How to leverage company culture for a successful M&A
In today’s fast-paced business climate mergers and acquisitions (M&A) are often seen as an efficient strategy for creating value, growth and competitive advantage.
However, a study released by the Institute for Mergers, Acquisitions and Alliances revealed that 83% of M&As fail to deliver on expectations and boost shareholders’ returns. A clash between cultures is one of the most frequently quoted reasons behind failure.
Despite this powerful statistic, during and post mergers, companies still prioritise financial aspects and risks over critical intangible assets such as organisational culture, human capital and company structure. Because organisational culture is often seen as a ‘soft’ component of an M&A and it’s difficult to measure, few organisations invest significant resources into integrating two disparate cultures.
Neglecting how a merger will affect employees from both companies can lead to many problems down the road.
Usually, during a post-merger integration many tasks are under time pressure and need completing quickly. Yet, different decision-making styles can lead to slow reactions and the failure to implement decisions.
A shift in leadership can generate turnover among employees, especially within the top talent category. Loss of top talent can quickly undermine the merger’s value by draining intellectual capital and market contacts.
If the organisational culture of the newly formed business is inconsistent, processes and handoffs may break down. Employees can quickly become frustrated by their new colleagues’ failure to understand how work ‘should be done’.
At the same time, people who believe they have to achieve goals as a team can clash with groups whose notion of success emphasises individual performance. The M&A’s expected growth is hindered as a result.
So, how can you create a culture to ensure a successful merger or acquisition?
Start by assessing and understanding the two cultures that are coming together. Consider values, policies, codes of practices and look for relationships and networks within the organisations. Listen to employee feedback, find out what drives people and understand what improvements are needed for the new company to become more efficient.
There are many tools to help with cultural integration and some deliver critical insight in just a matter of hours. Such tools enable leaders to cut through the noise and guesswork when deciding on the best strategy for managing and adjusting staff beliefs and behaviours.
Plan & execute
Once you diagnose commonalities and differences between the two cultures, define the new unified culture, put in place a rigorous programme with clear objectives and outline measurable business results.
Leaders need to clearly articulate the new organisation’s aspirations and targets. Set up mechanisms and incentive programmes that will fuel the desired behaviours for a successful cultural integration.
Create a committee from both companies that is responsible for steering integration and improving collaboration among teams and departments.
Decision-making styles are crucial for a successful M&A. Decision makers must be able to act with speed. To facilitate this, identify decision makers from each area and assist them in adapting their behaviour so they can deliver the new culture and engage the wider workforce.
Build an attractive brand in terms of career opportunities and rewards, and identify what appeals to employees from both companies. In this way you’ll secure staff loyalty and reduce employee turnover.
Manage and celebrate change
Don’t expect to see massive behavioural changes instantly. Check the company’s ‘temperature’ regularly and try to assess key areas:
Who has registered significant progress?Which elements still need adjusting?Are employees engaging with the new structure?How is overall organisational performance looking?
Keep in mind that employees go through the change curve at different speeds. Adjust your strategy so people feel supported through change and communicate with them as much as possible. Constructive discussions can truly trigger significant improvements for everyone.
Celebrate change and the new culture by involving your staff in joint activities. Team-building events enable people to know and understand each other’s strengths and common beliefs.
Culture = added value
Ultimately, left unattended, culture will often undermine any new organisation and have a negative impact on its progress.
Dedicating time and resources to developing and articulating a strong organisational culture can help your newly formed company to overcome common bumps and bruises and also deliver significant business value to move forward and thrive.
Foot note - article originally written for the csuite.co.uk and published in February 2017