Transition Management Consulting, Inc.

The Road to Abilene

by Robert T. Van Hook, CAE | Mar 01, 2000
In theory, association mergers make a lot of sense. The new organization is operationally streamlined, services and infrastructure are combined in ways that take advantage of economies of scale and save precious resources, and political clout is consolidated and power enhanced. This, however, is the story of a merger that was tried and failed, told in the faith that sometimes we learn more from our failures than our successes.

A Cautionary Tale About a Failed Association Merger

In theory, association mergers make a lot of sense. The new organization is operationally streamlined, services and infrastructure are combined in ways that take advantage of economies of scale and save precious resources, and political clout is consolidated and power enhanced. This, however, is the story of a merger that was tried and failed, told in the faith that sometimes we learn more from our failures than our successes.

The talk of consolidation began in the summer of 1998. We were three separate organizations, operating under a corporate umbrella that looked a lot like an association management company. The players in this drama were:

  • The American Orthotic and Prosthetic Association (AOPA), a trade association with an 80-year history;
  • The American Board for Certification in Orthotics and Prosthetics (ABC), a 35-year-old certifying and accrediting agency for the field;
  • The American Academy for Orthetists and Prosthetics (the Academy), the 20-year-old professional society; and
  • The National Office for Orthotics and Prosthetics (National Office), established more than 10 years ago to provide infrastructure services to the three "constituent organizations" and to serve as a coordinating mechanism among them.

In addition, the National Office sponsored several smaller organizations within its structure.

In many ways the National Office was a victim of its success in supporting the operations of AOPA, ABC, and the Academy. The three constituent organizations were doing well financially and programmatically. They had operating budgets of $2.5 million, $1.8 million, and $1.2 million, respectively. The leadership of the past three and four years was taking the organizations where their constituents wanted them to go. There was a proverbial "chicken in every pot."

But all was not well in the National Office. Financial management systems were inadequate, and other National Office services were not living up to their promise. The National Office controlled nearly all the means of production for the constituent organizations. As the employer of record for all staff, the National Office provided the office space and equipment, human resources, finance and accounting, MIS, meeting services, and publications for all constituent organizations. However, the constituent organizations complained that they were paying for services out of their immediate control. I like to characterize the arrangement as "like doing business with my father-in-law."

Governance was cumbersome at best. The National Office board of directors was comprised of the officers of the constituent organizations. Every action of the National Office board was subject to review and approval (or disapproval) by each of the constituent organization's boards. This process made timely decisions difficult and threatened a death loop of spiraling inaction, which was narrowly avoided on several occasions.

In May 1998, the chief staff executive of the National Office resigned. The National Office board - with the approval of the three constituent boards - installed the three executive directors, aka the Executive Management Team (EMT), to run the National Office until they could decide what to do.

Let the Games Begin
Management by committee is fun. Okay, not really. But at least the three executive directors were in charge of the infrastructure underlying the services their organizations provided.

The boards - including the National Office board - were beginning to talk about what the future would hold for the organizations. No one - least of all the EMT - thought the management-by-committee structure was more than an interim measure. A joint meeting of all the boards was planned for September 1998 to figure out our future.

In preparation for the meeting, the EMT crafted a memorandum outlining four possible future organizational structures:

  • Status Quo: Keeping the National Office structure intact with the EMT making incremental operational changes.
  • Internal Outsourcing: Reorganizing the National Office into an independent shared-service cooperative with which the constituent organizations would outsource certain services.
  • Separation: Eliminating the National Office and separating the constituent organizations.
  • Consolidation: Merging all of the entities into a single organization.

The EMT originally recommended internal outsourcing. A later memorandum the EMT sent to the board, however, provided many arguments in favor of consolidation. The memo concluded that consolidation "may not be all that difficult." Famous last words.

If It's So Easy
The EMT's memorandum identified many reasons for the orthotic and prosthetic "family" to consolidate.

  • Our missions were related in the same field - each organization performed a different function.
  • The boards had a history of working together. Elected leadership had a tendency to migrate from one organization's leadership to another.
  • The organizations were already essentially "consolidated" through the National Office structure, and staff duplications were minimal. Our staffs worked together in the same office.
  • The organizations shared not only offices, but also a similar organizational culture (or so we thought).
  • While there were differences in the financial stability of the organizations, all were doing reasonably well. The organizations knew each other well enough through the shared accounting system that "due diligence" investigations would be almost non-existent.
  • Merger of the constituent organizations just "made sense." Why have three small organizations when you could have one larger one that is still not huge?

