Building and maintaining a high-performance work culture can be a test of wills and expectations even within a tightly knit organization. Those efforts and struggles only deepen within the context of a corporate merger or acquisition where it takes vision, fortitude (and a solid dose of humility) to orchestrate the movements of two cultures into one.
I’ve orchestrated a number of acquisitions over the years and have found that assessing a target’s culture and planning for cultural integration is an often undervalued dynamic. Typically, culture is not given the same level of importance in M&A due diligence as financials, growth drivers, synergies and valuation models. We focus on the things that are crunchy and tangible, so the human factor is left out of the equation. It isn’t until we get into integration that we see the intense effect culture has on the short-term gains and long-term success of the new organization.
Integrating cultures in the context of an acquisition or merger is fraught with challenges. Typically these are: a) employees do not understand or buy into the rationale for the acquisition due to poor and inconsistent top down communication, b) employees get anxious and restless if there is a long period of uncertainty between acquisition announcement and closing due to regulatory approvals e.g. antitrust clearance by the DOJ or FTC, c) employees fear losing their jobs if the primary driver is cost synergies, d) there is inherent cultural conflict due to contrasting management styles e.g. a big, process driven, rigidly structured public company buys a smaller, highly nimble and entrepreneurial private company run without many rules, and e) employees fear the “ Reverse Takeover” i.e. the acquiring company employees get their egos bruised because they perceive the acquired company employees to have won! This happens especially when the acquired company executives are offered plum senior management roles in the combined organization and cliques emerge.
Although there are no “one size fits all” solutions to the above challenges, I believe embracing the Four C’s can lead to effective culture change and integration. They are:
Communication, Clarity, Candor and Compassion.
Let me elaborate on each C:
Senior leaders need to communicate, communicate, communicate. In the context of effective cultural integration over communication is a virtue— never assume everyone gets it.
Clarity of communication is equally important. Use simple, easy to understand language that is understood by all employees. Paint a picture of the combined organization and how it benefits the employees. Employees especially at the front line maybe less inspired by paeans to shareholder value or waxing eloquently about high NPV’s! Their primary concerns are whether they will have a job and a future.
Candor goes a long way. Do not over promise or exaggerate the benefits of the acquisition. It is critical to be honest and truthful. If a major driver of the acquisition is cost synergies, do not purport that there will be no job losses. When we merged OfficeMax and OfficeDepot, I told our employees that there was a good chance that one out two employees could lose their jobs. At the same time, I had to retain every employee during a nine month long regulatory process. By inspiring our people and being honest, we lost very few of our team members.
Finally, it is important for leadership teams to show they have big hearts and are compassionate people. Show respect to the acquired company’s employees; even when making tough decisions and letting people go to achieve synergies, treat them with dignity, be fair and show compassion. If you are planning on a major reduction in force, do not procrastinate or delay. Do not make employees suffer a death by a thousand cuts.
The board and CEO need to walk in the shoes of the employees. Recognize their lives are about to be disrupted and they are not in the know. Show that you care, understand and be genuine.
“Erasing the whispers of ‘us’ vs. ‘them’ that can permeate the hallways of the corporate office and seep into every regional outpost can be an enormous challenge.”
Following are some perspectives for how to lead through integration of cultures.
Culture Survey – Do a culture survey early on such as the Denison Cultural survey, analyze the results and create a plan to leverage those learnings in your cultural efforts moving forward. We did this as we were preparing for the Ritchie Bros. acquisition of our competitor, IronPlanet. While we were still independent companies, the culture survey provided leadership with a good understanding of where there were similarities and differences. What did employees think of themselves? What did they think of the “other guy”? It created awareness of some of our greatest stress points and commonalities.
The acquisition of IronPlanet was not just about complementary business models, revenue streams and technology…it was as much an acquisition of talent. Retaining all of our talent was especially crucial, so we needed to understand where everyone was starting from before we could create the right platform to bring people together.
Harness Nimble Leaders – Usually in any integration, there are different executives in charge of specific aspects of the process. As the companies begin to integrate, tap a few key, highly respected senior leaders to lead the cultural initiative. This culture task force should be charged with gaining alignment for the vision, and values of the combined company across the organization and lead change management.
I would also recommend doing a joint leadership exercise between the senior members of the acquiring company and the acquired company to discuss perceptions of each other, especially if they were previously competitors. If there is enough candor in this leadership exercise, it can create an action plan for how to tackle the biggest misperceptions of each other and set the ideals for the development of a thriving combination.
Find the Tie that Binds – Erasing the whispers of “us” vs “them” that can permeate the hallways of the corporate office and seep into every regional outpost can be an enormous challenge. To break this down, it’s critical to find a common anchor, which can foster team unification. When we acquired IronPlanet, it was very clear, both companies had a huge passion for serving the customer. That became our anchor. We even crafted a program slogan “Better Together” for the entire merger effort. With that mantra in mind, people at every level of the organization were encouraged to share their success stories and cases of when our initiatives or skill sets really worked better together. It helped break down barriers. We were coming together as a unified team, working to create the best results for our customers.
Symbolism – Pay attention to symbolism and words. As the Ritchie Bros. and IronPlanet teams were joining, we had so many big details to work through. But how were we answering the telephone when a customer called? It sounds like a detail of little consequence, but it was terribly important. We quickly trained our receptionists and customer service teams on messaging and had everyone in senior management change their voicemails so when a customer called, they knew they were talking to “Ritchie Bros. now together with IronPlanet”. This little detail reinforced that we were treating the combination as a merger even thought it was an acquisition.
The word “fun” may not be the first one that comes to mind when leaders and employees consider working through a corporate merger. There are many unknowns, which can make people feel uncomfortable or dissatisfied. It’s a natural sensation. So flip the script, and convert the experience into an exciting and rewarding opportunity for people and partners. Communicate with consistency and inspire teams across all facets of the business to be problem-solvers, idea-creators or brew-masters utilizing the 4 C’s recipe in creating the perfect blend for your new organization