Your organization is going through a massive merger.
As the head of HR, you’re laser-focused on protecting one thing: your culture.
But it’s a little unclear how to do that.
The first challenge is that it’s not entirely clear what “the culture” is now that two organizations have come together.
So the first few months – maybe the first couple of years – of this merger will be spent determining:
- what exactly this new culture looks like
- what needs to be protected, and
- what must be nipped in the bud
This will take time and money, so first, you’ll need to demonstrate to senior leaders why managing your culture during and after the merger is so important.
Why culture matters (especially during a merger or acquisition)
Think about why you’re merging your company. You’re doing so to:
- enter new markets
- deliver new products and services
- access a more specialized workforce
Your people play a vital role in this merger’s success.
But if they can’t work together, or they refuse to work for you anymore, your merger could be at risk.
Aligning your culture is essential to a successful integration after your merger.
Twenty-five percent of executives say that lack of cultural alignment and cohesion is the main reason their integration fails.
And when issues with culture arise, this can lead to further issues like the following.
Low engagement
Culture refers to the attitudes and values that guide how employees behave and make decisions.
For example, if an employee works at a company where unethical behavior is overlooked, so long as it leads to results, then it breeds an environment where others do unscrupulous things to get ahead.
Those who don’t want to do so feel a sense of dread or anxiety.
If an employee works at a company where managers are abusive or unsupportive, they’re likely to keep their head down, do their work, and go home rather than share their ideas or try to go above and beyond.
These kinds of poor cultures lead to low engagement levels.
Engagement is how committed an employee is to their organization. It’s the difference between showing up to work happy to play a role in the overall functioning of the place and just viewing “the place” as a source of pay.
When you’re engaged, you want to contribute to the growth and betterment of your company by delivering great service to customers or helping your colleagues get work done.
When you don’t feel engaged, your goal is to get in and get out and never do anything beyond your remit.
This makes sense. Engaged employees feel aligned to their company’s values which makes them feel good about working for it.
They are also supported with the resources they need to get their work done, so they aren’t too burnt out to contribute further.
They’re also treated with respect and appreciation rather than being overlooked or dismissed.
Moreover, employee engagement levels have an impact on other important factors such as employee turnover and productivity.
In 2013, Arby’s was a struggling fast-food chain. Employee morale and engagement were down due to the high turnover rate of company executives and declining sales.
That year, Paul Brown was hired as CEO. Coming from Hilton Worldwide he was an outsider to the restaurant industry. Nevertheless, he used this to his advantage by talking to his employees.
He went on a listening tour. He talked to his employees, from across the business, and asked them what they believed was working, what they felt wasn’t working, and what they would do if they were in his position.
This humble, inclusive approach gave Brown insight into not only what people would do if they were in charge of a single location, but what they would do if they were in charge of the entire brand.
During his first tour, he visited over 50 Arby’s locations in the United States and talked to over 1,000 Arby’s employees. After covering all that ground, he began to pick up on specific themes.
He learned that Arby’s was best when it embraced its own unique menu items instead of trying to go head-to-head with all the other big burger chains or trying to be something it wasn’t.
He learned that the Arby’s brand was fragmented, especially when it came to the different ad campaigns in the market, and that this prevented employees from getting behind a singular Arby’s brand identity.
He also learned that despite Arby’s access to a great supply chain with quality ingredients, the company wasn’t taking advantage of this.
By engaging employees he was able to create a new vision for the company that focused on having high-quality ingredients, clean restaurants, and fan favorites on the menu. This led to a significant financial turnaround for the brand.
They’ve continued to enjoy success by launching programs that aim to engage employees with a promise: if their employees take the time to get to know Arby’s goals and vision, they’ll take the time to get to know their needs as well.
This is only one example of how investing in engagement can make a difference to a company.
Employees know their jobs better than anyone else, and they know the people they work with (whether it’s customers, vendors, or other team members) better than anyone else. When they feel heard, they’ll share insights that make your company better.
This kind of engagement is essential during a challenging transition like a merger.
High employee turnover
The lower your employee engagement rate, the higher your turnover rate, and turnover can cost your organization a pretty penny in recruitment costs.
During and after a merger, your employees are already dealing with a significant amount of uncertainty.