The combined meeting of the boards in September 1998 was a key turning point. The purpose of the meeting was "to come to closure on a conceptual approach on the future structure of the National Office." Before the meeting phone and e-mail lines were abuzz with talk among members of the associations. Much of the talk was about consolidation.

By the time the meeting was held, opinion was rising in favor of consolidation. It made sense - at least in theory - to volunteer leadership and staff alike. The resolution in the joint meeting was to expeditiously pursue consolidation of all of the organizations in the National Office family.

Two remarkable things happened at this seminal meeting. First, consolidation became an "all or none" proposition. ABC, the credentialing body, was reluctant to commit at first because of its concern about its ability to maintain the integrity of its programs free from "undue interference." Leaders from the other organizations demanded that consolidation include all of the organizations or not go forward.

Second was the way consensus was built and momentum carried the day. At the start of the meeting there was less than consensus among the elected leadership about consolidation. Passage of consolidation required a positive vote of two-thirds of the eligible members of the two membership organizations, AOPA and the Academy. It didn't seem possible.

Surprisingly, at the end of the meeting, every person in the room voted to support consolidation.

The Road to Abilene
In his book, The Abilene Paradox, Professor Jerry Harvey introduces a model that aptly describes what happened in this proposed consolidation effort. Harvey tells the story of a visit to his in-laws in Coleman, Texas. One day while they were enjoying a game of dominoes and cold lemonade on the shady porch of their house, someone says, "Let's go to Abilene and have lunch at the cafeteria." They piled into an old Buick without air conditioning for the 53-mile drive to Abilene, with the temperature reaching 104 degrees. The food at the cafeteria was predictably bad.

As they returned hot and sweaty (and with indigestion) from their journey, they realized that no one really had wanted to go to Abilene in the first place. Each person thought the other wanted to go, and they just went along with the group's decision.

Harvey says that many groups find themselves going to places (Abilene) that no one really wants to go (Abilene). He identifies a "Groupthink" in organizations when they fail to "manage agreement." Groups that fail to manage agreement develop "false consensus." People in organizations agree to act believing that everyone else is in agreement. No one knows about the lack of true consensus because no one is willing to ask hard questions about why they are going to Abilene in the first place. When they return, everyone says they didn't want to go and wonders how they got there.

In our consolidation situation, several of the elected leadership wanted to pursue consolidation. For whatever reason, the rest - whether they really wanted to or not - agreed to go along with it. We all piled in the car and headed for Abilene. 
The first stop was a "consensus conference" planned for early December. More experienced elected leaders remembered an earlier staff-driven consolidation attempt. The 1992 plan was "dead on arrival" because it had too little member input. Whether this interpretation was reality or myth, they did not want to make the same mistake. About a dozen members came to the conference, joining more than 40 elected leaders and staff.

An exceedingly skilled organizational development professional, Vic Cocowitch, agreed to facilitate the conference process. He developed an elegant plan for the meeting that allowed all 55 participants to have input into all areas of the organizational design. Over three days, conference attendees developed a mission statement for the new organization, a name, broad goals, governance structure, membership categories, voting rights, and substructures (how other groups would be related in the new organization). 

Staff Roles
The three executives originally pushed for a shared service cooperative model to take over the functions of the National Office, fearing that consolidation was just too hard to do - they had tried that and failed six years before. 

Just before the September 1998 meeting of the three boards, however, I had a flash of an idea. I began to make the case that consolidation could happen - that it was the right thing to do, and if we all committed to making it happen, we would create an irresistible force. In retrospect, I may have been the one that said, "Let's all go to Abilene."

Because the original 1992 effort was generally perceived as staff-driven, the elected leadership in this effort wanted staff to take a back seat. They wanted to drive the process. They also didn't want any "association experts" telling them how to organize their new association. The roles of the executive directors were to be both cheerleaders and scribes. We were there to support and facilitate the process - not to lead it, oppose it, or bring in organizational expertise.

Staff was charged with writing bylaws that implemented the organizational model volunteers had outlined at the conference. We performed dutifully, although we had reservations about whether the organization we were developing could succeed. 

