culture change
during a merger
or acquisition

Every merger and acquisition is stressful. There are a lot of moving parts to manage, not just from a financial standpoint, but also from a people and process perspective. It involves bringing together two organizations and requires uncovering redundancies and synergies in technology, roles and responsibilities, communicating the change to shareholders and employees at both organizations, and melding multiple systems and operations.

One major area often overlooked in the planning and execution is creating a culture of competence that aligns organizational focus, capability, systems, and processes to capture the value of the merger described on paper. If leaders fail to address the cultural changes needed, they see limited success in attaining the strategic benefits that were the initial goal of the merger or acquisition.

In fact, it’s ideal for there to be discussion and focus on the two companies’ cultural similarities or differences before the agreement concluded. Even if there are similarities in culture between the two organizations coming together, there are still numerous issues to be worked through in terms of people’s values and beliefs (particularly from those at the acquired company), operations and processes, and behaviors at different levels of the organization.

Three things get in the way of effectively considering the role of company culture in the merger and acquisition process

Leaders tend to underestimate the impact of culture on the actual success of the venture – not just in morale, but dollars.

Leaders may not be able to comfortably deal with sensitive and personal issues that come with culture change, especially the feeling of loss that is often present in both organizations.

People don’t have the skills or the focus required to effectively manage through a process that considers culture for the entire population of the new entity.

Most of the hard work begins after the merger or acquisition, but keep the following things in mind before, during, and after

Well-Defined Communications and Behaviors. Newly created leadership teams often struggle with norms that define the most appropriate conversations during this process. As different management styles and cultures meet, leaders tend to be overly cautious in where, when, and how they share their perspectives. In turn, that slows down execution speed and leadership credibility. New and shared behavior standards help bring all leaders together.

Clearly Articulated Future State. Most executive teams struggle to clearly define what success looks like in the future for the new organization from a customer, competitive, and internal point of view. It’s essential to rapidly create a compelling future state for the business through an authentic and honest dialogue as a leadership team. Not as a “nice to have,” but as a mission-critical insurance policy that significantly increases the odds of hitting merger and integration goals on time. This includes identifying the behaviors, beliefs, and rules of the road that everyone from leaders to managers to the frontline must demonstrate to evolve the culture in a way that supports the strategy.

Employee Engagement is Paramount. There is an absolute need to actively engage everyone in how the merger or integration relates to new norms, processes, and behaviors. A common mental model or clear picture of what the new culture and strategy should look like is important to convey to everyone in the business in order to tie new organizational objectives to individual goals and action. Otherwise, change happens slowly or not at all.

from theory to reality

As a leadership team, if you recognize these three areas need significant attention, how do you kick-start the process to ensure success?

1. Meld leadership teams.

Bringing together new leadership is challenging. Once you’ve determined who is part of the executive or leadership team after the merger is completed, it’s important to quickly get on the same page. This involves:

  • Building Trust In many regards, this is more than just building trust. It’s also about making it safe for people to be vulnerable. At the heart of this is the willingness to abandon pride and fear and sacrifice ego for the collective good of the team. Vulnerability, shared vulnerability, and even public vulnerability are key to building trust.
  • Mastering Conflict – Conflict without trust is politics, and politics is an attempt to manipulate others so you can win an argument regardless of the truth. Politics don’t make for high-performing organizations. Trust and transparency are close cousins. Overcoming the tendency to run from discomfort is one of the most important requirements for any leadership team. Teams must accept they will be novices for a while and not dash back to what they’ve been good at for years.
  • Achieving Commitment – The reason conflict is so important is that a team can’t achieve commitment without it. Great teams avoid the consensus trap. Not-so-great teams avoid disagreeing and commitment. This may require a type of “fight card” where the team puts the most critical issues “in the ring” and battles the issues to clarity.
  • Embracing Accountability – At its core, accountability is all about having the courage to confront someone about their deficiencies, take a stand in the moment, and deal with their reaction – which may be unpleasant. This is especially true when it violates the standards that have been established as a leadership team’s “contract” with each other to lead this change.
  • Owning the Whole – In many cases, leaders focus only on the results their department or function is tasked with providing. This, of course, is the opposite of teamwork, and it’s often a challenge for any organization. Building trust, mastering conflict, and being accountable and committed are all in the service of one thing – greater results for the organization as a whole and demonstrating ownership of the company strategy and the culture that will enable the business to achieve its strategic outcomes.

In the course of bringing together the leadership team to focus as “team one,” the culture of the future – including behavioral contracts, processes, and expectations for the business – begins to surface. Then the team can communicate more effectively with the rest of the business with higher levels of conviction and clarity.

2. Get clear and aligned on future state culture and strategy.

Building a “culture of competence” depends on how well the business can answer and orient itself around the following questions:

  • What unique value is being created from the merger or acquisition? Why is this value enhanced by the combination of these two firms?
  • How well are we currently integrating these unique value drivers into our strategic and operating plans?
  • What must be done to better integrate these strengths into how we manage and operate the business?
  • Why are these competencies valued by the marketplace? How can we enhance the value that is being created in the marketplace?
  • What barriers exist within the current businesses that will inhibit our ability to fully develop and realize this value?
  • What aspects of the culture must we keep/enhance, eliminate, and create to ensure that the ways we work allow the integrated firm to organize itself to support these unique value drivers and create a culture of competence?

Aligning leaders and the broader organization on the answers to these questions is of course only the first step in gaining clarity on the expected outcome for how you then move forward in building a culture of competence.

While this is really just the beginning of the process for creating a plan that delivers the results you want to see, it’s an important step you can’t afford to ignore and sets the tone for the business in the future.

3. Create a clear line of sight for the business.

You can substantially accelerate results when leaders connect all employees to the unique and differentiated value of the culture and how that translates for the business. This isn’t about culture for the sake of culture or any of the soft definitions of culture. This is about aligning organizational focus, capability, systems, and processes to develop and enable the differentiated and rare economy of scope identified at the outset.

It’s paramount that managers at all levels are clear on the changes that need to be made since they are tasked with delivering on the integration expectations and making sure their people stay engaged throughout the journey. Unfortunately, they aren’t often clear where all of the activity leads and are unsure how they can add value in the post-integration world. As their engagement wanes, so does their ability to keep their people connected in a meaningful way.

For the individual, their previous mental models on how the business works are destroyed and their ability to align their actions and efforts with what differentiates the business is significantly diminished – as is their overall level of engagement. So having managers that can help individuals connect their role to the new world order and ensure engagement continues to bring the culture and the strategy to life.

There are too many examples of organizations that failed to make their mergers or acquisitions a success largely because they ignored what they perceived as the “soft” parts of the business. Taking a hard look at an organization’s current culture and determining if that is the culture that will take the organization forward will save a lot of pain and allow the business to see results faster.

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