Step 6: Develop M&A Culture Integration Plans

As far as corporate culture is concerned, “change” is the dirtiest word in the dictionary.

It’s culture’s nature to believe deeply in itself, and it shows absolutely no sense of humor when people attempt to redesign it.

In Culture Matters: How Values Shape Human Progress, Harrison and Huntington discuss how difficult it is to find something that “can substitute for disaster in stimulating cultural change.”

You’re dealing with a self-righteous, heavy-handed adversary. Don’t expect it to fight fair.

Culture’s overriding priority is to protect itself. This is more than a habit—it’s buried deep within culture’s DNA.

Let’s look at how this plays out when management decides to reshape the existing cultural …
 

Turnover has its virtues. Used correctly, it gives you a chance to reconstitute the workforce. The simplest, most straightforward solution to transforming corporate culture is to switch out people in the acquiring and acquired companies. Nothing else has the potential to so quickly change the chemistry of the culture of the newly merged organization.

The “best of both worlds” strategy for integrating cultures brings traumatic destabilization to both organizations. Managers in both companies end up struggling to manage an unfamiliar situation. They can’t necessarily draw on their previous successful experience as they wrestle with subtle and not-so-subtle ramifications of cultural shifts. Besides, after all is said and done, one of the two cultures virtually always comes out on top anyhow.

We recommend a much more pragmatic, business- oriented approach ... 

Organizations have grown far more sophisticated and skilled in their ability to execute the integration process. The one area where companies still struggle, though, is in merging disparate cultures. This is the black box of integration, the most complex problem that executives encounter in M&A.
PRITCHETT, LP surveyed 130 executives and their responses offer important clues for cracking the code on culture in M&A. Here’s what the data indicates:

• Most culture assessment efforts are too ad hoc, unstructured, sketchy, and haphazard. In fact, they may very well cause more problems than they solve. There is a clear lack of efficacy in the data-gathering process and how that information is utilized.
   
• Outside consultants have utterly failed at establishing credibility in this arena. Executives have apparently concluded that the purveyors of traditional culture assessment/culture ...

Mergers very often are such a destabilizing event, and have such a powerful impact, that they “break the organizational box,” so to speak. Frequently there is a window of opportunity that develops during which management can do some very profound things in terms of reshaping the corporate culture.

But if that opportunity is not seized, the window soon slams shut, or gradually slides shut, as the case may be. If time goes by and nothing much changes, people tend to settle back into their same old behaviors and reembrace the same old beliefs and values.

This says two things. First of all, management has an outstanding opportunity to do some things to a corporate system and its beliefs, priorities, and so forth, on the heels of a merger. There is a superb opening (plus a real responsibility) to come forth and lead the organization into the changes that are needed … 
 

The integration of a small, well-run company often requires a light touch strategy. In those situations, follow these 10 rules to achieve the best results:

1.  Turn off "integration autopilot"

Over time, serial acquirers develop detailed procedures and checklists for running efficient integrations. That can work very nicely, just as long as the same tactics are not blindly applied to all deals, no matter their size.

2.  Don't "wing it"

A light touch integration strategy does not mean no touch. Processes always should be implemented even on little deals, to define goals and time frames, track progress, and hold people accountable … 
 

There's an insidious threat facing organizations that is growing rapidly via M&A:  A loss of alignment between corporate strategy and the existing culture.

If these two fall out of sync, you’ve got a real dilemma on your hands.  But the disconnect often goes unnoticed by top management and the board of directors, even as it quietly undermines operating effectiveness. So what causes strategy and culture to fall out of alignment?

Think of it this way.  Strategy is forward-oriented.  It’s today’s game plan for tomorrow.  Culture, on the other hand, is essentially the product of your history.  One is shaped by the future, the other is forged by the past.  (That’s a dramatic difference and it has huge implications.) …

Look out, because culture usually wins the war.  Or to put it another way, far too often the past fouls up your future.