Merging Cultures

March 14, 2015

Hand Mixer with Eggs in a Glass Bowl on a Reflective White Background.When there is a merger, acquisition or other major organizational change, the different cultures must be blended into a coherent new culture. Managers often assume this will happen naturally over time, so they do not focus on this aspect when planning the merger.

WRONG! Achieving a stable culture where people are at least supportive if not enthusiastically driving a singular mindset is the most significant challenge for most change efforts. Do not assume things will work out; instead, take a highly proactive approach to defining a new culture.

In every case, even when the action is described as a merger of equals, one group will feel they have been “taken over” by the other. Curiously, in many instances, both groups feel they have been taken over because employees in each former group will need to modify procedures to accomplish the union.

Usually, one of the parties is assumed to be in the driver’s seat, so it is the other party that needs to endure the bulk of changing systems. Lack of trust and genuine animosity lead to resistance when it comes to blending the two groups into one.

It is common to have the conflict occur as passive resistive behavior. People will have the appearance of agreeing, but subversively undermine the other group however possible. This kind of “we – they” thinking can go on for years if allowed. So what actions can management take to mitigate the schism and promote unity? Here are a dozen ideas that can help.

1. Start early – Do not let the inevitable seeds of doubt and suspicion grow in the dark. Work quickly after the merger is announced to have teambuilding activities.

Openly promote good team spirit and put some money into developing a mutually supportive culture. Good teamwork is not rocket science, but it does not occur naturally. There must be investments to accomplish unity.

2. Have zero tolerance for silo thinking – This is hard to accomplish because human beings will polarize if given the opportunity. Set the expectation that people will at least try at all times to get along.

Monitor the wording in notes and conversations carefully and call people out when they put down the other group. This monitoring needs to include body language. Often rolling eyes or other expressions give away underlying mistrust.

3. Blend the populations as much as possible – Transplant key individuals from Group A with counterparts from Group B. If this is done with care, it will not take long for the individual cultures to be hard to tell apart. Sometimes the transplanting process is unpopular, but it is an important part of the integration process.

4. Use the Strategic Process – It is important to have a common set of goals and a common vision. If the former groups have goals that are not perfectly aligned, then behaviors are going to support parochial thinking. When conflicts arise, check to see if the goals are really common or if there is just lip service on this point.

5. Reward good teamwork – Seek out examples of selfless behavior from one group toward the other and promote these as bellwether activities. Verbal and written reinforcement from the top will help a lot. You might consider some kind of  award for outstanding integration behavior.

6. Model integrated behavior at the top – Often we see animosity and lack of trust at the highest levels, so it is only natural for the lower echelon to be bickering. People have the ability to pick up on the tiny clues in wording and body language. The leaders need to walk the talk on mutual respect.

7. Co-locate groups where possible – Remote geography always tends to build polarization in any organization. If merged groups can be at least partially located under one roof, it will help to reduce suspicion by lack of contact. If cohabitation is cost prohibitive, it is helpful to have frequent joint meetings, especially at the start of the integration process.

8. Benchmark other organizations – Select one or two companies who have done a great job of blending cultures and send a fact finding team made up of representatives from each group to identify best practices. This team can be the nucleus of cooperation attitudes that can allow unity to spread through the entire population.

9. Make celebrations include both groups – Avoid letting one group celebrate milestones along the way while the other group is struggling. Make sure the celebrations are for progress toward the ultimate culture instead of sub-unit performance.

10. Align measures with joint behavior – Make sure the measures are not contributing to silo thinking. If the goals are aligned for joint performance, have the measures reinforce behaviors toward those goals. Often, well intentioned measures actually drive activity that is directly opposite to the intended result.

One way to test for this potential is to ask, “what if someone pushes this measure to the extreme – will that still produce the result we want”?

11. Weed out people who cannot adjust – A certain percentage of the population in either group are going to find it difficult to get over the grieving process. Identify these individuals and help them find roles in some other organization. It will help both the merger process and the individual.

On the flip side, identify the champions of integration early and reward them with more exposure and more span of control.

12. Create incentives for the desired behavior – People should be encouraged in every way to act and think in an integrated way. This can be encouraged by having the incentive plans pay out only if the joined entity performs seamlessly.

The road to a fully functioning integrated culture can be long and frustrating. By following the ideas given above, an organization can hasten the day when there are few vestiges of the old cultures, and people feel a sense of belonging to a single new order.


