Case Studies
Mergers

Merger Case Study: American Cancer Society’s national restructuring effort

Based on interviews with John Seffrin, Chief Executive Officer and Don Thomas, Chief Operating Officer

Background

The American Cancer Society was founded in New York City in 1913 as the American Society for the Control of Cancer. In the early part of the century, cancer was steeped in fear and denial and the disease was rarely mentioned in public. The organization focused its early efforts on public awareness and education, and it wasn’t until 1945 that the organization changed its name to the American Cancer Society (ACS) and got heavily involved in cancer research. Since then, the organization has grown to become a nationwide organization, raised more than $2 billion for cancer research, and has played a leading role in education, advocacy, and service to patients, survivors, and families in order to prevent cancer, save lives, and diminish suffering from the disease.

As the organization grew from a local to a national organization, the early leaders saw the need to maintain a consistent structure and message, so divisions were formed to represent each of the fifty states, as well as Puerto Rico and American Samoas, and a number of municipal areas like New York City. Over time, the divisions became independently chartered corporations with their own boards of directors. While each of the corporate divisions had a substantial amount of autonomy, “We were essentially thought of by the public, and we tried to purport ourselves, as one American Cancer Society,” said John Seffrin, Chief Executive Officer. “However, in terms of size and capacity these corporate divisions were often more different than they were alike.”

Even though the Society had grown to become a stable and robust $350 million operation, the 1980s brought an economic downturn that affected donations and, ultimately, service delivery. As the downturn lingered and the Society’s finances worsened, some of the smaller divisions began merging together to form larger regional groupings. While leadership was concerned with the potential fallout associated with a large-scale consolidation, they decided that their commitment to achieving their mission implored them to restructure. Between 1993 and 1996, the ACS would merge 57 corporate divisions into 17.

Building Support

Don Thomas was the Executive Vice President of the Florida division of ACS prior to assuming the role of Chief Operating Officer of the national organization in 1994. Having run the second largest division of ACS in the country, Don knew the kinds of advantages the larger divisions had compared to their smaller counterparts around the country. “I had the rather conceited, perhaps, view that if all divisions were more like mine, they might have more capacity to deliver the programs or mission than they currently did.” Don brought this vision of enhancing divisions’ capacities to his national role.

CEO John Seffrin, COO Don Thomas, and their team were responsible for leadership and communication in the massive restructuring effort, and, ultimately, for designing the implementation of the mergers. The first step in the process was to build support internally.

Don explained that when ACS started down the path of consolidating divisions, they needed to have unanimous commitment from all of the senior people that this was the right thing to do. “It was such an emotional and unfamiliar issue within our organization. In the early stages, if there was a crack in the armor, or if people felt we weren’t united or that we weren’t committed to mergers, I think they would have looked for flaws in the system. So unanimous support from the top down was a very important function.” John Seffrin agreed that it was important that the senior staff communicated unwavering support for the mergers. “There was no question that we put time and energy into making sure that we were singing from the same hymnal.”

Focus on Mission

Although the organization had used various strategies to enhance its organizational effectiveness, the concept of merging divisions was brand new. “It was not something that was well received or highly thought of as a potential solution to becoming a better organization.” However, John saw that, regardless of each of the divisions’ size, they each did basically the same things, and that a merger had the potential to save money. Don, John, and their team began to make a case for collapsing and consolidating the functions that were being duplicated or replicated among all the divisions, and investing the money into mission-delivery types of activities.

John said that the savings always played a part in their decision making, but that money was just a door opener to talk about fulfilling the organization’s mission. As John said, “we really hung our argument for considering merger on creating a more efficient way to serve our mission.” He described the initial reactions to the merger as ranging from “incredulous to anger.” But even though the conversation started with money, it always came back to a focus on mission and freeing up resources for programs. When the conversation was presented to the division boards as an opportunity to serve the mission, Don said that the boards felt that it was their obligation, as stewards of the organizations, to explore the idea further. And board members of different divisions would then discover that they had many similarities and many of the same concerns and fears.

