Oh what a tangled web we weave…
When we attempt to create a super-council in London.
Ok, so not as poetic as Shakespeare, but the tangled web that will be created by this merger, may take decades to resolve.
Plans for a merger of Westminster, Kensington & Chelsea and Hammersmith & Fulham councils are expected to generate savings of £100m per year. All well and good, but statistics from Accenture show that only 45% of mergers achieve the expected savings . It is worth addressing why this is the case.
The average global petrochemical firm has around 40 functional lines. When merging with a similar sized partner, the complexity of merging these organisations is staggering, and managers’ are so focused on this complexity that they often miss what blocks success… people and culture.
In 1998 a Roffey Park research report (Devine M & Hirsh W, ‘Mergers & Acquisitions: Getting the people bit right’. 1998: Roffey Park Institute) stated that in reviewing the research and literature on the success of mergers:
“It is now believed that regardless of the degree of organisational and strategic fit, human beings determine whether mergers and acquisitions work in the long-term.”
This was not new at this time and should be well known now, but many mergers still fail because this area is mismanaged.
The challenge facing these local authorities is that the average unitary authority in England & Wales has 700 functional lines. The sheer scale and complexity of the undertaking of a three-way merger between organisations with this number of functional lines is mind-boggling.
However this challenge, like a very large and complex Rubik’s Cube, is solvable. It will take a lot of brain power, time, computer models and process maps, and a fair dose of compromising on many parts, but it can be done.
In addition there are Political complexities, which our large petro-chemical firm does not face. Yes the three authorities concerned are Conservative, yet these politicians will no longer be ‘big fish in a small pond’. The pond will be bigger and with more fish, which is a guarantee of political manoeuvring by politicians.
Another complexity is the issue of local strategic partnerships. Services are now delivered in a more joined up way across all agencies in a local area, so merging these authorities also involves reconfiguration within a wider set of local agencies.
The biggest problem however sits with issues of people and culture. A senior manager in a London local authority, unaffected by these changes, felt that this was a “potential recipe for disaster.” From their perspective the authorities merging are all successful authorities with strong cultures, and with no motivation for each to change and compromise – essential elements to a successful merger. This manager believed that cultural issues were the significant potential blockages; despite believing that mergers of London authorities are essential.
Whilst everyone is scratching their heads working out the right answer to the functional integration problem, managing the politicians, and managing local partnership agreements, the people problem can be ignored.
Why is it ignored? Well which would you rather deal with: a complex, but solvable puzzle with a ‘right’ answer at the end, or an ambiguous, messy, challenging problem with no clear right answer, many redundancies, and a long stream of difficult and challenging conversations? Most managers choose the former, and the seductiveness of this particular puzzle will be significant due to the scale of the challenge.
Meanwhile we will generate a further case study showing that mergers are unsuccessful if the people and cultural issues are not addressed. Our fear is that these mergers risk being an expensive mistake, with declining services. This is something which will take decades to iron out and get back to the current levels of service. Our challenge therefore to these authorities is to begin with plans for cultural integration and to give this issue attention throughout.
(This article was originally published in The Times newspaper (London), 12th November 2010)