The path to successfully integrating your merger
By Steve Swanston, JMFA Executive Vice President of Sales
John M. Floyd & Associates
For a variety of reasons—competition, regulatory burden, and the opportunity to enhance valuable member services – many credit unions are merging or beginning to ponder the thought. In fact, there were a reported 302 credit union mergers in 20051 all done for a variety of reasons.
Expanding services to members is a prime consideration for many consolidations and mergers. Consumers want debit cards, ATMs, convenient hours, numerous countywide locations, as well as phone and Internet account access. To be able to offer that level of member benefits, you need to leverage your institution. If you don’t offer at least a few of these services, your member base is at risk of being wooed away by larger institutions. One option for the smallest credit unions that cannot afford the technology build-out is to consider being absorbed by their larger competitors. For larger and mid-sized credit unions a merger is a viable option to consider for boosting their competitive edge.
Although the notion to merge may be based on solid synergistic potential and enhanced customer service, many of these marriages quickly hit rocky ground. Keeping the organization focused on customers and daily business while also working successfully to integrate the two operations is a monumental task for management. Merger integration is tough, but there are ways to successfully tackle the challenges.
Start with your tough decisions. It is painful to make the tough decisions, but it is better to begin where you will see the biggest financial bang. Eliminating branches and staff is tough, but should be one of your first integration processes. Don’t whittle away at staff and benefit programs – make sweeping changes. Rocking the boat a little at a time only causes more unrest and delays the inevitable. Your employees and members can focus on business once the uncertainty is behind them
Communicate. Communicate. Communicate. A high priority should be placed on communicating a compelling strategy to your members and remaining employees, or they will resist the change. Put culture high on your leadership agenda. Decide quickly on organizational structure, branch closings and compensation incentives. Merger failures usually revolve around people issues – loss of key staff, culture clash, uncertainty and last but not least, poor communication and interaction between the employees of the two merging organizations. In most cases, top executives should focus their energy on communicating, and on the people issues – both employees and members once the deal is signed.
Focus your top talent on the base business. It is important to have a talented integration team, but it is more important to have your key talent continue to focus on the base business. During the integration of a merger, both institutions and their brands are most vulnerable to competitive attacks on both members and employees. Staying focused on the day-to-day business is critical.
Hire the necessary help to maximize your merger and integration. Get your merger integrated right the first time. Once a merger is contemplated, a third party consultant can help you address the issues and outline the steps for integrating and maximizing your operations. The most treacherous time in the failure-strewn business of mergers comes when companies attempt to combine operations. Look for a strategic partner that has extensive experience implementing performance-enhancing programs. Your integration partner should understand the new business strategy, goals, processes and cultures in order to offer the new organization a variety of methods for enhancing the combined institutions’ operations including recommendations to combine and improve:
• operational processes;
• workflow analysis and design;
• regulatory compliance;
• technology utilization;
• “Best Practices” procedures;
• product design;
• outsourcing alternatives;
• centralized operations and lending; and
• expense control including staffing studies and salary administration.
A successful merger is more likely when you’ve done your homework in advance and laid out a comprehensive integration plan that includes your quick hits, new organizational structure, communication plan and identified the expertise that can help ensure a smooth transition.
JMFA, a leading provider of overdraft privilege programs and a CUANM endorsed partner, serves more than 2,000 financial institutions in 49 states and Central America. JMFA is also nationally recognized for training, account acquisition and earnings enhancement programs, as well as product, service, pricing and technology improvement consulting. To learn more about JMFA, visit www.JMFA.com. To contact the Executive Vice President of Sales, Steve Swanston, call him at 877-809-23047 or email him at .