May 14, 2019
Newly merged cultures have the very real potential to negatively impact employee morale, stymie collaboration, and far worse, diminish the quality of employee interactions with customers, vendors, and others outside the organization, impacting business results. So why is merging corporate cultures more challenging today than it’s ever been? The short answer is communication. The long answer – as would be expected – is more nuanced. But, first…
More mergers fail than succeed. This simple batting-average doesn’t distinguish between flawed deal valuation, failures in execution, deficient synergy realization, and the inherent complexities of combining cultures. The reality is, during pre-merger planning, it’s nearly impossible to anticipate all of the realities that await a newly combined culture after a merger is finalized.
So, what is the long answer?
It starts long before the merger is even consummated.
Given tightly managed communications between parties during M&A diligence, there are frequent impediments to understanding the other company’s culture. If cultural incompatibility exists, it is often discovered too late.
Additionally, now more than ever, employees at merged companies (as in real life) simply have too much messaging clutter – attention-consuming social networks and an array of digital mediums bombard them throughout the day. This results in less reception to the verbal and written messaging that facilitates leadership influence. And yet, spoken word is sorely needed from leaders of merged entities.
What to do about it.
If you’re wondering how your organization can increase its chances of successfully merging two cultures, here are some worthwhile practices to consider:
- Ensure employees have a voice: Before the merger, gain insights into the culture (and any subcultures) by the people who know each of the combined businesses the best.
Consider small group discussions, brown bag lunches, or coffee chats between leaders and employees of the acquiring and acquired firms. Town halls and Q&As can be effective, as is simply walking the halls and striking up informal conversations. Each of these is harder to do before a merger (confidentiality, facility access, the pre-merger frenzy); however, whenever possible, gathering information from employees – and even former employees – is a valuable endeavor.
This Harvard Business Review article on Amazon’s acquisition of Whole Foods illustrates the potential hazards of insufficiently assessing cultural compatibility in advance of a merger.
- Define a Cultural Change Plan: This, once you have a working understanding of both cultures and their most consequential differences.
A Cultural Change Plan involves quickly identifying and articulating shared cultural values and connecting them to a unifying aspiration that solidifies those values and ties to winning in the marketplace. As a general rule, winning is a rallying cry for employees at both entities. And it’s important that employees recognize some aspects of their pre-existing culture in the unifying values articulated. This may require some sorting and sifting, as not all values work bilaterally for both cultures. In mergers, the dominant company will typically weigh more heavily on the newly combined culture. Therefore, acknowledging the different core elements of the smaller firm’s culture, and how they link to its performance, is important to drive joint performance.
When making pivotal strategic decisions, it’s healthy for leaders to have disagreements, identifying, prioritizing, and deprioritizing initiatives with finite resources. That said, there needs to be a foundation of agreed values and norms of behavior to enable that sharpening dialogue about strategy and execution.
- Activate the Cultural Change Plan: This includes committing to behavioral reinforcement and effective communication of the newly established (or newly articulated) cultural values.
Sample activation plans typically involve the following:
- It starts at the top with C-suite leadership modeling how seriously they take the values, at both small gatherings and large meetings.
- Business leaders should also actively seek out project(s) between the combined entities where the values are critical to that project’s success. It’s vital to invest heavily in those projects. Any success stories have the added benefit of illustrating positive impact of the joint values.
- Catch people doing something right. This could mean sharing situations within the new entity where values were clearly demonstrated.
- Set up a nomination process with rewards that empowers employees to recognize colleagues, indirect reports, or others throughout the organization who have exemplified the joint core values.
- Integrate the values into HR practices, including reviewing and incentivizing adherence, while also reprimanding instances where a joint value was neglected.
These are a few examples. The takeaway is: with greater intentionality and an ongoing commitment from leadership to communicating and standing by established jointly developed cultural values, meshed organizations have a far greater chance of not only surviving a merger, but thriving long after it.
See also approaches on successful change in this white paper from HighPoint Associates’ Senior Consultant, Alex Nesbitt: Keep the Change: Making Business Transformations Work.
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The highly accomplished consulting team at HighPoint Associates has both the operational chops and industry expertise to successfully and rapidly execute each aspect of M&A planning and integration. We’ve led significant M&A activities internally, and understand firsthand each endeavor is a high-stakes event that integrates complex assets, cultures, processes, and IT systems. Contact us today to learn more about HighPoint’s mindful approach to mergers.