Publicis Omnicom and the Tricky Business of a Merger of Equals
Joining forces with your competition may be your best move for your bottom line, but it can be a challenge for some strong-headed entrepreneurs. If you are going to successfully bring two disparate groups of employees into one cohesive staff, you are going to have to check your ego at the door and think strategically about what's best for the new business.
This weekend, advertising giants Omnicom and Publicis Groupe announced their boards have unanimously approved a merger that creates one of the world's largest advertising firms. New York-based Omnicom and Paris-based Publicis have combined annual revenue of $22.7 billion and a market value of more than $35 billion, based on closing stock prices on Friday. The merger still has to be approved by regulators, but if it succeeds, the new group, to be called Publicis Omnicom Group, will have more than 130,000 employees.
Publicis Groupe Chairman and CEO Maurice Levy and Omnicom CEO John Wren will lead the merged company as co-CEOS for the first 30 months. After that, Levy will become a non-executive chairman, and Wren will continue his role as CEO.
Changes in the advertising industry motivated the two giants to team up, as heavyweights like Facebook and Google collect massive quantities of data from their users in order to target ads to specific individuals. “The communication and marketing landscape has undergone dramatic changes in recent years, including the exponential development of new media giants [and] the explosion of Big Data," says Levy, in a statement.
While joining forces is expected to help these old-guard advertisers compete with the newer ad-tech giants, combining thousands of employees from around the world is sure to be a culture shock. Merging the two companies will bring together a handful of independently operating agencies, so creating a common culture may prove challenging.
Some mergers, like the 1999 Exxon Mobil juggernaut, have been near seamless, while some others, like the infamous 2001 Hewlett-Packard Compaq merger, have been bumpy, says Ben Dattner, an organizational psychologist and the author of The Blame Game: How the Hidden Rules of Credit and Blame Determine Our Success or Failure (Free Press, 2011). A merger’s success or failure depends on both the business models and cultures blending, says Dattner. But if the leadership of the legacy CEOs isn’t collaborative and strategic, then the new company hardly stands a chance.
If you have ever considered banding together with your competition, Dattner has a few guidelines. Levy and Wren would do well to take note.
1. Accept that there will be conflict. When two CEOs come together, “there are going to be real, substantive and symbolic differences of interest,” he says. You have to learn to work through those differences, not deny them. “People often make the mistake that, ‘We want to reduce conflict.’ The issue is how do you have the good conflict, not the bad kind of conflict,” says Dattner. If you attempt to avoid conflict entirely, small areas of disagreement will build and become large impasses. So in the early stages of a merger, expect some amount of conflict, and be ready to work it out productively.
2. Despite your differences, you have to be able to come to the table and work productively with your new co-CEO. It is possible for former competitors to work together, says Dattner, but they have to be willing to put previous mindsets behind them and learn to trust each other. “The two CEOs need to be aligned with one another,” says Dattner. “Any difference between the two of them in terms of perspective, strategy [and] approach will inevitably cascade down to their respective organizations. So they really need to have an open, trusting, candid relationship with one another.”
3. Don’t focus on being fair. Do what’s best for business. “If there are more talented executives from one organization rather than the other, there will be a temptation to say, let’s do the King Solomon thing and just split up the management team 50-50 from the two legacy organizations,” says Dattner. But it can be better to go with a merit-based approach to reshuffling talent. “There is no off-the-shelf, shrink-wrapped formula.” There has to be open communication and debate among leaders as a new executive team is put in place.
4. Define a new vision for the combined company’s culture. The two CEOs need to describe their ideal culture together, says Dattner. Identify the best characteristics of each legacy company, and look for commonalities. It’s very likely that there have been multiple cultures existing within each company. “There is not just variation between the two legacy cultures, but there is also variation within the two legacy cultures,” says Dattner. And with some analysis, you might realize that the two companies have some values that are more alike than they are different.
5. Reward employees who work towards the larger group. Company leaders will need to give employees and executives in the two legacy companies financial and nonfinancial reasons to work together. Beware of the “us vs. them” dynamic, says Dattner. Levy and Wren need to say, “We are no longer Publicis or Omnicon; we are now part of this newly emerged identity.” Employees need to be evaluated not based on their individual work or through their work for the legacy organizations, but as contributors of the new organization," says Dattner. “You recognize and reward people who display organizational citizenship in the new entity, rather than defending turf in the old entities.”
Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.