Mind your merger: when consolidating forces, effective communication is key.
THE INSATIABLE DRIVE FOR EFFICIENCY AND INNOVATION AS well as the increasing acceleration of changing member demographics, deregulation, global trade, and technological advances have made alliances, partnerships, and mergers necessary association survival strategies. Merging takes many forms. Call it what you will, many are doing it and others are thinking about it.
How about you? Did you see a merger coming for your association but deem it far away and unlikely to change your job, your life, and your relationships with the people you networked with during your entire association career? Maybe the spate of mergers you noticed in the business press seemed "all too corporate"--until members of your association said the same things were happening in their businesses. When mergers among member organizations translated into different relationships with members and different things they were buying or not wanting anymore from the association--is that when the reality of mergers got your attention? As the rapidly changing economy and methods of doing business in the Information Age seriously and permanently changed your association, what did you do? Did you understand that your association could be next in line in the chain of events, moving with the speed of falling dominos?
Tear out this article and put it in your top drawer. You may need to refer to it often in the next few years. What you do about mergers will define your career and your association. Will you be a communicator, a facilitator, and a leader? Will you spend more of your energy focusing on synergies and new opportunities or actively seeking out clues to see if you will have a job? Will you focus your great mind on how a merger could create better forms and more profitable versions of member and customer services and events? Will you, instead, turn inward and focus on "me issues" such as compensation, benefits, relocation, reporting relationships, job scope, authority level, project assignments, and funding?
Whether you are a survivor of a recent merger, a participant in the middle of a merger now, or a researcher in the preliminary stages of probing for purposes and potential advantages of mergers, you will want to consider the vital role that communication plays in the process.
Conditions for mergers
If any of the following conditions exist in your association, chances are good that consideration of a merger is around the corner or already beginning:
* Members can get professional development and networking from other sources.
* More than one association claims to be the "voice of the industry" or professional group that you represent. You know it's not exactly the same, but this is not so easy to discern by others not involved with the association's business every day.
* Convention traffic and revenues have gone down and are not rebounding as in the past. Perhaps corporate mergers mean fewer trade shows and yours is not everyone's top choice.
* Members can get information, research, and community involvement through Internet portals at a price you can't touch: nearly free.
* Advertising is down and publications are going through major makeovers. Web site costs are increasing.
* Corporations are inviting your association and others to summit conferences or high-level gatherings during which discussion of common needs surface.
* Stagnation abounds. Membership levels and revenue have been at the same point for a long time and the culture you represent rewards "going along" rather than innovation and risk taking.
* Shared knowledge from different associations forms the core competencies or body of knowledge needed to build and administer a national certification program. Customers or members want to go to one place to get their certification and recertification needs taken care of in a centralized, standards-backed way.
Many are called, few are communicators
Many roles must be fulfilled during a merger and all are valuable. Much has already been said and written in the past 50 years about legal aspects, financial scenarios, and operational issues. Here we leave those aspects where they belong, in the hands of lawyers, accountants, executive staff, and volunteer leaders. In the past 10 years, communication, as a process and a skill set, has become evident as a make-or-break factor in mergers. As trained communicators, facilitators, and consultants working with more than 400 associations in the past 20 years, we have worked in the middle of merger processes. Typically, we were specifically included to help with the human aspects. After all, the only thing that is real is people--members, customers, staff or employees, and investors (exhibitors, grant partners, and so forth). Products, services, buildings, business models, and so forth are ephemeral. What matters most to people is communication or their connection and relationships to all elements of their world, in general, and to the merger in particular.
From these 20 years and our observation of recent mergers we have gleaned lessons, advice, and warning signs that are generally transferable from one merger scenario to another.
Forms of mergers
Association executives use many different words to describe the act of two or more associations or other businesses coming together to serve the same, individually known customers or members. For purposes of this article, because the advice is applicable o a variety of temporary and permanent relationships, we're using merger as a generic term to refer to any of the following:
* strategic alliance;
* interlocking boards;
* shared trade show;
* parent-subsidiary arrangements;
* association A dissolving into association B; and
* association A and B (or more) becoming association C.
The difficulties and the differences
Most likely, an association in any of the various stages of merger courtship or commitment is unlike anything you've prepared for. It is humbling to realize how much there is to know and how serious are the mistakes that can be made if you lose sight of any of these guiding points:
1. The master you are serving is the future. During the merger process, two or more associations, boards of directors, sets of members, policies, cultures, and financial statements are involved. This means that you are not working for either one of the associations; instead, you are working for what the new association will become. This requires a completely different mind-set about issues of communication, confidentiality, competition, and customer base.
