I recently stepped down after a five year stint as a board member of a small housing organisation here in Brisbane. This organisation was created out of four very tiny organisations – when the four came together they had a total of about 70 dwellings, an annual income of around three-quarters of a million dollars and the equivalent of less than three full time staff positions. An amalgamation on that scale should theoretically be simple, but this one turned into a saga of epic proportions that dragged on for about seven years.
There were two reasons for the delay. One was that that we had problems with the funding department which slowed us down. The other was that we had so few resources and so little clout with anyone that we had no way of pushing it along. With a tenant-participation tradition, most of our key decision-makers were tenants who had never done this before and were working it out as they went, and we couldn’t afford to pay for any serious advice. We had no choice but to keep plugging away until we eventually dragged ourselves, exhausted and frustrated, over the finishing line.
Recently I got to see how much easier it could have been. I spent a little bit of time helping two health-related organisations to negotiate a potential amalgamation. The two partners between them had an annual turnover of over $20m and almost 300 staff. Working with them was like a dream after my previous experience. The two CEOs were highly professional and focused. Their boards were made up of experienced professionals who were quick to grasp the issues and made good, considered decisions. If they needed professional advice or extra practical help they could afford to pay for it. We worked quickly to develop a project plan that would see the most important parts of the amalgamation completed within 3-6 months and the whole job done in a year.
After one of the key decision-making meetings I joined the board members and senior managers for dinner and got talking to one of the board members of the larger partner. I commented on how nice it was to work for two well-resourced and professional organisations. He smiled wryly and told me his own story. Until recently he had been the manager of mergers and acquisitions for a major Australian company. In this role he managed a number of different corporate mergers. The biggest involved acquiring a company worth $9b. Yes, that’s billions! He said the whole thing took three months, start to finish. The thing was that he had a team of highly paid professionals who did nothing else but make it happen and if a problem came up they could spend whatever it took to fix it. He said he had to exercise patience in the current situation because his staff were just learning how to do it.
When I told him about the little housing organisation I was part of, he just laughed.
We are currently seeing a new wave of consortia, partnerships and amalgamations. Some of these moves are in response to perceptions that current and future government tenders will favour providers that can service large geographic areas such as regions or states. Others are hoping that increasing their size through amalgamation will protect them from the impacts of funding reductions and policy changes.
When we’re working with organisations considering various collaboration options, one of the questions they ask us is how to decide who they should consort with. Given that a business partnership is much like a marriage, I recently turned to my reliable source of wisdom on many topics, the Ladies Guide by J.H. Kellogg M.D. (1895).
Dr Kellogg has some sound advice for young ladies considering who to marry, and this advice is equally relevant to organisations considering consortia or amalgamation. Here is a summary of his advice:
1. The individual should be the possessor of good health and a good constitution (i.e. don’t shack up with a basket case!)
2. He should be a man of good habits (find out whether they have met their commitments and honoured their contracts in the past)
3. He should be of suitable temperament (assess their compatibility with your organisation in terms of values, service model, culture and the like)
4. He should be of good morals and good reputation (find out what others say – get some intel from those in the know and do some research)
5. The individual must be of the proper age (consider how established the organisation is, and that their thinking is from the same era as yours)
6. The prospective husband should be of proportionate size (i.e. consider size and power imbalances and establish roles and governance up front)
7. Take care when marrying a cousin (perhaps the relevance of this is to check that your organisations don’t have the same weaknesses, and that you are not creating conflicts of interest or nepotism perceptions)
A decent time for courtship is recommended by us as well as by Dr Kellogg:
“The primary object of courtship should be to allow the parties to become acquainted with each other’s characters so as to know whether or not there exists such mutual adaptation as to make a life partnership desirable or likely to be a happy one.”
If there’s time, it’s worth considering low-commitment forms of partnership before signing up to a long-term contract or amalgamation. After all, as Dr Kellogg says, “young people can judge of each other’s characters much better by daylight than lamplight.” Working together on a project, or sub-contracting some services for a trial period, can be a chance to experience working together before committing too deeply.
Following Dr Kellogg’s advice will help you avoid the mistake made by a young woman he features, who married a man of obnoxious temperament to avoid being left an old maid: “During the first few months of marriage, when her eyes had become thoroughly opened to the folly of her course and the dreadful slavery to which she had bound herself, reason was nearly dethroned; but it was too late to correct the fatal mistake. She had nothing to do but bear it with as much calmness and patience as she could summon.”