Merger: Does Bigger Mean Better?

”Tis the season for merger!

Following Area Reviews a lot of mergers have taken place or are going through the process. We could soon see a sector of just 250 colleges. When I started in the sector there were about 550 colleges.

You’d think that with the number of colleges merging over the years we would have learnt a lot and saved significant sums. In some ways we have learnt a lot. But many principals I talk to can’t point to any financial savings as the result of merger. Most say there is no evidence of any form of saving and some say costs have gone up due to everything from merging systems and technology … to a host of other costs. The optimistic ones I’ve spoken to say it’s necessary to think long term and that savings will emerge 10+ years down the line.

I favour a return on investment within a few years and know it is not just about money (though I could be wrong if I correctly read the Whitehall runes). And of course we are told it is also about sustainability and a few other imperatives.

But nowhere can I see much mention of the customer. Without customers we have no colleges, no jobs and no future.

So how does merger impact customer service?

In theory when two institutions merge the best practices rise to the top and we see improvement. Perhaps one of them is incredibly good at school liaison. So their strategy, tactics and techniques are used across the merged college and improvement is seen. That sounds logical, but does it happen? Sadly not always.

Scaling up a simple effective system is often easy on paper but problematic in reality.

To take the schools example it might be that in reality what made one of the colleges better than the other was the schools liaison post holder. They may be empathetic, great at networking and get on really well with the people in the feeder schools. That doesn’t mean their skills and mindset can be scaled up across double the number of schools. In a worse case scenario they might be good with people but find admin quite challenging. They cope on a small scale but would we really want to replicate their poor admin skills? It might be the other college had a better admin system but wrong person in post. Get the variables right and we have a winner but clearly merger isn’t quite as simple as logic might at first glance dictate.

How big is too big?

Take the example of a big college merging with a smaller one. What I’ve seen on occasion is that merger makes the resulting departments too big. They become corporate and lose that personal touch which had previously been their strength.

Years ago we had a banking system where the local bank manager was a pillar of society and there was an element of personal service. When I started my first business I met with my bank manager every year and discussed my business and financial position. He knew me and I knew him. It wasn’t a cheap system but it was very effective. Then banks started to merge and grow. New systems were implemented and bank managers become a dying breed. Today they are extinct.

Today banks are often criticised as being too big. They are impersonal organisations where computers make the decisions and personal contact has largely disappeared. Today when I try to speak to the bank there is a good chance I get an overseas call centre. There isn’t anything inherently wrong with that if it works. Sadly it often leads to frustration rather than answers.

The same problems are true of the utility companies, telephone and broadband providers, many hotel groups and large retailers.

Big can be bad.

 

So how does merger impact customer service?

I’ve introduced Chatline software to many providers and it is very revealing. As questions are asked they pop up on my screen and, hopefully, are quickly followed by relevant answers. The type of questions I see in large colleges are different than those in small colleges. In larger organisations there are more queries that are the posted as a result of poor communication and ineffective systems. Very large organisations suffer far more from the inability to scale customer service or communicate effectively within the larger organisation. There are of course some large organisations that break from this generalisations and some smaller ones that are poor …… but they are the ones that are having to merge!

But bigger doesn’t always mean we get the economies of scale that size should provide. Sometimes unit costs go up as organisations get bigger. Bizarre but true.

Small can still be beautiful .. and much simpler.

How to handle growth

The mistake I see most often when colleges merge is that as soon as merger occurs “they think it is all over”. Not instantly in most cases, but very quickly the idea of merger fades into the past, even though the integration of two (or more) cultures, systems and processes is not complete.

In many cases senior managers get distracted by Ofsted, new funding initiates .. .. I’m sure you could list the many distractions we all face every day. The middle managers grapple with merger and integration for longer because they see the problems as they occur at the chalkface. But very soon they also get distracted by the senior managers sending down imperatives related to the latest initiative. It’s understandable …. that’s life. But that doesn’t mean we should accept this situation.

What really works well is a robust merger project plan(s) and an external project manager with a long term contract to manage the complete process over as many years as it takes.

In a perfect world the economies of scale can materialise. We can see effective systems and processes that provide excellent customer service and even more growth. For this to happen the project manager shouldn’t report solely to the CEO. They need to report directly to the corporation. They need to be able to demonstrate when benchmarks have been missed or exceeded and recommend actions.

As more providers merge this is going to become a bigger issue. We need to be aware of the issue and ensure we survive merger. One principal, having gone through multiple mergers told me that we need to think about a merger as being a process that takes up to ten years.

This being the case consider the following …….

Richard Koch* has recently been explaining that whilst small and simple is beautiful we all too often over complicate the issue. It seems like we tend towards complexity.

In FE terms that means that a successful college is frequently merged with vast amounts of energy put into into scaling it up. This makes it more complex. Yet scaling is rarely just more of the same. Often it is accompanied by expansion into new fields such as emerging technologies, which makes perfect sense, or developing an overseas campus which can certainly complicate the issue and spread the focus of senior managers.

In essence when institution is smaller and / or simpler, the chances are that it is closer to the customer. There are fewer complex systems and less management “in the way”. Customers are listened to, they feel that they are important and are they willing to “pay” a lot more for this.

We certainly can’t stand still. Some merger is necessary and inevitable. But if it is to be we need to think deeply, plan carefully and keep the processes simple with the customer as our raison d’être.

 

About Stefan Drew
FHE Marketing Consultant Stefan Drew was previously director of marketing at two FHE colleges and for the last decade has worked with colleges, universities and private providers throughout the UK, Europe and the US
http://www.StefanDrew.com
http://www.providermastermind.com
LinkedIn http://uk.linkedin.com/in/stefandrew

*Investor, speaker, author or co-author around 20 books dealing with business, ideas, and personal success, including the million-copy best-seller The 80/20 Principle.