The primary flaws, as we saw them, were:

  • The power in the organization would tilt too much in favor of individual members, leaving companies with little reason to pay dues.
  • The model included two autonomous credentialing commissions with budgeting and hiring authority.

The three executive directors had a big stake in the outcome of the process. There would be only one chief staff executive in the new organization, although the credentialing commissions offered another important leadership position. Privately we agreed that there was a good chance that the board of the new organization would look outside for a new executive - someone that didn't carry the "taint" of having run one of the existing organizations. While there was a chance that one of us would be chosen, that meant that some of us might not have jobs if the consolidation was successful. Still, it was the right thing to do, and the car had left for Abilene anyway. All we could do was go along for the ride.

The Great Debates
The draft bylaws and organizational design for the consolidated organization were unveiled in March 1999. Elected leadership knew that consolidation would be an uphill battle. Corporate law in Delaware, where all of the organizations were incorporated, required a positive vote of two-thirds of the members eligible to vote. Only two of the organizations - AOPA and the Academy - were required to vote. ABC, the certification agency, had no members, so the board could make the consolidation decision.

Seeking to avoid the errors of the previous attempt to consolidate, elected leaders invited members' comments on the plan through June. The ballots were to be sent to all voting members in early July and counted in mid-August. Leadership directed staff to develop an elaborate marketing plan, which called for spending more than $100,000 to sell the plan to the membership. The plan was passed in March, but by late April, leadership's support began to falter. The boards voted in early May to curtail many of the planned marketing activities, citing the belief that "we need to treat members like adults."

The primary forum for discussion and debate was a listserv on the Internet. Listserv debate was hot, heavy, and occasionally rancorous. In truth, however, most discussion was dominated by a group of no more that 10 to 15 people who seemingly had nothing better to do than express and reiterate their opinions. They did not trust their elected leaders or the staff to represent their interests. Many felt that their elected leaders were giving away all they had built over the past 15 years when the Academy was organized. They feared that the trade association (AOPA) - with its business and policy orientation - would detract from clinical, educational, and professional issues enjoined by the Academy.

Consolidation supporters - always the majority - were timid and weary of being blasted every time they voiced their support. The dissenters were very effective. Their messages frightened elected leaders and swayed some opinion against the proposed consolidation.

Chaos Happens
By late June, things were rolling along, but few thought consolidation would pass. Members were still debating the fine points and beating each other up on the listserv. Some elected leaders expressed privately their reservations about the plan, but none would admit it publicly. Opponents of the consolidation were feeling pretty sure of themselves because of the stringent legal voting requirement. Because the law called for a two-thirds positive vote of all eligible members, any member who abstained from voting was effectively a "no" vote.

About two weeks after the ballots and a full copy of the consolidation plan were mailed by certified mail to all members, our attorney called to tell us that the Delaware legislature had changed the corporate law for associations in the last session. Under the new law, only a simple majority - 50 percent plus one - was required to dissolve the organization and merge.

Many members reacted with vengeance, especially those already opposing consolidation. Others disbelieved the news, while still others saw a conspiracy among the leadership to hide the fact from them. Suddenly, the requirement for passage was considerably lower than they had expected. Among the suggestions was one that AOPA had exercised its lobbying clout to have the law amended.

Drum roll, Please
A third party received and counted all ballots. By the second week, it looked as if consolidation would pass. The final tally was made on August 20, and both AOPA and the Academy failed to pass the consolidation plan. The turnout was quite respectable, with 48 percent of AOPA members and 59 percent of Academy members voting. Of those voting, 75 percent of AOPA members and 69 percent of Academy members voted affirmatively. Since a non-vote was actually a "no" vote, it should be noted that 36 percent of eligible AOPA members and 40 percent of eligible Academy members voted in favor of consolidation. More than 1,000 members thought consolidation was a good idea. The other 1,650 members either voted "no" or declined to respond.

Now what?
Faced with a failed consolidation effort, the boards had three choices:

  • Status quo - keeping the National Office structure and services largely intact, managed by the three executive directors.
  • Setting up a shared service cooperative arrangement as recommended by the executive directors early in the consolidation process
  • Dissolving the National Office and completely separating operations.

The boards - sick to death of National Office problems and the consolidation process - voted in early October to "de-consolidate" effective December 1, 1999. The boards were in effect giving staff less than two months to undo the National Office entanglement that had taken more than 10 years to grow. 

