There are various reasons why two companies might join together to create a combined business operation. One frequently cited explanation for a merger or acquisition is “synergy” – a combination of complimentary businesses with a view to increasing performance and reducing expenses. Another motivation behind combining is for the purpose of diversifying business, often in order to reduce the impact of falling profitability within the single markets to which each was previously limited. A further reason is pure growth – the acquisition of a smaller competitor in the same field to produce an increased market share. Yet another reason is simply to take over a competitor with a view to removing them from the market and commanding a greater share in the trade of a common product.
Clearly, these factors have one common denominator – an economic one – in that they are all founded on the overarching desire to increase performance, reduce expenditure or both. Although companies do not tend to join together through a desire to combine operations of a similar corporate culture or to integrate the qualities of two outstanding staff teams, the consideration of “people” and “culture”, in addition to organisational matters, may well prove fatal to the success of the venture.
The Importance of People and Culture
People are essential to the successful operation of any business. They are, equally, fundamental to a fruitful integration of two individual operations. The reactions of the employees of business, both before and after integration, will be crucial in determining whether it succeeds or fails.
The culture of an organisation is reflected in the values and personal philosophies of its staff team and the corporate culture of a successful business is one that values its employees and is clearly perceived by them to do so. This results in a staff team simultaneously working towards achieving their own personal goals and those of the organisation because they recognise that they have an identity of interest in so doing. The recognition of the role that a positive corporate culture plays in a successful business is critical, therefore, when implementing the changes that are required to achieve a successful merger.
Within this context, we at Adcurata, a Human Capital Consultancy, specialise in supporting organisations through the process of change, help them to ensure that the business remodelling is a positive one and that the strategic outcomes that underscored the initial decision to merge are achieved.
It is essential, from the outset, that open, frank, honest and regular lines of communication are established in order to ensure that information is disseminated clearly and in good time. This is especially so where the context of the merger is for one company to take over the assets and business of the other.
- An analysis should be undertaken to ascertain the existing corporate cultures of the two organisations, identify similarities and differences and assess how the differences might best be addressed. This analysis should also include the objective of appraising the respective workforces and their skills, views, ideals, motivations, and goals, determining the key personnel within each staff team and evaluating how, with their assistance – and the involvement of all the employees – the merged company will achieve the integrated corporate culture that will enable it to achieve the aims of the merger. This process might take the form of a SWOT analysis.
- In the light of the above, and in consultation with the respective leadership teams, crucial non-financial determinations should be made before proceeding with the implementation of the planned merger. If it is felt that the personnel in the two companies will simply be unable to work together or that the merger will result in a loss of the talent that helped the two organisations to achieve their worth in the first place, an alternative to complete corporate integration might be considered preferable. Alliances, partnerships and other forms of mutual collaboration may provide most, if not all, of the perceived benefits of merger without some of the significant potential disadvantages.
If, after this analytical and consultative process, the integration plan remains intact, Adcurata will, through our Consultant, provide ongoing advice, input, support and ideas in the key areas of personal, cultural and organisational integration.
- One of the primary areas to address is that of staff opposition. Conflicts raised by the planned integration should neither be ignored nor overridden. To do so risks alienating employees, resulting in what may become long-term antagonism, rejection of the integrated organisation’s corporate culture, a steadfast refusal to accept the new organisational structure, an unwillingness to engage in all but what is contractually required of them and the sabotage of future innovations and initiatives.
- When two companies join together it is likely to create a sense of vulnerability amongst the employees, with the possibility that some of them will decide to seek what they perceive to be a more secure position elsewhere. Those that are most likely to obtain alternative positions will be the most able and, inevitably, there is a significant risk that they will join a competitor. If this is allowed to happen, the obvious consequence will be to strengthen the competitor whilst weakening the newly integrated organisation. Adcurata will work with both companies to devise strategies to limit the sense of vulnerability and to create an atmosphere in which the “safe” option is perceived to be the combined operation.
- It should always be borne in mind that major organisational alterations such as mergers can be a profoundly uncertain, worrying, confusing and demoralizing time, particularly if communications from the leaders are sparse, irregular, inconsistent or misleading. Furthermore, as the integration of the companies proceeds, many may feel that their past ways of working and their contributions are not valued and it will be essential to reinforce to them that their subscription to the former traditions remains valued, despite the commitment to a new model. As we have already endorsed, communication is the key to carrying the workforce along with the process of integration and to address issues such as these.
- Prevarication is likely to exaggerate the type of concern referred to above. The transition should therefore take as little time as possible in order to avoid uncertainties, rumours, gossip and leaks, all of which might militate against the development of the required positive corporate culture within the merged operation.
