7 Steps for Healthy Mergers and Acquisitions Cultures Integration
The Mergers and Acquisitions industry is a lot like marriage — two companies have to be culturally compatible or make concessions to live with each other to make the relationship work. One can't deny that cultural change in every merger has to be treated as a top priority if you want the union to be successful and the company to thrive. You don't have to look far for a botched-up culture change example to realize its importance. Just look at what happened to Amazon and Whole Foods- the unsuccessful merger of a loose and tight corporate culture. People who work for both companies became highly unmotivated, and this eventually led to their failure.
But if changing organizational culture is very important, why does it often get pushed at the bottom of the barrel of the list of the things to do in a new merger?
There are two significant reasons for this. First, culture integration doesn't have monetary value, so you can't quantify its importance on paper. Second, people in charge of cultural integration don't know how to 'mission the merger' and have no clue what 'culture' is in the business environment. Or, if they do, they don't know where to start.
So, what exactly is the definition of corporate culture? Corporate culture is simply a set of values shared by people who work together to get things done. A company culture could be loose, creative, but disorganized, or it could be a company that's focused on precision and performance.
M&A culture integration is complex, and like in life, there is no fit-all manual of cultural integration because each integration has to have a unique road map for the companies involved. But here are some concrete, actionable steps to help you build a targeted, actionable cultural integration strategy.
Negotiate on Culture
Besides negotiating the price and other financial terms, people in charge of the discussion need to negotiate culture. The first step to achieving success in this negotiation is to conduct a cultural assessment that you can do in-house or by a third-party Merger and Acquisition coach to understand both companies' practices and management types. A Focus Group Discussion can be an effective way to do this. After this, identify the pros and cons of each culture and the opportunities and threats if you merge the two - is combining the two cultures beneficial or harmful to the parties involved? And the most important thing is to decide if there are areas that both parties can compromise.
Provide A Culture Compass
Now that you're past the negotiation stage, you now need to define what you want in the new culture. Can the new culture be anything that you want? The simple answer is yes. Please think of this as terraforming, a chance to get rid of the old toxic work culture and to replace it with a new, better one. Whatever you choose, the important thing is you paint a crystal clear image of the new company culture in terms of:
• Type of leadership - autocratic or Laissez Faire?
• Management style
• Company values
• Hiring process
• Employee reward and motivation
• A collaborative or process-driven environment
Do Your Homework
Lao Tzu, in his book The Art of War, wrote that knowing is half the battle. Besides the data on your desk, see what the other company's culture is from the ground. How do you assess a company's organizational culture?
Start by listening to the stories of the people who work there. For sure, they can tell you tales and legends of the things that happened there. From this, you can quickly tell what the work environment is and how they view their leaders.
Observe, grab a coffee and spend a day on the company floor just looking and listening. You'd be surprised at all the knowledge that you can get from just being there.
Or you can go all out and review the company's internal communications in the last rolling six months or listen to the company's 411 meetings and town hall gatherings. From there, get a wealth of information on how the company runs its operations. Leave no stone unturned and no mountain unexplored.
Choose The Right Leaders
In a wolf pack, the speed of the leader determines the rate of the team. Choosing the right people to lead the new M&A company is crucial to the success of the recent merger. But how do you choose the right leaders?
The right leaders inherently have the following characteristics: High EQ, a team player, good speaking abilities, raw ambition, a strategic thinker, have the support of peers, and have superior problem-solving skills, to enumerate a few.
Choose leaders from both organizations who are enthusiastic about the new culture and will go the extra mile.
Talk to the pool of potential leaders, have them go thru a leadership assessment test, leadership development training, and give them the resources and tools they need to get the job done.
Open a Dialogue
With the integration plan set and the leaders put in place, it's time to get everybody aligned in both organizations. Everyone needs transparency in the information regarding the merger milestones. Explain the what's and the why's. What are the changes to be implemented, and why will they be better for the company.
In any relationship, newly gained or merged companies included, open communication is critical if you want people from both parties to accept the recent changes. Cross-culture communication helps mitigate the threat that people might feel from both sides. It's simple; the unknown creates fear or, worse, gossip. When the teams integrate with "healthy" velocity, open communication is the nucleus, and new cultures amalgamate.
It would help if you are culturally ambidextrous - be flexible in showing both parties the importance of both cultures and prepare to answer your team members' questions so that they can work through their fear of change.
Adopt Each Other's Culture and Create an Immersive Experience
A company is not a soulless thing that you can buy; it's alive, full of people who have their own emotions and thoughts. After all, has been said and done, focus now shifts to having the people who work in both companies, if not like, at least accept one other. The best way to do this is to get their feet wet and have them get to know each other through team-building activities both in the workplace and outside.
There are many things that you can try. One good example is implementing a no desk lunch hour wherein employees may not have lunch in their work desks, so it compels them to have lunch in the common area to meet their coworkers. Group team dinners are also another way to foster teamwork. Perhaps install some sports equipment like a ping pong table and have monthly tournaments, with teams composed of both organizations.
There are loads of other ideas for team building, but whatever activities you choose should foster inclusion, teamwork, and a chance to celebrate the birth of a new company. It's imperative that team members feel that merging two company cultures is a lot like putting two families together. It's fun. It's exciting. It's a win-win situation with all the things that each company can contribute to the equation. The more, the merrier!
Model, Reward, Repeat
In the end, you must make sure that the new culture set in place stays there. The change has to permeate everything in the new company, which boils down to the leaders' lead.
One of the most influential models to follow to achieve they call this the Influence Model.
At its core, this model asks you as the leader what you can do to make sure that they cascade any change that you want to trickle down the base. This kind of thinking is crucial, especially for leaders who are terraforming a new culture.
Four things need to happen for change to take place and root.
There has to be a believable story - they must understand the what and the why's for the recent change.
The team members should see that there is support given for this recent change.
You provide the team members the skills and the opportunities to make a new culture happen.
The leaders have to walk the talk. They have to live, eat and breathe the new culture in every aspect.
This model is not linear, meaning that at some point, your team might experience a relapse, and you'll have to take a few steps back. And that's ok. Be patient and go through the steps until the new culture becomes rooted and part of the new company's life.