The merger that formed the International Code Council (ICC), Falls Church, Virginia, offers a case in point. For three-plus years, more than 350 staff members working for the International Council of Building Officials, the Building Official Code Administration, Inc., the Southern Building Code Congress International, Inc., and the Council of American Building Officials had to exercise high discipline and high mental flexibility, without pause or detours. Exceeding goals and looking terrific to the merger partners was expected. At the same time, every staff member and volunteer leader had to make every action count toward the creation of a new association. This meant working and thinking in the real world and in the imaginary world that would become the new reality once the merger became official.
2. Communication skills and processes are on high alert. Because the need to reach consensus about what to become, what to be called, and what to do can become stuck in conflicting needs and management styles, it is nearly impossible to over-communicate. Employees' appetites for information are voracious and satisfying them requires using every channel available, repetitively. At the same time, the leaders and spokespeople for the merging organizations must be circumspect about what to communicate and when. For example, they need to be aware of various antitrust issues. Until the deal closes, the associations are still separate and parties cannot discuss current or future pricing plans, costs, strategic plans, or proprietary information.
According to Bob Heinrich, CEO of ICC, "one of the first communications that we had with our staff, membership, and board of directors was that we were committed to communicate all that they needed to know but not all that they wanted to know." In so doing, ICC set clear expectations up front.
Members, too, need proper forums and organized communication programs to reduce anxieties that come from people who may have been rivals working side by side toward an uncertain future. To effectively communicate with members about your merger, decide on the three to four important messages that need to be conveyed. Then use regular communication vehicles that members already receive from the association such as newsletters, bulletins, and magazines to deliver and reinforce these points. There are several advantages in using this strategy: 1) money is already budgeted for these publications, so you won't incur extra costs; and 2) these publications already have established credibility with your members and are more likely to be read. Special publications should be used sparingly and only for strategic reasons.
3. A crisis or two and some tough jumping-off points always emerge. Often, sheer will to succeed and to reach the vision and projected results of the merger has to take over. Hundreds of key points and agreements are part of the merger journey; consequently, communication with those not involved on a day-to-day basis is absolutely necessary. What to say now, what is premature, and what will replace anxiety with facts-these are involved in every communication action, large and small.
Crisis points for the ICC merger have been multiple. "While no consolidation is 'normal,' ours was very different in other ways," comments Heinrich. The merging organizations agreed on who would be CEO of ICC; then in the middle of the consolidation process the first CEO of ICC died. "This sent shock waves throughout the organizations at a point where we were just coming together strongly," says Heinrich. Many items had to be revisited and communication was strong and intense.
4. The business of each association must go on. Each association must function more productively than ever while the major changes of mergers are set into motion. This is similar to changing oil in a car going 70 miles an hours. Communication, humor, negotiation, motivation, team building, and process consultation are all needed, at once and well done, to raise the performance bar to what seems to be, at times, beyond everyone's capacity. Morale, member participation, and income-generating ability must stay at a high level to remain attractive and active to merger partners.
Lessons from the front lines
Businesses equate growth with success. Right now and as far as anyone is forecasting, mergers and acquisitions are a major strategy for achieving growth. However, our informal analysis suggests that the success rate of mergers and acquisitions is less than 50 percent as an average across all sectors. What makes one combination work and the next fail? Careful thinking, thorough analysis, extensive planning, and effective communication.
As Jane Arsenault points out in her book Forging Nonprofit Alliances (1998, Jossey-Bass Publishers), a good transition plan helps ensure the success of the new venture. She says the following goals are helpful for this period of time:
* Protect relationships with consumers by avoiding any major disruptions in service and productivity.
* Reduce staff anxiety and promote reassurance and movement through the period of grief and loss.
* Reinforce organizational commitment and loyalty to the new venture at the earliest opportunity.
* Promote retention of key staff and eliminate unnecessary turnover.
* Adjust management systems to support the new venture.
* Provide correct and reliable information throughout the transition and engender staff support in reducing office rumors and misinformation.
Automotive aftermarket merger. Ample application of Arsenault's principles is evident in the story of the consolidation of the Automotive Parts and Accessories Association (APAA), Bethesda, Maryland, and the Automotive Service Industry Association (ASIA), Elk Grove Village, Illinois. The merger was completed in summer 1999. The new association that emerged is the Automotive Aftermarket Industry Association (AAIA), Bethesda, Maryland, an organization of more than 2,800 member distributors and manufacturers.
This merger was not born of crisis or desperation. Both associations were sound financially through their programs and strong trade shows and conventions. However, beneath the surface, the winds of change were blowing. With a mature market for automotive parts and accessories, consolidation among member companies was taking place at a rapid rate. As a result, membership bases were dropping, especially among APAA and ASIA's core membership of manufacturers and distributors.
