HOW SHE SEES IT Merger mania: Size is the law of the jungle

By ROSABETH MOSS KANTER
KNIGHT RIDDER NEWSPAPERS
"When elephants dance, the grass gets trampled."
That African proverb could be an American business saying, too.
Corporate giants are prowling again, hungry for acquisitions. Will they trample the folks at the grass roots?
The biggest retailers are getting bigger. Federated (owner of icons such as Macy's and Bloomingdale's) is buying May Department Stores (Lord & amp; Taylor, Filene's and others). CVS expanded its already-large chain by buying Eckerd.
"As retailers swallow, manufacturers follow" -- to coin a new business proverb. Giant distributors provoke suppliers to merge. Gillette executives cite the need for clout with gargantuan Wal-Mart as the reason for selling Gillette to Procter & amp; Gamble.
Size is the law of the jungle. Banks continue to consolidate; Citizens Bank CEO Larry Fish predicts that six big banks will soon dominate the U.S. market. Media conglomerates own local broadcasters and newspapers. Telecommunications is shaking down to just a few giants, as SBC acquires AT & amp;T, Verizon and Qwest vie to buy MCI.
This merger surge derives from more than a herd mentality or ambition to be king of the jungle. It reflects a long-term economic power shift from production to distribution. Companies with large distribution networks dictate terms to their suppliers and control the flow of goods and services to consumers.
Long-term economic logic might favor this process, but in the short-term, much grass gets crushed.
Effect on consumers
Let's start with consumers, whose purchases fill company coffers.
Consumers hate mergers, Business Week asserted in December. That's not surprising. In service industries, a change in company ownership potentially inconveniences each individual user of a bank account, e-mail domain, cell phone line, long-distance plan, or discount card -- not to mention losing neighborhood facilities. While waiting for services to improve, consumers bear the costs of confusion -- and upgrades they might not want.
Another grass-roots worry is rising prices if competition decreases. At a House Energy & amp; Commerce Committee hearing last week, U.S. Rep. Edward Markey, D-Mass., asked six telecom CEOs involved in three potential mega-mergers to guarantee not to raise post-acquisition prices. No promises.
The work force isn't happy either. A Conference Board report on falling U.S. job satisfaction finds widespread discontent across ages and incomes. Half of all Americans surveyed say they're satisfied with their jobs, down from nearly 60 percent in 1995; only 14 percent feel very satisfied. In a related study, 40 percent feel disconnected from their employers, 25 percent are just "showing up to collect a paycheck." Mergers add uncertainty and anxiety that depress satisfaction.
Some laid-off employees pray for work, others decide to worship something bigger than business. After merger-related layoffs in a suburban high tech corridor, church attendance increased.
Communities lose
Community leaders deplore acquisitions that remove a local headquarters. My research shows that companies contribute more money and leadership in their home office city. A division owned by a giant elsewhere doesn't have the same check-writing ability. Local nonprofits find corporate support shrinking -- unless they, too, expand their networks across cities to match giants' national reach.
Personally, I don't hate all mergers, I just hate the way most are managed.
Attention focuses on making the deal, not on what happens afterward.
Some mergers do bring instant improvements. CVS enhanced pharmacies at former Eckerd stores. Shinhan Financial Group in Korea raised wages for workers in an acquired bank. Others create funds to maintain local community support for several years. This shows what's possible.
Ways to respond
Opposition to mergers by local politicians is often misguided and futile. But if concerned citizens can't trip the elephant, they don't have to let grass grow under their feet either.
Consumers can make noise at the first announcements and vote with their wallets. Workers can keep skills fresh and an eye on starting their own business. Voters can insist on better programs to help with transitions and attract new jobs. Local nonprofits can develop innovations valuable outside their community. Communities can encourage leadership from those more deeply planted than big companies: entrepreneurs (including women) and professional sectors such as education and health.
We know what kinds of beasts the elephants are. That makes it even more important to cultivate trample-proof grass.
X Rosabeth Moss Kanter is a Harvard Business School professor and author of "Confidence." Readers may send her e-mail at rkanterhbs.edu. She wrote this for the Miami Herald. Distributed by Knight Ridder/Tribune Information Services.