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To Merge or Not to Merge: That is the Question - Part 1

Change has been the watchword for many fire department operations during the first decade of the 21st Century. A number of our accepted practices within the fire service have been revised and the manner in which services are delivered has witnessed a number of changes. In a great many cases, the actual departments which we have come to know, love, and understand have needed to be changed to meet the societal and economic imperatives of our new public safety environment. Some changes have been non-confrontational, and easily accepted, while others have been really ugly, drawn-out battles.

Let me suggest that the impetus for operational changes comes from the fact that our national economy has gone into a deep recession. It has been my experience of the course of my career that when the economy slows down, people begin to look for ways to save money. Government also begins to pay closer attention to the way money is being spent. When the citizens of a community express a desire to see cuts in the local budget, the government entities must work harder to spend the money of the people wisely. If they don't do this, people will express their displeasure at the ballot box. In this way, pressure is placed upon government to husband their scarce tax resources. Let me suggest that to some extent, this is what is happening all across America.

In New Jersey, things are no different. At the current time, for example, the state government has become a strong proponent of such concepts as shared services and municipal consolidations. Laws have been passed and funding has been provided to study the manner in which these state-mandated programs could be developed. More than this, the media is heralding the wisdom of using consolidations and shared services agreement to stretch the taxpayer's dollar. Pressure is being put upon local government to look at mergers and consolidations and the new way of doing business. Bartels, et al (2006) suggests that, "...both in profit and non-profits organizations, mergers seem to be the order of the day" (p. S49). New Jersey is merely joining with the balance of the country in their search to deliver fire protection services in a more cost-effective manner.

In order to understand how such consolidations and mergers work, we need to explore what they are, how they work, and the impacts of them upon our existing staff? The people who deliver the service have an important stake in the equation, as their lives and labors are an integral part of the manner in which fire protection services are delivered to the public: the people who are being asked to pay for the services which fire departments deliver. Research performed by Ling (2001) strongly indicated that, "...when considering consolidation as a way to cut cost and prepare for economic slow downs, we must consider how we effect the people involved" (p. 3). However, it has long been a personal belief that before any of us can determine how something should (or should not) be done, it is critical to come to an understanding of just what that something it is. In line with that, let us take a look at just what mergers and consolidations are and how they are supposed to work.

What is a merger? What is an acquisition? What is a consolidation? These are all critical questions which must be answered if we are to provide a clear portrait of the various opportunities for organizations to come together. While you might imagine that they are all the same, the differences might be a bit surprising to you. It is these differences which make the combination of two (or more) organizations somewhat problematic.

Gleibs, et. al. (2008) note that, "...merging is a strategy designed to increase competitiveness, reduce costs, create synergy, and meet changing financial and demographic challenges" (p. 1095). In those situations where one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. Let me suggest that this sort of organizational combination is not what we are looking for in the fire service environment. This has all of the characteristics of a bully stealing your lunch money. The usual example is of a big and powerful organization swallowing a smaller and weaker group. This is somewhat akin to a python swallowing another animal whole. It is not pretty and it has a habit of creating a lot of really ill will.

A consolidation is the generic term for the combination of two or more things (jobs, entities, etc.). You can consolidate debt for a new loan. You can consolidate operations from a wide variety of locations into a single new facility. You can consolidate a number of organizations in order to create a new organization. This concept has been around for a long time. In fact the generic terms merger and consolidation can actually be tied together by definition within a thesaurus. These words stand for what is called the combination of things.

In the purest sense of the term, a merger happens when two or more organizations agree to go forward as a single new organization rather than remain separately owned and operated. In some cases there is a recognition that it is in the best interests of all parties to come together in a new and stronger version of the existing organizations. In the fire department arena, a merger occurs when two (or more) fire departments come together in a new form or operational arrangement. Coincidently, this is what a consolidation is designed to achieve. Ling (2001) argues that, "...the consolidation of fire departments in almost any community would mean cost savings for the taxpayers" (p. 4). However, what are the driving forces behind the merger/consolidation effort in the fire service operational area? Research findings reveal the following:

  1. Lack of adequate staffing
  2. Societal changes
  3. Increasing call volume increases service delivery need
  4. Equipment shortages
  5. Apparatus duplication
  6. Cost reduction
  7. Improved efficiency
  8. Public dissatisfaction

In the state of Pennsylvania, the number of volunteer firefighters has plummeted over the past 40 years. Reeger (2008) indicated that, " … (T)he number of volunteer firefighters in the state is in sharp decline, from 300,000 in 1976 to 72,000 in 2005, according to the Governor's Center for Local Government Services" (Pittsburgh Tribune Review.com). Fire departments are simply unable to field a sufficient number of firefighting personnel to constitute a viable public safety workforce. Reeger (2008) noted that there are a number of communities which have even entertained the notion of disbanding their fully-paid, career fire departments. David Eckman, President of the Pennsylvania Professional Firefighter's Association went on record as suggesting that, " … it is high time in Pennsylvania that we really start taking a look at providing this vital public service on a much larger scale than just every little town, every city having their own department" (Reeger, 2008, Pittsburgh Tribune Review.com). It is important to note that the combination of decreasing volunteerism and increasing call volume is one critical element of the service-delivery problem package.

