10 Steps to Successfully Integrate Cultures During a Merger

Anyone who has gone through a merger or acquisition knows that they are riddled with social, cultural, economic, and technical complexity. Acquirers spend a tremendous amount of time working on the financial and operational aspects of the merger and acquisition transaction, but often neglect the equally important "soft" task of aligning two organizations whose cultures might be entirely different. Studies conducted on the outcome of mergers and acquisitions show that 30% fail within three years, with the majority failing due to disparities in organizational cultures.[1]

Mismatches in social norms and human-centered policies tend to result in employee frustration and anxiety, factors that cause many to leave the organization. For the employees that remain, the organization's internal processes and procedures do not always mesh, making it difficult to operate effectively.

Making organizational alignment part of your merger and acquisition plan will greatly increase your chance of creating an organization that achieves its promised value. With social and cultural integration at the center of the merger and acquisition strategy, synergies develop, a newly aligned culture forms, and employees begin to see themselves as part of a whole.

Here are 10 best practices for pre-merger and post-merger management that we have developed over the years to aid in the technical and cultural integration of multiple organizations:

Develop an integrated management team of top performers to oversee the merger or acquisition. Pick your best people and shift their full-time focus to getting the merger or acquisition right. Make sure to give the team appropriate incentives, clear direction on desired outcomes, and the leadership support to be successful. The culture you create with this team will have a big impact on the culture of the new integrated organization.
Visually depict the business model of the new, integrated organization. The business model is the framework for how your organization earns revenue — what it offers customers and how it reaches them using available resources. While it sounds obvious, creating these visuals is harder than it seems, and doing so is critical to generating a shared perspective among the leadership team. This shared perspective allows the group to work together to find places within the system to innovate — and to begin to enroll others in the shared vision for the business model.
Interview stakeholders to understand cultural values, economic interests, and leadership styles. Internally, employee interviews and surveys can be used to assess and diagnose values, unwanted behaviors, and understand cultural commonalities and differences that need to be mitigated. Externally, interviews with customers and other key stakeholders can help develop a qualitative picture of current performance and service levels.
Design a stakeholder alignment plan focusing on the fewest, most important internal and external stakeholders of the merger. Map stakeholders by level of influence and support inside and outside your organization. Develop an engagement and communication approach tailored to each distinct stakeholder group.
Build a compelling narrative about the benefits the merger will deliver and then anchor your merger management approach around capturing those benefits. Use insights from the interviews to speak directly to the values, interests, and priorities of your most critical stakeholders. Focus on the core motivations of your stakeholders — and take into account that some will be motivated by logic ("head"), some by emotions ("heart"), and others by financial drivers ("wallet").
Use a collaborative process with your most critical stakeholders to co-create the new culture — At the Clearing we define culture, at its most basic level, as all of the behaviors the organization does and does not tolerate. Communicate how the new culture centers on the most important common objective desired by all.
Clarify new roles and responsibilities — When mergers occur, new agendas and structures must be established, and employees must obtain an understanding of their new roles and responsibilities. If this does not occur, there will be increased conflict — or even resistance — and organizational goals will not be achieved easily. Executives in mergers and acquisitions need to disseminate what each leader and group's role will be and how each one complements other elements of the system.
Clarify the process, style, and approach for decision-making — Which decisions are collaborative? Which decisions are hierarchical? For high profile decisions, make sure the decision-making process is visualized, transparent, and clear for those impacted.
Provide ongoing opportunities to listen and address employee feedback — When employees go through a merger or acquisition, many of them experience emotions such as confusion, anger, sadness, and disagreement. When employees are not given the space to work through these emotions, there is often conflict, low morale, and impacts on service delivery. Provide regular outlets for feedback and dialogue. Your customers, staff, and stakeholders want to be listened to and treated with respect. In some cases, an objective third party to the merger or acquisition can provide a neutral sounding board.
Relentlessly pursue outcomes together and use integration as the means to these achieve outcomes. Track collaboration metrics and reward employees and teams that achieve outcomes together. Show integrity as a leadership team in walking the talk of the declared culture and the integration strategy. Avoid focusing on integration for integration's sake. Stay focused on customers and business outcomes. When you 'chase' meaningful, shared outcomes together, the new integrated entity will have a foundation for dealing with the cultural issues that get inevitably get in the way.

Leaders and managers must be diligent, proactive, and intentional about aligning both the subjective (culture, communication, values, etc.) and objective (technical expertise, business processes, financial models) elements of integrating two organizations. When leaders couple these complimentary streams of activity before, during, and after the merger, the organization can achieve successful outcomes.

If your organization is considering a merger or is currently going through one, The Clearing can help manage all integration efforts from a perspective of culture creation. Contact The Clearing to discuss your needs.

[1] Isaac Dixon, "Culture Management and Mergers and Acquisitions," Society for Human Resource Management case study, March 2005.