- The primary aim of any merger should be for the best characteristics of the two organisations to endure beyond the integration process. The two companies should be enabled to acknowledge that this is just as crucial in the case of culture as it is for operational, technological, productive and functional processes. The new culture should therefore represent a combination of the most positive cultural features of the two merging companies.
- A cultural assessment , involving the clarification of each organisation’s culture will make the task of integration easier by uncovering those areas of corporate culture that are complimentary and those in which one or other – or both – of the companies may need to moderate their chosen/established values, beliefs, and behaviours to achieve the shared ideal of integration.
- To achieve cultural change involves both organisations agreeing upon a model of their shared vision of what the combined culture should be and then both devising a methodology and implementing the necessary programme to achieve it.
- An interesting point is that cultural change often seems to come about only when major events impact upon an organisation. A merger or acquisition provides a ready-made opportunity to assess and change. In that respect, the time and effort put into achieving the corporate culture that the two businesses wish to represent their combined operation should be viewed as a positive contribution to the process of merger.
As we indicated at the outset, there are a significant number of critical organisational issues, in addition to human and cultural matters, that will arise during the process of integration. The Adcurata Consultant will provide advice and support on all of those set out below – and any others that might become apparent in each individual case.
- Measuring Progress
The establishment of a clear and specific set of goals for the merger will assist the leadership team to focus on tangible, measurable results. Measurement is not only key to the ongoing assessment of progress, it is also an excellent communication tool, since it is an action which gives words greater credibility. Measuring results at a number of carefully plotted milestones can also point to potential problems before they become crises, helping to make the merger/acquisition smoother and increasing the likelihood of success. It also helps to keep leaders focused on a balanced set of issues.
- Scenario planning
No merger should be considered in isolation of external factors. Influences over which the integrating organisations have no control should be factored into the planning process. Circumstances such as market decline, customer response, regulator reaction and others should all form part of a process of scenario planning. (Did anyone consider the consequences of Chrysler no longer being an American company, including a loss of sales (since most of its customers are in the United States) and its de-listing from many indexed mutual funds. The 2001 power crises in California were also seen as a result of lack of scenario planning – in this particular context a failure to test the assumption that natural gas prices would stay flat.
- The process of integration can be markedly affected by assumptions. The Adcurata Consultant, as an outsider, is in a unique position to bring out hidden assumptions. These are sought continuously throughout the process, not only as a discrete procedure, but also through scenario planning, the exploration of options and brief tactical surveys.
- Communication, in terms of both ensuring that a steady stream of information is released by the organisation’s leaders and keeping that information balanced, direct, clear, and accurate, thereby preventing undesirable subtexts from being communicated is, as we have already stated, another essential component of merging two operations. The Adcurata Consultant would support leaders in effectively communicating with the workforce and would identify any contradictions between words and actions that might that generate uncertainty.
- Rewards are an important means of encouraging the workforce to undergo the significant changes that integration is likely to require of them. If employees feel that their contributions to the merger are recognised, valued and rewarded (not necessarily purely financially) their ongoing support for and ownership of the integrated business are more likely to be achieved.
- Leader Coaching
The integration of the leadership teams of each organisation will not only enhance the ability of the leaders to communicate their intentions accurately, build trust, and manage conflict and tension, it will also place them in a better position to address conflicts and assure mutual involvement and dedication to the merging process. Adcurata will advise and support the respective leadership teams throughout this process.
- Identifying Best Practices
Identifying which are the most effective practices and procedures, in terms of both operational and service processes will assist the integrated company in adopting the most effective standards, which may not necessarily be those previously espoused by the dominant company.
- Integrating Initiatives
The integration of initiatives can be a difficult process, not least as it may involve the suspension or abandonment of certain highly regarded initiatives. Nevertheless, it is important to ensure that the managers and staff of the new company are not overwhelmed by adding the pressures of merging initiatives, projects, strategies, schemes and projects to the stresses already inherent in the integration of two organisations.
- Key Processes
Whilst the integration process is undertaken, the key systems and processes of each company should be closely observed, as these will have a direct bearing on the success or otherwise of the culture of the combined company and, as a consequence, the viability of the merger itself.
Adcurata fully appreciates the importance of acknowledging and understanding the role of each company in the process of planning and implementing a merger. Whilst market issues may have been the determining factor in the decision to merge, effectively addressing all key organisational areas within both a “human” and “cultural” context is likely to determine its success.
Article written by Mark Edwards, Marketing Director, Adcurata Limited
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