In the past, they could use the company culture as a way to trust how their leaders would manage change.
With a merger, there’s an unknown entity – the new company – giving employees very little in the way of a touchpoint to understand what the future looks like.
Low employee engagement can lead to high employee turnover in a number of ways.
- Dissatisfaction: One cause of disengagement is dissatisfaction. Since people spend about one-third of their lives at work, it makes sense that they’d want to find another job.
- Lack of advancement opportunities: High-performing employees want to advance in their careers, whether that means managing a team of their own or becoming specialists in their field. When employees feel there’s no room to learn or grow, they’re less engaged in their work. One study found that 82% of employees would leave their job if they found that there were no career progression opportunities available.
- Uncertainty: If employees feel like information is being withheld from them during a merger, they may be unwilling to stick around to find out if the new changes will harm them or help them.
A negative feedback loop can also occur.
A company has a poor culture because of toxic behavior, limited opportunities for advancement, or micromanagement.
This poor culture leads to turnover. When other people see this turnover, they start to question whether they want to stick around as well.
This further poisons the company culture as people stop viewing their workplace as a place of growth, opportunity, and excitement, and start viewing it as a stop gap in their career or, worse, a sinking ship.
As employees see their former colleagues thrive at other companies, this contributes to a “fear of missing out” or a “fear of stagnating” and an urgent need to start looking for new opportunities.
Low productivity
Bad work environments that breed toxicity and glorify things like being “cutthroat” lead to lower productivity.
These stressful, high-pressure environments may seem like they lead to better results, but in reality they incur a number of hidden costs that undermine a company’s productivity.
High-pressure companies have higher healthcare costs.
In fact, these costs are 50% greater than other organizations. And over 550 million work days are lost each year due to workplace stress.
Even if tough work environments excite employees and lead to engagement in the short term, they often lead to disengagement in the long term that leads to lower productivity due to presenteeism, absenteeism, and more.
Since it’s harder for companies to measure how much effort knowledge workers expend, disengaged employees can get away with not bringing 100% to their jobs.
These potential issues are bad enough for an organization undergoing regular operations, but they can be devastating for a company going through a merger.
If employees are unhappy, uninspired, overwhelmed, or disengaged, they’re more likely to look elsewhere when you need them most. This makes it important for companies and their leaders to take managing culture seriously during and after a merger or acquisition.
In some cases, there might be low productivity not because a culture is “bad” but because a culture is different.
Consider the case of Amazon acquiring Whole Foods.
When Amazon acquired Whole Foods, the idea was that Amazon would benefit from expansion into the grocery market and more customer data.
For Whole Foods, the upside was offering their customers lower costs.
The post-acquisition reality was a little different.
Amazon’s disciplined, rigid, and metrics-driven work culture clashed with Whole Foods’ more laidback, decentralized power culture.
The result was media reports of Whole Foods employees struggling to grapple with Amazon’s obsession with efficiency. There were also reports of people leaving the company and crying on the job.
In this case, it’s harder to call one culture bad and one culture good. Both cultures suited their respective organizations and brought them success.
But when the companies came together, the dominant company’s culture didn’t work for the employees in the acquired company.
This is because Amazon has what’s known as a “tight culture” while Whole Foods has what’s known as a “loose culture.”
A lack of understanding around these two different types of cultures had an impact on post-acquisition productivity.
How to prioritize culture during the integration
Companies undergoing a merger have to prioritize culture, and this means thinking about the integration of company cultures as early as possible.
The earlier companies think about how to merge their cultures, the better.
McKinsey recommends that companies go through the following steps:
- Figure out how the work gets done
- Prioritize
- Support important changes
Let’s look at each of these steps more closely.
Understand the culture of both organizations
What is the culture of the two companies that are about to be merged?
At the strategic level, what is it about the individual cultures of these two companies, pre-merger, that made them so successful and made them worthy of coming together?
Identifying this early is key, since you run the risk of unknowingly spoiling the secret sauce when you go through the process of integration.
If you know what and where the secret sauce is early, you can preserve it.
It’s also important to identify how work gets done within these organizations.
Are employees encouraged to speak up and disagree with a leader’s plan of action?
