The marriage between synergy and bureaucracy

February 27, 2011 § Leave a comment

Do you work in a company or an organization that is merging or has merged excellent smaller units and the management explain and claim that by doing this it becomes possible to improve company efficiency, competitiveness, management, administration, technology, and various processes, to have a better use of the resources and to provide opportunities for profitable synergies? This is what has happened at my own university, University of Helsinki (UH) and the Faculty of Behavioural Sciences (FBS), for example.

In the rhetoric, it is claimed that by combining different units, new strategic strengths are gained: for example, collaboration, communication and interaction between the merged units should create new possibilities, innovations and synergies. Indeed this can happen if the merged units can maintain their core strengths and cultures, or at least build on them, but unfortunately often their most valuable assets are such that the new organization or the other merged units are not able or ready to accept them. In the worst case, like in my own university, the core assets of the units can be destroyed without anyone noticing it and the hidden river of creativity dries up.

A destructive paradox

There is a destructive paradox in such mergers: the more distant the merged units – in their culture, competences, and in the mental models of their people – the more difficult it is to the other units and to those responsible for the merging, to understand, accept and even entertain this diversity. This introduces a strongly experienced internal need for control in the management and administration of the new entity. It can appear as a need for improving the knowledge or enterprise information management. This can destroy just those expected gains that the emerging synergies are expected to offer. I have commented a related management disaster in the Finnish University system in (http://ek.multiedition.fi/oivallus/en/search.php?we_lv_search_0=nyman&we_from_search_0=1). I believe that it is a result of the top-down blindness described here.

What happens is that due to the complexity and multi-valued nature of the merged units, it is difficult to find managers or management frameworks that would understand and master this complexity so that the new organization would really benefit from the fusion. In contrast, weak and narrow or loose top-down management visions inspire stronger and “richer” administrative and management control which in turn introduces centralization, “aligned” performance metrics and almost paranoid ways to follow “what really goes on in the new organization”.

Loss of qualitative resolution

Due to the large scale, the resolution of significant issues and cultural elements are lost, people are forced to orient themselves according to shared process and control systems and what has been aimed at with the fusion is silently destroyed by these disastrous forces. It is difficult to see these developments since the outcome can still be quantitatively and in the short run reasonably good by simply getting rid of the extra overheads. But the qualitative losses are almost impossible to see: who would follow the loss of such a potential and how? Of course, the people in the merged units see these qualitative, differentiating elements in their work and being: this has typically been their main motivating power, line of life,  and the source of meaning in their work that they have been proud of.

Signals are weak in the management’s eyes but strong where creativity lives

After the merger, there is scarce place for such views and the signals they send are seen as “weak signals” in the organization.  There is a good reason to claim – based on my own experience – that many so called weak signals are only weak to the strategic management, while those generating the signals perceive them as clear and loud – with no sensitive audience.

An analog to this situation is where a large company buys a smaller one but fails to secure the presence of the most skillful and competent personnel in the acquired company. By loosing the core assets the company has no future value.

What can be done? The window of opportunity to correction  is extremely narrow since the destroying forces act on people in a few weeks and months. The best brains react first and loosing them physically or psychologically is equally expensive to the organization. At my own university, the quantitative damages could be seen perhaps in 10 years so there is no sense of burning platform there, as of yet although the destructive administrative processes are creating huge problems, loss of time, cynicism in the personnel, and utmost frustration. Brains have been lost in numbers, not physically, but psychologically. Everybody knows this but the real damages will appear only slowly. But it is highly likely that the qualitative losses remain invisible and you can perhaps read of them in the odd blogs like mine.

New challenge for incentive design

A preventive cure to avoid this kind of mistakes is a change management model with a holistic view of the main assets involved. This requires participatory change collaboration where unit differences are taken as starting points, different company cultures are recognized, and the change process is built on the asset base that the units can offer.  This is the place to treat “the most valuable asset “ as it really was material capital.  It is like building a cathedral.

But who would have incentives to do this and where would be the forum for it? Some suggestions can be given but it is interesting to note how in a large entity like UH or the whole university system in Finland, the forces that initiate these ongoing changes disappear as soon as they have got their processes started and there is no ownership – or responsibility – left. This makes even the most stupid processes like a perpetual motion machine.

When the sick change hits the fan

What to do when the problems are already occurring and there is a risk of loosing the core strengths of the merged units? The first thing to do is to make the whole scene perceptible: describe what are the essential assets in the merged units and what are they based on, what is taking place in the units during the change, what are the attitudes of their personnel, can they perform so that they maintain their best performance level.  There are many forces in the administration and in the management system that are against this because it requires the visibility of all the mistakes made.

Managers do not have incentives to deal with what can be attributed to them as a failure, and the administration does not want to take more burden that they already have with the failing system. Very seldom there are people who have the skill and right to present a valid view of the new situation. The young generation (which is the most valuable future asset) does not see what is going on, they do not have that perspective.  So, there’s another kind of paradox: the more ambitious the company – the establishment – in its future plans, the more likely it is to loose its main young assets in these change processes.

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