Culture Change in M&A

on November 8, 2010

During a merger or acquisition, it’s critical to consider corporate culture. The required cultural change often represents the soft underbelly of a merger or acquisition. Everyone agrees that it’s important, but it often takes a back seat to the stated cost synergies to be achieved and the new organizational footprint to be established.
Without addressing needed cultural changes, we slow down the attainment of the strategic synergies that were the goal in the first place. There are three things that mostly get in the way of effectively considering the corporate culture. First, we tend to underestimate the impact on the actual success of the venture, not just in morale but dollars. Also, leaders may not be able to comfortably deal with sensitive and personal issues that come with culture change as part of a merger or integration. And a degree of skill is required to effectively manage through a process that considers culture for the entire population of the new entity.

Executives in charge of a merger or acquisition should keep these things in mind:

  1. Newly created leadership teams often struggle with norms that define the most appropriate conversations. As different management styles and cultures meet, there is a tendency for leaders to be overly cautious in where, when, and how they share their perspectives. In turn, that slows down execution speed and leadership credibility.
  2. Most executive teams struggle to clearly articulate the successful future state of the organization from a customer, competitive, and internal point of view. Without a consistent platform that intellectually connects all the pieces and makes the future emotionally compelling, adoption will move far slower than it otherwise could.
  3. There is a great need to actively engage everyone in how the merger or integration relates to new norms, processes, and behaviors. A line of sight for individuals from new organizational objectives to individual goals and action is needed, or change will happen slowly.

HR practitioners must facilitate a smooth transition following a merger or acquisition by ensuring that there is sufficient understanding and buy-in at the leadership level about the costs of not addressing the culture issue early in the process. It’s also a great opportunity for HR to lead this aspect of the process, as it often lacks a natural champion.

It’s essential to view the rapid creation of a compelling future state for the business – the ability to have authentic and honest dialogue as a leadership team and the ability to effectively engage the entire organization in the process – not as a nice-to-have but as a mission-critical insurance policy that will significantly increase the odds of hitting merger and integration goals on time.

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