An M&A strategy can generate synergies, growth, drive value, expand market access and establish a global presence. But while deals can benefit the companies involved, many mergers have resulted in lost value for shareholders because of culture clashes.
Ask 100 different people what their company’s culture is, and you’ll get 100 different answers. Mergers can leave employees feeling isolated, unsupported and unsure about what the future holds. This uncertainty can undercut the upsides of any deal and even derail it.
For a deal to be successful, culture clashes have to be eliminated well before the deal is done. Otherwise, the enterprise runs a great risk of losing its most valuable and high-performing talent.
MANAGING CULTURAL INTEGRATION
No merger is easy and there is no general integration template that can ensure a successful outcome. In order for cultural integration to be effective, it has to be specifically designed for the two companies involved. You need to create a roadmap that you can easily follow.
Here are some concrete action steps to help you build a targeted cultural integration strategy:
Focus on culture early on
Cultural integration starts in the due diligence stage. It’s extremely important that the leadership body of the newly formed entity is fully informed and prepared to design and implement a cultural integration strategy.
In this early stage, it’s important that culture management is part of the overall integration effort, rather than an isolated HR process that will slowly loose its significance as the deal progresses.
Get management approval in this early stage. Make sure that cultural integration is part of the overall M&A action plan and that all stakeholders agree on it.
Define how you want your culture to look like
Culture is often overlooked when in fact it should be used to the benefit of the transition process, as a catalyst that brings together the two organizations.
Start by assessing the current state of both cultures. Analyze individual and organizational behaviors, the business outcomes they produce and the key factors that influence patterns of behavior.
This will help you understand how people operate in both cases and it will serve as a starting point to creating the new merged culture that will serve your business objectives.
Set a clear image of how you want your culture to look like in terms of:
- Leadership style – patriarchal or community-oriented?
- Company values and direction
- Environment attributes: collaborative or process-driven?
- Coordination and control (management style)
- Capabilities and talent management
- Employee engagement and motivation
- External orientation
As a key M&A success factor, cultural integration does require its own time and effort investment. In order to overcome the action freeze that follows the well intentioned planning stage, you need someone to make triage decisions, manage taskforces and set the pace; you need time, effort and involvement.
You should have an integration team to oversee the entire M&A integration process and, within this team, someone exclusively responsible with the cultural integration.
The main resources you will need are:
- A strong leader to oversee and coordinate the cultural integration process
- Time and effort to analyze and strategize on the existing cultures and the desired final culture
- Preparation and involvement of the leadership body
- A communication strategy
- A communication channel available at all times to connect with middle management
Focus on leadership
Companies often overlook an assessment on the capabilities and capacity of the leadership team to manage a cultural integration. They are the first people who should be informed, trained and equipped with the necessary resources to actively ensure a successful cultural integration.
For example at IMG we take a practical approach on company culture by focusing on management practices. By viewing culture as a result of these practices, we make it easier to define, identify and tackle cultural integration.
One of the main reasons why M&A cultural integrations fail is the inherent power struggle. The new company has to be designed around the desired culture. Its new leadership body has to include people from both organizations, people who are enthusiastic about the new vision and who are able to contribute the most to seeing it accomplished.
Don’t wait too long to select your new leaders. You risk endless corridor debates about who’s leaving or staying, power conflicts, frustration and turnover.
Change communication is a critical element in creating, managing and distributing the messages at each stage of the cultural integration process. To help employees understand and cooperate in this monumental effort, leadership must present the story early on, in a straight-forward matter, addressing all key aspects that deal will involve.
Employees need to know what’s changing, why, when and what will happen, both in the overall big picture, as well as on a day-to-day basis. They need to understand what this means for them and what the newly promoted behaviors are.
It’s essential that the communication efforts be organized in a well-thought change communication strategy and that they remain constant throughout the merger (both pre-merger, as well as post-merger).
However, be careful to remain human in your communications efforts as this is already a challenging time for your personnel.
Have your cultural interventions target specific behaviors
Focus not only on the “what” but the “how” of culture. In the early stages of assessing a culture, the most valuable information you have to obtain is what the key cultural drivers are.
What makes people engage in certain patterns of behavior? Understanding how a culture works gives you all the information you need to design a successful cultural integration strategy.
Seeing how these drivers interact will help you asses the threats and opportunities that you face and build dedicated approaches.
IMG offers a tool called ”CULACT” to use in identifying the main culture and engagement drivers in your company. It gives you an honest, detailed analysis into what determines certain behaviors and how people feel about a cultural integration.
Using this information, you can customize both your communication strategy, as well as your cultural integration activities, to fit the need of your employees. This way, you avoid losing your key talent and you keep productivity levels high.
Cultural integration is a key part of the overall integration process, as most companies foresee in their planning efforts. However, planning rarely translates into action. Remember, mergers represent an enormous operational and cultural change for employees. Therefore, the management has to act.
For some companies, this is due to a lack of understanding into what culture is and how it can be productively managed during the integration process. For others, priorities shift and all that remains is a well-written plan that never got to be executed.
In order to ensure a successful cultural integration, the focus should be on acting rather than planning. Creating a cultural integration roadmap requires resources, effort and a targeted approach.