Learning from "Failure"
It has become a management cliché that we learn more from our failures than from our successes. That is probably true in our attempt to consolidate the organizations representing our small field. I don't know if everyone involved learned a lot, but I did.

  • Be careful what you wish for. Consolidation made sense. Industry consolidation and healthcare payment changes were sending a clear message - get it together. We were three small organizations. We could have been one larger organization with more political power and policy clout. But just because it made sense "in theory" didn't mean it was the "right thing to do." I really wanted consolidation, and I pushed hard at the beginning to make the process happen. I was not happy with the organizational design that came out of the consensus conference. I felt the new organization would be unmanageable and may not have many company members - hence, not enough money to be successful. 

  • Care and feeding of staff. Staff didn't have a clue about their futures in the consolidated organizations. The 18-month trip to Abilene was arduous for everyone, but at least the executive directors were engaged in the politics that drove the process.

  • The road to Abilene is paved with good intentions, and sometimes even good process. The process designed by our consultant allowed every person to participate in every aspect of the new organization's design. In retrospect, the consultant was asked to help build consensus, rather than to question whether the organizations really wanted to consolidate. 

  • Never underestimate the power of culture. In a memo to the boards before the decision to move ahead was made, I wrote that I thought the cultures of the three organizations were similar. Similar, yes. The same - or even compatible - no. From a staff perspective, I saw that we worked together in the same building, sharing most of our infrastructure services. What I didn't fully recognize was the latent distrust and hostility between the practitioners and the businesspeople. 

  • The power of quiet dialogue. In addition to my role as catalyst, I also played the role of peacemaker. When members posted diatribes on the listserv, I chose to respond with calmness and clarity. I gave them facts and rational proposals. That strategy had a powerful calming effect on the situation. I will confess that this was a new and different role for me - I tend to like a good fight. This was a big piece of learning for me. 

  • We should have thought out of the box. Ultimately, the consolidation process was held hostage of the Delaware corporate law, which required a two-thirds (later simple majority) of members to approve the plan. If we had known that earlier and had thought more creatively about it, we might have been able to change our bylaws to allow for a more lenient voting requirement or to allow the boards to make the decision. 

  • Holding firm to a decision is difficult unless the alternative is odious. I am struck in this and other situations how difficult it is to maintain a consensus for change. In our situation, going back to the old National Office structure was never a real alternative. Separation was always an acceptable - for some even desirable - fallback position if consolidation failed. Having an easy "out" made sticking to the consolidation intention more difficult. 

  • The Trickster appears to confound every complex process. The Trickster - this time in the form of the Delaware legislature - made his gleeful appearance in the midst of the voting process. For me, it was the high point of the process. The unknown and unexpected always seems to happen when you're on a roll, coasting down hill to whatever sure, anticipated outcome you expect. 

  • Management by committee sucks. Interim management of the services shared by the three organizations was an ordeal. The three of us have very different leadership styles. I have difficulty playing second fiddle in any situation. The prospect of consolidation probably added to the competition among the three executive directors as we began to jockey for the leadership position of the new consolidated organization. 

  • Mergers or consolidations are hard work and expensive. When the consolidation process began, the EMT had been managing the National Office for six very difficult months. Managing that kind of transition would have been hard without consolidations. (Have I mentioned that management by committee sucks?) But staff costs are largely sunk costs (notwithstanding the loss of focus and distraction caused by consolidation). In the end, the process cost more than $100,000 - and that was doing it "on the cheap."

  • No one supported consolidation. An amazing thing happened after the consolidation vote failed. The support for consolidation evaporated. No one admits to voting for it, and everyone knew it was doomed to failure from the beginning. After everyone has been to Abilene, the natural tendency is for an "outburst of recrimination" and blame. It was someone else's idea, and I didn't want to go in the first place.

Post Script
Even though the three organizations are separated, our long-term lease forces us to live together for another 18 months. It's like the "War of the Roses," and not a pretty sight. The three executives are not even a committee - we are joined only by whatever goodwill we can muster, without a formal structure or a mandate to cooperate and "make nice."

The good news is that the separated organizations are blooming. We are recreating our brands and developing systems that work and for which we, and we alone, are responsible. We work with our own staffs, who happily now know exactly who they work for and what their mission is. After all, they've been to Abilene and back, too.

If you have any questions about Transition Management Consulting, our services, or our approach, please contact us.