Writing in the Harvard Business Review, Alan Lewis and Dan McKone state that mergers and acqui-sitions should come with an official warning: “Acquisitions can result in serious damage to your corporate health, up to and including death”. Not a surprising opinion considering a study of 2500 M&As by their firms show that more than 60 percent destroy shareholder value. This is not a sur-prising number as many other sources including a KPMG study puts the number at 83 percent.
But this does not seem to reduce the popularity of this power play among CEOs. The 2017 M&A Out-look published by EY as part of their Global Capital Confidence Barometer reports that 56 percent of CEOs expect to actively pursue mergers and acquisition in the next 12 months.
So the question is what can these CEOs do to make sure that their journeys end differently?
A collated study of the plethora of articles on reasons for failure throws up some usual suspects —inadequate due diligence, poor program management, misgauging strategic fit, incorrect deal struc-ture or price, infrequent and irrelevant communication and inadequate effort at culture integration.
I will focus on ‘communication’ in this article.
Imagine you are an in-company reporter who is chronicling the post-merger journey of your organi-zation with a competitor of almost equal size. This is Day One and you along with another 500 an-xious people, made up of leaders from both the organizations, are gathered in a giant ballroom eager to hang on to every word that the CEO of the merged organization is going to say. Whatever the CEO says or doesn’t, will be processed by each individual listeners brain to answer the key questions everybody has — Where are we heading from here? and What will happen to me?
The CEO comes on stage and in a speech peppered with words like collaboration, humanity, cohe-siveness, agility, he outlines the next five years plan and articulates the strategy for the 12 months ahead.
Now fast forward to a week later. You are going around the organization to understand how much of the 12 months strategy is clear to these leaders. Your simple interview question is “What is the strategy the CEO announced at the conference? Can you share with me the key thrusts?” Say you ask this question to 15 leaders. If 2 or more leaders get it right, then your CEO has beaten the odds.
In the book The Strategy-Focused Organization, Robert Kaplan and David Norton note that, according to an abundance of research data, on an average only 5 percent of the workforce understand their company's strategy.
The situation becomes even worse when the message needs to be taken down to the next level. A version of the CEOs PowerPoint is sent out to the regional offices along with detailed speaker notes. Has that worked in the organizations you have had experiences with? In my earlier years, I have been a recipient of many such decks. My manager would connect his laptop to the projector and say “I have been asked by HO to share this strategy presentation which was shared with us in Goa last week.” He would then go on reading slide after slide with a few sheepish pauses and comments of “I am not sure what this means.” We would all be suitably bored, and happy when the download got over. If 5 percent was the retention post the real event, you can well imagine what the comprehension and retention of the cascade would have been.
Why does this happen?
Abstraction, lack of context and unaddressed anti-stories?
Abstraction
There is common belief among leaders that important messages must have important sounding words. In the past I too have been guilty of the same.
It was as if the title of “Chief Strategy Officer” ensured that I forgot to speak in commonly understood English. If I wanted to share that the single most important theme for the year ahead would be ‘teamwork’, would I be able to go on stage in front of 500 employees and just say that? Unlikely. That would sound too simple. Not something befitting a highly paid executive. I would probably say “this year we must break down each and every silo in the organization and instill a sense of deep collaboration and connection”. Now I think I sound like a CXO.
But the effect is negative. I probably would have a bunch of people who not only don’t understand me but not trust me as well.
A study by New York University and a Swiss University shows very po-werfully that when you want to come across as believable and trustworthy, using concrete language is the way to go. In these experiments the professors found that statements that said exactly the same thing were judged more likely to be true when they were written in definitive rather than fuzzy language. The study found that using verbs like ‘count’ and ‘write’ are solid, concrete and un-ambiguous. Whereas verbs like ‘help’ and ‘insult’ are open to some interpretation.
But if ‘help’ and ‘insult’ are ambiguous, where does it leave ‘collaboration’ and ‘cohesiveness’ and ‘agility’?
Lack of context
In most communication, including important issues like transformation, we often take the context for granted. Context is critical, because it tells you about the receiver, what importance needs to be placed on something, what assumptions to draw (or not) about what is being communicated, and most importantly, it puts meaning into the message.
