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Graham Atkins looks at the problem of merging after local government reorganisation. Local government is an old hand when it comes to dealing with change. Organisations are frequently reinventing themselves in response to policy initiatives and to better serve their communities. And while the theory always looks good on paper, the reality of implementation can be a different story. Historians would argue that looking to the past can help inform the future. As the local government sector heads into another major wave of unitary mergers, learning from previous ventures will be key to success. Hay Group recently conducted a study into the performance of 46 unitary authorities created in 1998, to examine what could be learned moving forward. The report, It looks good on paper, reveals how the highest performers have successfully addressed two major challenges – how to manage the merger process (the journey), and how the new council should operate (the destination). The journey The first challenge lies in how the process of restructuring, splitting and merging departments can distract from performance. Our research unearthed a tendency for merging authorities to focus on basic operational and structural priorities during the merger process. However, the most successful authorities focused more on identifying and protecting the intangible assets of the merging organisations – culture, structure, knowledge, brand, networks, loyalty, leadership, productivity and engagement. Merging organisations tend to audit and protect their tangible assets – money, capital, infrastructure – but it is these intangible assets which frequently create more value. These are often neglected during major change programmes, as they are hard to manage and measure. A comparison with the private sector is illuminating in this respect. A separate Hay Group study found private sector mergers which neglect intangible assets take an average of two-and-a-half years to achieve full integration. Rapidly establishing a new leadership team can also have a major impact on post-merger integration. Delays are a prime cause of turmoil and confusion during restructuring. Appointing a new team as early as the pre-merger due diligence phase is likely to result in full integration within a year. Where appointments cannot be formalised, creating a shadow top team to steer the integration is a useful substitute. The new leadership team will also need to change its focus from ‘how?' to ‘what?', defining outcomes and freeing partners and providers up to pioneer new approaches based on expertise. The destination When embarking on a merger, organisations need to have a clear vision of where they are going. The scale, resources and context of the new unitary authority will be entirely different from that of county councils. Effective integration cannot be achieved without a clear understanding of what the new organisation will look like, and critically, how it will operate. Our study identified a significant performance gap between authorities when it comes to service delivery performance and value for money. A minority of unitaries even continue to under-perform the county councils they replaced. The few high-performing unitaries identified by our research had all pioneered new operating models to suit the newly-merged organisation. New organisations need new ways of working. And as the shift to localism and place-shaping gathers pace, working with both public and private sector partners is becoming more and more important. Every organisation is founded on principles and priorities. This includes decisions about the location of staff and the utonomy of individual units. Most importantly, it sets out the ground rules on how the council delivers its services to citizens. These principles must be aligned with how people conduct their lives and use services in the current era, rather than based on historical legacy or administrative convenience. Authorities should keep this front-of-mind when embarking on unitary mergers. For unitary authorities, time spent finessing the operating model is a priceless opportunity to stimulate radical thinking. Creating new organisations which invite partnership and properly align with local citizens and users will enhance efficiency, and help authorities understand local needs and manage demand for their services. Graham Atkins is a management consultant at global management consultancy Hay Group

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WHITEHALL

Is there life after merger?

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