According to former ASIA President and retired AAIA President Gene A. Gardner, the ASIA/APAA consolidation was a reflection of the mergers that were already occurring in the overall industry during the 1990s. "With so much consolidation going on in the manufacturing and distribution segments of the industry, the combination of trade associations was a natural response to the market," comments Gardner.
The leadership of both organizations saw that a merger was not a matter of if it would happen but when. Gardner believes that the merger probably happened five to seven years before the market would have forced the hands of both organizations.
"By doing a [merger] early, you have a chance for an equal say in the structure of the merged organization," points out Gardner. "Each association brought a lot of assets and strengths to the merger, and by combining, the result was a much stronger organization than the two individual ones."
Thomas A. McLaughlin wryly observed in his book Nonprofit Mergers and Alliances (1996, John Wiley & Sons) that "the best time to consider a merger is before it is necessary, when coming together with another organization will mean combining strength with strength, and when the collective energies and creativity of the two entities can be used proactively instead of being sapped by the demands of crisis management."
Gardner says that, among other things, the formation of AAIA has doubled membership, reduced costs, and greatly enhanced the influence of the organization in the industry and on Capitol Hill. It has in essence created a single voice for the industry. Here's how the automotive aftermarket merger started.
The same two organizations attempted a merger in 1991. For various reasons, that merger failed. Two other merger attempts involving different associations also collapsed before the successful combining of ASIA and APAA in 1999. Why did this merger work and three previous attempts fail? Industry and association politics, unwillingness by some members, improper structure, timing, and lack of effective communication were among the culprits. To succeed the fourth time, the atmosphere for consolidation had to be different.
As McLaughlin says in another book, Trade Secrets for Nonprofit Managers (2000, John Wiley & Sons), "Every merger encounters resistance. A merger is a big idea, and big ideas are never accepted unanimously by any group of thinking individuals. The important thing is not whether the merger encounters resistance but how it is handled, and the key to handling resistance is understanding it." From his viewpoint, most resistance derives from the two big Es: ego and economics.
At the automotive aftermarket associations, this time the leadership of both groups meant business. There was an urgency and determination to make it happen. Why did the fourth attempt become the charm?
First and foremost, clear communication made the difference. The communication started at the top with paid staff and volunteers, and filtered to members and the media. Key influencers in the industry--the ones to whom rank-and-file members turned for advice--were consulted from the beginning. Most of these people were already serving as volunteers for both APAA and ASIA. Ultimately, members would want to know from these people whether the merger was something they should support.
With ASIA being composed of seven individual division memberships, it was important to find out how each group would react to the idea of a merger. So focus groups were convened for the purpose of understanding their viewpoint.
Gardner recalls the wisdom of that step in the process. "I think it is a tremendous thing to do.. .to get the focus groups together and find out what your membership is really thinking and test how it is you are going to sell it to them."
From the focus groups, the association learned about potential stumbling blocks that could derail the consolidation. More importantly, the focus groups demonstrated that the way the plan was presented to members could make a big difference in how they would perceive and react to it. Communicated correctly, the consolidation had a good chance of succeeding.
Gardner felt that an important thing that he could impart to the focus groups was a framework so that participants could see what the merger would look like four or five years down the road. "You must give them a vision of where you want to take the combined organization and why it is necessary to go there," he says.
Out of the focus groups emerged a plan that laid out the communication that would need to take place with both staff and members. This market research was extremely helpful. The research garnered in the focus groups helped communication professionals identify key advantages and benefits that would be emphasized in all communication to ASIA members. Association leaders also used these key points as aids in discussing the proposed consolidation with other members.
The staff and volunteers of APAA undertook a similar communication effort. They too wanted to make sure they understood how their members viewed a possible merger. A public relations firm was retained to help establish a comprehensive plan that would communicate effectively to the separate needs of APAA and ASIA members.
Both Alfred Gaspar, president of APAA and currently president and CEO of AAIA, and Gardner, had extensive interfaces with their respective memberships to explain the consolidation and answer questions. Face-to-face meetings were held with the respective boards of APAA and ASIA and the individual committees of each group. In addition, Gaspar and Gardner traveled to individual association division conferences and meetings to make presentations and answer questions about the consolidation. Among the most common questions asked: What changes are anticipated (name of the organization, location of the new association, membership benefits, etc.)? Why merge now?