Why M&As Fail

June 24, 2014

HindenbergAccording to one study, (Selden & Colvin, 2003, Harvard Business Review) nearly 80% of mergers or acquisitions fail to reach their initial performance targets.

Not all of those crash and burn, but the results are none-the-less disappointing.

The reasons for these failures are as numerous as leaves on a tree. I believe there are some conditions that align to stack the odds in the direction of failure rather dramatically. Here are ten examples:

1. Perspective Problem

When first contemplating a merger, the benefits are rather easy to see and to quantify.

The problems or impediments are far more numerous, yet most of them are hidden from view, like bats in a cave. They will eventually come out and swirl around us, but at the start we do not know the magnitude of the problems.

If we are lucky, and we picked the right cave, the problems will be small and manageable, but if we are unlucky, the sky can turn black with a swarm of issues, and our safety nets are woefully inadequate.

2. Over Enthusiasm

The senior leader “falls in love” with the concept of the merger and loses a sense of reality.

If anyone dares to question the sanity of what is being contemplated, that person is dubbed a non-team-player and sent off to the minor leagues.

Just as love can be blind, managers can ignore the symptoms of problems until it is far too late. Then, all that can be done is to mitigate the damage.

3. Focus on Financials

The deal is conjured up as a financial arrangement having to do with ownership of property, technology, and processes.

The cultural aspects of getting people to work together effectively is assumed until the deal is struck.

The polarization between groups and the interpersonal hassles metastasize throughout the organization and become untreatable very quickly.

4. Wrong People on the Bus

During the run up to a merger, people are aware of what is going on, even though there is a laughable charade of secrecy.

The highest performers recognize the risk and have their alternate landing spot already selected. By the time of the announcement, some of the best people already have job offers elsewhere.

The poorer performers hunker down in the trenches and become problems to deal with after the news is announced.

5. Lack of Trust

The games played during the due diligence and negotiation end up destroying trust within both organizations, and neither group has much trust in the other entity.

Building up a culture of high trust is a daunting task under the best of conditions, and trying to do it amid the chaos of a whole new organization is about as likely as the sun turning blue.

6. Stiffing the Customer

The customers of both organizations don’t care a whit about the integration. They just want seamless service and excellent quality products on time.

When both organizations are urgently focused on stamping out internal problems and redefining their processes, there is little focus on satisfying the established customer base.

In hundreds of ways the poor customer’s needs get shoved to the back burner every day. Since there are alternatives, it does not take long for smart customers to turn elsewhere.

7. Uncertain Environment

People at all levels are petrified. They really do not know their future, and they just hang on until the dust settles.

Teamwork is pretty rare, and everyone is looking out for number one. Meanwhile the work is not getting done as before because people are not getting clear marching orders.

8. Spotty Communication

Since a good portion of the discussions are supposed to be secret (which is a true sham since everyone in both organizations knows what is going on) little credible communication is coming out of the top level.

This environment is a perfect incubator for rumors and gossip that only add more instability to an already fragile system.

9. Faulty Assumptions

Many of the procedures must be recast with both groups having to change in some ways. It is common for both groups to feel they have been “taken over” and forced to revamp their culture to accommodate the other entity.

Bitter feelings arise as people would rather live in the world that existed before. Of course that is not possible, so there is a grieving process going on, just when the organization needs people to be at their best.

10. Chaos

You can observe true chaos in one of these situations. It is as if a major earthquake just hit off the coast, and people on the island are scrambling because of the tsunami to follow. Not much constructive work is happening during this time.

These are just ten of the conditions that make the M&A process so chancy. There are dozens of other negative things going on as well. It is no wonder the track record of success against the goals is so low.

My new book, Trust in Transition: Navigating Organizational Change, explains how to improve the odds dramatically by focusing equal energy on the cultural parts of the integration as the mechanical process. Doing this mitigates all of the problems listed above and gives a fighting chance for success, despite the issues.

Trust in Transition Cover060The book will be launched on August 18, 2014 by ASTD Press and is currently available for preorder. The book is about how organizations must do a better job of preserving and enhancing trust when they go through changes such as reorganizations, mergers, acquisitions, or other restructurings. Your purchase of the book includes access to a set of videos that enhance several of the key points. For a video introduction to the book, click here.