M&A Cultural Considerations
M&A decisions are based on multiple factors, principally expected financial benefit, operational synergies, the acquisition of a new user or client base, etc. However, companies must take into account the impact on brand, since the outward face of the post-M&A integration can have serious repercussions for both external market perception and internal organizational culture, not to mention employee morale. Here we consider this last element – what does M&A do to an organization’s culture, and how best to steward that culture through an M&A process?
It’s Normal to Be Anxious – Both Leadership and Employees
Companies spend thousands of dollars and thousands of hours developing their organizational culture – from hiring the right people and creating the right teams, to on-boarding processes, to employee-management touch-points and performance reviews, to retention programs and many more activities. So when the rumor mill starts up and water-cooler whispers begin to flow that a potential M&A deal is on the horizon, you can be sure employees will become anxious. Stress amplifies substantially when uncertainty and instability related to a work situation are concerned.
Management should be worried, as well. Will employees run for the exits early, anticipating that heads will roll when the M&A deal is completed? Will productivity decrease, frozen by the paralysis of the uncertain future?
In contrast to the external teams responsible for the public’s perception of the post M&A brand – marketing and communications – M&A culture is the purview of not just HR, but the executive suite all the way through to the CEO. An organization’s leadership, whose vision and strategy is executed through HR, is ultimately responsible for stewarding the M&A process and adapting a new culture or – in some cases – constructing a new one entirely. This involves defining what the new context is, explaining it to employees and providing the tools and systems to achieve their buy-in and help them adapt.
Establishing a Shared Purpose in the M&A Process
It’s imperative that all organizations have a strong Shared Purpose that unites the organization internally, giving customers a reason to purchase a product or service, and employees a reason to believe in what they’re doing and to come to the office every day. Not just a slogan or tagline, a Shared Purpose is developed by distilling down the true essence of what an organization strives to be. The Shared Purpose should unify both brand, business and operating strategy around a clear and compelling singular idea – an articulation of the organization’s value proposition to both customers and employees alike.
When we discuss M&A culture, what will be the new Shared Purpose of the combined organizations? If one brand is sunsetted, will the new company borrow some of the former’s identity? If the brands are kept separate, will their unique Shared Purposes remain the same, independently? And finally, if the two organizations are combined, management must take accountability for creating a wholly new Shared Purpose, which may differ radically from its previous incarnations.
How to “Culture” Your M&A Brand
A useful toolkit to enable cultural change during the M&A process is our Culture Framework. Leveraging the Culture Framework allows an organization to consider all the different facets which together compose an organization’s culture: Leadership, Communications, Symbolism, Rewards & Recognition, Environment and Structure. Here we elaborate:
Leadership- all eyes will be on the organization’s leadership during this complicated period. Transparency, decisive guidance and effective decision-making will help leadership shepherd the organizations through an inevitably complicated period, coming out the other side with a reinvigorated organizational culture.
Communications- again, not just the MarCom team will be involved in the M&A brand expression, but HR and the executive suite, as well. Clear internal communication is paramount to successfully carrying an organization through an M&A process.
Symbolism- so much of an organization is built on symbolism, so it can be especially jarring to see changes during the M&A experience. For example, if one organization symbolically bonds employees by volunteering together for a charity, but the other organization focuses on allowing employees 10% of their time to develop their own projects apart from work, how to integrate those different symbolic norms into the combined organization?
Rewards & Recognition- this lever is extremely important because, at the end of the day, employees are “rewarded” for their time and energy given to the organization in different ways. Some organizations focus on cash bonuses, others on public recognition such as an Employee of the Month model, others on additional vacation time, etc. How the M&A process treats this aspect of engagement is extremely delicate since employees inevitably compare benefits and resentment can build quickly in the new culture.
Environment- chic, sleekly-designed tech start-up offices differ greatly from a standard office layout in an industrial park. How do you synthesize a culture of, for example, free bicycles to cycle between buildings at a wooded corporate campus vs. the rigid setting of a mid-city skyrise?
Structure – the difference between a highly hierarchical organization with corner offices and a defined pecking order vs. a flat organization with an open floor-plan could not be more different in terms of making culture.
All M&A actions are fraught with excitement and anxiety, as everyone watches to see what will emerge from the combination of two disparate organizations. Apart from the essentials of financial opportunity and operational synergy, it’s equally important that organizational leadership pay attention to both internal and external brand, with a particular focus on the resulting employee culture of the combined organization.
Defining a clear Shared Purpose, and building a culture around the Culture Framework principles, can add immeasurably to the success of an M&A deal.