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Housing Association Mergers - time for the sector to eat a little humble pie?

The world seemed a bit of a different place a few months ago when I wrote a blog on “the rise and fall of the mega mergers”. Brexit vote was in, however it felt like this poll-defying outcome was a one-off blip; little did I know… 

Construction hats

Something else started to defy the odds, contrary to much cynicism (including my own): significant housing association mergers are actually starting to cross the line. Perhaps I’m desperately reaching for those rose tinted spectacles or it is the innate positive psychologist in me, but with Clarion, Sanctuary/Spectrum and L&Q/East Thames over the line it feels something is starting to shift.

The business case for consolidation of the sector is still a long way from proven - as Mark Rogers (Deputy Chief Executive, Clarion) told me, “the hard work starts here”; however with some Appreciative Inquiry into “what went right”, as oppose to dwelling on what went wrong, I think it is time to open our minds.  

Keeping focus on the vision

Speaking to some of the key players in the sector, it is unsurprising that there are commonalities considering the ingredients for merger success. Yvonne Arrowsmith, Chief Executive of East Thames told me:

“It took eight months to successfully complete our merger with L&Q. What kept us on track…has been our shared vision and commitment to providing more affordable housing and first class services to our customers.”
“When it got tough, it helped to remind ourselves why we were doing it, by spending time with our customers, sharing their stories with our staff and keeping in mind the thousands more we can reach by working together”.

When I asked David Montague, Chief Executive of L&Q, about the key ingredients to success, unsurprisingly he echoed that vision and social purpose were key for resilience when the going got tough:

“The thing which made our deal worth fighting for in those inevitable moments of doubt was shared vision and values. From the outset we wanted the same outcome, we wanted to be bold and ambitious, we wanted to write housing history, and we wanted to stay true to our guiding social purpose.”

Mark Rogers stressed something very similar. The business case for the merger of Circle and Affinity Sutton was clear: Clarion in its lofty ambition of delivering 50,000 homes over the next 10 years comprising 65% affordable housing is undoubtedly greater than the sum of its parts.

“What is integral is that you hold the core belief and overarching vision in mind so you can drive the agenda through.”

Mark Rogers also felt it was important to give staff opportunity to share their concerns:

“Give them the chance to air doubt, and help them understand the rationale by sharing the business case with them.” 

The financial gain – often one of the merger drivers in the private sector – is absent in the social housing market. Arguably, this makes the social purpose and vision of the mergers even more significant.

Cultural alignment

Interestingly at a recent round table event run by Social Housing, Elizabeth Froude (Executive Director of Resources, Genesis) took on a slightly different viewpoint. Perhaps referring to the recent ill-fated merger plans with Thames Valley HA, Ms Froude commented:

“The focus on the end goal can be so strong that you never stop to look at what’s going on around you”.

She added it is important to “never underestimate the cultural difference between organisations”. Not the first to make such an assertion - the original management scientist Peter Drucker said famously “culture eats strategy for breakfast”.  

A lot of culture is intangible: it is not what you do, but how you go about doing it. The part you can see and articulate is only the metaphorical tip of the iceberg, and maybe it is unrealistic for there to be a close ‘match’.  

It is easy to see how a fixation on cultural differences may open too big a can of worms. When I asked Mark Rogers about how Circle and Affinity Sutton reconciled the differences in culture, he referred back to the shared belief that he and Keith Exon (CEO Clarion) held: simply that Housing Associations need to build more houses. Commenting on a similar discussion point at the Social Housing round table, Mark Washer (Chief Financial Officer, Clarion) highlighted that it is important to stay focused on alignment rather that differences; ultimately it shouldn’t be too hard to find a common culture between associations.

‘We’re housing associations: it’s not like we’re merging Oxfam and an arms dealer’.

Trust is key

Whilst there is a healthy debate as to whether culture or shared vision is the most important component of success, there is no doubt the two are intrinsically linked. Whilst merger 101 states that personalities should not be the main driver (or derailer) of mergers, trust between the key individuals on both sides is perhaps the ultimate hygiene factor. Mark Rogers and Keith Exford had known each other for a long time and as Mr Rogers says, they had a good sense of how they would operate together to achieve their shared belief. Yvonne Arrowsmith underlined the trust element and the need to recognise organisational strengths. She said: 

“While L&Q may be the larger partner, they’ve always recognised East Thames’ reach in east London and Essex and our expertise in care and support”.
“We’ve also relied on the honesty that exists between the two executive teams. Our success has depended on frank, open conversations, in order to ensure our new organisation captures the best of both.”

We may not want to start eating humble pie just yet, as the business case for the mega merger is far from proven; the seedlings are however hatching and the sector is a small step closer to realising a vision of doing things differently, more efficiently and to ultimately build more houses. 

As always, your comments are welcome.

 

Sarah Stevenson is the Principal of Social Housing at Interim Partners.

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