Most evidence of the impact of mergers is mixed and suggests benefits do not always materialise.
“Two turkeys won’t make an eagle” a Nokia executive said when making an avian assessment of the merger of two major telecoms companies. There is wisdom in these words, and those of us who have been involved in health service mergers know that they are fraught with risk. But it is hard to see how mergers of services and organisations and between sectors are to be avoided.
The most successful mergers tend to be delivered by using a classic “loose-tight” approach
Most evidence of the impact of mergers is mixed and suggests benefits do not always materialise. Conversely they can spectacularly succeed. I have experience of both ends of this spectrum, ranging from the classic “shotgun wedding” organisational reconfigurations of the mid-1990s in London, bedevilled by internal and external politics, to more organically driven mergers, led by clinicians with grassroots support from communities and stakeholders, most often experienced in mental health and community service mergers.
Historically, the more successful amalgamations have tended to deliver qualitative benefits arising from a larger pool of professional staff. A great example of this is the improvement in child and adolescent mental health services, largely from unifying previously fragmented services.
Successful mergers capitalise on the financial benefits by maximising the economies of scale; removal of excess capacity; expansion of market power; reduced management costs; and less duplication of services. Scope for investment in risk taking initiatives and research and development is often greater.
Then there is the vexing question of unifying the corporate culture. Up to 50 per cent of merger failures arise because of a lack of attention to this. It means developing plans on identity, reputation, leadership, engagement and communications.
So how can mergers, managed clinical networks or other forms of service and organisational amalgamation be made to work? This is a tough question and to some extent the choices made will still be akin to an act of faith by those involved. The current vibe about change management suggests a dispersed approach, because much evidence suggests programmes with too many initiatives designed to cascade down the hierarchy deliver disappointing results.
This has led me to believe that top-down change, on its own, is at risk of failing because at every step between the board and the front line messages get diluted and often distorted, so the initiatives become increasingly less compelling and less authentic.
Fubini, Zollo and Price, in their recent research on corporate mergers, suggest the most important challenges involve the top of the organisation: appointing the right top team, structuring it appropriately, defining its agenda and building trust.
They say the change required to integrate companies cannot be just driven from an entrepreneurial business unit, an innovative functional unit, or the front line. These are important, but too much co-ordinated, programmatic change must be achieved in too short a time for such approaches to succeed.
The reality probably lies somewhere between these two approaches.
I believe the most successful mergers tend to be planned well and then delivered by using a classic “loose-tight” approach, to ensure high performance in the short run while enabling change.
All this is highly relevant as we strive to continue to deliver more and more unified services and organisational forms to support them.
These will range from integrated clinical networks to provide emergency services, stroke care, 24/7 diagnostic services and large scale acute and tertiary service reconfigurations.
Over the years business and the NHS have become more systematic in identifying and capturing the available synergies to be derived from mergers and in undertaking the necessary due diligence. As a result there is good guidance and many project tools and techniques are available.
Yet history suggests it remains very difficult to master the art. Even an apparently successful merger is at risk of losing momentum and weakening the combined enterprise and the morale of its employees, thereby offsetting any short term financial and operational gains, unless careful attention is paid to creating an eagle.