The Consultant’s Side of the Story
“How did I ever get myself into this situation?” Susan Barlow said, sighing in frustration. Less than 12 hours remained until an 8
a.m. status meeting with the most misguided and cantankerous client she’d ever worked for, and Barlow was sitting in her office, drumming her fingers on her well-organized desk. Neat piles of policy documents and transcribed interviews obscured the project management flowchart she had drawn for the Kellogg-Champion project, and she pulled it free to inspect it for what seemed like the hundredth time.
Where was Jim with the take-out menus? Once they had eaten, they could get down to business. Between the two of them, they should be able to figure out a defensible course of action fairly quickly. After all, the Kellogg-Champion Securities engagement had seemed like such a straightforward job—at first.
Indeed, when the Kellogg-Champion opportunity had dropped into her lap, Barlow, a senior consultant with the Statler Group, thought it a lucky break. She was happy when she got the call from her director of human resources. The conversation had been brief and to the point: Kellogg & Meyer had merged with Champion Securities. The new CEO of Kellogg-Champion, Royce Kellogg, had engaged the Statler Group for a fairly simple job: to reconcile the policies and practices of the two former firms now that they had become Kellogg-Champion. Another senior consultant assigned to the case had suddenly resigned for personal reasons, and Barlow’s background in the securities industry made her the ideal replacement. The Statler Group and Kellogg had already agreed on fees and a schedule, but the project had not yet begun. Could Barlow fill in?
Barlow had been particularly enthusiastic because the consulting firm had recently decided to target the securities industry as a new source of growth. And although she had never dealt with a merger before, six years of successful consulting experience told her that the task would consist mostly of comparing two sets of policies in detail and then touching base with the relevant managers. She had thought she would be able to crack the case quickly if she pushed through the grunt work fast enough—and the project’s profitability depended on speed. Jim Roussos, a junior consultant with two years’ tenure at Statler, would be working with her, she had learned in that initial phone conversation. Roussos had been assigned to the project from the start. Thinking back now, Barlow sighed again. She wished she could say that Roussos or any other single factor was responsible for the mess they were in, but she couldn’t. From day one, Roussos had shown himself to be a hard worker.
Finding the flowchart useless, Barlow tossed it aside. Every deadline had slipped. How could such a simple project go awry? What had she done wrong? And where were those dratted menus? She was starving.
Seemed Like a Good Idea at the Time
Barlow thought back to the kickoff meeting that had taken place almost immediately after she accepted the assignment—a mere two weeks earlier. Although Royce Kellogg had struck Barlow as overconfident and patronizing in that first meeting, she remembered shrugging off his behavior as typical of an entrepreneur-turned-CEO. “Maybe I should have taken some of his grandstanding more seriously,” she thought with a twinge of regret. “Maybe he really meant some of the stuff that I wrote off as corporate platitudes.”
She tried to remember Kellogg’s exact words—something like, “Although my firm acquired Champion Securities and I am its chairman and CEO, the integration of our two firms is a merger of equals. Each of the firms contributes important strengths to the combination, and all our employees know that.” Barlow remembered smiling in encouragement at the banalities. After all, he was the client.
Barlow also recalled Kellogg’s explanation of why the postmerger integration had gone so smoothly. It all had sounded like a well-worn lecture to her: “The secret is careful planning before the two come together, and good communication from start to finish.” Then he added, “Because the big integration-related issues have been resolved, the only thing that remains to be done is finalizing common operating policies and procedures in ways that are good business and fair to all involved.” Clearly, Kellogg had believed that the job of merging policies and procedures would be simple. And he had also made it clear that because both sets of policies were the same in many respects, he didn’t see the need to create any new policies.
“I have already notified key employees that you will be calling, and I’ve asked them to give you their full cooperation,” he had added. “Be sure to touch base with folks from both sides so that nobody feels left out.”
When Barlow had received the list of people to contact, she began to wonder whether everything really was as simple as it appeared. Were all these people truly in agreement? She read the newspapers—since when had a merger ever gone so smoothly? But Barlow also knew that Kellogg had built his original firm from nothing into a huge success, and he seemed like the kind of forceful leader who could plow through anything and make it work. So voicing none of her doubts, Barlow had agreed to the schedule with outward enthusiasm: a status meeting to discuss any problems in two weeks and a final report in a month.
Twenty-Twenty Hindsight
Barlow now wished that she and Roussos had accomplished more during the first week. She had spent the first two days after the kickoff meeting extricating herself from another project while Roussos collected and organized the myriad documents that formed the policies and procedures of Kellogg & Meyer and its rival, Champion Securities. In what remained of the week, they had identified policies that were the same and developed a detailed list of differences. The list of differences outweighed the list of similarities by a fairly large margin. Barlow winced when she remembered how surprised she and Roussos had been by the number of discrepancies. Why hadn’t warning bells gone off then?
And why hadn’t she and Roussos been more concerned about how hard it was to schedule interviews with the major players? Two of those employees had called Kellogg’s office to find out if it was okay to talk to “these outsiders.” When Roussos had joked, “Kellogg’s brilliant communication about the merger may have stopped at the outer door of headquarters’ inner sanctum,” Barlow had laughed grimly and vowed to work harder. She remembered that she had decided to focus first on the sensitive area of compensation policy: better to identify the biggest problems and deal with them as soon as possible.
