Step 6: Develop M&A Culture Integration Plans

You can’t keep everyone happy when it comes to culture change in a merger. So, here’s the deal. Don’t get scattered trying to address all the cultural preference items people make noise about. And don’t tiptoe around the delicate culture issues if they’re crucial and need to be hit head-on. Focus sharply on what’s mission critical.

Ordinarily, only about 5 percent of the cultural issues truly qualify as mission critical. What does that mean? This small handful of traits accounts for about 95 percent of culture’s influence on operating performance. These are the “vital few.” The cultural matters that remain are more or less noise, the “trivial many.” And it’s a mistake for the organization to get distracted by these lightweight issues. Why? Because this remaining 95 percent that’s basically noise will soak up people’s attention, yet account for only 5 percent of culture’s overall impact on business results.

In this section, we provide presentations that explain the facts about cultural integration, assessments that examine cultural differences, and articles that explain M&A culture best practices. Plus, we reveal our insightful research findings on culture in M&A.

Check out our answers to FAQs about Merging Cultures in M&A.

Research

M&A Culture Presentations

Cultural Due Diligence

Cultural Best Practices

Research

Cultural Integration: The "X Factor" in Merger Success and Failure
Cultural Integration: The "X Factor" in Merger Success and Failure

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 ...

M&A Culture Presentations

Organizational Culture and Mergers: The Hard Facts
Organizational Culture and Mergers: The Hard Facts

Hard Facts About Culture

  • Strategy is a product of your view of the future.
  • Culture is essentially the product of your history
  • That will always present a challenge in ensuring that the corporate culture is aligned with and supports your plans for tomorrow.
  • VERY FEW culture characteristics wield a make-or-break influence over operating results and an organization’s future …
Post-Merger Integration Culture
Post-Merger Integration Culture

Content

Several Ways to Address Cultural Issues
Four Possible Scenarios for Culture Integration
Advantages to Each Approach
Why Are Post-Merger Cultural Issues Difficult to Manage
Consequences of Culture Conflict
Culture Differences Can Cause Integration Failure
3 Important Drivers of Cultural Issues
Components of Culture Change Programs
Cultural Differences in Mergers and Acquisitions
Cultural Differences in Mergers and Acquisitions

The cultural differences between the Acquirer and Acquired Company are identified.

Content

  • Reality
  • How You Described Yourself
  • Cultural Traits
  • Human Resources and Information Technology
  • Acquirer
  • Acquired Company
  • Messages
  • Assessment Summary
     

 

 

Cultural Due Diligence

How to Perform Culture M&A Due Diligence
How to Perform Culture M&A Due Diligence

41-slide PowerPoint presentation on how to perform culture M&A due diligence.

How to Perform Culture M&A Due Diligence: The 5 Stages

1) Understanding the Deal Logic
2) Getting Organized
3) Data Gathering Tools and Techniques
4) Analyzing the Data
5) Operationalizing the Data
M&A Culture Assessment
M&A Culture Assessment

Listed below are a number of cultural dimensions and indices that are organized across a continuum.

Step 1: Review each cultural characteristic and place an A in the column that most closely represents your perception of the Acquirer’s culture.
Step 2: Place B in the column that most closely represents the Acquired Company’s current culture.
Step 3: Calculate the absolute difference between each rating to determine the largest culture gaps ...
Cultural Due Diligence Assessment Results
Cultural Due Diligence Assessment Results

1. How do people feel about being merged/acquired?

The corporate perspective is different from the field’s perspective. Here at headquarters the questions are, “Is there room at the inn?” and “Will I go to Atlanta?” In the field, people are wondering if they will have to work for less money. Some are angry that it came to this. Did the CEO and the SVP just sell us out? People’s emotions run the gamut from “How could you do this?” to “What took you so long?”

It’s no shock that we merged, but people are set back on their heels that it is this acquirer...
M&A Organizational Culture Checklist
M&A Organizational Culture Checklist

Organizational Culture Checklist covers questions for:

Owners 
Staff 
Customers / Community 
Competitors 
Operations   
What Questions from the Operating Style Analysis Are Particularly Useful?
What Questions from the Operating Style Analysis Are Particularly Useful?
  • "What are the unwritten rules? A lot of things get accomplished in organizations through unwritten rules, side channels and work arounds.
  • What gives a person power here? It gets to the core of what is valued and what makes people successful. Sometimes it is not good behavior.
  • What do people hold sacred about the culture ..."

 

 
Most Companies Combine Cultural DNA
Most Companies Combine Cultural DNA Without a Strategy

How different a person would you be? If the change happened overnight, would you even recognize yourself the next morning? What would it feel like? How would you behave?

That’s what happens when, for example, a 4,000-person company acquires and integrates a 1,000-person firm. The acquirer’s cultural DNA will be reconstituted as it absorbs the new employees. Immediately when the deal closes, one out of every five people in the workforce will be from a firm with a different genetic code.

Can anyone doubt that the immigrants will leave their cultural mark on the land of the parent company?

Cultural Best Practices

Rx for M&A Culture Integration
Rx for M&A Culture Integration

Nothing in the realm of M&A gets botched up so consistently as the blending of two companies’ corporate cultures. This foul-up is rooted in naiveté and fueled by the popular idea that culture requires broad-gauged attention once a deal closes. The naiveté is revealed in executives’ misconceptions regarding the malleability of culture. (Actually, it’s hard as hell to change.) 

And the popular idea is wrong because instead of focusing on quickly “fixing” culture differences in the broad sense, which isn’t feasible, top management should focus the organization on delivering operating results in spite of those differences. That is feasible ...

 
Don't try to Merge 2 Cultures
Don't Try to Merge Two Cultures by Taking the Best of Each

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 ... 
Strategy Culture Disconnection
The Strategy-Culture Disconnection

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.) …
Merging Cultures After An Acquisition
Merging Cultures After an Acquisition

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 … 
 
When Big Guys Buy Small Fries: The 10 Rules to Follow
When Big Guys Buy Small Fries: The 10 Rules to Follow

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 … 
 
Don't Be Surprised When Culture Counterattacks
Don't Be Surprised When Culture Counterattacks

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 …
 
When It Comes To Culture Change, Standard Communication Procedures Won't Cut It
When It Comes To Culture Change, Standard Communication Procedures Won't Cut It

You need a tremendous amount of high-quality communication to sustain a culture change. Managers typically underestimate the effort that is required. They rely on the normal communication practices and patterns, failing to consider that those methods were never designed for times like this. Standard communication procedures simply won’t cut it.

Consider the situation at hand. First, people need to hear the logic, the rationale, behind the decision to change the culture. Give them an airtight case, based on hard facts about the marketplace and the firm’s competitive position. Next, they want to know what’s coming, and how they’ll be affected personally. You must give them a clear understanding of what’s expected regarding new ways of work. You need to sell people on the purpose, preach hope, and explain the part they’re expected to play in the change strategy. The vision must be articulated, and then promoted with the zeal of a crusading evangelist.

And it doesn’t stop there. You can’t afford to let up. Don’t relax ...