Mergers, effects of brass
‘Get a comrade’
“AN intelligent leader is the one who looks at the outcome of the combined abilities, takes into account individual talents, and uses each man according to his ability without asking for perfection from the untalented” — Mencius.
Amerger has challenges. Usually in merger deals and agreements between big firms after the effects of legal, administration and financial procedures are ironed out – a process that is most of the time very difficult and tiresome, another problem emerges which is not less important than the merger deal itself. It is the problem of leadership positions in the new entity resulting from the merger.
In each firm, there are leaders and officials. It is not easy to displace them from their positions or change their job titles and designations. What happens is, in each of the two merging firms, there would be two similar positions occupied by two distinguished personalities. It is not easy to dispense with any one of them. It is in such situations that there is the need for wise top leadership that can lead a team smoothly based on a balanced and professional approach.
Let us assume that the merger is between two big banks. What will happen is that there would be two boards of directors and two chief executive officers, deputy directors, and employees in other highly sensitive positions that require no flattery when appointing such as the chief executive officer of the newly formed bank after the merger and other important positions such as treasurer, asset manager, risk manager and so on.
The leader of the merger process (assuming there is a leader) will have two names for each position. How will the leader choose the suitable name for the two available candidates, and what standard will he adopt? How will he deal with the other candidate who is sidelined? Will he get rid of him or appoint him as the deputy or assistant to the selected candidate? There will be a real dilemma if there are distinct competencies for the same position.
I am not talking about the board of directors because its position is very easy. Appointments will be based on new ownership structure and shares. Most of the time there would be some slight changes for reasons related to new ownership, which is the basis. One might own a majority before the merger, and after the merger, they consolidate their majority. However, if there is any radical change, I expect it would be in the position of the managing director.
I am always against a board member holding an executive position. Separation between the board and the executive positions is important because it is difficult for a board to monitor itself. Anyway, let us leave it there, as we will not enter into things that need not be mentioned. However, like I said, the chairmanship of the board would be based on the new ownership structure.
For any merger deal to achieve the desired goal, early planning and attention to executive leadership positions are among the most important aspects because you are choosing captains of a ship and looking for a safe journey for it is in a ruthless competitive sea that never becomes calm. Get a comrade before the road.