From Bad to Worse
The first conversation—the one that set the unhappy tone for the others—had been with Carol Ludwig, the polite but brisk director of human resources from Kellogg & Meyer. When Barlow had asked Ludwig her opinion about the merged firm’s compensation policy, Ludwig answered coolly that she could save everybody a lot of time by simply referring them to Kellogg & Meyer’s policy manual. “We revised our compensation system just before the merger to make it truly state-of-the-art,” she had explained. “Champion’s outmoded compensation system no longer meets the organization’s needs.”
According to Ludwig, Champion’s brokers were “thrilled to pieces” at the prospect of switching to Kellogg & Meyer’s compensation system. But Barlow and Roussos hadn’t had a chance to question her more closely about that assertion. Ludwig’s secretary had interrupted them after only 20 minutes to announce the director’s next appointment. And as Ludwig hurried the consultants out of her office, Barlow got the feeling that her distracted promise to answer any other questions at a more convenient time was just a way to get rid of them.
Next Barlow and Roussos had interviewed Tom Flynn. The former director of human resources for Champion Securities, Flynn hadn’t had the faintest idea why the consultants wanted to talk to him. He said that Kellogg had not told him about the consultants, adding, “But that’s not unusual, since I’ve been out of the communication loop ever since the merger. Perhaps you could let me in on Kellogg’s plans?”
Barlow remembered her embarrassment when she had told Flynn that the merged firm planned to adopt Kellogg & Meyer’s compensation system. His response had been angry—and loud: “You got that from Carol Ludwig, didn’t you? She knows we agreed to use Champion Securities’ compensation policy. Champion’s brokers are the best in the business, and there’s no way they would stand for any changes in compensation. Before the merger, Royce Kellogg promised not to change anything. Carol and I have been over this a hundred times, and the only thing we agreed to use from Kellogg & Meyer was the computer program that keeps track of compensation. Wait till Champion’s brokers hear about this. We’ll have mass resignations on our hands!”
Remembering that scene, Barlow realized uncomfortably that she had probably missed a chance to get inside the reality of the merger. “All I did was try to calm him down,” she thought, sighing. “I just tried to pass it off as my misunderstanding. I knew very well that Ludwig clearly saw herself in the driver’s seat. Why didn’t I consider the implications for Flynn and for everyone else from Champion?”
Interviewing the former marketing directors of the two firms had proved equally awkward. John Tucker, senior vice president in charge of marketing for Kellogg & Meyer, had sketched out an organization chart that showed Greg Masters, executive vice president of marketing for Champion, reporting to him. The chart that Masters drew for Barlow and Roussos revealed a different understanding: Masters clearly believed that he and Tucker were on the
same level and that
both marketing directors reported directly to Kellogg. After the ruckus with Flynn, Barlow had decided not to mention the contradiction to either marketing man. “Am I a coward or a politician?” she wondered ruefully in retrospect. “Maybe both.”
Barlow then thought back to the consultants’ visits to two branch managers—one from each of the former firms. She and Roussos had hoped to find greater agreement at the operational level. “How could I have been so naïve?” she thought.
The two consultants had split the interviews between them because the branches were in different cities and time was of the essence. Barlow had interviewed Russell Sanders, the manager of one of Champion’s most profitable offices. After Sanders had ushered her into his office, he closed the door, lowered his voice, and begged her to keep the conversation in the strictest confidence. “I’m sure they’ve told you that all the merger issues have been settled and we’re all one big, happy family, but don’t you believe it,” he had said. “Everyone operates under their old policies, and virtually no communication exists between the management personnel of the two predecessor firms. Kellogg pats himself on the back for having done such a great job of bringing the firms together, and nobody has the intestinal fortitude to tell him that the merger has been a colossal failure.”
Roussos, meanwhile, had spoken with Brian Matsuo, an office manager from Kellogg & Meyer. Matsuo had told Roussos that he was much too busy to bother with office politics and that the merger was going very well, as far as he could tell. His office followed the policies and procedures that had been in effect before the merger, and he saw no need to change anything. When Roussos had probed about specific operating policies, Matsuo referred him to the Kellogg & Meyer policy manual. “Matsuo had no intention of saying anything that deviated in the slightest from the party line,” Roussos had told Barlow later that day, over the phone. Barlow had wondered privately whether she could have gotten more out of Matsuo than Roussos did. Maybe she shouldn’t have sent the young consultant out alone on such a tough interview.
What to Do?
A knock at the door brought Barlow back to her most pressing need: dinner. Roussos came into the office waving three dog-eared menus. “Sorry it took so long to get back to you,” he apologized with a sheepish grin. “I was trying to reconcile the various menus of each type—Chinese, Italian, ribs—to come up with an optimal list of offerings for our team.”
Barlow laughed. “Let’s get some
moo shu and figure out what we’re going to say to dear Mr. Kellogg in the morning.”
