisions, and (c) know how to explore negative emotions and channel them constructively.

With their help, management must take the time to define what outcome they want to emerge from this marriage. What kind of company do they want to be managing when the dust of urgency clears away? This question is not related to routes or development or aircraft of projections of bottom line, but rather to the values that will drive the company, the desired climate within the organization, the quality of relationships, the ability to bring out the best talents in the staff.

Applications of the new values will define how the company deals with redundancies for instance. Who do we need to do the job? How will we select our staff? What are the criteria? What are the desired outcomes? Will we be guided by equity? Do we want the best person for the job? OR do we want to work with people whom we know and are comfortable with? Do we want to eradicate the team integrate? What values should prevail to make this safe, successful, happy company?

Once management knows what is their shared vision of the company and where they are going, they can see more clearly how to get there, and who has to be in place to do it, what are the critical success factors, and so on.

The same process needs to be carried out with each key group: Get the past out of the way, and get on with the job!

It is most reassuring to the employees to see management pulling in the same direction. If you and your wife are fighting, and are keeping it from the children by fighting only behind closed doors, don’t fool yourself into thinking that the kids don’t know. In the same way, if the management team has rough interfaces, no matter how slick a face they present, the employees know it. My experience is that if gossiping were an Olympic category, several aviation companies I know would be in running for a Silver, for sure. Whether they like it or not, management is transparent to its staff.

TRUST

Trust, of course, lies at the heart of any well-managed company. It becomes all the more crucial in times of uncertainty, in times when there is a genuine basis for anxiety.

One of Murphy’s laws states: "Sincerity is the key; once you’ve learned to fake that, you’ve got it made." Well, that won’t do it.

Management’s responsibility, then, is to establish trust between different levels of management: management and employees, management and the union. Trust means that management is seen to be open, to be honest, and to care about the people from whom they are responsible. They must be seen to base their actions on well-thought out, clearly communicated, defensible and honourable principles. They must be seen to deal fairly with members of both groups. They must be seen to respect the staff of both groups. They must be seen to equitable. They must be seen to be willing to acknowledge and remedy their mistakes. They must be seen to be making sensible decisions. They must communicate the criteria on which their decisions are made. They must be seen to be working together and to have a clear directions and their behaviour must be consistent with that direction. Each failure on any of these points damage management’s credibility and reduces trust.

As you know, it is under pressure that character shows. Management is under heavy pressure at the time of a merger. They may forget that the first gestures they make will define the future. These first gestures will be analyzed, discussed, exaggerated and perpetuated by the staff, whether the gestures are generous or disrespectful, whether they are open or manipulative. The effects of these first days will be long-lasting and perceptions subsequently difficult to change.

Some management groups start out with tough (and perhaps uninformed) decisions that are imposed on the staff; management assumes that its kind of bullying will get things started and that the staff ‘will come round’. Again, first impressions are important: they are long lived and they tend to be accurate.

Early on, management will surely be heard to say, in its opening declaration to the troops, "We care about our people; we realize that you are the ones who are going to make this work. We will respect and protect you. We need you. We will do our best for you. Trust us."

This is what a friend of mine calls ‘the sign on the front of the building". What really matters is what’s going on inside the shop – the substance rather than the words. What are the operational realities in the back room: Is it "We care about our people"? Or is it "First comes profit and the shareholders, then our convenience, and then if there is any time and energy left over, the people"?

How does management deal with redundant staff? Is the individual given two hours to clear his desk, or is a farewell party given for those who are leaving, celebrating the contribution these people have made to the company? What message does management’s behavior deliver to the survivors? As the troops draw conclusions about management’s intention and values, management, if it has inadequate pipelines to the troops, may continue on its way, unaware of the drain of energy, unaware of the causes for the failure of what appears to be a well-thought-out strategy.

In any merger, the, there is perceived swallower and perceived swallowee. Power is usually unevenly distributed, with the takeover company the top dog. How do they utilize that power? Do they genuinely want to make a partner of the other company? Do they want to crush the other group and are blatant about it? Do they want to crush them and lie about it? How the company in the position of power manages and expresses that power tells the world about its values and incidentally, gives the astute financial analysts material on which to base their projections of success or failure.