Staff members of APAA and ASIA worked together in groups to help iron out all the nitty-gritty details for the new association. And all staff members from both organizations were offered jobs at the new headquarters. Most of ASIA's Chicago office decided not to accept the move to the Washington, D.C., metropolitan area. But communication about what was and was not happening helped staff members fulfill their duties even though some were in the process of looking for jobs. Keeping staff focused on the feasibility and implementation of the consolidation was essential. As a participating member of several teams, each staff person had several tasks assigned to him or her to help carry out the implementation of the consolidation. Assignments were ranked in order of importance from high to low.
Outside of headquarters, APAA and ASIA members received regular communication through association newsletters, magazines, and fax alerts--all the publications that they were used to seeing.
When the consolidation was formally announced, each APAA and ASIA member received a brochure explaining the benefits of combining the two organizations. In particular it was pointed out that finances would be stronger, that the combined organization would have a stronger presence in the industry and on Capitol Hill, and that services to members would be improved through new programming and services. In addition, they were mailed a packet of information presenting all the details of the merger, including new bylaws, organizational structure, and governance plans.
The goal of the material was to demonstrate to APAA and ASIA members that the consolidation of associations was going to produce a winner that could provide members greater benefits.
"That little package went a long ways toward bringing everybody on board," Gardner explains. "The staff and leaders on both sides worked hard to make this consolidation happen." As a result, the consolidation was easily approved and AAIA became effective on July 1, 1999. But communication didn't stop there.
"When you complete the consolidation you have to have a dedicated staff to make it successful. And in that transition from the old associations to the new association there is still a lot of communications needed," says Gardner. "We had a lot of that going on, especially to our members with new Web site information, logos, and general information."
Code council consolidation. The previously discussed International Code Council offers a consolidation story to watch as implementation starts this year. The merger took three years and culminated in January 2003 with ICC becoming the one, official organization important to the nation's model code market, fire-protection officials, plumbers, building owners, architects, and construction officials. More than 10 years of discussions and meetings among four associations--and others along the way that dropped out of the merger talks--came before the three years of intensive communication at all levels. This even included a Web site where all of the players and the public could follow the thousands of details, meetings, agreements, and movements involved in establishing ICC. More than 350 staff members in offices around the country, which now serve as service centers, consolidated in one identity, mission, purpose, and unified operations.
The organizations that became ICC were the Southern Building Code Congress International, Building Official Code Administration, the International Council of Building Officials (ICBO), and the Council of American Building Officials. Competition was the driver for the merger. Other associations and even the federal government became good reasons to complete the consolidation. The government, for example, weary of dealing with too many different standards and associations saying what works for Americans with disabilities, came up with an alternative solution, the Americans With Disabilities Act, and became a national force in addressing building codes relative to handicap access and other matters. That spurred the different codes associations to bear down and get the merger deal done.
David Nelson, ICC vice president of certification and licensure, explains that one of the reasons the merger took three years to align everything correctly is that more than 50 certifications, all voluntary, had to be included in the merger process. Because these certifications are so close to safety and public welfare, the certification achievement is accepted by many states and counted as partial fulfillment of requirements for licensure and renewal of license to do business in states and jurisdictions.
Many communication initiatives and campaigns greased the skids for the ICC merger. Bob Heinrich, CEO of ICBO and now heading ICC as CEO, remained personally involved in communication efforts tending to all human interests in the megamerger. His priorities included the following:
1. Keeping customers first. Heinrich knew that customers could suffer when organizations focus their energy and resources on consolidation efforts. The mandate for everyone in the organizations going together was to "work harder than ever to provide the highest caliber of service every day.
"I have to emphasize that the leadership cannot over-communicate," says Heinrich. "Even if there is nothing new to report to the membership and staff, communication is still key. Wild and wonderful new realities can be created in a vacuum. Then, that takes more time and effort to deal with than if communication was done right the first time."
2. Providing information about the integration. Information is power, especially as it affects individuals' careers or business. The integration Web site (www.iccsafe.org) made breaking news available within minutes. Members', customers', and other stakeholders' questions, concerns, and interest in participating or doing business with the new organization were addressed directly and immediately.
3. Providing service beyond the integration. The communication plans and strategies included everything one could know or discuss about the merger, plus the implementation phases, starting in January 2003. When one considers the thousands of people who depended on the three organizations prior to the merger--for certifications, uniform codes, standard codes, and other services or products that affected millions of jobs and lives--the communication challenges were enormous.
