Nearly all mergers go through some form of culture clash because every organization has its own unique people, context, and culture regardless of all the “synergies” between two parties. Bringing them together will never be a seamless fit, but intentionally managing the combination of these cultures will make a difference.
Summary by The World of Work Project
M&A(&C): The Significance of Culture in Mergers and Acquisitions
I’ve been beating the drum about the role of culture in mergers and acquisitions since graduate school, when I worked on a deep dive into the 2001 HP-Compaq deal and saw just how “largely incompatible” (my words) the two cultures were.
Even then, 18 months after the closing, the culture clash was evident. All employees felt the impact regardless of their legacy employer. Three years later, the headline was, “Why Carly Fiorina’s Big Bet is Failing.” In 2016, it was “Worst Tech Mergers and Acquisitions: HP and Compaq.”
One could argue some sort of vendetta keeps bringing this particular deal back into the dialogue. Another explanation is that the effect has been long lasting and there’s a lesson to be learned here. This particular merger failed for a number of reasons, but low and behold culture has been named as one of them (see examples here and here).
This merger is one of many who experienced the culture clash. I would even go so far as to argue that all mergers go through it because every organization has its own unique people, context, and culture regardless of all the “synergies” between two parties. Bringing them together will never be a seamless fit, but intentionally managing it will make a difference. Here are a few things to consider when it comes to M&A and culture, and how Design of Work Experience (DOWE) can help you navigate through it all.
Make culture a part of due diligence
If every organization is different and a culture clash between two entities merging into one is inevitable, then doing this should be a given. Evaluating culture is just as important as looking through the books, IP, assets, business operations, etc. as part of due diligence. For each organization, determine where and to what degree these differences exist through DOWE’s Culture Study before the decision to merge or acquire. Are there cultural strengths to leverage on both sides? Does the buyer actually want to acquire the culture for sale? Are there red flags that could signal a deal breaker? This helps the two sides to go into their new world with eyes wide open.
Forge a new shared vision and culture
During the highest peaks of M&A activity, the focus isn’t typically on the aftermath—it’s all about getting the deal done from a legal and regulatory standpoint. This myopic view leaves organizations ill prepared for the fall-out, despite the fact that all employees care about is what happens to them afterwards. Instead of having two cultures forge a battle royale or see one culture cannibalize the other, partner with your employees using DOWE. You’ll be able to articulate a new vision and culture as well as design new employment experiences that reflect them. Create a new identity that employees from both sides are proud to join. Instead of a mass exodus of talent, you might just garner enough attention to attract new talent at a time when business performance is so critical.
Deploy Change Management early and continually
Use of full-on change management is shockingly low during business as usual, despite the need. After all, change is constant in business. Something as huge as a merger or acquisition makes disciplined, well strategized and executed change management an imperative. With the culture studies in hand, DOWE helps organizations determine the distance and the path from the current to the future state. This brings people along for the journey as engaged collaborators throughout the integration. Isn’t that preferred over force-feeding the new state with all the pain that comes with disengagement and attrition of your best talent?
Sustain Changes
If you’ve gone through all the trouble, then you’d want to make sure your changes stick for as long as you need them. The positive aspects of the new vision, culture, and experiences post-merger need to be the new norm. The way to do that is to continue managing change well past integration. The DOWE process creates the opportunity to ensure that enough is done to set the conditions, support them systematically, and measure progress.
So before you go into your next merger or acquisition, think about how you want history to remember it. Then consider how these steps might help you.
About the Author
Karen Jaw-Madson is principal of Co.-Design of Work Experience, author of Culture Your Culture: Innovating Experiences @ Work (Emerald Group Publishing, 2018), founder of Future of Work platform A New HR, executive coach, and instructor at Stanford University’s Continuing Studies Program. She enables decision makers to address organizational challenges that affect business performance, through:
1. Coaching and developing LEADERSHIP
2. Enabling organizations to leverage CULTURE, DIVERSITY, and EMPLOYEE EXPERIENCE
3. OPTIMIZING TALENT by aligning people with strategy
4. Driving CHANGE MANAGEMENT & TRANSFORMATION
A former corporate executive, Karen is known as a versatile leader across multiple industries with experience developing, leading, and implementing numerous organizational initiatives around the globe. She has been featured in Inc., Fast Company, Fortune, Thrive Global, and Protocol, as well as written for publications such as Forbes, Greenbiz, SHRM’s HRPeople+Strategy, TLNT.com, HR.com’s HR Strategy & Planning Excellence magazine, and HR Professional magazine. Karen has a BA in Ethnic and Cultural Studies from Bryn Mawr College and a MA in Social-Organizational Psychology from Columbia University.
