Maverick Thinking

Integrating cultures for merger and acquisition

26 May 2021 10 mins
Robin Bryant image
Written by

Robin Bryant

Often a merger or acquisition unexpectedly heads south, for which the costs are painfully clear for all to see. Typically morale drops, and the desired alignment between teams or the blended businesses fail. Key stakeholders who you planned to keep start heading for the fire exits. But what really is going on and why is the process failing?

Why many mergers fail or under-perform

One of the hardest and certainly the most mis-understood aspects of managing the merger of companies is bringing together their respective cultures into one defined team and therefore desired culture – for which the scale of complexity increases with the number of companies that are part of the merger, either at the beginning of the process or later in the ongoing merger strategy when newly acquired businesses are introduced. What’s very clear is that every business comes with its own unique personality, values, behaviours, purposes and relationship dynamics that can lead to clashes, if not a downright dysfunctional mindset, regardless of how culturally aligned the companies may be.

In an industry survey of corporate executives who have overseen and managed through mergers, it was concluded that the number one reason for a deal’s failure to achieve the promised value was a clash of multiple cultures. In a culture clash, the businesses’ fundamental ways of working are so different and so easily misinterpreted that people feel frustrated and anxious, leading to demoralisation and key stakeholders jumping ship. Ultimately productivity declines, and no-one seems to know how to fix it, let alone make sense of it.

Sadly, and rather unfortunately, culture falls to the bottom of the pile in the merger and acquisition consideration checklist and more times than not fails to be considered at all. Acquirers have well-developed toolkits for managing the financial and operational aspects of a deal: they obviously track corporate results closely and they hold executive groups accountable for hitting their targets. However, integrating multiple differing cultures typically seems fluffy, both difficult to measure and almost impossible to manage directly. Basically this is the one simple factor as to why it’s the last, if at all, considered and a fundamental reason why in many instances mergers and acquisitions fail.

Integrating cultures for merger and acquisition

So, how best to tackle this fundamental failure in the merger of multiple cultures and what tools should be deployed to help the smooth transition of multiple cultures into one, giving all stakeholders, executives and staff the confidence to understand how to behave and perform and also give them a constant belief and a vision to believe in long-term? It’s also critical for the business to ensure there is a consistent belief and buy-in from the customer perspective, new and current. If the business fails to deploy a culture that its customers can buy into then it fails. Immediately.

The most experienced acquirers have developed a set of practical, effective tools for facilitating cultural integration and blended behaviours, alongside measurement of success – typically a set of KPIs.

These cultural integration tools offer companies an opportunity to close in on merging multiple cultures. Using these tools, business leaders can manage and measure the difficult task of persuading people to adapt their beliefs and behaviours, therefore increasing both control over outcomes and the probability that the mergers or acquisitions will show positive results against the pre-determined KPIs.

It’s important, when setting the success factors and planning the culture integration, that the following should be key aspects of consideration:

1. Set the cultural integration agenda

2. Diagnose the differences that matter

3. Define the culture you’re trying to build

4. Develop a culture-change plan

5. Sustain and measure progress

6. Ensure the C-suite believes the culture and walks the talk

7. Set the time frame for complete cultural integration

8. Build a culture ambassador team

Integrating cultures for merger and acquisition

It’s also a critical factor to ensure the correct tools are utilised to ensure maximum impact and buy-in from all stakeholders. This must not be complex, but efficient in its use and effective in its outcome. Here at Mobas we utilise many tools when deploying programmes of activity related to blending cultures during either mergers and acquisitions or a current business building multiple teams within. The following chapter explains one of our key and most effective tools, Employee Value Proposition (EVP). The EVP sits alongside the Employer Brand (EB), which is the aspect of businesses that is externally facing, however the EB becomes incredibly weak and ineffective in the marketplace if it doesn’t align to the EVP and the culture of the business.

Utilisation of successful tools: a focus on Employee Value Proposition (EVP)

When people work towards a common goal, they are driven, passionate and purposeful. Success soon follows. Source: Richard Branson, Virgin

Imagine your people being so clear and motivated about your offer and promise that they seek to deliver on that promise with every client in every interaction along with one another culturally.

In its simplest form, an EVP defines where a business is going, what it requires from its employees, its vision and what it will provide to them in return.

An EVP is a clear internal definition of what an employer brand (the external facing aspect of the brand) stands for and therefore offers to both the internal stakeholders and its customers.

In increasingly competitive market conditions, and certainly during a merger, it’s more important than ever to attract and retain the best people and certainly during a merger of businesses as these will be critical to the success of the business. When implemented correctly, an EVP should make it immediately clear to new recruits as to how they fit within the culture and understand what’s expected of them.

An EVP should be both rational and emotional. It needs to be easily understood and inspiring. Most importantly, it needs to be more than just a sentiment. It needs to be lived throughout the organisation culturally, and as part of a merger or acquisition the EVP is the solid framework that can be created to ensure a blended culture is successfully created and delivered.

An EVP is built from the inside out, engaging current employees to build out the answers to four very simple, but critical, questions:

Integrating cultures for merger and acquisition

It’s crucial to develop an EVP that resonates with the audience – the employees – which is why it’s so important that this comes from within the business or the acquirers ahead of the merger. The EVP needs to resonate with all employees from the multi-businesses that are part of the merger, and so developing this also means understanding where the new blended business is going and what makes it unique.