One more merger to watch. The Association for Conflict Resolution (ACR), Washington, D.C., offers another great instance of lessons and communication strategies. Three organizations merged into a single new association in January 2001. The three organizations coming together were the Conflict Resolution Education Network, the Society of Professionals in Dispute Resolution, and the Academy of Family Mediators. A grant of $2.45 million awarded by the board of directors of the William and Flora Hewlett Foundation supported the merger activities and the internal communication and public education required to promote the awareness and purposes of the new organization. La Piana Associates, which has facilitated more than 60 mergers and other partnerships among nonprofits, assisted with the merger. La Piana's work, writings, and workbooks were cited by BoardSource, Washington, D.C., as especially valuable to nonprofit decision makers (see sidebar, "Focused Reading").
One of the priority areas for ACR this year is formation of a certification program, now that the people needed to define the body of knowledge and the primary customer base for the credential has merged into one association.
Critical communication points
The Harvard Business Review (November--December 2000) says that "there are two critical periods in the life of most acquisitions. The first is the time between the deal's announcement and its close. The second is the first 100 days after the close." One of the association executive's most important roles, as the champion of the communication program, is to move everyone as quickly as possible through those two deadlines.
The longer the soon-to-be-merged associations are in the period between announcement and close, the more consuming and the more complicated the communication becomes. Speeding things along, bringing closure with appropriate involvement from all who must sign off or buy in, and forging social connections are critical requirements for the spokespeople. Orchestrating tangible success that could not be achieved before the associations came together is how many measure success. Until the merger journey and communication fueling it lead to business results, the deal does not pay off.
RELATED ARTICLE: FOCUSED READING
Association executives will find more than five decades of merger research and writing on the success and failure of mergers. No statement for mergers exists for which one can't find a study confirming exactly the opposite. It is easier to focus on what we do not know about mergers. Until the last 10 years, little was considered, done, or analyzed regarding association mergers and various forms of doing business through alliances, acquisitions, and partnerships.
The forward-thinking association executive will check out these books and take their advice and lessons to heart. Discounting or ignoring the merger wave now washing over many associations is a high-risk position. We recommend starting with the latest books, because they have proven to be most relevant and immediately useful to the authors and their association clients. All are worth your time or they would not have made list:
* Merging Nonprofit Organizations: The Art and Science of the Deal, John A. Yankey, Barbara Wester Jacobus, Kelly McNally Koney, 2001, Mandel Center for Nonprofit Organizations.
* Nonprofit Strategic Alliance Case Studies: Lessons from the Trenches, John Yankey, Amy McClellan, Barbara Wester Jacobus, 2001, Mandel Center for Nonprofit Organizations.
* Trade Secrets for Nonprofit Managers, Thomas A. McLaughin, 2000, John Wiley & Sons.
* Nonprofit Mergers: The Power of Successful Partnerships, Dan H. McCormick, 2000, Aspen Publishers, Inc.
* Enterprising Nonpro fits: A Toolkit for Social Entrepreneurs, J. Gregory Dees, Jed Emerson, Peter Economy, 2001, John Wiley & Sons. (See Chapter 7--"Mastering the Art of Innovation.")
* The Nonprofit Mergers Workbook: The Leader's Guide to Considering, Negotiating, and Executing a Merger, David Lapiana, Vincent Hyman (editor), 2000, Amherst H. Wilder Foundation.
* The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances, James E. Austin, 2000, Jossey-Bass Publishers.
* Managing a Nonprofit Organization in the Twenty-First Century, Thomas Wolf, Barbara Carter, 1999, Fireside. (See pages 327-330 in particular.)
* Forging Nonprofit Alliances: A Comprehensive Guide to Enhancing Your Mission Through Joint Ventures and Partnerships, Management Service Organizations, Parent Corporations, and Mergers, Jane Arsenault, 1998, Jossey-Bass Publishers.
* Nonprofit Mergers and Alliances: A Strategic Planning Guide, Thomas A. McLaughlin, 1996, John Wiley & Sons.
* Nonprofit Mergers: The Board's Responsibility to Consider the Unthinkable, David La Piana, 1994, National Center for Nonprofit Boards (now BoardSource).
Georgia Patrick is president of The Communicators, Inc., Myersville, Maryland. Gary McCoy is president of Fairway Communications, Elgin, Illinois, and immediate past president of the Automotive Communications Council. He was communications director on the ASIA staff at the time of the Automotive After-market Association merger. The two share a consulting partnership. E-mail: firstname.lastname@example.org; email@example.com.
|Printer friendly Cite/link Email Feedback|
|Date:||Jun 1, 2003|
|Previous Article:||An effective advocate: here's how the Consumer Electronics Association tackles--and often wins--public policy challenges.|
|Next Article:||Collaboration, competition, or cannibalism? A personal perspective: with 150,000 associations nationwide, we all can't be that different, special,...|