The Client’s Side of the Story
Royce Kellogg, CEO of Kellogg-Champion Securities, stared out the window of his twelfth-floor office. It was getting late, and there wasn’t much activity on the streets of downtown Dallas. Slowly, he swiveled his chair around to face the glass walls of the bull pen. Desks and equipment filled the large, open area, and the computer screens glowed eerily. It was strange to see the room so empty.
Kellogg thought about the 8
a.m. appointment the next day with the consultants from the Statler Group, and he grimaced. “I hired those people for a simple, straightforward assignment: to help blend policies and programs during the final stages of merging this firm with Champion Securities,” he thought. “But those blasted consultants have caused more problems than they’ve solved.”
As Kellogg reflected on what his organization had been through, he pounded his fist on the broad arm of his chair. “The people in this firm and I have worked too damn hard to see a couple of inexperienced consultants throw a hand grenade in the middle of everything,” he thought. “If Mort were here, he’d have them for breakfast.”
Unlikely Bedfellows
Kellogg thought back to the day 34 years earlier when he and his friend and partner, Mort Meyer, had opened the doors to the brokerage house of Kellogg & Meyer. Although both men were expert in securities, Kellogg had made most of the business decisions, while Meyer had excelled at building an organization staffed with long-term, dedicated professionals. Together they had survived some lean times and a couple of nasty recessions, and the firm had earned the respect of the brokerage community from the start.
After years of steady growth, Kellogg & Meyer’s business and reputation had soared in the 1980s. “When the other firms hit the skids in 1987, we knew how to handle it,” Kellogg recalled proudly. Thanks largely to Kellogg’s canny reading of the market, the firm’s client newsletter had recommended investing 80
% in cash and 20
% in securities only three weeks before the thud—and many clients had gotten out of the market in the nick of time. After the crash, Kellogg & Meyer had advised its clients to load up on newly undervalued stocks—with very profitable results. Those two tips alone did more for the firm’s reputation than its previous quarter century of solid performance. Kellogg & Meyer saw its accounts balloon in the five years following the crash, as it attracted larger and wealthier clients. Under Meyer’s guidance, the firm managed its growth brilliantly, and its sprawling network of local branches grew even larger.
The success soon tasted bittersweet, however. Kellogg still felt keenly the loss of Meyer to a sudden heart attack three years before. “I wish Mort were here now,” Kellogg thought in frustration. “He was always better at dealing with this people stuff. He was so good at keeping the firm together, making sure that folks stayed happy. I wish that Stan Carpenter had anything close to Mort’s people touch.”
In fact, Meyer’s death had prompted the merger of Kellogg & Meyer and Champion. When Meyer’s family sold its interest in the firm, Kellogg had become the largest shareholder. Soon after Meyer’s death, Stan Carpenter, CEO of Champion Securities, had invited Kellogg to join him in his box at a Cowboys game, and at halftime, Carpenter had asked Kellogg the question: “What do you say we stop beating up on each other and join forces? Why don’t we stop dividing up this pie and make it bigger instead?” Kellogg remembered his fleeting hesitation: he had always run his own show with a man who’d been like a brother to him. What would Kellogg & Meyer be like with Carpenter and Champion attached to it?
But Kellogg had decided to take Carpenter seriously. After all, the two firms were about equal in market share, and although Kellogg didn’t like to admit it, he had known for a while that Champion was poised for faster growth than his firm was: Champion’s brokers concentrated mostly on young, upwardly mobile professionals while Kellogg & Meyer’s business depended on older investors. By the end of the football game, the two men had identified enough opportunities for synergy to convince Kellogg that a merger made good sense. “You may be onto something here, Stan,” Kellogg remembered saying. “Costs should come down, revenues should go up, and we’d leave everyone else in the dust.” Kellogg and Carpenter had met several times in the three weeks following the game.
One week later, each CEO had promised the other that he would speak to his board. Kellogg & Meyer’s board had supported its CEO wholeheartedly, as they did on most issues he brought to them. Kellogg had been somewhat surprised by the challenges Carpenter’s board raised—after all, was Carpenter CEO of Champion or not?—but ultimately their questions had been answered and they had approved the merger. “I guess it made sense that they’d balk at the Kellogg name coming first and at my being CEO while Stan is president,” he recalled saying to his wife. “They’re worried that we’ll have enough board members and won’t need them anymore. They have nothing to worry about—I want everyone’s expertise.”
It’s Not Rocket Science
“I wonder if maybe we didn’t hurry things a bit too much after we decided to merge,” Kellogg reflected as he sank deeper into his chair. “I hope that people have had a chance to adjust.” During the previous three years, several direct competitors of Kellogg & Meyer had acquired other firms, and those newly combined organizations seemed to be thriving. In the case of Kellogg & Meyer and Champion, both firms operated in the same segment of the same industry, acting as full-service agents providing a broad range of financial instruments. Even the sizes and locations of their branch offices overlapped a great deal.
