By any measure, 1998 was the biggest year ever for mergers and acquisitions, with 23,000 deals valued at approximately $2.5 trillion. If the economy does not falter, this trend is likely to continue because, when successfully engineered, mergers enable two companies to achieve strategic and financial objectives neither could attain independently.

Unfortunately, reality can fall considerably short of promised potential. Despite current "merger mania," surveys show that one-half to three-quarters of all mergers fail to achieve lower costs and increased market share. While the announcement of the merger may be trumpeted in the headlines, in actuality fifty percent of all acquisitions eventually end in divestiture. And increasingly, experts are attributing these dismal results to a failure of post-merger integration.

The challenge is how to successfully integrate separate organizations with different cultures, management, systems, and compensation structures into one organization poised to take advantage of the resulting financial and market strength. These concerns are no different than those faced by U.S. General George C. Marshall during World War II when given the task of preparing the combined armies for the largest military effort in human history.

General Marshall credits much of his success to his non-partisan position and his deep concern about the human dimension of soldiering. He traveled around the world to see officers and front-line soldiers, taking careful note of their concerns and comments. As he himself said, "To issue an edict or regulation would probably do more harm than good. The job must be a personal one, to be effected slowly." General Marshall recognized that poor change management and cultural incompatibility could sink the merger of forces even when there were attractive battle strengths and obvious allied interests.

General Marshall's story contains the keys to successful integration: He created a non-partisan integration team, had knowledge of his soldiers and a detailed integration plan. Here is what we can learn.

At the outset, leadership of both companies must communicate the business rationale for the merger and articulate a framework and a timetable for integrating the two organizational structures. Then they should create a process by which everyone at all organizational levels can contribute to shaping the new company. Companies often appoint an Integration Team, people who are key in the organization and have clout at all levels. The team's job is to develop an integration strategy and translate the culture of the acquiring company to the target and vice versa. The integration team must be viewed as neutral, willing to involve all employees in order to create buy-in to the new merged organization. As part of the pre-acquisition due diligence, this team must assess the target company's culture to determine the degree of fit or disparity between the two firms.

This can be done through carefully interviewing management, conducting focus groups, surveying employees, and directly observing operations and meetings.

Once the integration team completes data gathering, it must work with management to devise an achievable integration plan. This plan should examine cultural fit and establish a clear framework to help people cope with the stress of uncertainty and inevitable loss in this turbulent period. The team should help develop a communication strategy, put transitional and permanent organization structures in place, and deliver programs such as compensation and performance management to integrate the divergent cultures.

Executives of the new entity must move quickly to create a vibrant and compelling culture. The stronger the culture of the new organization, the more attractive and motivating it will be to employees. Without an exciting culture and mission, the sum fails to be greater than the whole of its parts and the merger fails.

Cultural conflict is an inevitable part of any merger, even when the cultures of the two organizations are similar. When companies are combined, the boundaries of both organizations are changed. Inevitably something of each culture will be lost in the process. Employees resist the loss of the familiar culture, are angry at leadership on both sides, and cling to old norms of corporate behavior as a form of resistance to change. If a mentality of victor and vanquished prevails, resistance will only be exacerbated. In order to lessen this resistance, it is useful to acknowledge that cultural conflict is inevitable and to highlight the values of the newly formed entity so that people have something with which to begin identifying. In the most successful cases of merging companies with divergent cultures, the views of remaining employees are solicited in the creation of the new culture.

Communication is another facet of successful integration: Employees should be encouraged to discuss their feelings of anxiety, job insecurity concerns and anything else related to the merger. For combating stress, real, detailed information from the CEO or Integration Team, whether positive or negative, is always better than rumor and hearsay. More generally, in all organizational communications, candor is preferable to unfounded optimism. For example, if no decision has been made about a crucial issue, it is advisable to acknowledge that this is the case, while providing a deadline for reaching a decision.

Of course, another reason that employees are fearful of mergers is the awareness that almost all corporate combinations include efficiencies achieved by eliminating "redundant" employees. While reduction in the workforce may be inevitable, and even fiscally desirable, the attitude of remaining employees to the new company will be affected by the degree of their involvement in helping to engineer the change.

The goal of integration planning is to enable employees to weather the turmoil and appreciate the benefits of the newly created company so they will continue to work productively, remain with the organization, and participate in the creation of a new organization and a culture attuned to current market realities.