I understand, havinglived through an unsuccessful merger.
Background There were two express freight companies to be merged, one predominantly “Road Express”, and the other ”Air Express”. Both offered a Road and Air Express service. In the last 3 years since the merge, the predominantly Road Express Company with over 30,000 customershas lost 33% of its sales revenue with an “ enormous” reduction of its former profitability. The Road Express company was previously by far the most the profitable of the two. To me, it seemed the most important component was the financial part… “how can we merge these two companies in similar markets with similar functions and customers into one company, eliminate duplication of processes, motivate the staff and make the single entity more profitable”.
Even though they appointed a large consulting company to do the reviews, the merger did not go smoothly at all, and the financial result was predictably very bad. The areas set out below should have been more thoroughly reviewed and managed a lot better.
IT and CRM systems
Customer Satisfaction – Net Promoter Score (NPS)
They did not look at the culture, as it was not seen as important. The culture at The Road Express company was always “ the customer comes first”, and it was thoroughly understood by all employees, actively driven by the previous owner. It was critical to the success of the company and why it was purchased for over $700 Million. The culture at the Air Express company was totally different. They had basically a monopoly on the Air Express business so they did not feel the need to put first priority into Customer Service.
Merging two companies means that a new management team needs to be selected, and one would normally expect that the selections would be based on individual strengths from within or outside the two companies. What in fact happened was that the most senior appointments were filled from the less profitable and least successful Air Express company.
CEO – Brought in a new one who was not a good leader and not customer service focussed (recently departed).
Customer Service Director – They did not see this as an important role, and the position was eliminated.
Sales and Marketing Director = ( previously a separate function to the Customer Service Director). Brought in a new one who unfortunately had never used a CRM system and did not understand nor take any interest in CRM as a process or opportunity.
Operations Director – Made the Road Express Director redundant and replaced with the Air Express Sales Manager (since departed ).
Financial Director – Brought in a new one with no Road Express experience.
IT Director – Selected the Air Express Manager to be responsible for this area.
Marketing Manager – Road Express Manager made redundant and the Air Express Manager was given this responsibility.
National CRM Manager – They did not see this as an important role, and the position was eliminated.
In summary most of the senior positions went to the Air Express staff. Overall they replaced all the very experienced Road Express management who helped create the successful Customer Service culture, with management who did not care about or understand the critical importance of Customer Service. The previous Road Company motto of “Service First – Cost second” ( i.e.” worry about the cost tomorrow with good smart management” ), was formally replaced by “ Cost First – Service Second “.. . a total disaster in an express environment where intact /on – time service was critical.
The Road Express company had a Call Centre system for Customer Service and dedicated Account Managers to look after all Accounts. A customer had to spend a minimum $1500 dollars per month to become a viable and profitable Account Customer because of high infrastructure and other operating costs. Account Managers had to visit their accounts regularly depending on their monthly spend. There was a weekly action oriented Potential Lost Customer reporting system in place. Operations tracked their Service failures to deliver intact/on-time on a daily and weekly basis. Everyone was focussed on trying to improve customer service. The Air freight company did not have a dedicated Call Centre system, anyone could become a customer, did not have dedicated Account Managers, so the Sales person who sold the service also looked after the same customer. No regular call cycle, no potential lost customer system, no failure to deliver intact/on-time system or reporting. Customer Service was not important. When marketing did a survey of Customers to decide what the new merged company should be called, by far the majority of customers replied requesting to use the Road Express company name due to the better Customer Service record.
IT and CRM systems
This was and still is a major issue. Both companies had systems for different departments creating silos of information. The Road Express company was the first freight company in Australia to use a Bar-coded Track and Trace system for its parcels in Australia based on Main Frame technology. Accounting and Credit were also on this system. The Air Freight company used PeopleSoft for their Tracking, Accounting and Credit. The IT management was faced with the problem of how to merge all this into one system. To my knowledge this has not been achieved, yet it is a massive job. A lot of projects were planned. I am told not many have been completed.
CRM systems – The Road Express company had implemented a successful CRM system since 2002, which had been developed and used successfully over 10 years. It started with the Sales Team and then moved to a range of different departments including Account Management, Internal Sales (Satchel Sales), Risk Warranty (Parcel Insurance) and Credit. Automated processes were developed for all these departments and user uptake was fantastic due to support from Senior Management.
The Air Freight company only had a CRM system for 1 year and the user uptake was not good at all due to little or no support from Senior Management.
