I wrote recently about politics trumping business and its impact on Caribbean Airlines Ltd (CAL). Well, there's another major impediment to an effectively integrated CAL/Air Jamaica. It's called post-merger integration (PMI).I am often amazed, that with all the models out there for making mergers and acquisitions (M&A) successful, companies still do not do all the right things to be successful, or they do them poorly.
Here are some examples of what the experts have to say:
Booz Allen & Hamilton (Merger Integration: Delivering on the Promise):
53 per cent of deals studied failed to deliver their expected results.Structuring a deal is relatively easy; implementing one is nothing short of heroic.Somewhere between the concept of the merger and its execution, the promise fades. Synergies evaporate. Savings vanish. Cultures clash. And the chief executive officer discovers the door.
McKinsey Quarterly (2001, Number 4, Why Mergers Fail)
McKinsey research sampled more than 160 acquisitions by 157 publicly listed companies across 11 industry sectors. Only 12 per cent of these companies managed to accelerate their growth significantly over the next three years. In fact, most sloths remained sloths, while most solid performers slowed down.Overall, the acquirers managed organic growth rates that were four percentage points lower than those of their industry peers.
KPMG Survey (1999)
83 per cent were unsuccessful.
53 per cent lowered shareholder value, 30 per cent showed no difference.
They concluded that the things that made a difference were:
• Pre-deal planning and selection
• Selecting the management team
• Resolving cultural issues
• Communications
Magical change
One area experts agree that has consistently been shortchanged in M&A is the human side of the process. It almost seems at times business leaders expect that once the ink dries on the M&A documentation, everything else will magically fall into place, including people's behaviours, attitudes and orientation to the new business entity. Nothing is further from the truth.Hindsight is always 20-20, and I'm not a proponent of Monday morning quarterbacking; but based on recent news articles, here are examples of where, I believe, CAL blew it on the people side of the M&A.
Pilot body
First, the Air Jamaica pilots. CAL had an opportunity to do it right the first time with the Air Jamaica pilots. CAL should have realised that it one small hiccup with the pilots would return them to JALPA's fold. Instead of making the pilots feel like adversaries, CAL could have worked with them to come up with a plan that represented a win-win situation for the pilot body and for CAL. CAL could have prevented this situation by having a different dialog with the pilots after it refined its pilot roster immediately following the due diligence process.Instead, the adversarial relationship continued, and JALPA lobbied and ultimately won representational rights. Bustamante Industrial Trade Union's president Kavon Gayle has claimed bargaining rights on behalf of the pilots "following concerns about their working conditions"-working conditions that, if true, should not have been allowed to deteriorate to warrant a return to a union environment (no offence to JALPA).
Flying blind
Second, it is no secret that employees in both Trinidad and Jamaica have been disillusioned by the integration process. As noted in my article, When Politics Trumps Business, May 28, "unrest and uncertainty are rampant both in T&T and in Jamaica. Caribbean Airlines is flying blind into the future with no leadership at the board or corporate levels, and with a highly disenchanted crew."Recent news of rolling layoffs at Air Jamaica with little or no advance notice; flight cancellations at Sangster International Airport that resulted in boisterous confrontation between passengers and CAL customer service, are examples of an integration that's grossly inefficient.
Mindset integration needed
There exist strong divisive social and cultural gaps between Trinidad and Jamaica that stand in the way of effective integration of these two entities. In fact, one Jamaican expressed his conviction about the CAL/Air Jamaica integration this way, "I prefer dead than see CAL buy over Air Jam."One suspects that the cultural divide is so strong in both Trinidad and Jamaica that some people would begrudgingly accept competition from Southwest/Air Tran; or JetBlue, or Air Canada rather than see us unified to compete with these airlines.Integrating business functions (mechanically and physically) with no regard for "mindset integration" has never cut it. Believing that physical and mechanical integration of pilot pools or of maintenance functions is sufficient for mindset integration is to bury one's head in the sand.
Take another look at the statistics from the experts above.Changing cultural mindset and achieving social and cultural integration post M&A, takes a deliberate strategy and hard work; until such a strategy is implemented, there will always be an "us against them" undercurrent across the organisation that puts the future of the airline at grave risk.Integration does not automatically fall into place because of signed agreements. In the final analysis, it's the people side of integration that will make CAL's new business proposition successful.
Integration of cultures
There is still time for CAL to salvage this integration of cultures. How can this be done? Leadership has to recognise that it can no longer bury its head in the sand and ignore the cultural divide that does exist between Trinidad and Jamaica. Here are some of the high level things that CAL should be focusing on (if they were in place, we would not be writing this article).Culture clash issues can be overcome by creating a new vision and strategy for doing business at CAL. But creating a vision that is not shared with employees is not worth the paper it's written on. That vision and strategy have to be cascaded down by the internal management structure, so that employees know the rules of the road-the strategic imperatives that they must focus on in order to make CAL successful.
But wait; it has been reported that there are gaping holes in the management structure at CAL.As a result, it is difficult for leaders to fulfil their most important role, and that is to clear the way of obstacles that stand in the way of their people being successful; because when employees are successful then management is successful and CAL is successful.One cannot expect employees to follow leaders to an uncertain and undefined future when they are paranoid about their own personal futures.That (organisational) future has to be defined in a manner that employees can grab it, own it, and perform against it. Remember what the Cheshire Cat said in Alice in Wonderland: "If you don't know where you're going, any road will get you there."
Rumour vs information
Next is communication. When two companies come together, employees need more than facts about the M&A activities. They need information about what the new culture will be like, specifically what CAL expects them to do; how CAL expects them to behave and relate to each other; how they should collaborate in the new organisation in order to ensure its success.CAL should have created a communication plan for dealing with the M&A effort, headed by a champion with responsibility for overseeing the execution of the communication plan, for fielding issues that arise, and for staving off misinformation. Misinformation seems to be rampant and the rumour mill is alive and well. This needs to be corrected immediately.
What many leaders fail to realise is that during times of uncertainty-like an M&A-employees need more information than less. It is a fact that during times like these, employees read it, but it does not sink in. They hear it but it's not internalised. There are too many mixed signals about their own personal survival to "get it." That is why management needs to communicate, communicate, communicate. This deliberate communication strategy is one surefire way to dispel rumours and calm already frayed cultural nerves. Cultural discontinuity has and will destroy the best laid M&A plans that do not include hefty doses of strong, deliberate, repetitive communication.According to Deloitte Consulting, negative attitudes often felt by employees, include, but are not limited to:
• Uncertainty about the future organisational direction
• Feelings of loss of previous organisational culture
• Uncertainty about personal job security
• Perceptions of lack of leadership credibility
• Feelings of confusion due to a lack of communication
• Survivor guilt due to downsizing of other employees
• Perceptions of increased job stress and workload.
Can these negatives be turned around for CAL? They sure can be. But it takes strong deliberate leadership from the board room to first line supervisors to make that happen. Has CAL's current leadership (board included) demonstrated the capacity to make it happen?I stated in my last article that CAL was flying blind into the future with no leadership at the board or corporate levels, and with a highly disenchanted crew. But I'd like CAL to prove me wrong. The ball is now in CAL's court.Peter Berkeley is a Trinidadian and a transformation consultant living in Louisville, Kentucky.