Why do most mergers fail to live up to expectations? Is it the finances or the technology? Rarely. Is it the overly ambitious strategy of executives? Occasionally. Mostly, it is poor execution of the actual combining of the companies involved. Merger failures usually revolve around people issues -- loss of key staff, culture clash, FUD: fear-uncertainty-doubt, and last but not least, poor communication and interaction between employees of the merging organizations. Many of these issues are also faced by companies participating in joint ventures and strategic alliances.
The organizational network map above shows a combined company. The red nodes are executives and managers from the acquiring firm. The green nodes are executives and managers from the acquired company. The dark gray nodes are new hires since the merger. A link is drawn between two nodes if they exchanged information about integration plans/issues/problems, or discussed strategy for the new combined organization. The link thickness indicates frequency of interaction.
As we can see some integration is happening -- red nodes interacting with green nodes, and vise versa. Yet most interaction remains between employees that worked together prior to the merger -- red to red and green to green. We measure the network to put a metric on the integration factor of each group. This is called the E/I Ratio -- a measure of how Externally/Internally oriented each group is in their interactions and communications. An E/I Ratio near -1 reveals a group that is totally focused on itself -- it has few, if any outside contacts. An E/I Ratio near +1 shows just the opposite. An E/I Ratio near 0 reveals a group with a balance of internal and external interactions.
The E/I Ratio for the red [E/I = -0.51] and green [E/I = -0.50] nodes matches what we see in the picture -- two groups with a mostly internal focus -- only a few interactions with the other group. This was the baseline metric. Once management saw this, they realized there was more work to do to effectively weave these organizations together. Further maps and metrics of the combined organization will be generated at 6 month intervals to track the progress of this integration. This x-ray of the integration process is a diagnostic that allows management to monitor the merger.