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BW Businessworld

Column: Hidden Agendas

Mergers of public organsiations work best when there aren’t any hidden agendas, which is not often the case in India

Photo Credit : Ritesh Sharma

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Consolidation of public sector companies is bound to fail unless the integration is pursued with clear strategy and strong determination. In India, it is often seen that there are hidden agendas behind such mergers and acquisitions, which are either meant to help the private sector or to make room for more political intervention.

A classic example of this is the merger of Air India and Indian Airlines. This merger, which was designed to ultimately fail the combined organisation cannot be even considered as a standard case of industry consolidation in its true sense.

A merger between companies can succeed only when there are clear synergies to exploit from each others strengths. Equally important is the culture of organisations involved in a merger. If these factors are not strategically looked into and pursued with a strong determination, deals will fail, the merged entity won’t be efficient and most likely will collapse in due course of time.

In the case of the Air India and Indian Airlines merger, there was no clear roadmap on how to lead the combined entity to desired goals. Integration of large entities, which have strengths in different areas of operation and different cultures of management and people, is a very difficult process. There can never be a smooth transition.

So, unless there is a very strong and determined leadership that can function without any bias, achieving the ultimate goal is impossible. In most merger cases, where one takes over the other, the senior management at the acquired entity/entities either gets sidelined or is asked to exit as part of the deal. The other situation is, where people at the acquired entity succumb to the pressure from the acquirer to make a forced exit. As a result, people who are used to the culture and the operational style of the outgoing management or leaders are invariably made to suffer in the new organisation. And this directly reflects in their performance, and in turn the overall performance of the new organisation.

In the Air India-Indian Airlines merger, there were many loopholes. First of all, the work culture and operational challenges of a domestic player are different from that of an international player; the two cannot be mixed up. Air India, which was headquartered in Mumbai, had comparatively less political interference from Delhi, and its recruitment and promotion processes were more professionally structured. At the same time, Indian Airlines, which was headquartered in Delhi, was more prone to political interventions mainly in the recruitment and promotion processes. Since the role of human resource department is critical in corporate and business integration, two totally opposite cultures started daunting the merged organisation. This started reflecting in every aspect of the operations of the merged entity; and in the absence of an unbiased and determined leadership to steer the organisation forward, it ultimately failed.

Air India has been suffering from the faulty merger since the very beginning. The public sector airline even reached a bad state due to government interference and bad decisions.

(As told to C. H. Unnikrishnan)

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Jitendra Bhargava

Bhargava is former executive director of Air India and author of the book, The Descent of Air India , which chronicles the financial downfall of the public sector airline

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