Kellogg knew that it was important to speed the blending of the two cultures. He had developed a statement that he used at all public occasions: “Everyone who is in the boat has to be pulling oars in the same direction. Our two firms had unique cultures before the merger, but we all are ready to place our individual differences aside. From this point on, our firm will operate as a whole unit, not as two separate entities.” When questioned by an industry analyst about the magnitude of the differences between the firms and the time it would take to integrate them, Kellogg had responded, “Look, if Stan Carpenter and I can go from rivals to partners, then surely our people can find a way to work out their differences. This isn’t rocket science. We’re all in the same business, and only the big guys are going to survive.”
He returned to the present with a start, shaking his head. “I don’t understand why this deal with these consultants is such a hassle,” he thought, as he stared into the bull pen. “The differences between Kellogg & Meyer and Champion are purely internal. They are completely within our direct control: evaluation, control and compensation, office policies and procedures, hierarchical levels, reporting structures, and executive titles. This is annoying, time-consuming stuff—but it’s not
difficult. Not like figuring out derivatives!”
Bring On the Consultants
It was at the recommendation of business associates, Kellogg remembered, that he had decided to talk to the Statler Group. In the preliminary meeting, he had met Statler partner George Gray, senior consultant Amanda Roth, and junior consultant Jim Roussos. Accepting their proposal with little delay and only a few minor modifications, Kellogg had scheduled a kickoff meeting several weeks later.
He also remembered the flash of irritation he felt when he realized that he wouldn’t get the Statler consultants he had originally met. “What was that all about, anyway?” he muttered. “Bait and switch? Bring in the partner to sell the business, then fob the client off on some kids cutting their teeth in the business world? I should have raised a fuss in the kickoff meeting.” He sighed. His kids were older than Barlow and Roussos.
Because the change in consultants had disconcerted him, he had been particularly careful to make a few critical points as powerfully as he could in that meeting. He also had given Barlow and Roussos parts of his integration speech. “I can’t imagine that I didn’t make myself perfectly clear,” he now fumed to the empty bull pen. “I said quite clearly what these consultants could and could not do. I clearly said, ‘No new policies. Simply integrate existing policies and programs. Expect full cooperation from any and all employees.’ And if that wasn’t clear, why didn’t they say something? A couple of minor questions, your basic chitchat about the weather—that was all I got. Maybe the partner in charge never even briefed them.”
Stirring Up Trouble
“I should have taken the early signs of trouble more seriously,” Kellogg thought, chastising himself. As soon as the consultants began conducting their interviews, he had fielded a couple of calls from employees asking what the consultants were doing and whether it was okay to talk to them. “I thought my people just wanted to know if I supported the project,” he mused. “I should have taken it as a sign that something else was going on.”
And things had gone rapidly downhill, Kellogg recalled now. First, Carpenter had called, wanting Kellogg to know that his people were very upset. “Royce, what gives?” Carpenter had asked. “I had to calm Tom Flynn down for an hour after the consultants blew through. Then I had to smooth Greg Masters’s ruffled feathers—he wanted to know why he hadn’t been consulted about mythical changes in the organization chart. And then one of my best branch managers told me that those two planned to downsize the Champion side by 50
%! I had a mutiny on my hands. I can’t afford to lose these guys. We’ve got to stop this before it becomes a runaway train.”
Kellogg had received equally distressing calls from other parts of the new firm. Office manager Brian Matsuo had been particularly annoyed. “I don’t know why these people are here,” he had sputtered. “They act as if I’m hiding something when all I’m trying to do is minimize the normal stresses that come with any merger and go about my work.”
Damage Control
“Damn it, I’m not getting what I paid for,” Kellogg thought angrily. “Where is that Statler partner while his two junior consultants stir up trouble? Do Barlow and Roussos have the experience to operate on their own? Obviously not, if they can’t handle a simple interview.”
He swiveled to face his desk. “Should I keep these people on or call a halt to this farce before things get worse?” he asked himself. “If I do continue with them, how can I make my point any clearer? What can I do about the damage that has already been done?” Finally, he said aloud, “Maybe firing those clowns would signal once and for all that the rumors are false.”
Then he settled down and wondered what Mort would have done.
Is the business relationship between the Statler Group and Kellogg-Champion Securities a lost cause? How should the consultants—and the client—handle the status meeting?
John Rau is CEO of Chicago Title & Trust Company. He is the former dean of Indiana University’s School of Business in Bloomington and the former CEO of LaSalle National Bank and its predecessor, Exchange National Bank. As head of LaSalle and Exchange from 1983 to 1991, Rau presided over two of the largest full bank mergers in the state of Illinois.
One could start with the platitude that a consultant’s responsibility is to do whatever is best for the client. But here is a situation in which the client has outlined an assignment that can be executed only in a fantasy world. Royce Kellogg, the CEO, has described the situation to the consultants in a way that their field interviews reveal isn’t accurate. He himself has only the vaguest inkling that his rosy view—his idea that things are in great shape except for a few miscellaneous details—may not be realistic.
Even worse, Kellogg believes that the consultants have created the problems he is just now beginning to see. He doesn’t seem to understand that those problems are unavoidable when there is a merger and the leadership fails to provide clear direction or tries to placate both sides.
