In our latest article, we discuss the opportunities, pitfalls, and strategies associated with mergers. Boards and CEOs, remember: future assurances lead to future success.
Read at REALTOR AE or below.
Your Career: Curb Merger Job Stress
by Leonard Pfeiffer
In his 25 years of executive recruiting for associations, Leonard Pfeiffer has placed CEOs into the top spots at dozens of new associations and MLSs created out of mergers. Here, he offers his advice to AEs facing the career uncertainty of a merger.
Q. One of the biggest (and often unspoken) hurdles to association mergers is the fear AEs have of losing their jobs. Would you agree?
Yes, but it is also an opportunity. A merger may be a chance for the AE to run an even larger group (and be paid more), to learn a lot about mergers (which will continue to be popular in today’s economy), or to negotiate a lucrative severance plan before moving on to a bigger, better, and more challenging job.
Q. What’s the most common scenario: one AE stays and the other is let go, or both stay on but assume different roles?
There really isn’t any common scenario, but what you’re most likely to see is that both AEs leave—maybe not immediately, but it’s important to keep in mind that a newly merged organization might need a new kind of leadership.
It is uncommon for both AEs to stay under different roles. Having two former CEOs in the same organization rarely works. You end up with two bosses, even if one is designated as the senior, “new” CEO. This scenario is confusing for both staff and leadership and it slows down the evolution of the two old associations becoming one. The buck needs to stop at one desk, and one desk only.
Q. When should an AE gain assurances regarding his or her future role?
As in life, upfront communication and clarification of expectations saves many problems later on. The AE should seek a definition of his role and assurances of his future near the outset of merger talks. Only once the AE’s position has been defined can he work to establish the merger and do whatever the directors deem necessary.
Even if there will be no position for the AE in the new organization, there is still important work to be done. For example, if the merger requires a restructuring of staff and one board feels strongly that its government relations SVP is the stronger one in the two associations, the AE will need to carefully negotiate that on behalf of his board. Of course, the same may need to happen in negotiating the dis-position of various assets, such as office buildings, receivables, excess staff, reserves, etc.
Q. Two AEs pitted against each other to lobby for the executive office sounds unpleasant. What would you recommend the board or AEs do to avoid ugly conflict?
In an ideal situation, all four parties (the two AEs and their respective boards of directors) should put personal aspirations aside and focus on what is best for the final, merged association. However, if the AEs do not know where they stand, you’re more likely to see them lobbying behind the scenes.
Keep in mind that this is, and always has been, a board of directors’ decision. If the directors want to avoid the backstage drama, they need to be very sympathetic to both AEs’ financial and career situations. Providing very attractive severance packages is a typical cost of merging that makes the process go smoothly.
If one board of directors insists on keeping its AE as the final executive, they owe it to everyone to make that a clear condition of the merger at the outset. The ugly conflicts erupt when directors make that a requirement at the eleventh hour.
Q. Sometimes working out who will be the CEO of a merged organization becomes the job of an outside consultant. What has been your strategy for choosing the best fit whether between the two current AEs or from outside?
Our strategy is focused on the goals and needs of the combined, new association. The position specification (job description) we develop may be radically different from the job descriptions of the two present AEs. We then move forward with a search, seeking qualified candidates who meet that new specification. Of course, we will look carefully at both of the sitting AEs as potential candidates, unless our client, the new board of directors, suggests otherwise. Frankly, there have been times when we have been more supportive of a sitting AE than the directors were, and we had to convince them to see some of the AE’s strengths that they had previously overlooked.
Q. What should an AE expect if he or she is not chosen to head the merged association?
If the AE will not stay on board and serve as the final CEO, she should establish a severance package to take effect after the merger is complete for anywhere between six and 24 months.
A severance package allows the AE to focus on the merger and not worry for a long time about finding a new job. Such an arrangement also helps the reputation of the new organization in that taking care of the CEOs in an honest and straightforward way sends a positive message to the staff and members of both organizations.
It is important to keep in mind that a merger may lead nowhere. You don’t want a situation where an AE quickly finds a new job and quits. If one or both of the AEs is nearing retirement, it could be opportune for the AE to negotiate a lucrative early-out package.
Q. What’s the worst thing you’ve seen an AE do in a merger situation?
Mergers can bring out the best and worst in people. Sadly, we’ve seen a few AEs revert to tantrums and other childish behavior, making themselves seem foolish and embarrassing their board of directors. Other AEs have, immediately upon learning of a merger, aggressively searched for a new job. The result is that one, or possibly both, associations lack an AE to negotiate the merger and it ends up falling through or is very one-sided. This is probably the worst-case scenario for both sets of leadership.
As we said above, the boards and sitting AEs need to speak frankly the moment a potential merger scenario appears. Once the AE is taken care of and protected fairly, he or she can be a tremendously positive influence on whether “to merge or not to merge” the association.