The choice the merger team made was for the Road Express CRM system, even though the competition was SalesForce. Within 6 months all the Air Express customer data was merged into the Road Express system and initial training had been completed, but due to little or no support from Management field user uptake was not good. It was the first system to have both companies Customer information on one system but the Air Express data quality was not very good due to the limited use of SalesForce by its users and absence of Management interest and support.
The main functionality of a CRM system is Sales and Support. In the Road Express company the Sales side had been implemented well and all reports including forecasts and successful sales were extracted from the system. This was done through and by complete support from the Sales Director. The Air Express company had just started using SalesForce for a year but had not been successful as some managers were still using Excel to gather their Sales Closed and Forecasts because of inadequate management support.
A CRM system can be used by a lot of different departments especially those that deal directly with customers which was why it was introduced to Account Management, Parcel Insurance, Credit and Internal Sales. Automated processes for these departments; were added to the system to make it easier and quicker for them to do their job and so they could easily see other departments interaction with a customer or prospect. I am not going to go in depth into these processes, but I will give you a highlight of a couple:
1. Internal Sales – Satchel Sales. This was originally a complete paper-based system that was reactive when a customer phoned. The order was written into an order book that had 3 copies – a customer copy, a shipping copy and a billing copy. This was turned this into an automated process so that the Invoice etc was created and recorded in the CRM system and any user who looked up an account could see what type of Satchel was purchased and the quantity. This turned around the function of the team from reactive to proactive. The Satchel sales staff would pre- call customers based on their usual order cycle. So if a customer used to call every week, fortnight, monthly, etc to order they now received a call from the Satchel Sales team instead. Reminders were scheduled in the CRM system. This helped increase Satchel Sales from $16 to $30 million in less than 5 years.
2. Account Management – Potential Lost Customer Report was an excel report created weekly based on a manual report created by Account Managers. This was turned this into an automated action plan report based on a process that was created in the CRM system. Call Frequency Report was another Excel report based on Account Managers manual reporting. This was turned this into an automated report based on completing activities in the CRM system.
In early 2010 I was investigating CRM strategy and came across Customer Experience Strategy and NPS ( Net Promoter Score). Unfortunately this was around the time that reviews were being done on both companies. I created a presentation for senior management and a cost justification for the project. This was well received by the Road Express Management but they were not allowed to make any decisions while the review was being performed. Therefore I built an NPS 3 question survey using our existing email marketing system. I sent out a test to a targeted audience of 1400 contacts at 180 customers and received a 35% response rate. All responses were automatically recorded in our CRM system under the contacts name. In the same survey they were asked what department needed to be more responsive and improved. The merge went through and I presented these findings to management, so we could do a full customer NPS survey. It was rejected and they decided to do the normal ANOP annual survey that they did at the Air Express company. In the Air Express company nothing was done about the survey results. As most people know Customer Feedback and NPS have now become the standard for most corporations around the world. If the original owner had been still in charge he would have really liked NPS and would have used it to improve Customer Service.
After the merger was completed, I had to get all the data out of SalesForce and merge it with the Road Express CRM. I also had to organise who would be managing what Accounts and train 150 Air Freight staff who would be using it. This was a big change with hardly any Change Management processes. Unlike the Road Express the uptake was not successful because there was little senior management support and explaining why the Air Express staff had to use it. It seems to me that this was the reason that they had not been successful with the original rollout of SalesForce at the Air Freight company as Senior Management were still using Excel reports instead of reports generated from their CRM system.
Be careful about your senior management selection and make sure that know about the technology that they are going to be in charge of. Technology has become a major change agent in the world. Make sure that Customer Service has got top priority as it is the major differential between competitors. The major reason for its failure was because of the determination to limit costs and Senior Management particularly the Sales and Marketing Director had little or no knowledge about how the CRM system had helped the past success of the Road Express organisation, or how it could help the future success of the new organisation. In addition I was pushing for a Customer Experience strategy to be implemented, and unfortunately someone saw this as being not in their best personal interest so the easiest thing to do was to make me redundant ! They made this clear by getting me to cancel my Customer Experience presentation to the Financial Director and to not arrange another one. No wonder the new merged organisation has not succeeded ! The new company now competes on price alone!
Why have I written this blog ? It is because I have been recently diagnosed with MSA, a disease that might soon stop me from being able to walk, write or normal things, so I thought that I would have my say in case I could not at some time in the future. Like most of the Road Express senior management I was made redundant after 10 years of implementing and managing the CRM system with the full backing and support of the previous 100% owner, who built it up over 30 years into the most successful (and profitable) Express Freight Company in Australia.