3 Key Factors Drive Culture Success in Mergers and Acquisitions
There are many reasons organizations set out for a merger or acquisition. It’s a business tool to grow the bottom line by obtaining key processes, achieving economies of scale, or realizing quick growth.
Time and time again, research demonstrates the importance of cultural integration to merger and acquisition success. With over 30% of mergers failing simply because of incompatible cultures, why does this often become an overlooked piece to the success of a merger or acquisition?
Mergers and acquisitions can be long, drawn out processes. Additionally, it can be difficult to obtain information about a company’s culture during the due diligence process. After the final paperwork is filed, it’s easy for top leaders to focus on leveraging the new business advantages to grow revenue instead of integrating the cultures. However, if culture integration is pushed aside, often the organization’s future success is pushed aside too. In order to not lose sight of the people side of a merger or acquisition, here are the three key factors to remember for a successful culture integration.
Mapping the Integration Process
Defining what the organization will look like when the culture is fully integrated is the first step towards mapping out the process. Filling in the details by outlining how the organization will get there is the next step.
Brian Mazar, a Certified Business Intermediary, and owner of American Fortune Mergers and Acquisitions LLC, sees the mapping process a critical step in setting the tone for cultural integration. “Companies must avoid placing the acquired company in a passive position during this process. As a co-pilot they have the ability to set the integration up for success”, he said.
An integration or transition team dedicated solely to culture provides the necessary building of relationships between the organizations to operate as one. This team has an important role, so careful consideration must be taken when making these assignments and should consist of recognized and trusted leaders from both organizations. A great example of this is found following the Disney and Pixar merger. Each company chose key change agents to create a transition team. This team proved as the key driver of an aligned organization.
Go slow to go fast. Part of mapping the integration process is being realistic with timelines. Many organizations focus on culture integration within the first 30 days of a merger or acquisition. However, truly aligning the culture within the new organization may last six months or more.
Develop the Right Communications Strategy
Various communication strategies have been proven to be successful in merging cultures. Examples of strategies that can be used are town hall meetings, focus groups, email and intranet communications. Even when addressing a large audience, individual concerns need to be addressed to gain trust from both organizations. Knowing the audience and how the organization has communicated with them in the past is important in making future decisions.
Throughout the Adidas and Reebok merger of 2005, Adidas believed in frequent communications to all employees along with monthly pulse surveys. These pulse surveys revealed the core issues the core issues concerning these employees. The surveys were followed up on and these issues were explicitly addressed either with the individual or through a group where the concern existed among several employees. Allowing employees to express anxiety in a safe environment and then following up on those concerns proved successful tactic for this merger.
During the town hall style meetings following the Procter & Gamble and Gillette merger, emphasis was placed on the best of both companies. The actions of Procter & Gamble following these communications demonstrated they were committed to learning from the newly acquired organization.
Although there is not one right way to approach the communication strategy, the key is to communicate to the employees. These communications provide the opportunity to redefine corporate values and reconcile differences between the two organizations. In addition, when competitors join forces in a merger, the tone of these communications must convey unity, not competition.
Chris Edmonds from the Purposeful Culture Group works with companies during the merger and acquisition process on cultural integration. In order to move the culture forward and truly transform the merger and acquisition process, he suggests developing an organizational constitution. He further went on to say, “A company must see the merger and acquisition as an opportunity to be explicit with their desired culture, not just announcing their desired culture. They must define it in observable, tangible and measurable terms. If a company wants a purposeful, positive and productive culture across all business unites, it must be specified.”
Create Collaborative Teams
Early on, it’s normal for actions between teams to be transactional in nature. Works gets handed off or passed along with little question or interaction. As time progresses, however, the goal is to transform these handoff interactions into meaningful working relationships.
Barriers to the team’s success must be removed to create collaborative relationships. These barriers could be the added challenge of global culture integration or could be as simple as not having a proper introduction between new coworkers. To foster information sharing and a collaborative working environment, cross-cultural training may be needed. This training should address communication, decision making, and teamwork styles. Regardless if the merger acquisition was local or global, employee networks and mentorships are a great way to break down barriers in employees working effectively together.
An example of creating a collaborative team following a difficult acquisition involves CEMEX and RMC. To address an underperforming plant operation in England, the company assigned a team from both organizations to turn it around. This team worked through cultural barriers and developed processes for other teams to follow. The success of this integrated team was shared throughout the organization and it laid the groundwork for more collaborative assignments.
Realizing the Full Potential
Businesses will continue to merge together. Companies will continue acquiring new organizations. The ultimate goal is to gain the benefits from both organizations to function as one. It is imperative for a business to understand the people consequences of these transactions and build collaborative teams to transform the future. This is accomplished by building trust and transparency through a thought out process and approaching the integration as an opportunity to establish the desired culture.
Understanding and accepting the human emotions during this change allows companies to set a successful path to cultural integration. Edmonds states that this may run counter-intuitive for most managers who never had to manage the quality of workplace relationships. However, when leaders simply focus on financial gains or determining winners and losers from the merger and acquisition process the company risks losing key talent, the true value in any organization. Balancing the tangible and intangible assets in mergers and acquisitions allows for unlimited potential and return on investment. With so much potential gain, a business would be foolish to not invest the time, energy and resources by implementing these three factors to a successful cultural integration.
Founder and CEO of Best Practice Institute, partner to Newsweek on America’s Most Loved Workplaces, and the author of more than 10 books on best practices in leadership and management, including Change Champion’s Field Guide, In Great Company, and Best Practices in Talent Management. Thought leaders and executives voted him as one of Global Gurus Top 10 Organizational Culture thinkers worldwide, and his feedback and benchmarking software has won HR Tech’s top product of the year award. Louis has been featured in Forbes, Investors Business Daily, Newsweek, MSNBC, Fast Company, and interviewed widely. For more information on Carter’s story see, “Meet the Fixer” and GoSolo.