One of the most-cited challenges to executing a successful merger or acquisition is the adoption of the new corporate culture and values within the integrated organization. However, making cultural integration a high priority early in the M&A process could increase the likelihood of long-term success for the newly merged company.
Laying Groundwork for Transparency
Development and implementation of clear, comprehensive communication with all stakeholders—employees, clients, and shareholders—should occur as soon as the parties are committed to an M&A transaction. In its absence, stakeholders may be left with troubling unanswered questions. An employee, for example, may wonder about the reasons for the merger, whether their job is in danger, and how their future opportunities will be affected by the new entity.
Information communicated early on in the process may be limited, so it’s important to reassure stakeholders that details will be shared as soon as possible and to provide a mechanism for submitting questions or comments (and, of course, addressing them). Help employees see the cultural bonds the organizations share, identify the best aspects of the transaction, and be forthright about the challenges. The goal is to have engaged, informed stakeholders, and this is more readily achieved if people know what to expect and what is expected from them early in the process.
Assessing Existing Culture and Core Identity
Before coming to the negotiating table, each organization involved in the transaction should have clarity about its culture and core identity; branding is related and relevant to this analysis.
Definitions vary but are generally along these lines:
- Culture – working and behavior norms and the mindsets that characterize them; management practices; and employee experience
- Core Identity
- Mission/Purpose/Vision – what an organization does, and how and why it does it
- Guiding Principles/Values – guidelines for behavior
- Value Agenda – how the organization creates value for customers or clients
- Brand – How stakeholders and the market perceive an organization
A crucial but possibly tough part of this analysis: Each organization must evaluate whether its culture is in alignment with its stated core identity. For example, if superior customer service is a core value, are orders delivered on time, or are they routinely late? Each organization should also identify the elements of the culture and core identity that must be preserved in the new entity.
The negotiating teams should then meet and compare their analyses—are their cultures and core identities compatible? Are the elements on the “must-be-preserved” list acceptable? A Deep Dive into Culture
If the organizations decide to move forward after the initial analysis, the next step is a deeper dive into the culture of each organization. To achieve this, the transition team should create a diagnostic tool with objective criteria. The goal is to generate an information base about the culture of each organization and use it as a common lens for evaluation. They can use this lens to identify similarities, opportunities, and differences that must be resolved.
The team should also identify critical success factors in each organization and examine how work gets done.
For example, they can investigate how decisions are made, how people are held accountable, how people are motivated, which aspects of the organization work well, and which could be improved. Data gathering methods could include organization-wide surveys, one-on-one interviews, and focus groups.
Role Modeling the New Culture
The next step is to define the elements of the new culture and core identity—its behaviors and management practices—and disseminate this information to stakeholders, especially employees. Any communication about a practice or behavior in the new entity should tie it to the relevant guiding principle/value.
The top team will lead by example, role modeling changes in behavior. Storytelling will be a critical part of this process. The transition communications team should develop a compelling, consistent change story for leaders to use and personalize their own experiences. This is especially important if there are any disparate practices in the organizations.
For example, if decision-making flows from the top down in one organization but there is autonomy for employees in the other, leadership needs to be emphatic and clear about the decision-making standard in the new entity.
Ensuring Long Term Sucess
The new core identity and culture must permeate all aspects of the organization to ensure widespread understanding and adoption. The transition team should oversee the redesign of policies, processes, and governance models to reflect the new culture. Developing mutually reinforcing initiatives will help solidify the new normal.
For example, if “we help each other succeed” is a core value, mentoring could be included as an assessment criterion in performance reviews. Branding for the new organization should be updated to reflect the new core identity to further solidify it in the minds of stakeholders.
The transition team should also recruit change agents from among the most influential employees. The team can provide training to these ambassadors about role modeling behavior and communicating about the change.
Building on the information collected early in the process, the transition team should develop a system for tracking the implementation of culture-related initiatives. They should develop milestones for each metric and monitor key performance indicators (KPIs), including HR KPIs like employee retention and turnover. Conducting periodic employee surveys and focus groups will further inform understanding of employee morale and the level of adoption of the new core identity and culture. Throughout the M&A process, the top leadership team must be at the front of the efforts and setting the tone.
Going through an M&A transaction provides an opportunity to use a fact-based examination of the component organizations to create a stronger, more resilient new entity. Clear, regular communication, comprehensive analyses of existing cultures and core identities, full engagement of and commitment to the new culture from the top leaders, and implementation of reinforcing systems to maintain it increases the chances of long-term success.
Michael Callam is president of Gertsburg Licata Acquisitions. Contact Mr. Callam today at [email protected] or (216) 573-6000 x7003.
Gertsburg Licata is a full-service, strategic growth firm, specializing in business law, M&A advisory and executive talent solutions for entrepreneurs and executives of start-up and middle-market enterprises. Our proven process ensures time and resources are dedicated to identifying the goals of your organization and how your executive talent needs align with that vision. Our expert recruiters partner with you to build your dream management team, securing the best talent to help drive value for your employees and customers. Contact us today to discuss how we can help you secure your next competitive advantage.
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