Given all that, the first thing Susan Barlow should do is pull together some general research and literature about mergers in preparation for the next day’s status meeting. It’s a safe bet that Kellogg has no experience and no database in this area; few people go through mergers more than once or twice in their careers. Unless Barlow replaces Kellogg’s wishful thinking with some informed perspectives, there is relatively little chance that she can help him reevaluate his position and move on to a productive course of action for all the parties.
By doing this research, Barlow, too, will gain some perspective. First, she’ll find that mergers are a high-risk undertaking under the best of circumstances. Most studies suggest that less than 50
% of mergers ever reach anywhere near the economic or strategic destination that was envisioned for them. In fact, in many cases the mergers fail because the new company’s managers underestimated, ignored, or mishandled the integration tasks. In mergers such as Kellogg-Champion, the integration work is especially important. It would be different if Kellogg-Champion were a holding company acquiring a new division in a distinct business, or if it were a new company formed by two organizations that complemented each other by providing links in the supply chain or by offering related goods or services. But for a firm that is formed by two organizations whose customers, products, and markets overlap heavily, the benefits of a merger can be realized only if the new firm can behave as one entity.
Second, Barlow will learn that there are precious few successful examples of “mergers of equals” in situations in which complete integration is necessary in order to cut costs, release synergy, and blend sales forces and product lines. Usually, success is achieved when one firm’s culture and practices dominate. There is some evidence that successful acquirers are typically those organizations with a history of cost control and productivity and, therefore, that the acquirer’s culture will be the more successful in directing and getting the most out of the new entity. So an economic Darwinism is at work suggesting that the acquirer’s ability to keep acquiring is fostered by a culture and set of practices that have passed substantial market tests and ought to be given preferred status.
Armed with that knowledge, Barlow also will understand—very clearly—that until all the integration issues are resolved, Kellogg-Champion will be too stressed and strained to achieve any new growth or progress. An organization whose employees are dealing with enormous uncertainty as to what the rules are, what the right practices are, and which behaviors are approved and which are prohibited will continue to flail against itself like a piece of machinery with badly fitting parts. Not only won’t it run well, but it will soon start to eat itself up.
Consider a classic example: the merger of the old Mellon and Gerard banks. Every attempt was made to treat the merger as a joining of equals and not to force common solutions. For several decades, the “old Mellon” and the “old Gerard” really ran as independent fiefdoms, with little interaction and little cooperation, ultimately becoming “Mellon East” and “Mellon West.” The lack of leadership probably cost Mellon the opportunity to move early into the ranks of the successful superregional banks. That merger also may have led to some of the company’s later moves, which brought the once proud Mellon to the edge of collapse and forced its senior management team to abdicate.
But back to the present. With the Statler Group’s assignment structured as it is, Barlow and Roussos are in a no-win situation—both for the client and for themselves. Any attempt to fix it is bound to fail. Therefore, I would advise Barlow to begin her meeting with Kellogg with a strong statement. She should say, “Mr. Kellogg, our firm never should have accepted this assignment, because we can’t do it. What needs to be done here is beyond what we or any other consulting firm can do. Fundamental management decisions must be made that cannot be delegated to consultants, regardless of how good they are. We can, and would like, to provide staff and process support to you as a way of helping to get this done, but ultimately these are decisions that you and Mr. Carpenter need to make.”
Then if Kellogg hasn’t tossed her out on her ear before she has finished speaking, Barlow should review with him some of the research on successful mergers and say something like, “We would recommend that you do one of two things. You can state that the policies of Kellogg & Meyer will be followed unless you or Mr. Carpenter makes an announcement to the contrary. That would, of course, be the fastest way to reduce the uncertainty and get you back to doing business.
“Or—and this second alternative is the one I hope you’ll pursue—you can appoint a small group of senior managers from both organizations to review the policies of both former firms and make recommendations to someone with the authority to approve the final policies, organization charts, and so on. That person can be you, Mr. Carpenter, or someone very senior in the firm whom you trust with these decisions, but it must be somebody whose determination will be viewed as final. You and Mr. Carpenter will need to support the decisions. That person should also handle all the communication with employees about the new policies and should ensure that the former employees of both firms are in contact with each other and understand to whom they report and with whom they must work. Clearly, this process would have to be completed with some speed, so that your employees will have a stable climate in which to work.”
Finally, Barlow should try to reassure Kellogg that this situation is neither unusual nor a sign that his management team—or the merger—has failed. She might say, “This situation is inevitable when two firms come together, and it takes tremendous effort and high-level involvement and direction to get it done right.” She might conclude by telling Kellogg that she and Roussos would be glad to support Kellogg’s review team and that, even though the process would take more time than the consultants originally signed on for, they would do the extra work for the fee they had agreed to. She should assure Kellogg that she believes the merger will succeed and that Statler can help it do so.
Obviously, Barlow and Roussos risk being thrown off the account, but this is the only advice they can, in good conscience, give their client. If Kellogg accepts it and they can work with him, they’ll have been party to a successful transaction and they also will have improved their chances of winning other accounts in the industry. If he refuses their advice, they should give up the account or allow the assignment to be canceled; they can’t afford to stay involved with what is certain to become a public disaster.
