588 Making Key Strategic Decisions
must be budgeted as they can have a significant impact on postmerger cash
f lows.
The detailed plan must start at the highest levels of the organization. If
executives from the two firms are going to lead the transition, they must be
confident of their future roles and comfortable with their compensation plans.
In the Daimler-Benz-Chrysler deal, there was a good deal of animosity be-
tween executives as the German managers watched their American counter-
parts walk away with multimillion-dollar payoffs from their Chrysler stock
options while simultaneously receiving equity in the newly merged firm. A fair
incentive system must be in place at the corporation’s executive suite before
any implementation plan begins.
Once the key managers have been identified, retained, and given the
proper incentives, they must carry the vision of the merger to the rest of the
organization. To combat the productivity problems discussed above, managers
have two critical weapons, speed and communication. Remember that the
enemy from the employee’s perspective is uncertainty, and absent timely infor-
mation from above, they will usually assume the worst. Executives must move
quickly to convey the vision for the merged entity and to assure key employees
of their role in executing this vision.
While all employees should be part of this process, those that deal with
the firms’ customers should receive special attention. We saw how Cisco moves
quickly to retain key salespeople and reassure important customers that the
merger will only improve product offerings and services. In contrast, the 1997
merger between Franklin Planner and Covey Systems failed to heed this ad-
vice. Combining sales forces was seen as a key source of synergy, but the com-
pany was unsuccessful in merging the two compensation programs.
Divisions were especially strong within the company’s 1,700-person sales force,
which marketed its seminars and training sessions. Former Covey salespeople
got higher bonuses than Franklin staffers. Covey employees also kept their free
medical coverage, while Franklin’s had to pay part of their premiums.^19This situation created such sniping by sales reps on both sides that productivity
plunged.
The implementation plan must focus management resources on those areas
at the root of the deal’s synergies. If value is going to be created, it will only be
by executing on those aspects of the deal that were the original rationale for
merging. Without a plan, it is too easy for managers to get bogged down in de-
tails of the implementation that have little marginal impact on shareholder
wealth. In the failed AT&T-NCR merger, the hoped-for technological synergies
between telecommunications and computers never materialized as managers
worried more about creating a team environment.
In many cases, the disappointing performance of mergers can be traced
to a failure to account for cultural differences between organizations. These
differences can be based in corporate culture or national culture in the case of
cross-border deals. In many transactions, both corporate and national cultural