You’ve been working on this M&A for months… maybe even years… The numbers add up. It’s a great fit with your business strategy. And on top of that, the cultures seem aligned. But are they really? Is this your “gut feeling” or do you have data to back this up?
Many executives seem content with a general sense of cultural alignment, but even if this is true at a high level, how people internalize and make these values their own is likely different. Your organization and the organization you are looking to acquire or to merge with may value customer centricity like you do – but despite a high-level common goal, your two organizations likely differ in how they define and achieve it. Philosophical alignment is a far cry from cultural alignment.
As companies work on the due diligence, there’s a lot of focus on balance sheets and financial data. But what about the human data? I’m not speaking about head count and organizational structure here. I’m speaking about “culture” – the shared values, beliefs and assumptions that drive attitudes, behaviors and meaning in the organization. According to a survey of executives, culture clash is the number one reason for failure of mergers to deliver on their promise (Bain, “Integrating cultures after a merger”, 2013). So, don’t stop at the superficial cultural similarities between the two organizations… and don’t wait until after the deal is signed to worry about culture. It’ll be too late and will already have had a disruptive impact on the success of the integration.
Proper integration planning needs to include cultural integration planning. There’s no way around it. And it needs to starts with a thorough cultural assessment to identify cultural drivers, as well as assess cultural similarities and differences. Using surveys and assessment tools, you can gain a deeper understanding of the behaviors and work practices around business processes, leadership and management style, and employee attitudes. You can then use the assessment as a guide on how to approach cultural integration. How will you integrate employees into your culture and what effect will it have on your own culture? Or are you going to maintain two separate entities and cultures in order to protect what makes each organization unique and successful? Or are you going to create new values and behaviors for the newly formed entity? Those are all questions you’ll need to address ahead of the transition.
An M&A is not just a business deal. It’s a deal that involves people, and therefore emotion and angst in the face of change and uncertainty. As employees wonder how the deal will impact them and try to figure out what’s expected of them, how to behave, and how to initially survive, and then succeed in this new organization, authentic two-way communication will be a key component of your cultural integration plan. But don’t stop at discussing the transition milestones, what’s going to happen when and why, or at sharing transition successes and challenges – inspire and engage them at a whole other level too. If you are merging the two organizations, shine light on the “why” of the new organization – what it will stand for and the impact it will have on the world and what they will be a part of. Inspire them not just about the new career and growth opportunities for themselves, but also about the greater purpose that the combined entities will now share. This is a good time to unveil a new “brand purpose” – your reason for being. Being part of a greater purpose can rally and bring people together like nothing else can. It can help you retain them after the integration…and recruit the employees you need to continue to attract to succeed.
Looking at a merger based on just balance sheet or fit with your business strategy and ignoring culture can have a disastrous impact on the success of your M&A. So plan ahead and factor in the human side of the transition, keeping in mind the following:
- Philosophical alignment is a far cry from cultural alignment
- Culture must be a key component of overall integration planning
- Cultural due diligence should assess cultural drivers, as well as similarities and differences
- Use the cultural assessment results to build your cultural integration plan and define the values and behaviors you want post-integration
- Do more than communicate; engage in dialogue…and inspire with a powerful brand purpose everyone can rally around
Learn how KHJ can help you “Brand Inside” by developing an aligned, purpose-driven culture. Get in touch today.
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