Why Partnerships, Alliances, Mergers & Acquisitions Fail

Organizations enter partnerships, mergers and acquisitions with enthusiastic executive optimism. They fail with frustrated executive confusion.

The business case was compelling. The market opportunity was significant. The strategic rationale appeared sound. Yet 18 months to 3 years later, the relationship has become more distraction than success. What happened?

After participating in more than 140 strategic alliances and the integrating nearly 100 acquisitions across public companies, private companies, governments, and nonprofit organizations, I have come to a simple conclusion.  Leaders are looking at the wrong dashboard.

Financial dashboards tell you what happened.

Relationship dashboards tell you what is about to happen.

Most organizational relationships do not fail because of bad intentions or poor analysis. They fail because leaders focus on what the relationship has accomplished months or quarters ago rather than on what the relationship requires to succeed for years to come.

There is a significant difference.

Organizations often spend months performing financial due diligence while spending very little time evaluating the health and strength of the relationship itself.  Once a relationship has begun, those inside the companies or organizations that make up the relationship begin to focus on revenue, market penetration, cost reductions, product capabilities, competitive positioning, or mission outcomes.

These are all important considerations. However, they are outcomes measured in what financial analysts call “trailing results”.  In relationships, this is information that is received too late to correct dangerous crevices that, left unaddressed, will break open to sever the relationship.

What is needed is to get information on the underlying conditions that indicate whether those whose who are executing the partnership goals or implementing the merger or acquisition’s shared vision are doing what it takes to achieve such.

Imagine preparing to run a race while focusing exclusively on the waypoints already passed rather than ensuring the athlete understands the course, has sufficient fuel to reach the finish line, has the support required to succeed, and is in communication with those who can help steer them if they are off track or need to make adjustments. Over time, the value of those past accomplishments, those trailing results, diminishes if the fundamentals required for future success are not maintained.

The same principle applies to organizational relationships striving to achieve a shared vision.  Over time failures consistently occur in the same specific areas. Relationships that failed to achieve their shared vision typically exhibited one or more of the following conditions:

·       Lack of committed executive sponsorship

·       Unclear or competing visions

·       A lack of short-term goals

·       Misaligned long-term objectives

·       Cultural incompatibility in communication, finances, or decision making

·       Excessive organizational distance

When any one of these six areas remains weak for as little as two consecutive quarters, the probability of success declines dramatically. The relationship may still appear healthy on financial dashboards, but the underlying structure is already deteriorating. By the time revenue has declined, objectives have been missed, or customers are moving to competitors, the relationship has already failed, damaging those involved, and recovery may no longer be possible. 

Again,

Financial dashboards tell you what happened.

Relationship dashboards tell you what is about to happen.

It’s important to note that most relationships do not fail immediately when these underlying conditions run into problems.   Instead,

• Progress slows;

• Misunderstandings increase;

• Decision making becomes more difficult;

• Trust begins to erode;

• Teams spend more time discussing why “the other party” has not done or delivered something;

• Organizations become increasingly frustrated while investing more time and resources trying to fix the relationship rather than serving customers, advancing the mission, or capturing market opportunities.

Eventually leaders begin asking the all-important question: “Why isn’t this working?”

By the time that question is being asked, significant damage has often already occurred.

Resources have been depleted.

Opportunities have been lost.

Momentum has disappeared.

One of the most expensive aspects of relationship failure is not the financial loss.  It is the loss of time!

Organizations that form partnerships or alliances frequently spend eighteen months before realizing the relationship is unlikely to succeed. For mergers and acquisitions, it often takes three years before leaders fully recognize that the expected outcomes of goals and shared vision are unlikely to materialize.

By then competitors have advanced, markets have changed, and valuable organizational energy and resources have been consumed.

The encouraging reality is that relationship failures are predictable long before they become visible in financial statements or operational reports.  With early detection, problems can be addressed and the relationship can continue on to succeed.

Just as engineers evaluate structural integrity before constructing a building, leaders can evaluate the structural integrity of organizational relationships before major commitments are made.  Once the relationship is in place, periodic relationship reviews can show any stress cracks that may be occurring.

However, this requires shifting away from using trailing results as the primary dashboard for relationship health and instead focusing on the essential relationship fundamentals that must be maintained month after month and quarter after quarter.

Organizations routinely conduct financial reviews, operational reviews, strategic reviews, technology reviews, and customer reviews. Few conduct relationship reviews.

That omission can be extraordinarily expensive.

The organizations that consistently build successful partnerships, alliances, mergers, acquisitions, and joint ventures recognize that successful relationships are not accidental.

They are built.

They are measured.

They are managed.

And they are strengthened through the deliberate application of timeless principles.

The better we understand those principles, the greater our ability to increase the probability of success before failure becomes visible.

The goal is not merely avoiding failure. The goal is creating synergistic relationships capable of producing transformational results.

You can evaluate the current status of any relationship you have and its probability for success by answering a few questions with the instant Relationship Wheel™.  You can also quickly learn and share with your relationship partners or members the timeless principles that can ensure 95% success rate for organizational relationships.

For more information on the tools and techniques of The Six Strand Weave check out www.loomllc.com or you can purchase, The Six Strand Weave, on Amazon