Companies have long looked to mergers as a way to gain instantgrowth and reposition themselves within an industry. The creditunions I work with are considering this option more frequently.Most mergers are predicated on financial advantages. The financialpossibilities of the merger may look good – but the merger maystill fail. Where are the unconsidered pitfalls and stumblingblocks?

Culture Clash

The impediments are almost always found in the culturaldifferences between the two organizations and how well theemployees blend in their habits, expectations and job performance.That critical blending begins with the managers and leaders of thecredit union.

In recent surveys, top executives say they have heard aboutcorporate culture but are not doing very much to manage it.Staggeringly, 75% of executives admit they have no plan to managecultural change associated with mergers and acquisitions. Seventypercent say their business did not assess its culture prior to themerger. These executives are either blinded by the potentialfinancial picture or simply haven't considered how importantculture is to their ultimate success.

When merging appears to be a financial opportunity, most creditunions typically don't consider culture as a warning sign or reasonnot to merge. However, for the sake of ongoing success, you mustweigh potential culture clashes. Look at mergers that did not liveup to their promise, such as Hewlett-Packard and Compaq, MercedesBenz and Chrysler, Time Warner and AOL.

In most cases there was a plan outlining how the merger would befinancially successful. Dig deeper, and you'll see the companiesnever reached a point where they could work well together becausethe cultures clashed and nobody found a way to get them tomesh.

According to a survey by McKinsey & Company, close to 70% ofmerger/partnership failures are a result of culture clashes. Thedue diligence on culture blending is as important as financialblending.

A new vision for a new entity

This newly merged credit union needs a new vision to help definegoals. Leaders need to identify and define this new entity, mostimportantly to the employees and members of the mergingorganization, especially if they are going to be operating under anew name. (Unless you are merging a small, one-branch credit unionwith less than $30 million in assets, a new name for the mergedentity is an idea all boards should consider.)

Each department within the new credit union must understand howit fits into the overall combined vision. How will departments setgoals and be measured on performance? In the skeptical society inwhich we live, communication and clarity will be critical toinforming employees about their role in the new entity.

Six internal factors to examine closely with amerger

Mergers trigger innumerable adjustments and shifts, fromprocesses to technology to expectations. In the midst of all thefocus on these changeovers, the most important transition that canmake or break a merger is frequently overlooked: the employees,culture and internal communications.

Here are six factors to be considered when contemplating amerger or in the beginning stages of a merger:

• How will executives establish a clear direction from the top asto why this merger is taking place and what are the expectedoutcomes of a successful merger?
• What is the new culture for all employees you are striving toestablish? Who do you want to be?
• What systems, procedures and policies need to be changed toreflect the new culture? Which established employees will find thismost difficult? How will they be brought up to speed?
• There will be a greater adjustment for those employees mergingin from the other company. How will you guide their changes?
• What does the rollout plan look like for all of these changes?Imagine the process of building a new branch; there is no need tobe installing carpet before it has a roof. Everything happens in aplanned order. What's your plan look like?
• How do you get everybody in the organization involved withsignificant buy-in to be ready for action plans to achieve the manyforthcoming changes?

Remember, the due diligence you perform to establish financialviability should set the standard for the effort you spend on yourdue diligence of cultural merger viability, and how you determinewhether your middle managers are prepared to deliver the potentialsuccess you see on paper.

RussellJ. White is a consultant, speaker and president of PinnacleSolutions in Lake Wylie, S.C.