Charles Fombrun is a professor of management and the director of the Stern Management Consulting Program at New York University’s Stern School of Business. He also is the author of
Reputation: Realizing Value from the Corporate Image (Harvard Business School Press, 1996).
To put it mildly, Barlow and Roussos completely bungled the Statler Group’s initial entry into the client’s system: they failed to anticipate their client’s concerns about the project’s execution; they unquestioningly accepted Kellogg’s definition of the engagement without doing any independent fact-finding; and they mishandled Statler’s introduction to the rest of the top management team. Not surprisingly, Statler is rapidly losing credibility with everyone at Kellogg-Champion.
It may not be entirely Barlow and Roussos’s fault: Statler’s client management process is inept across the board. Nevertheless, the two consultants should recognize that they are about to be scapegoated. It will take some skillful maneuvering to salvage the engagement. To maximize their chances, I suggest they do the following:
Prepare for reentry. A critical objective of the status meeting is to create an atmosphere in which Barlow and Roussos can start their work afresh. Right now, Kellogg has serious concerns about their skills; he doubts that they’re doing what they’re supposed to be doing. Successful reentry depends entirely on demonstrating to a very skeptical Kellogg that Statler is staffed with top-notch consultants at all levels. Rebuilding Kellogg’s confidence in Statler’s consulting skills is crucial if Barlow and Roussos are to salvage the engagement and their firm’s reputation.
That’s why Barlow needs to call Statler partner George Gray, explain how the project is unfolding, and ask for his help in straightening out the mess. Under no circumstances should Barlow and Roussos meet with Kellogg on their own. Because the initial contract for the engagement was established with Gray and with a senior consultant whom Barlow subsequently replaced, Gray should be present and fully involved at the status meeting.
Diagnose inaccurate expectations. The status meeting is critical. It will be impossible to reestablish a working relationship until all parties arrive at a convincing diagnosis of the situation. That’s why the consultants need to follow a tightly ordered script. I would suggest the following: As the senior partner on the engagement, Gray should open the meeting by reviewing the initial statement of the problem and the agreed-upon objectives. He then should acknowledge his own misunderstanding of how far along toward integration the two firms actually were. The fact is, they are in the very early stages of the process.
No doubt, after Gray has said his piece, Kellogg will need to vent his anger and frustration. The Statler team should anticipate his concerns and prepare to defuse them—not by ascribing blame to either party but by emphasizing the degree of
misaligned expectations by both the client and the consultants. To show goodwill, it would be judicious for the Statler Group to offer to write off part or all of the consulting fees that have been accumulated during the last two weeks.
Review the facts. Gray then should reintroduce Barlow and Roussos, building up their experience and expertise, and invite them to summarize the surprising facts they uncovered in their preliminary interviews. Although the consultants actually mishandled the interviews, they should avoid discussing their mistakes. Instead, they should point out that the issues that had been raised by different members of the premerger firms were unexpected and went far beyond a simple combination of policy manuals. Indeed, the feedback hints at some serious unresolved questions about the structure, culture, and strategy of the merged organization. For example, Who will control Kellogg-Champion? Which of the two firms’ policies will prevail? and Where is the new firm headed?
Educate the client. Kellogg obviously underestimates the process and content issues involved in completing a merger of two firms that operate in the same industry. The consultants therefore must call on their expertise gained from other merger situations to describe convincingly the necessary steps involved in postmerger integration. It might be useful for Barlow and Roussos to sketch out a typical process and distill the kinds of problems other merged firms have experienced, particularly other securities firms that Kellogg would be familiar with. Unvoiced issues that the consultants also might raise include the competitive implications of a merger of two organizations in the same industry: Will offices be closed, jobs redefined, or employees laid off? How will leadership succession take place? Will some clients be shifted within the merged firm in its efforts to rationalize operations? The Statler team should conclude by presenting a comprehensive model of the strategic, organizational, and operational issues that need to be addressed in order to achieve successful integration.
Reframe the engagement. If the meeting has gone well thus far—that is, if Kellogg has calmed down, is listening, and is back on board—the Statler team should be prepared to present a revised proposal that reframes the engagement and lists a new sequence of steps. Among the first steps that the team should request of Kellogg is a face-to-face meeting of the consultants with the senior managers of both premerger firms. The purpose of the meeting is to introduce the Statler Group properly and explain its role, to develop a common vision of the merged firm, and to endorse a plan for integration. It could turn out to be a long meeting and might be better conducted off-site, preferably in a pastoral setting that would be more conducive to interactive planning.
At this point, even if the Statler consultants work harder than they ever have before, they probably won’t salvage the situation. It’s a long shot, and they’ll need luck on their side. My final word of advice? They should forget the
moo shu and check out the fortune cookies.
Robert H. Schaffer is a principal in the consulting firm Robert H. Schaffer & Associates in Stamford, Connecticut. He also is the author of
High-Impact Consulting: How Clients and Consultants Can Leverage Rapid Results into Long-Term Gains (Jossey-Bass, 1997). Schaffer has written five articles for HBR.
