Can customer experience make a merger better?

There’s a lot of news lately about potential mergers and acquisitions…BofA and Countrywide, Microsoft and Yahoo, Delta and Northwest. And there's good reason to combine organizations, not the least of which is expense reduction through greater efficiencies, and the oft lusted for…”synergies”.

It would be terrific if mergers worked out that way, but in a study of 118 deals, KPMG reported 70 of those did not create shareholder value for the combined companies or at best, received marginal returns. As if that weren’t bad enough, according to a McKinsey study, nearly nine out of ten deals over $100 million saw a median DECLINE in revenue of 12% in the first 9 months following the announcement, and only 11 percent were actually able to accelerate growth over the three years following the merger.

What’s up with that? The problem is that in spite of what we would like to think, mergers aren’t a math problem. Instead, they’re an attempt to bring disparate societies together under one umbrella for a common purpose. The work that Maritz has done in M&A shows pretty clearly that if companies want to make a merger or acquisition work, revenue, not expenses, makes the difference, and revenue is driven by people who are motivated to do what they need to do to make the business work through tough transitions.

There are three things to do to keep the revenue side cranking to make a merger successful:

1) Communicate – With customers, employees, and line managers to make sure that everyone understands what’s going on and why it will benefit them. There probably isn’t such a thing as over-communication in this environment.

2) Motivate customer facing staff with meaningful incentives – The front line will bear the brunt of customer dissonance and they also can be the source of revenue growth. Getting them to do the right things and to feel good about it takes highly focused incentive programs.

3) Actively (and aggressively) manage the customer experience – Everything that matters about the customer experience matters more in a period of transition. The customer experience has to be engineered to ensure that customer annoyance is minimized, and opportunities to deliver positive experiences are found and delivered.

Like everything else related to managing the customer experience, successfully managing the revenue side of a merger/acquisition is hard to do but it’s worth it. The McKinsey study also showed that growth oriented companies drove returns 22 percent greater than the S&P 500 post merger, and 40% faster than industry peers.

So, if your company is merging, acquiring, or being acquired, pay attention to the revenue side and the odds of achieving your objectives are a lot better.

BTW, here’s a link to a whitepaper that Maritz has on the subject.