Time and time again, culture is cited as one of the top five reasons for integration failure, and there are a variety of key reasons. The culture waters can be murky as culture might be defined differently company to company, and, let’s face it, everyone tends to point to someone else when it comes to culture (“HR owns culture,” “no, culture comes from the top-down”...).
Developing a strong strategy around culture in order to have a smooth integration and preserve deal value (which ultimately translates back to the talent - aka the people -) is of the utmost importance.
Furthermore, this strategy must go deeper than the acquirer and target discussing similar values (two companies may value people, but one company might show this by working to ensure employees stay for the duration of their careers, while the other might have rigorous six month evaluations).
Moving beyond basic value discussions, best practices surrounding cultural integration can be summarized by the motto “strategy, spirit, and structure,” and today we will go deeper into this motto and its specific action steps.
Implementing Strategy, Spirit, Structure for Robust Cultural Integration and Maximizing Deal Value
Engaging the integration leader as part of the deal structure is obviously critical, and the structure of the deal has to be well known when planning for integration. Specifically, the main question must be “what are the incentives behind behaviors,” and the answer must be clearly communicated.
For instance, if you have a deal that will incentivize certain behaviors, how do you structure the deal and what does all of this mean for integration?
In order to answer these questions and execute plans based on their answers, cultural work must begin before the deal closes. Here are suggested action steps:
- Have detailed conversations with the target’s leadership team; cover the background of the target, how it works, what it likes about the company, how it evaluates and compensates....work in a structured, methodical way, dimension by dimension.
- Post discussion, analyze your findings to uncover the differences between your company (the acquirer) and the target.
- Once you have the differences identified, you must decide which behaviors you want to preserve and how you will preserve them. Additionally, clearly identify the behaviors you will want to eliminate and how you will deal with them to avoid friction in the future.
- Once you close the deal, the CEOs from both companies must have a frank conversation about the above behaviors. Namely, the acquirer will want to express what it will preserve and what are non-negotiables. The non-negotiables are related to preserving specific assets (again, going back to the spirit - the reason behind the deal).
- Communication prior to Day 1 needs to be explained to the integration team, and the integration team must enforce critical behaviors with workshops, town halls, and training in every work stream.
Additional Cultural Integration Best Practices
1. It helps to have a specific role that facilitates cultural integration
To begin, it is ideal to have a change management position on the side of the acquirer that facilitates the various aspects of cultural integration and works to hold everyone accountable. This role can go by a variety of names and plays a key part in the process, but one person alone cannot be accountable for culture - everyone must own culture.
2. Don’t assume people understand your way of communication
A common, and costly, mistake during acquisitions is taking for granted that the person in front of you understands how to make a decision or communicate based on your company’s culture. With this in mind, as two companies come together, it is critical to take the time to begin each meeting with a brief overview of what you will be discussing, why you are discussing it, and how this communication will take place and how decisions will be made.
This suggestion can be tempting to push aside or labeled as something that will slow you down, but reviewing your focus and communication norms/expectations actually helps you move faster towards execution. It also cultivates an inclusive environment.
3. Remain agile
As you move to integration, it is critical for the acquirer to remain agile; you have to be able to adjust even though you have a strategy and clear idea of what you want to/need to do. Do not allow the pressure of the deal/time prohibit you from being agile and thinking clearly - you cannot just stick to a playbook.
4. Both sides need to be open to learning from each other
While the acquirer should hold its ground when it comes to non-negotiables, and the target must learn what is not worth wasting time fighting for, both sides need to be willing to learn from each other. Sometimes the acquirer can be challenged to be better by the target; therefore, as an acquirer, do not lose the opportunity to advance your company by learning from the target. This is also where diversity and inclusivity is tested.
Of course, this does not mean the acquirer must always embrace the target’s ways, but taking the time to listen and think about the target’s ideas and how the target will experience change can go a long way toward ensuring a successful deal.
When culture is accounted for in a strategic way that captures the spirit of the deal, integration will not only happen faster, but it will also happen without the friction that tends to accompany it. Friction, of course, is the risky part of integration because it can lead to loss of value, which ultimately diminishes the purpose of the deal.