When a couple of large companies join together in a merger the media buzz is about how the two top executives will get along. That becomes interesting luncheon conversation and keeps the gossips going for some time. However it really makes little difference when we are calculating the possibility of winding up with a successful venture. These senior people will leave after a while and the company will have to be managed by others about whom everyone can speculate. Executives come and go.

But how about the merged? I read the NY Times stories about the CBS/Viacom togetherness from cover to cover. Each aspect of the two companies was examined in detail and projections were made about their finances and influence. But nothing was said about the employees, the people who actually make all that wonderful stuff happen. I couldn’t even find out how many are involved, but there are hundreds of thousands I am certain.

What do you suppose they are thinking? The first thing that pops in their mind in this situation is "are we ‘them’ or ‘us’". They wonder which end of the stick they are going to receive. The smartest ones are already looking around for a new position. The rest are hunkering down. While toasts are being made at the top of the building, bunkers are being constructed downstairs. There will be turmoil, and the expected efficiencies of scale will not show up for many years. Ask Citigroup.

Where the merger creators go wrong is that they do not plan to offer their employees a common philosophy of management – a language they can all understand and trust. These people are scared about their jobs; they are concerned about the vibrant personalities of the new leadership; they don’t know whom to trust. They get all their information from the media, and much of that is conjecture. It makes for a dispirited, cautious, rebellious bunch of warriors that are supposed to fight the new wars. It is a very big and expensive mistake which most of them make.

When Harold Geneen was building ITT in the 1960s and 70s he acquired around 500 companies in many different industries. His pattern was to "buy what is for sale". He used equity and cash and paid honest prices. Then he did two things: first he planned to grow the new organization, not strip it of assets and try to get the money back right away; second he taught the new folks a common language of ITT. All through the 46 countries where we had operations the management and employees understood the basics the same way

There was one financial management system and it was run from New York. Classes were held to teach operating and financial management how to measure and report. We could look at the numbers all over the world and understand what was or was not happening.

There was a common language of quality. We taught everyone that quality meant conformance to the agreed requirements; that it came from prevention, not detection; that Zero Defects was the performance standard; and we measured quality by the price of nonconformance. (Most companies spend over 20% of their revenue doing things wrong. Reducing PONC was the best way of increasing profitability in these new organizations).

Building on financial and quality management he incorporated a wide ranging management development system which led to promoting from within and resulted in growing organizations. Sheraton, ITT Industries; and many others began as small-underfinanced companies. He raised them up. Of the 500 only a very few grew smaller and that was usually because their product or services just didn’t cut it

When I left ITT in 1979 to teach organizations how to make quality certain through our Quality College, we dealt with thousands of companies worldwide who wanted to create a common language of philosophy within themselves. The result was that they vastly improved their relationships with employees, suppliers, and customers. We are still teaching it today. But we don’t see these big merger organizations reaching out to do this. They will wonder why no one answers the bell when it rings.

Philip Crosby is author of "Quality and me: lessons from an evolving life".

© 2000 Philip Crosby Associates II, Inc.

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