Consciously crafting your new Culture is essential for successful Mergers and Acquisitions (M&A)
Your organisation’s culture is one potentially of your greatest strategic assets. Your competitors can match your prices, products or service but they will struggle to duplicate your culture. As your culture is what makes you successful it is essential to consciously manage your culture when two (or more) organisations merge into one.
Ironically, the more similar the organisation’s cultures are during Mergers and Acquisitions (M&A) the more challenging the integration will be. Often the more stark the differences the easier they are to manage as the differences stimulate discussion. With small cultural differences many will assume that they are not significant, but the small differences often end up increasing conflict and misunderstandings.
Culture clashes are the main reason that almost 70% of all Mergers and Acquisitions fail.
Mergers and Acquisitions (M&A’s) involve aligning two sets of expectations, as each side comes to the table with different desired outcomes. How we manage the human elements of the change – aligning the communication, behaviours and reinforcements (reward, recognition, performance management) impact the speed and success of the change.
Expectation Alignment Disorder (EAD) is often at the heart of failed change programmes.
Tips for crafting your new Culture in Mergers and Acquisitions:
1. Start planning early
Cultural Integration is a process, not an event. Too many organisations only start thinking about culture after the deal is signed. Culture could be a key reason why a merger doesn’t happen, so prioritise it at the beginning of the due diligence process.
- Understand the real Culture – It is essential to understand both your own culture and the attributes of your potential partner. Cultural assessment should look at both the formal and informal elements of the culture! Formal elements include written values, policies and procedures; job descriptions; organisation charts and performance appraisals. Informal elements (often unwritten) include relationships between stakeholders; internal politics; the unwritten rules; institutional habits; informal leaders/influencers and daily recognition/punishment practices.
- Look for shared purpose, values and beliefs – Go beyond what is listed on the company website, interview employees to get an insider’s view of knowledge sharing, communication flows and unofficial reward systems. Pay attention to how these elements are lived each day versus just what is written down.
2. Pay careful attention to leadership selection
Evaluate all the key leaders in the organisation based on the culture and plans for the new organisation. Who demonstrates the behaviours and skills required after the deal? Which leaders in the new combined organisation are ready for bigger roles? The leadership of the new organisation need to stay focused on the “why” and actively demonstrate the new values/culture. It is easy to forget why the deal was done in the complexities of merging cultures. The more leaders are open and human during a merger process, the more likely the process will run smoothly. Secrecy and an authoritarian approach lead to rumours and fear.
3. Communicate, Communicate, Communicate
Change communication is an essential part of successful Mergers and Acquisitions. Communicating early, clearly and often throughout the transition will make it easier for team members to adapt to the new organisation. Rumours of a merger or acquisition rattle us as we want to feel secure in our jobs and know how we will fit in. However, it is important to avoid platitudes – such as “Nothing will change” or “It will be for the better” as this will increase uncertainty. Plan and execute a two-way communications strategy (with frequent employee participation) that includes what, when and how to communicate to all the relevant internal and external stakeholders. Communication must pay attention to the emotional elements as people’s values, beliefs and emotions drive their actions and behaviours, and these in turn impact the results produced.
4. Clarify roles, responsibilities, and processes
The earlier we give our people clarity on the roles, responsibilities and processes in the new merged organisation the better. Help employees to answer these questions as soon as possible: Who is my boss? Where do I fit in? What am I responsible for? Who relies on my outputs/information to do their job? How does my work contribute to the success of the organisation?
5. Create early wins
Mergers and acquisitions are an emotional process for the stakeholders involved. Our employees, customers, suppliers and investors are all looking for signs of success or failure. Craft and seek out early wins, and communicate them to all the relevant parties.
6. Clarify the goals of the new entity
Leadership must decide if one company’s culture will dominate, if each will maintain its original culture, or if a new unified culture can be reached. It is crucial for the new combined leadership to be on the same page about where the organisation is heading, and the culture that will support these goals. Effectively sharing the business case that underpins merger or acquisition is critical as it shapes what must be done, how people are expected to contribute and the behaviours required.
7. Get your people Involved
The more members of the organisation are involved in the change process, the more likely they are to embrace it. Change impacts everybody, not just the organisation being acquired. Existing employees may feel apathetic, threatened or excited. Participation helps increase buy-in and to shape the assimilation process. Some ways to involve stakeholders include:
- Create a culture committee to explore and share the values of the new organisation
- Share best practice and lessons learned throughout the process
- Initiate a buddy system to provide a support system during the change
- Run training early on to share core skills and values
These approaches help make the new people feel more welcome, and allow your existing staff to participate in shaping a living culture.
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