Making mergers work

Wall Street welcomed the Continental and United Airlines merger with a yawn. The planned merger that would create the U.S' largest airline received little press, as consolidations within the industry are both inevitable and necessary. Yet, we should not allow the relative disinterest from the press obscure the difficulties of combining organizations and making them work. Despite the financial logic, many mergers fail miserably.

I have two suggestions for the CEO, Jeff Smisek, who will lead the new, combined operations. Both suggestions are based beekeepers many years of experience in merging hives. Beekeepers merge hives when each hive is weak and could benefit from the complement of bees needed to properly fulfill the operational needs of the colony. That is, the goal of the combination is never to lower unit costs, but to improve efficiency. In fact, the carrying costs of the colony rise through the merger, but the bees get better at what they do through the increased pool of talent. Therefore, the first thing I would tell the CEO is to not count on cost savings to be your salvation. These short-term advantages dissipate with time. Instead, find a way to use the combined workforces more effectively. Unless you figure out how to do things better versus less expensively, you will never realize long-term monetary gains from the new organization.

And speaking of new organizations: if a beekeeper simply combines the bees from two colonies, they will mutually reject each other. Each hive develops a genetically and environmentally unique signature, or culture, based on the composition of its comb. Bees know who belongs in the hive and who does not. Unless the comb from the two colonies is mixed together, the bees will never accept each other. Thus, my second suggestion to Jeff Smisek is to create a brand new culture by "mixing the comb" as opposed to making a decision that favors one set of cultural values and institutional practices over the other. Only a brand new culture assures harmonious execution among the former inhabitants of two organizations.

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