In those communities where fire protection is provided by a fully-paid, career fire department, the economic issues come quickly to the front as problems for local government. In the state of New Jersey, the Jersey City Fire Department has seen nearly 150 fire personnel retire since December 2009. When you combine the drop in personnel, with a freeze on hiring, you see the potential for a number of operational problems. Fire companies are being closed on a rotational basis and as a result, response times are increasing. In September of 2010, the Newark Fire Department was threatened with a total of approximately 97 layoffs and demotions in the 2010 time frame. The Trenton Fire Department is facing a loss of approximately 78 members of a much smaller force. The same is being seen in a number of states in our nation. It is in situations like this where the concept of mergers and consolidations begins to gain traction.

Let us separate the issue of staffing from apparatus and equipment. In many cases there is a larger fire apparatus fleet than is actually needed in a given area. This comes from a desire by many groups to have one of everything, even though a nearby neighbor has that particular piece ready and available for instantaneous deployment. While at one time this was not a problem, a combination of escalating costs for apparatus and equipment, and an economy that is not performing well makes this an attitude whose time has passed. When you factor in the costs of maintaining and insuring the fleet, you can see the potential for a dollar savings from consolidating different agencies. At least this has been our experience.

Gleibs, et. al. (2008) reported that, "… two thirds of all mergers do not meet their expectations and fail" (p. 1095). It is also important to understand why mergers sometimes fail. A number of such reasons were identified during research on this process:

  1. No cost savings occurred
  2. Service did not improve
  3. Different organizational cultures
  4. Fear of change
  5. Animosity between elemental subgroups within the merger process
  6. The blame game

There is also research which indicates that the merger/consolidation process can have a strong negative impact upon leadership within the combined, new organization. Ling (2001) notes that, "…the effects of combining services will have a different emotional impact on all involved. One estimate identified the period of ten years as the time it would take to develop a new leadership environment" (p. 5). In addition, in those cases where there is a service overlap, it is common to experience a loss in those positions which are suddenly surplus in the new reality. It has been the experience of a number of my professional associates and I, that three general reactions might be anticipated among people within an organization when faced with major organizational change:

  1. They see it, like it, and embrace it.
  2. They see it, need to be convinced of its rightness, and will wait to make their decision on how to interact with it
  3. They do not like it. They never will like it. They will do all within their power to make the new approach fail.

The key is to build upon the support of those people who like what they see and work to gain the support of those who are sitting on the fence, waiting to be convinced. Once you have won over these two groups, you need to be able to root out and challenge the people who are fighting the efforts at change. The most fortunate circumstance comes from people who openly challenge the change operation. Discipline is the tool of choice here. There will be a certain amount of behind the scenes and underground sniping at the changes. Be tough and stand by the decision to change. It is my personal experience that many times the only way to win is to outlive the other side.

References

Aakers, D.A. (2001). Strategic market management. Hoboken, NJ: John Wiley and Sons, Inc.

Bartels, J., Douwes, R., de Jong, M. and Pruyn, A. (2006). Organizational identification during a merger: Determinants of identification with the new organization, British Journal of Management. (Vol. 17 pp, S49-S67).

Carter, H.R. (2001). It's all about me. Conshohocken, PA: Lyons Publishing

Gleibs, Mummendey, A. and Noack, P. (2008). Predictors of change on postmerger identification during a merger process: A longitudinal study. Journal of Personality and Social Psychology, Vol. 95, No. , 1095-1112

Ling, J.D. (2001). Fire department consolidation: A view from those effected. Ypsilanti, MI: School of Fire Staff and Command. Eastern Michigan University.

Reeger, J. (2008). Fire department mergers ahead. Pittsburgh, PA: The Pittsburgh Tribune Review. Retrieved on August 24, 2010.

Weidner, J.S (2010). Strength in numbers. Fire Chief Magazine, vol. 54, no. 5. p. 36-37.

HARRY R. CARTER, Ph.D., CFO, MIFireE, a Firehouse.com Contributing Editor, is a municipal fire protection consultant based in Adelphia, NJ. Dr. Carter retired from the Newark, NJ, Fire Department and is a past chief and active life member of the Adelphia Fire Company. Follow Harry on his "A View From my Front Porch" blog. He recently published Leadership: A View from the Trenches and Living My Dream: Dr. Harry Carter's 2006 FIRE Act Road Trip. You can reach Harry by e-mail at drharrycarter@optonline.net.

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