However, we often suffer from the illusion of transparency. We think others are much more in synch with what we are thinking then they really are. And hence, we jump straight into the ‘what’ of our message without even a tiny mention of the ‘why’. Psychologists call it the signal amplification bias. We routinely fail to realize how little we are actually communicating. Many a times when I have brought this to the attention of the speaker I have often heard “I thought it was obvious that…” or, “I didn’t think I needed to spell that out.” I know it is easier for me, as an outsider to spot this but being aware of this would certainly help.
Understanding context becomes even more critical when the message is about change. We are biased towards reason. Even if we don’t like to do what we are being told to do, it becomes easier to complete the task once we are given the reason why we are doing it.
This was brilliantly demonstrated in an experiment at the Harvard University which showed that people were twice as likely to allow others to jump a queue when given a reason compared to when not given one. That is the power of the “why”.
Unaddressed anti-stories
What Kryptonite is to Superman, anti-stories are to any communication exercise. Especially those dealing with change. How often, during the coffee breaks in a conference, have you heard groups discussing why something a leader proposed cannot be done? Cannot be done in this company, in this industry, in this country, etc. And this is not just from the cynics and not always malicious. Often such observations are based on historic evidence. These powerful stories of why something prom-ised or something planned by the management should not be believed are what we call anti-stories — a term coined by my partners Anecdote from Australia.
The story solution
So how does one address these three key issues of — abstraction, lack of context and unaddressed anti-stories. One powerful way is by using stories and story structures.
When I work with organizations to help them get key messages like transformation, change, new vision etc. to stick, I help them craft the message into a story structure. We call it the clarity story structure. We are not writing a story on the post-merger strategy but writing the post-merger strat-egy as a story. It is impossible to craft a story without a context and when we tell stories we always use simple words. This takes care of two issues — lack of context and abstraction.
The best way to deal with anti-stories is to first acknowledge them. Then replace them with a more powerful story. Assertions don’t work as a story can only be replaced with a more powerful story. For example, if one of the anti-stories is “No matter what the CEO says, there is bound to be job losses as not everybody can be re-skilled to take up new roles”. The way we would address this is to acknowledge this and replace it with examples from similar situations when the opposite has been possible. So in the above example, the CEO could say “Many of you may be thinking that redeploy-ment via re-skilling will not be always possible. I remember a similar concern during 2001 merger between Vodafone and Mannesmann of Germany. 125 network engineers were going to need to be re-skilled and redeployed and people believed that would not be possible. But within the next two years all 125 were helped to develop skills in their area of interest and all of them were relocated into alternate roles. In fact, the current head of customer service of Vodafone Europe was of the 125 people. That is why I believe we can always find a way to redeploy”. Of course, this example of mine is made up and the example we use must be real. I am yet to face a situation where we haven’t been able to find a relevant and powerful example to kill the anti-story.
Once the clarity story about the transformation is crafted and the anti-story addressed, we train the senior leadership to be able to tell this story orally — after all, that is how stories are best told.
There are several advantages to this process. Everyone uses the same narrative structure or skeleton when talking about the merger strategy. Sharing strategy is no longer subject to the interpretation of various senior members of the team. Whether the Chief Executive is addressing the post-merger conference today or the Chief Financial Officer is having a regional finance heads meet or the Chief Marketing Officer is addressing the joint marketing and agency personnel, they are using the same narrative structure and, hence, there is consistency.
Consistency, a critical element in getting messages to stick, is the first advantage. The second advan-tage is what we have been after — the ability of listeners to relate to a story. Because stories make the abstract concrete, stories connect and stories stick. The third advantage for me is the most po-werful — stories can be retold. No matter how clear the message is, and how simple it is to under-stand, there are only a limited number of occasions, be it one-to-one or one-to-many, for the CEO (or the team) to personally narrate the post-merger strategic story to the employees. However, a story well told is easy to retell and this strategic story can be retold by people.
Finally, we have a cascade that works. Your strategy sticks. And with that a crucial part of the successful merger jigsaw is in place.