One of the most valuable services a consultant can provide is to help clients develop new insights and perspectives about their situations. Unfortunately, even though such fresh understandings almost always lead to more effective action, this kind of help is rarely provided. That is because most consultants see their work as a set of technical tasks aimed at delivering a recommendation or a solution. And that is clearly how Barlow and Roussos viewed their job. They never explored with Kellogg how the amalgamation of policies might contribute to—or interfere with—the specific aims of the merger. Nor did they even try to find out what those aims actually were. Instead, they slipped at once into their well-choreographed study-analyze-recommend routine.
Kellogg, for his part, accepted the consultants’ view of their assignment. After all, it was what he wanted to hear. He had told Barlow that “the big integration-related issues had been resolved.” The problem is that they were far from resolved. This is Kellogg’s first experience with a merger; it appears that he doesn’t even have an integration plan. Moreover, his forte is investing, not managing. He may not know what a merger plan should look like or even how to start creating one. My hunch is that the policy amalgamation project was simply a nice, tangible task that Kellogg could launch to reassure himself that he was indeed getting on with the merger.
That’s why if Kellogg were to ask me, as a trusted adviser, how he should handle the upcoming meeting, I would suggest he do the following three things:
Clarify what’s going on. I would first ask Kellogg to think about what can be learned from what has already taken place. Would he not agree that his associates’ reactions in their interviews seemed much too highly charged and intense to have been triggered only by the consultants’ techniques? Isn’t it logical to suspect that their reactions were, to some extent at least, provoked by tensions that were being aroused by the merger? I would tell Kellogg that such reactions, far from being unusual, are almost inevitable. In every merger, in fact, even the most secure people wonder how they will fare. Will their jobs change? Will their status and security be affected? Since Kellogg hasn’t said much about any of those issues, his people’s worst fears may have been aroused—even if Kellogg has no intention of firing or demoting a single person. I would suggest to Kellogg that, although he should not be alarmed by his new understanding, he also shouldn’t sit still. Which brings me to my next piece of advice:
Use Kellogg-Champion’s business goals as the key to formulating a strategy for the merger. Kellogg’s overall goal is clearly to be successful in the marketplace with a merger that has gone smoothly. But right now, more attention is being paid to amalgamating policies. True, the policies must be reconciled at some point, but now that project seems to be diverting attention and energy from where they’re truly needed.
Kellogg should take a deep breath and think back to why Kellogg & Meyer and Champion Securities made sense as a prospective merger in the first place. Then he should call in his colleagues—indeed, all the senior managers of both former firms—and engage them in the process of identifying Kellogg-Champion’s greatest business opportunities. He also should ask for their assistance in designing the plans necessary to exploit those opportunities. Kellogg needs to talk with these people, tell them what he is trying to do, and explain how they will be involved in the work. In other words, he should begin to share accountability with them for the merger’s success. If the members of his management team are focused on their new firm’s performance, there will be much less anxiety driving them to engage in internal turf battles. Furthermore, when the time comes to tackle the policy amalgamation issues, the process will be easier because all the parties involved can help identify and adapt the approach that best serves their shared vision of Kellogg-Champion’s marketplace goals.
I also would suggest that Kellogg tell his management team why he launched the initial consulting assignment and ask for their help in shifting its focus. Up to this point, his people have not had a clear understanding of the consultants’ mission. That permitted them to indulge in their wildest fantasies about what the consultants were up to. Once he has had an open discussion with his people, then it’s time to deal with the Statler Group. If Kellogg is reasonably confident that he is now on the same page as his senior management team and that everyone is focusing on Kellogg-Champion’s business goals, he can:
Test whether the consultants can help. There are two possible ways in which outside consultants can help this merger succeed. One, they can follow through on Kellogg’s original idea of a limited assignment: helping to integrate the former organizations’ policies when the new firm is ready. Two, they might be able to help formulate and launch an overall strategy for ensuring that the merger is successful.
Can Barlow and Roussos add real value in either of those scenarios? Thus far, they have functioned, as most consultants do, as outsourced technical workers. But a great many people who are trapped in this role would love the opportunity to work in a more advisory mode. Barlow and Roussos may be among them. Kellogg can find out at the status meeting. I would suggest that he ask them some open-ended questions: What is their view of the merged firm’s potential in the marketplace? What are its greatest opportunities? Given what they have seen, how can those opportunities be exploited to their fullest? What obstacles have to be overcome? How can that happen? Can policies be merged in a way that helps the firm achieve its business goals? By asking such questions, Kellogg will quickly discover whether the consultants have any relevant capabilities beyond their task-oriented, technical expertise.
Kellogg also will find out whether he wants to continue working with Barlow and Roussos, and if so, whether he wants their role to be large or small, broad or narrow. This, of course, is the kind of exploration that should have shaped the assignment in the first place.
My sense is that the original proposal prepared by the Statler Group was a one-dimensional document that listed the tasks the consultants would perform and the products they would deliver. My final advice to Kellogg, then, is this: If he does decide to continue with the Statler Group, he should try—beginning with the next morning’s status meeting—to build the consultant-client relationship on a foundation of mutual understanding of what the two parties are trying to accomplish and of how they will collaborate to make it happen. That’s not a guarantee that there won’t be more bumps along the path to a truly integrated organization, but it will give him the best shot possible. Mort would have approved.
