Tag Archives: Mergers and acquisitions

Too Big To Care

More bad publicity for the folks at United Airlines over the weekend.  This time, a mechanical issue in-flight resulted in a plane full of passengers having to spend the night in a military barracks.  Obviously there was no issue with the need to land the plane – who wants to be 6 miles up with a mechanical issue?  But what happened next is yet another black eye on United’s record of customer care.

English: United Airlines Boeing B747-400 at Be...

(Photo credit: Wikipedia)

What company needs this headline:

Hundreds Of United Airlines Customers ‘Abandoned’ In Remote Canadian Barracks Without Heat, Little Food

I won’t reiterate the list of stories that portray United as a company that hates its customers and instead I want us to have a think about a bigger question.  Only four airlines—United, American, Southwest and Delta—now control 85% of domestic air travel due to mergers and acquisitions. I think we’ve all seen higher fares and worse customer service pretty much across the board. According to the Department of Transportation, airline-related complaints increased by 26% in 2014.  This same sort of routine – a business sector becoming more consolidated and customer service declining while prices rise – has played out elsewhere.  Banking, cable TV and broadband providers and insurance are just a few areas where we’ve all seen this play out.

My thinking is this.  Companies become too focused on improving systems without focusing on how those improvements affect customers.  United, for example, may focus on improving financial performance by increasing baggage and other fees while angering their customers.  Maybe their attitude is “If everyone does it, what choice will the customers have anyway?” and that has, for the most part, been true.  What’s also true, however, that the many of the quality metrics – are declining along with their costs.

Smart companies improve the bottom line but not at the customers’ expense.  They maintain the small company mentality even as they become quite large.  Customer satisfaction is always a front and center metric, and product improvements are made to benefit the customer, not always the bottom line.

All of which makes me wonder if “economies of scale” generated through dynamic growth can actually not mean “too big to care”.  Do you have any thinking on that?

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Filed under Huh?, Thinking Aloud

Flying Into The Merger Wind

I see that American Airlines and USAir announced their long-rumored merger this morning. I’ve flown over a million miles on American so I know it quite well. Over the years I’ve flown USAir from time to time but it I’m certainly not as familiar with it. Why do I bring this up?

departing LAX

(Photo credit: Wikipedia)

I’ve been through several corporate mergers. I was with ABC when CapCities bought it and then again when Disney bought CapCities. I was at CBS when Viacom bought it. From those experiences I learned a couple of things that I think have broader implications even if your company isn’t getting bought.

Mergers fail.  A lot.  In fact, studies indicate that somewhere between 50% and 85% of mergers come up short.  I suppose that part of it has to do with the reason for the merger in the first place.  If a company is buying another to eliminate a competitor  the mission is accomplished no matter what happens to the acquired company.  Part of it may be the enthusiasm for the merger blinding those involved to the potential pitfalls or wacky financing.  But I think it’s primarily for another reason.

Simply put, culture.  Think for a second about new immigrants to this country.  They may not speak the language.  They are unaware of our customs.  They might not even know our laws.  All of those things create resentment – look at the news and you can find many examples of it.  It’s not that they’re bad people – their culture is different.

It’s no different when corporate cultures meet.  There are almost always differences in management styles.  How employees feel about the companies vary as much as do their benefits.  Lost in the shuffle is the fact that one company is not buying another – you’re acquiring people!  Those people may have been trained to have a different focus and how they measure success might not align exactly with your expectations.  As with the immigrant example, helping them to learn the culture and to speak the language is an imperative.

I’ll be watching this merger with interest.   I’m wondering if and how the cultural changes will manifest themselves to the flying public.  If the managers are smart , the next year will be spent making sure everyone is on the same page and understands the cross-cultural changes.  If they aren’t, like the vast majority of mergers, this one will fail.

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Filed under Helpful Hints, Reality checks