Some of the merger discussions went more quickly than others. John said, “Readiness was important and clearly at the beginning some people weren’t interested in talking. But when they started to talk, the boards started comparing their programs, and what could be done differently or better, and that created enthusiasm and synergy about the potential for program delivery. The mergers represented additional available resources for program.”

Communication

Don said that once a division convened a steering committee to look at whether there was potential for a merger, there was a real need for constant communication. “You cannot over-communicate to volunteers and staff in these issues. And I think sometimes we fell short there – not intentionally, we just didn’t take enough time to invest in communicating where we were in the discussions to date.”

“At the end of the day,” said John, “every time you’ve got a problem, people will say that you could have done a better job of communicating.” He referred to the challenges that people face in accepting change and acknowledged that sometimes it seemed as though senior management was repeating itself to make sure that people didn’t think that something was being done behind their backs. John said that communication and engagement with the process are both important. “You need to demonstrate right up front that there’s not a hidden agenda, and you need to be sure people are engaged and are participants.”

Honest and open communication was crucial to the process. Don noticed immediately that “if the communications that were coming out of that group were open and honest, there was no perception that people were behind closed doors deciding everybody’s fate.”

Leadership

John said, “There is no question that none of these mergers would have worked without strong division leadership. You can work through all the numbers, but you’ve got to have strong leadership. And that can be defined as having some element of charisma, but also includes vision, trust, courage, and persistence. And those ingredients are indispensable as parts of effective leadership. If these things were easy, they would have already happened a long time ago. You have to be in there for the long haul.”

John played the role of senior strategic advisor, looking at it from the “30,000 foot level.” Don Thomas was the “field general — perhaps you’d say the Schwarzkopf of the whole merger process.”

Don was able to take this role because he had been working in different roles within ACS for more than 30 years, so he was respected and had credibility within the organization.

With varying levels of encouragement and hands-on involvement from senior staff, natural partnerships amongst divisions began to emerge and eventually individual boards of directors voted to merger. As Don said, “We were accused of having a master plan, when in reality there wasn’t one — and yet intellectually, in a way, you could argue there was. We had an idea that we wanted to collapse 57 divisions into an amalgamation that would have a critical mass in volunteer staff and dollars sufficient to do cancer control.”

Implementation

Once merger agreement had been reached, implementing the complex restructuring efforts required a ready and able set of leaders to run the new divisions, newly formed boards with clear operating objectives, reassigned staff, refined programs, and the resolution of a handful of complicated legal issues.

Special attention was paid to selecting the right individual to lead each division and to making sure that the decision making process was open and fair. “Even people whose jobs were taken away said that they felt that the process was fair because they were kept informed and had a chance to provide input.”

Rebuilding the division boards was an important first step. The boards of directors were now in charge of larger, more complex organizations and were also responsible for navigating the newly merged organizations through what, at times, were complicated legal issues. For example, each state has different laws of incorporation and dissolution of a nonprofit corporation. In the Heartland division, the merger required close to 100 percent approval of the full governing body, which was comprised of 350 people that came together just once a year for an annual meeting. “The governing body had to be convinced that they needed to vote to dissolve their corporation and merge into a new one,” explained Don, and “some of these people who live out in small towns in the center of America hadn’t heard anything about mergers within ACS and were shocked. Sometimes when you thought you had the hard work done — which was getting the boards to agree — you ran into some of the technical issues that were extremely difficult to get over.”

Don said that staff was not as quick to support the restructuring efforts as the boards, however, because it meant changes in their jobs, which led to insecurities. While there was some staff turn-over, John estimated that more than 90 percent of those who left were volitional, which meant that the actual downsizing by virtue of lay-off was actually very small. “But people did have to be flexible and willing to be re-deployed in other meaningful ways.” In some cases, where four or five divisions were merging into one, and there were four or five executive vice presidents (i.e., the senior-most staff person in a division), some were offered early retirement options, and many others moved into other executive positions such as chief operating officer.

In order to merge, the organizations also had to make difficult decisions about program delivery because of the differences that existed in the divisions’ programs. John described the discussions about program as “very emotionally charged.” He stressed that getting some consistency of program delivery was important and that, as a whole, the organization now has a much more consistent program nationwide. For example, John said that this is the first time in the organization’s history that there is a list of programs that all divisions provide.

