Culture Clash or Collaborative Clique?

How to construct a connected, cooperative, and constructive culture post-merger or acquisition.
There is a lot written about organisational culture. In fact, over the last few years it has become one of the most favoured organisational buzz words, thrown around by senior leaders and management consultants alike. While there are some key differences between the academic organisational psychology concept of culture, and that being discussed in Boardrooms across the country, the most important thing to understand is the outcomes associated with a strong culture; be it a positive one or not. A company with a toxic culture will suffer from decreased productivity and performance, it will have sluggish growth, absenteeism, presenteeism, stress leave claims, increased safety incidents, higher turnover, and inevitably, especially in a city like Perth (#everyoneknowseveryone) will end up with a poor reputation that makes it impossible to hire and retain quality employees to replace those who leave. By contrast, an organisation with a strong positive culture will not only avoid these negative outcomes but is likely to also have a cult-like following of customers or clients who worship and recommend the business. This is because engaged employees who fit with the culture are a lot more likely to not only be happy and productive but provide an exceptional customer experience.

Strong positive cultures do have their negatives, but that is a conversation for another day!

We know that culture can be difficult to manage, and this is no more evident than in the case of mergers and acquisitions. While the statistics on merger and acquisition failure are varied (depending on who you ask!), there is consensus that when the process of integrating or transforming two cultures into one is done poorly the result is generally less than optimal. This tends to be a great disappointment to everyone involved given that mergers and acquisitions are generally expected to improve organisational growth, performance, and outcomes.

Managing culture, in particular as part of a merger or acquisition, is not simply a set of human resource management stages. Rather, it is a complex change management process which cannot be separated from the intricate and complicated legal, financial, and strategic processes that must be undertaken during a merger or acquisition. Generally, one culture is dominant and rarely is there a case where two companies are complete equals: instead, differing in size, profitability, technological or process sophistication etc. If the dominant culture is simply left to consume the other, the result is usually that the new company retains the intellectual and physical property of the other while losing its human capital. A less than ideal outcome as generally the employees who leave are the ones who were more adaptable, flexible, or simply the subject matter experts who were responsible for the company’s success which made them attractive to merging or acquiring in the first place.

The desired outcome then is that the cultures must be integrated or transformed to create a completely new culture, suitable for not only meeting the needs of all remaining employees, but also appropriate for underpinning the strategic direction of the newly created entity. What we see time and time again is that the due diligence efforts around mergers and acquisitions are handled by lawyers and accountants and focus on the strategic, legal, and financial aspects of the transaction. While these factors are obviously important, neglecting the human aspects of such a fundamental change is a drastic oversight which can lead to less-than-optimal long-term outcomes. The consequences of failing to manage this component of the change carefully will likely lead to an increase in miscommunications, misunderstandings, and exacerbate the negative emotions which tend to be present during times of extensive change and stress within organisations.

If the only HR consideration you make prior to, and during the merger or acquisition process is that of executive salaries and the need to decide who keeps their job and who doesn’t, you are doing a true disservice to the new entity being created and all of the employees who have a vested interest in its success. Increasing performance or growth are nearly impossible with a fractured culture, especially one plagued by presenteeism, absenteeism, and high turnover.

While it is ideal to manage this process appropriately from the start of negotiations (just like the strategic and financial aspects), this is rarely done. However, not all hope is lost as it is possible to improve the chances of success after the fact (i.e., once the merger or acquisition process is complete). Done in a similar way (to doing it right from the start), this entails first getting a comprehensive understanding of the current culture(s) within the organisation. A culture assessment or “audit” is a formal information gathering process which takes into account not only the views of multiple stakeholder groups, but also the processes, procedures, and policies which exist in the organisation. This process can help us to understand where you are currently, identify potential areas of less-than-ideal culture which are creating risk for the organisation, and inform a plan to address these. Similarly, it makes it clear whether your promoted values and norms are congruent with the individual and collective behaviours being exhibited by employees.

As a result, you are able to not only manage any sub-culture issues or culture discrepancies that exist, but get the entire organisation on track to embedding the new (ideal) culture and creating a new shared sense of purpose, identity, and belonging for all employees regardless of which organisation they originally came from.
How do we accomplish change?
Like with most things in an organisation – it all starts from the top! The success of culture change efforts stem from how dedicated senior leaders are to the way forward, how well they set an example of the new required norms, values, and behaviours, how clearly and consistently they can communicate with employees, and how well they inspire others about the future vision and strategy of the organisation.

There is vast variation in the stages described for changing or creating culture, but we look at the process as involving four broad steps which are adapted to suit the context of the client organisation.
Information gathering
Ideally this should happen as part of the due diligence process. Here there are conversations occurring about the potential merger or acquisition which allow senior leaders to get to know one another and each other’s organisations. Basic underlying information is collected about the structure and processes of each business, the values and norms of each company, and whether the promoted and marketed “culture” aligns with the reality. Each party can start to consider how they see the culture integration or transformation process evolving as the merger or acquisition progresses.
Formal planning
Once the merger or acquisition progresses from a functional standpoint and is nearing completion it is worth starting to plan for the new culture. This includes defining what it will need to look like to best support the strategy of the new organisation, who will be responsible for driving this change, what the key milestones will be, what budget and time considerations there are for the process, and what, if any, training or external support may be necessary to ensure a successful culture change. These decisions should be made by a combination of leaders from both parties to ensure that discussions are balanced, fair, and agreeable. Involving lower-level employees at this point and allowing them the opportunity to participate is likely to reduce their resistance to change and engage them with the new organisation, increasing their acceptance of the new culture. As with all change programs, this is when “champions” should be identified to lead the change through lower levels and decrease any resistance occurring within their teams and departments. Clear, consistent, and transparent communication is key at this stage.
Change implementation
Once the legal processes are finalised the actual change process can be implemented. This stage is focused on executing the new organisational structure (with input from relevant staff from both organisations), communicating to employees about the outcomes of these processes (e.g., the new structure, reporting relationships, role changes, next steps etc.,), providing any necessary training, development, and/or socialisation opportunities, and starting the process of integrating the processes and systems of the two organisations into one.
Evaluation and continuous improvement
Ideally this should happen as part of the due diligence process. Here there are conversations occurring about the potential merger or acquisition which allow senior leaders to get to know one another and each other’s organisations. Basic underlying information is collected about the structure and processes of each business, the values and norms of each company, and whether the promoted and marketed “culture” aligns with the reality. Each party can start to consider how they see the culture integration or transformation process evolving as the merger or acquisition progresses.
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