Or do they operate within a strict hierarchy where what a manager says always goes?
And how are they incentivized and motivated?
Does the entire team operate with a shared mission that fuels them to go above and beyond, or is every completed goal met with some kind of monetary or material reward?
For instance, if your organization has a very cooperative, collaborative environment and it merges with a company that relies heavily on sales and a fierce competitive culture, there’s bound to be clashes.
But it doesn’t make sense to completely swing towards one culture or another. The cooperative, collaborative culture may have worked for Company A because it’s a research-driven organization and this kind of culture is essential for anything to get done.
At the same time, one of the things that made Company B an attractive target for acquisition was its amazing results driven by its cutthroat culture.
During the integration process, it’s important to identify what business goals require these different kinds of cultures and retain them in those areas rather than eliminating them wholesale and undermining the environments that made both pre-merger companies successful.
Once the leadership team has understood the culture of both organizations, it’s up to them to merge them into a new mission and vision, set of values, management practices, and behaviors that incorporate the best of both organizations.
This is something that Time Warner and AOL struggled with when they merged. Time Warner had a more buttoned-up, corporate media culture while AOL had a more entrepreneurial, scrappy culture.
This led to friction during their merger and mutual disrespect while working together, making it difficult for the company to navigate the burst of the dot.com bubble and the shift from dial-up to broadband internet.
Something similar happened when Hewlett-Packard and Compaq merged.
Even though both companies had popular products, the newly-formed company struggled because Hewlett-Packard was a more engineering-driven company while Compaq was a more cost-centric, sales-driven company.
Fuse the new change into the company’s DNA
You’ve decided on what your new company’s culture is going to be.
Great. But this is just the beginning.
Now that you have a clear understanding of what the culture should be, it’s time to make that happen in practice.
Why?
Because the clock is already ticking. Work doesn’t grind to a halt during an acquisition. People continue to work – and they start to work together with their new colleagues.
You don’t want bad habits or contradictory cultural traits to cement themselves during the early days of your integration.
Identify elements of the culture that you want to shift.
For instance, if one of the goals of the new culture is to become a more collaborative, innovative work environment, then leaders can model what this looks like.
For instance, this may mean speaking up with ideas, practicing creative problem solving, and identifying areas of improvement within the company.
These leaders and managers should lead by example, by articulating what the past behavior was (e.g. hear an idea and faithfully implement it) and what the desired future behavior will be (e.g. hear an idea and present alternatives for the purposes of creativity even if the original idea winds up being the final plan).
It’s also helpful for organizations to identify influencers, particularly within the company that’s being acquired.
These influencers help spread the message that the management team has crafted, since top-down communication is not enough.
Measure and support the new culture through employee surveys
What gets measured, gets managed, and your new culture certainly needs to be managed. It’s important to understand how your employees are feeling about the newly merged company.
You don’t want to wait for negative signals such as decreased productivity or increased employee turnover.
The best approach is to ask your employees how they’re feeling over the long term, identify issues, and then act on the feedback.
Don’t wait until your annual engagement survey. Instead, distribute pulse surveys that ask your employees to rate their experience with the acquisition.
Do they feel excited about the new mission, vision, and values for the post-merger organization?
Do they know and understand what their job expectations are after the merger?
Do they feel a sense of uncertainty about their place in this new company?
Would they take the same role for the exact same pay at another company if they were offered the opportunity?
Do they understand the new org structure?
These questions can help you identify areas where your post-merger efforts aren’t working.
For instance, if the leadership team has come up with a unified corporate strategy, vision, and mission, but your employees express confusion about the post-merger goals, then you know you need to improve your internal communications.
Collecting feedback from your employees after a merger accomplishes several goals.
First, it gives you the information you need to take targeted, meaningful action.
Second, it demonstrates to your employees that someone is listening and that they aren’t being left adrift in the aftermath of your merger.
That said, creating and distributing employee surveys can be complicated. Once you’ve distributed your survey, it’s important to block off time in your calendar to review the results, pull out major themes, and turn these insights into an action plan.
You can simplify the survey process by using technology to easily create, distribute, and analyze your surveys.
Sparkbay’s employee engagement tool makes it easy to measure and manage your post-integration culture at scale.Click here for a demo.