Implementation Challenges

Looking back on this experience, John said that the most significant challenges and barriers were local pride and autonomy, people and personality issues, and the merging of organizational cultures. Some people were very defensive and felt that by exploring a merger, the organization’s leadership was getting into their turf and telling them how to do things. He encountered resistance to changing the way things were done, and the suggestion of change made people feel attacked or threatened. “What’s wrong with what we’re doing? Are you telling us that we don’t know what we’re doing, or we can’t do it effectively here anymore? Or what we’ve done isn’t good?”

And some staff members were very concerned about their careers. “There were individuals who have a tremendous amount, understandably, of self interest, and they would politicize the process behind the scenes with the volunteer leaders,” noted John. “But people’s careers were hanging in the balance, and some were out to protect that regardless of their approach — so self-preservation sort of ruled, or tried to rule.”

It was also challenging to work with different, and sometimes conflicting, organizational cultures. “Despite the fact that they were all part of the American Cancer Society, one division adjacent to another division could have vastly different cultures in how they do things.” To overcome these cultural challenges, Don, John, and their team worked diligently to build relationships, communicate openly and honestly, and to focus on mission.

Benefits

Now that the merger is complete, John and Don can talk about the many benefits of the restructuring effort. “Although we did generate significant savings, that would go near the bottom of my list of the benefits that we’ve derived as a result of the merger. The greatest benefits our organization was the fact that we went from 57 divisions to 17, and that we created a senior management team of 17 executives and a few of us from the national office who can sit around a table in a small enough room to make collective decisions about where the Society is going.” Before the merger, the management staff was disparate and had different levels of capabilities. Now, post-merger, the management team has similar core competencies and can make decisions together. “The management team,” Don said, “more than anything else, has accounted for the tremendous growth we had in the six years after the merger.”

And there are programmatic benefits too, says Don. “With this kind of delivery capability, we can advertise it in mass media, we can put it on our national website, we can talk about some of our programs that are available to people, and be at least 75 percent sure that it’s available in their community.” As it was hoped, there is more money for program. “We’ve deployed more staff to the field- or community-level.”

Hindsight

John Seffrin and Don Thomas felt that while the merger yielded a number of important and beneficial outcomes, there were a few things that they would have done differently or better. They said that they would have spent even more time communicating and more time planning, created a plan for the disaffected volunteers, a plan to help staff transition into new roles, and would have engaged the national board in a greater leadership role. One board member called the process “product perfect and process poor.”

The merger did displace a number of board members who had had very significant roles and, even though ACS made every effort to find a role for the board members, some felt that the mergers had downgraded or diminished the ACS’ commitment to volunteers. In retrospect, John said that he should have spent at least as much time focusing on the volunteers as he did taking care of staff, and should have had a more proactive plan to deal with disaffected volunteers. “We’re still dealing with that — thankfully to a lesser extent, but it hasn’t gone away.” The disaffected, he said, “make so much more noise than the people who are off busily working and are as happy as they can be in the new organization.”

Don explained that he had underestimated how important self-preservation is for people in a career. “You can’t guarantee employment for life, and you can’t guarantee a person’s happiness in a new role. We did run into some situations where people really did pull out all the stops to try to either preserve their jobs, or vie for a better job.”

Another potential misstep involves the lack of engagement of the national ACS board. Individual board members carried immense weight in certain divisions and could have been instrumental in addressing concerns voiced by both volunteers and staff. A formal endorsement of the process may also have been useful but could have also fueled fears that the decision to merge head already been made and was going to be enforced at the very highest levels.

Although some board members and staff did find their roles diminished, and some of the ACS offices have closed since the restructuring effort, the organization is now earning and raising more money than ever before. And because of the new staffing structures, ACS has decreased its administrative costs and devoted a much higher percentage of its income towards program support; education, advocacy, and service to patients, survivors, and families in order to prevent cancer, save lives, and diminish suffering from the disease. The success of this merger can be attributed to ACS’ commitment to mission that overcame all other obstacles.