Integrating the Human Element in a Merger or Acquisition
By Jason Richmond, Chief Culture Officer
Bringing together two companies…
also brings together two sets of people.
Executives considering any type of merger or acquisition do their due diligence. They pore over balance sheets, scrutinize operational procedures, evaluate budgets and forecasts, and conduct numerous other analyses. But how often do they pause to consider the people. Bringing together two companies also brings together two sets of people. And the corporate cultures within which these people operate may be significantly different.
What can you do to overcome any differences and smoothly blend corporate cultures? It’s important to plan ahead, because the early days of a merger are so very precarious. It’s the time when employees on both sides are most nervous about the new relationship and how it is going to play out.
Here are some tips taken from my book Culture Spark: 5 Steps to Ignite and Sustain Organizational Growth that reveal how you can bring two cultures together to build a joint organization that’s stronger than the two separate entities:
Define the culture you want. Jointly establish your core values. If you don’t know what they are, you can’t expect employees to understand and internalize either.
Research and identify any significant cultural differences. Interview relevant personnel, hold focus groups, and conduct employee surveys. Talk to customers; they will be impacted too.
Communicate with employees, new and old. Keep them informed about progress. Make them feel involved. Foster links between peers at the two companies. Be ready to respond quickly to the inevitable rumors and concerns. As Nielsen’s Chris Augustine told me, “When employees aren’t sure of what to expect next, it can leave everyone on edge, waiting for the other shoe to drop. This is especially true during mergers or acquisitions, when facts and plans aren’t being shared freely, leaving the employee base to come up with their own conclusions—whether they are right or wrong.”
Plug the brain drain. Often, key managers become disenchanted with the blending of two companies. Go out of your way to keep this influential group on board. Otherwise, the exodus of talent can spread exponentially. Make sure people from both sides of the merger are involved in key projects.
Never forget that a company is only as good as its people. Companies often focus on integrating the operational elements (the policies and procedures, rules, and regulations), but don’t give equal time to the human elements (the relationships and informal structures). Conduct talent reviews sooner rather than later and identify the “keepers.” An executive from Coca-Cola once told me, “Identify your top talent and get your arms around them. Show them the love, over and over.” Sage advice, indeed.
Understand that size does matter. If you are a small-to-medium business (SMB), you might think that you can’t afford to devote resources to the issue of merging cultures. Don’t short-change culture. The smaller the company, the more intimate the environment. And because of that, the consequences of ignoring the issue of culture or thinking that everything will take care of itself can be extremely damaging.
John Hren, business director for a multinational basic minerals and marketing company, has seen corporate mergers from both sides of the fence. In one experience, one of the merging companies was very focused on short-term profits, cash flow, and the marketing program while the other company’s culture was much more focused on the long-term investment and basic research. “It almost turned into a civil war,” he recalled. Figuring out how they were all going to get along consumed the organization.
What lessons did he learn? “If you don’t set out a strong harmonious vision early in the merger process, it just degenerates into individual fiefdoms. If you don’t have a vision that both sides believe in and can work towards, then you’re already a step behind.” The vision has to be authentic and effectively communicated if you want employees from both merging companies to truly buy into it, he said. And it’s vital to get quick wins. “Get both sides focused on tasks and sub-tasks that can be achieved quickly. Having common goals to focus on—and completing them side by side—helps to bring the two different cultures together in the early stages.”
While that’s certainly true, doing effective “cultural due diligence” avoids the dreaded “culture clash.” Gary W. Craig, Managing Partner and COO for Vector Group, says that in over thirty years of handling M&As across the world, he’s never seen two organizational cultures that could not be successfully integrated. “M&A failure due to culture clash is just a way of describing management negligence, arrogance, ignorance, or some mix of the three. Dysfunctional culture clash need never occur.”
And, at the end of the day, it all comes down to how you integrate your people.