Mergers have the potential to be marvelous drivers of growth. More often than not, however, mergers fail: 80% of them don’t meet objectives, and 60% actually destroy shareholder value.
According to research, this thoroughly avoidable situation is the result of culture clashes and confusion that emerge when business leaders concentrate on the functional aspects of the organizations they’re bringing together, but ignore the human realities facing the newly combined company.
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This is where all the analysts and accountants in the world can’t save a merger – leadership needs to bring in the culture-building brand experts. You see, if the new entity’s brand purpose, mission, vision and values are clearly articulated and understood, employees can understand their own purpose and prospects within the new union, and therefore get behind the merger.
However, if employees are left feeling confused, discontented, and anxious about how they fit in the new picture, they’ll be miserable coming to work every day. This produces poor customer experience, loss of brand loyalty, and dangerous exposure to competitors (who see your merger transition as their opportunity to pick up market share).
Executives experienced in making mergers work will empower brand leaders to engage the merging organizations in a process of self-examination. One of the best places to start is with a leadership workshop, to explore cultural alignment (or lack of same). And while any workshop should be tailored to a specific organization, I can say from my experience taking teams through these crucial exercises that every merger can benefit by getting the answers to ten key questions.
The Culture Q&A For Merging Companies
Gather leaders from across functions in both merging companies, ideally off site and away from daily distractions. Allow enough time so that each participant is able to not simply answer questions but really discuss them – particularly on points of perceived difference.
“On a scale of 1-10, how similar do you consider our merging cultures to be?”
(One being not at all alike and 10 meaning identical).
The point here is not that successful mergers depend on having similar cultures – rather, that success depends on knowing the level of like-ness or dissimilarity so that adjustments can be made.
“How do you compare the operating styles of the two entities, in terms of leadership, decision-making, financial management, etcetera?”
As with personal relationships, opposites often attract in mergers. For instance, a well-established, buttoned-down firm may be seeking the innovative spark of a free-spirited start-up. Understanding where there is potential friction or misunderstandings about how the two differences will work to complement each other will help keep that spark from becoming a distraction or, worse yet, being snuffed out.
“How do you view the basic orientation of each organization: market-driven or customer-driven?”
Having your leaders compare answers to this question will help clarify the motivations behind your decision-making motivations that, once you are merged, must be aligned to produce consistent forward motion.
“How would you describe the “customer-centric” focus of the two cultures?”
Even if you fancy yourselves to be driven by larger market forces, customers – particularly current customers – are an immediate concern in a merger. If one set of customers is accustomed to extremely high-touch, personalized service, and a merger sweeps that all away in favor of automation, long-time buyers may get swept away, too. Understanding the varying levels of customer dedication, and expectations will help the new organization more easily adapt to whatever changes that financial, staffing and other realities of the merger may demand.
“How would you describe the energy levels of the two cultures?”
If you’re lucky, everyone will be excited about the coming changes. Still, leaders will do well to assess not just the initial enthusiasm but also the day-in-day-out energy levels that the merging cultures exhibit.
Consider the hypothetical case of two marketing agencies:
A well-established, family-oriented firm acquires a boutique agency known as a bunch of no-holds-barred iconoclasts. The traditionalists are looking for a shot of creative adrenaline – but also looking past the side effects of such a shot. Perhaps the new go-getters like to start late and stay late, while the acquirers are used to heading home for family dinners. Unless both organizations come to recognize, respect, and plan ahead to integrate the different energy levels, a potentially debilitating culture clash is inevitable.
“Do you consider the decision-making style of each organization to be centralized or de-centralized?”
In a merger situation, the manner of how decisions get made can impact whether they get made at all. If there are differing styles, agreement on a unified approach to decision-making must be made as early as possible, to avoid stalling the merger integration process and frustrating the new team.
“To what degree does each company recognize and reward positive employee behaviors and contributions?”
Employees are your brand. They bring your brand purpose and promise to life. As players central to your success, employees have established expectations about how they should be treated. These expectations must be closely managed during a merger – understood, respected and addressed – especially if reward and recognition programs are going to change.
“What is the experience level with M&A of each organization as a whole?”
Experience can be both helpful and hurtful. For instance, if the acquiring firm uses frequent mergers as a core growth strategy, long-time employees may develop an “Oh here we go again” cynicism that prevents them from completely entering in. And of course, if the acquired firm is new to the merger dance, it may need extra help to stay in step.
“Do mid-level managers on both sides have significant experience with merger integration?”
Here’s the overlooked truth about what makes or breaks a merger: It’s not ultimately about what happens in the strategic planning sessions or big town hall meetings. Success is lost or found in day-to-day interactions between employees. Mid-level managers have the best visibility to, and insights about, those interactions, and they represent your best chance to directly address issues right in the moment, when they are most easily managed.
“How do you rate the potential for losing key talent due to cultural conflicts: low, medium or high?”
This question should be saved for last. After discussing all the above, your leaders will have much better-informed perspectives on one of the most critical challenges in any merger, keeping your best people.
Yes, most mergers may fail – but yours doesn’t have to, if you look ‘deeper than the deal,’ to assess, align and empower the culture that is the key to your success.