- Posted by: Jim
- Category: Uncategorized
Four Principles for Preventing Culture Shock –
Almost 20 years ago, America Online agreed to purchase Time Warner for $165 billion in what would be the biggest merger in history. People still talk about it today – not just because it was big, but because it was bad. In the end, 1+1 did not equal 3. Why? Experts cite “incompatibility,” “lack of synergy,” “bad fit” or some variation on a theme that’s critical to successful acquisitions – the integration of two different cultures into one.
According to Deloitte’s sixth M&A Trends Report, confidence is high in 2019, extending several years of record M&A activity. Private and family companies looking for growth or exit strategy opportunities through acquisition would do well to heed the lesson of AOL Time Warner: Signing on the dotted line is just the beginning. If you want the marriage to work out, consider these four principles for a successful integration.
- Incorporate Human Capital Strategy Early. The M&A process has evolved over the years to include human capital in the due diligence process. When evaluating an acquisition, be sure to assess people, talent and culture with the same rigor you apply to the company’s customer base, profitability or market potential. In the case of two family companies becoming one, don’t assume your cultures or values are the same just because you’re both family-owned.
- Communicate Quickly and Clearly. When it comes to employee communication, time is never an ally. People in both acquiring and acquired companies often express that they don’t know what’s happening. When they don’t know, they speculate. Fill the vacuum by anticipating employee questions and concerns before they raise them. Communicate about the culture so that people know what’s most important and how they’re expected to do their work. Remember that to a large extent, the new culture of the combined organization will be shaped by these early communications.
- Accelerate Integration to Reduce Anxiety. Believing that too much change too soon is overwhelming to people on both sides, some companies proceed too slowly. Though it’s counterintuitive, an accelerated pace actually helps with cultural integration. What creates the most stress for people is ambiguity, so the sooner you make changes and put an end to the uncertainty, the more quickly everyone settles in. In an acquisition, there’s also a unique window of opportunity to make important changes because everyone expects change.
- Focus Everyone on the Customer. Right after an acquisition, it’s natural for the focus of both organizations to turn inward. However, this can be a negative distraction to the real intent of most acquisitions, which is to attract additional customers through more compelling products and services. Having a clear priority around extraordinary customer service can become a rallying point for the new team and a cultural touchstone of the new organization. Not to mention, it helps everyone focus more on business goals and less on personal concerns.
Buildings, equipment and technologies can be acquired. People and cultures cannot. To ensure the success of an acquisition, they must be carefully integrated before, during and after the deal is done.
What is “Culture”?
Ignoring a company’s culture is the leading cause of problems in acquisitions. But what exactly is this “culture” thing? What does it mean to pay attention to culture, not just in connection with an acquisition, but all the time?
Generally, culture is about how things work in an organization. How things really work, not just how things appear on the website or in the employee handbook. Are we truly innovative or more traditional in our thinking? Are managers directive, collaborative or a little of both? Are leaders visible and available or do they work behind closed doors? How do we communicate and in what direction does information flow?
Culture is the company’s leadership personality, management style, strategic focus, history and character. It’s about what the company communicates to employees (intentionally or not) and how strongly people embrace those messages.
Culture is also the story we tell about ourselves. It’s what we believe in, what we talk about, what makes us anxious and what we celebrate. It’s about how we relate to each other inside the company and out in the world. It may even be that we wear jeans to the office and always have pizza on Friday.
Human beings react to culture in much the same way they do politics and religion – small differences in beliefs often unite people more powerfully than great similarities.