LOYALTY

Crucial to the success of any merged organization is management’s ability to elicit the transfer of employee loyalty to the new organization. This is the ultimate test of leadership, and one for which too many mangers are ill-prepared. Unfortunately, "eliciting loyalty" is sometimes taken to mean that the "swallowees" have to gracefully accept their new bosses, and keep their nose to the grindstone. In fact, the difficulties of transfer to loyalty to the new organization apply to anyone. It is as dangerous – and much more insidious – to overlook the smugness and arrogance of the takeover company, whose attitude can be as destructive of team spirit as is the former’s resentment.

In a company that handled this well, steps were taken very early on to provide a NEW IDENTITY:

Example:

The company has a new name. It’s a NEW COMPANY and every staff member or a stranger to the same degree. New uniforms are designed immediately – pilots from company A don’t have to wear the uniform of company B or vice-versa. Belt buckles, tiepins, cufflinks, bumper stickers indicating previous allegiance are not welcome. Mangers and supervisors don’t encourage reminiscences about ‘how we used to do it at company A’ unless there is a definite contribution to be made by examining that procedure. Both companies are referred to equally as ‘donor companies’ to the new entity. Management works hard to make the new group feel welcome. The new values do not support criticism of either donor airline.

These appear like insignificant details. But they’re not. They are a way of saying, "WE ALL belong to THIS tribe now". Management’s consistency in reinforcing the new US is critical to the establishment of the new culture.

At the best of times, too many manager underestimate the importance of the psychological issues in the workplace and consequently short-change themselves of success, short-change their shareholders of profits that are attainable, and short-change their staff of job satisfaction and personal and professional growth.

This, I say, is at the best of times. At a time of great transition – merger or reorganization – to overlook the human aspect verges on incompetence and may threaten the very survival of the organization.

At the best times, introducing change is difficult. When change is imposed, resistance ensues. The aviation industry, as you know, is well supplied on the rebellious side; more than many other groups, your people are difficult to lead and impossible to push. Resistance – if it is not meant to bring about career suicide – is subtle and creative and can be very powerful.

Energy that might be productively invested towards the success of the new organization is spent trying to outfox the system. The longer this state of affairs persists, the more difficult it will be to remedy.

The neglect of the human issues leads, at best, to delayed transfer of loyalty to the new company; at worst, to a long-term hemorrhaging of enthusiasm,, commitment, morale and safety. These problems incur heavy costs which are characterized by their amazing longevity. They are rarely subsequently correctly attributed to the mishandling of the people issues at the time of the merger.

COMMUNICATE, COMMUNICATE, COMMUNICATE

An important part of acquiring the trust and loyalty of the staff is genuinely keeping the lines of communication open. Let the staff know what you are doing and why, and do so often. A friend of mine says, "Everything important I have ever learned, I had to learn at least five times". That is under normal circumstances! Transitions are a time of anxiety, resentment, excitement and high feelings tend to make us hard of hearing. Keep the lines of communication open: let the staff know again and again what you are doing and why; TELL THE TRUTH. And let your actions be consistent with your stated values and objectives. Distrust and irrational fears thrive in the dark.

Too often, decisions made by senior management, in good faith, whether they are reasonable or not are resisted by staff because of the lack of consultation, lack of explanation, lack of clarity and lack of participation of the relevant players. Too often, management’s main weakness at this time is their propensity for Hurry Up, which I have described in other papers, and the Hurry Up’s belief that "We don’t have time to do it right just now, but we’ll get around to fixing it later on".

The criteria on which management decisions are based must be clear – first of all, one hopes they are clear to management itself (does management have a well-though out plan?) and secondly, must be made known to the staff, repeatedly; staff must be reminded of them each time a change is announced. Caesar’s wife had it easy compared to management’s need to establish its trustworthiness. Resources must be allocated to manage this process; among these resources is the time of senior managers who recognize the importance of building a team that will really work together. It also means that these managers must know and support the plan, that they know what needs to be attended to, they know where they’re going and how they’re going to get there.