The EVP needs to be:

CREDIBLE – Your employees should believe and trust that your business can live up to it

RELEVANT – It needs to resonate with your business and market

UNIQUE – It shouldn’t be generic, but should be specific to your organisation

SUSTAINABLE – It needs to be for the long term to avoid scepticism

The benefits of an Employee Value Proposition to a business or a merger of cultures:

Internal benefits:

1. Increased retention

2. Improved employee satisfaction

3. Higher engagement and productivity of employees

4. Deeper alignment and cohesion across the business

5. Greater degree of focus and flexibility

6. Reduced confusion and ambiguity

7. Improved integration and responsiveness across the business

8. Ensures strategy and value propositions are understood by all staff and management

9. Smooth embedding of multiple blended cultures

External benefits:

1. Clearer understanding of value proposition by customers

2. Greater clarity about the business and its reason for being

3. Ability to attract the best talent

4. Clear differentiation among competitors, for prospective customers and staff

5. Easily identify the most suitable new employees in terms of fit

Embedding an Employee Value Proposition:

In order to effectively embed an EVP into any business and ensure that it’s embraced at all levels throughout, the following steps need to be followed through with complete consistency:

1. Engage directly with the audience – face-to-face, surveys, workshops, etc.

2. Allow the employees to help create the EVP

3. Involve employees as owners and ambassadors of the EVP

4. Be loud and proud with internal communications

5. Articulate it from the beginning

6. Demonstrate at every touchpoint

7. Constantly monitor

Successfully implementing an Employer Brand and EVP into your business will not only create a more positive and productive working environment, it will also turn your employees into brand advocates and deliver a cohesive and consistent culture, one that may have been blended from many, i.e. merger and acquisition.

This in turn will attract new talent and have a positive ripple effect on your overall brand perception and ultimately drive success and deliver against the overall merger and acquisition success factors.

An EVP can be incredibly powerful for the culture of a business. Once the EVP has been communicated to all employees and you / they have an understanding of the ideal culture that the organisation should have, the next step is mapping of the current culture and how this needs to shift in order to embrace the desired EVP.

Once this exercise has been done, employers and employees will be able to clearly understand what cultural shifts need to happen. Equally this mapping can be used to map multiple cultures and then look at the relevant shifts to ensure a cohesive culture.

The process of embedding into the organisation is a critical once, requiring maximum focus from many parties. The below diagram illustrates the many moving parts and teams required to deliver such an important aspect of any organisation – one focused upon success:

Integrating cultures for merger and acquisition

Example: Virgin’s employee values and behaviours

The Virgin brand values and therefore culture are lived and breathed from the top down.

The Virgin Group encompasses more than 60 businesses with over 70,000 employees worldwide. Virgin’s employer brand proposition, values and behaviours are strongly aligned with the Virgin brand culture. The values are demonstrated at every touchpoint, even down to providing tips on their website for prospective employees on how to approach a job interview, what they expect and what they value from the onset.

Integrating cultures for merger and acquisition

Achieving the ideal culture

In today’s rapidly changing business environment, companies are more likely to be in a state of restructure, culture change, merger or acquisition, or in many cases all of the above. All businesses need to be prepared for these events and maintaining a positive culture and retaining your talent is of utmost importance.

Change can be daunting, especially for those who have worked for a business for years and proven to be loyal and positive in their existing working environment. The key to managing change through a business is understanding and communication: ensuring your team is aligned with the new direction and ensuring the new goals align with the values of the business.

Once you have articulated your EVP and gained an understanding of the ideal culture needed to move forward, mapping this ideal state with your current state will help identify the gaps.

The circumplex below outlines the values an employer holds and aims to measure how closely an employee’s values align with these values. These can vary by business. I have used fictional values to demonstrate this.

Once you have mapped the gaps, both employers and employees will be able to clearly understand what cultural changes are needed and, indeed, whether these changes are achievable, within the current team.

Integrating cultures for merger and acquisition

If the EVP tool and process is followed closely, the benefits can be immense and truly deliver a positive impact upon the business, the people and therefore the culture. Utilising such a tool during the process of a merger and acquisition can help bring multiple cultures together in an aligned approach with complete buy-in and adoption of the core values of the business which ultimately will enable the employer brand to gain a stronger market penetration and audience engagement. All of which work towards the acquisition criteria and KPIs = SUCCESS.

Conclusion

Cultural integration isn’t something that can wait until the merger or acquisition is complete. Hyper-intelligent acquirers take stock of possible cultural conflicts as part of their due diligence well in advance of a merger or acquisition: they prioritise those cultural issues that might put the synergy of values at risk – they actually put this at the forefront of the decision-making process. The right tools make this process both feasible and effective. Tools, however, do not substitute for leadership.

Employees always watch for signals from the top of any organisation, because they know that their own managers will be guided by those signals. But if the signs are positive – if the senior team seems truly committed to building a culture that excites employees about the future – then the new tools of cultural buy-in will help pave the way to deal success.