David H. Maister is a consultant who specializes in professional services firms. He also is the author of
True Professionalism (The Free Press, 1997).
It’s perhaps understandable that Kellogg thought this was a simple, straightforward assignment, since he seems to have little interest (or experience) in management, or “people stuff.” But it’s unforgivable that his outside consultants accepted an assignment that was so poorly thought through. They acted very unprofessionally in taking on something that was impossible to do well in the time allowed.
First, there is no such thing as a “merger of equals.” In fact, when two companies join forces, it’s almost never a merger per se—it’s almost always an acquisition. Kellogg’s people know this (especially those on the Champion side), his outside consultants should have known it, and someone certainly should have enlightened him. What’s more, a merger is never one merger but in fact is made up of tens or hundreds of minimergers, with each department jockeying for power, influence, and authority. Each minimerger needs its own reconciliation process, and many will need third-party facilitation. The consulting team that the Statler Group sent Kellogg—skills or lack thereof aside—is insufficiently staffed to get the job done. Two people are simply inadequate to do what is necessary on this project.
Kellogg shouldn’t panic, however. Everything that has happened so far is par for the course in a merger and should have been predicted. But that brings us to what Kellogg needs. What he
doesn’t need is an industry expert like Barlow or a subject matter expert—someone who specializes in compensation or marketing or branch management, for example. He also doesn’t need (as he seems to think) a consultant to advise him on administrative processes. Instead, he must find someone who can guide him and his people through the political and interpersonal process of completing the merger. Wanted: a skilled diplomat, a wise counselor, or an organizational tactician who can devise a set of processes to navigate through numerous turf battles.
Kellogg was right about trying to accomplish things quickly. In a merger, there is always a certain amount of pain that must be spread around, and you get one of two choices: either a little pain for a lot of people spread over a long period of time or a lot of pain for a few people in a short period of time. The latter course tends to be the wisest. It’s usually better to get things done fast and then move on. Generally, it’s ambiguity that distracts people from doing their jobs properly (“How are we going to get paid?”) and hurts the organization the most.
However, there’s an old saying in the professional services field: The client can have it fast, good, or cheap, but not all three at once. The client gets to pick two out of three. Until now, Kellogg has been going for fast and cheap, and that’s not a good choice. He needs fast and good. And that means a consulting team with a different composition from the one he has now.
So where does he go from here? The first thing he should do is get George Gray, the partner who sold him the assignment, on the phone. Kellogg has every right to feel burned by the “bait and switch.” Where has Gray been during all of this? Kellogg should insist that Gray be present to hear the report from the two “junior consultants.” He needed a high-level political counselor, and he’s been given analysts. If Gray can’t make it, Kellogg should reschedule the meeting for a time when he can. (Gray will make it—of that I’m sure.)
At the meeting, Kellogg should hear the consultants out and then ask a lot of questions. Among them should be: What do you think the problem is? What do you think is the best process to follow to reconcile the opposing interests of the different groups? Exactly what activities will you engage in? What do you think I should be doing? What help do you need from our employees? How many people would your firm need to provide to do the job right? What would the timeline really look like? How much would that cost?
Kellogg has a number of valid complaints about the consultants, but unless he’s prepared to fire them right away, there is no point in dwelling on the critique. He has bigger fish to fry (his merger), and he needs to find out whether Statler’s consultants have a revised plan of attack that can help him deal with all his thorny problems.
If they have such a plan, he also needs to know if they can act quickly. Given the hornet’s nest the consultants have stirred up (or, at a minimum, surfaced), Kellogg’s need for speed is even greater than it was. He probably can buy himself some time by sending out a memo announcing the formation of a merger integration team, preferably staffed with representatives from both Kellogg & Meyer and Champion. But even that team will need to work fast as it treads carefully. Kellogg has been smart to stress balance in the process—that is, being evenhanded in dealing with both sides of the merger. But nothing is more certain to destroy a merger than aiming for balanced results, such as taking equal numbers of policies from both sides or selecting managers equally from both sides. He realizes this; he doesn’t want any new policies.
If they are smart, the consultants will themselves recommend that Kellogg form a merger-integration team staffed with his own people, to which they would act as advisers (and to whom they would report). It is often helpful to have consultants around during this process—if only to play the Saint Sebastian role of having the arrows aimed at their flesh—but it’s almost certainly a bad idea to give them the whole task to perform. They may know the securities business, but (as is already obvious) they don’t know where the land mines are buried. Kellogg also needs to make sure that some members of the integration team have a greater sensitivity to people issues than Kellogg himself has shown. He has, after all, been quite naïve.
It’s often said in the professional services world that to do a great job, you have to have a great client. Kellogg has not been a great client. He didn’t understand the full scope and challenge of his problems, and he commissioned an approach that was bound to fail. But then, it’s also frequently said in consulting circles that the person who hires you is always a part of the problem, and part of great consulting is helping your client understand what that problem is and what is needed to solve it. Kellogg has not been well served.
