Merging Corporate Cultures when companies buy companies

Best practices to merge corporate culture.

 

When corporations merge, it is required to align corporate culture with employees as part of the merger activity.  This of course should be planned for with ground rules set before the completion of the merger.

This article will provide you with some Best practices to merge corporate culture which can also be used for your ongoing corporate cultural challenges.  The Best practices are explained in more detail below and here are the topics you will discover:

Determine Cultural types

Overcome Us vs Them

Gain trust

Customer focused Structure

Create Moments of Celebration

Together with the findings from the following articles and our experience in the field, this list of best practices for your company has been created.

From a Forbes article titled, “The Importance Of Team Building Events After Mergers And Acquisitions”, Michelle Riklan, Managing Director of Riklan Resources LLC, wrote:

“While there are many moving parts to consider when heading an M&A (including business systems, operational models, aligning the vision and mission, company metrics, transparency), the most important thing of all is cultural integration.”

 

The same article went on to highlight this warning:

“For small and mid-market companies, failure to integrate properly has costly effects on talent pools and bottom lines.”

 

From a Harvard Business Review article titled, “One Reason Mergers Fail: The Two Cultures Aren’t Compatible”, we are introduced to the concept of “Tight and Loose” corporate cultures.

“Tight company cultures value consistency and routine. They have little tolerance for rebellious behavior, and use strict rules and processes to uphold cultural traditions. Loose cultures are much more fluid. They generally eschew rules, encourage new ideas, and value discretion.

[Based on] 4,500 international mergers from 32 different countries between 1989 and 2013:

We found that mergers with more-pronounced tight-loose divides performed worse overall.”

 

The article talks about the cultural troubles caused by the Amazon and Whole Foods merger in 2017. Highlighted differences and difficulties in merging the Tight culture at Amazon with the Loose culture at Whole Foods was discussed with examples.

From another Harvard Business Review article titled, “After a Merger, Don’t Let “Us vs. Them” Thinking Ruin the Company”, further warnings are highlighted:

“[W]hen mergers are not done correctly, the end result can be at best uncomfortable, and at worst devastating to both companies.

M&A often fosters us-versus-them thinking, which can undermine deal success from the get-go.”

 

A study performed by Price Waterhouse Cooper (PWC) and reviewed in an article titled, “Global M&A Industry Trends: 2022 Mid-Year Update”, the importance of focusing on employees was again reinforced:

“PwC research has found that workforce is the number one risk to growth”

 

One more PWC study and reviewed in an article titled, “What 52,000 people think about work today”, drives home what state the companies have to get their employees into to succeed.

“[Companies will] succeed only if their people are fully engaged, motivated and eager to contribute.”

 

Best Practices to Merge Corporate Culture

Together with the findings from these articles and our experience in the field, following are some best practices to merge corporate culture.

 

Determine Cultural types

1. Determine the type of corporate cultures you are working with, tight and/or loose.  The most success will be found within the middle ground of not too tight and not too loose.
   1. You need to negotiate corporate culture to determine what strict rules to loosen and what loose activities to tighten
      1. Tightening is to add more structure and guidance to a process or procedure to allow efficiencies and productivity gains
      2. Loosening is to remove structure and guidance to allow more creativity and experimentation
   2. Always communicate the how(s) and why(s) to all the stakeholders in the process including leadership and employees
      1. Clearly communicating the how you are going to go about change and why it is needed will create buy-in from the all the stakeholders on the common new path for the corporation
   3. Allow flexibility and experimentation mentality in the process to correct things which just aren’t working and move in another direction
      1. It will happen that the plan may not work for some reason and adjustments need to be made
      2. Again, clearly communicate the how(s) and why(s) with this change

 

Overcome Us vs. Them

2. Overcome the “Our company versus their company” feelings amongst the workforce
   1. Before the merger is complete determine the strengths each organization brings to the table and hand pick the best practices to move forward with after the merger
   2. Communicate the how(s) and why(s)… as this will be important for every step I won’t add it to every following point but you should…

 

Gain trust

3. With tension created between new management and frontline workers, it will be important to gain trust
   1. The best way to gain trust is to communicate actions and follow through with what has been communicated

 

Customer focused Structure

4. Be structured in who to keep and who to let go
   1. Build the corporate structure based on what is best for the customer as this will position the company
   2. Fit the people from the available workforce who best fit the new corporate structure roles

 

Create Moments of Celebration

5. Create moments of celebration for your employees in your merged company
   1. It is important to remind the workforce that your company is moving forward and highlighting the employees’ participation in company accomplishments is critical
   2. On going celebration plans and corporate culture building programs should be executed to continue to bring the workforce together
   3. Particularly with a newly merged company and outside firm to build programs can also reduce the “Our company versus their company” feelings

 

Summary

Your company can certainly be one of the successful mergers and acquisitions reported with some careful planning and clear communications to all stakeholders.  Follow the best practices above including the most important steps to celebrate your accomplishments as the new company and continue to succeed.

 

Sources and other readings about M&A and corporate culture:

https://hbr.org/2018/10/one-reason-mergers-fail-the-two-cultures-arent-compatible

https://ideas.ted.com/why-some-people-wear-masks-but-others-dont-a-look-at-the-psychology/

http://www.cs.umd.edu/~nau/papers/roos2015societal.pdf

https://hbr.org/2018/05/after-a-merger-dont-let-us-vs-them-thinking-ruin-the-company

https://hbr.org/2008/03/is-yours-a-learning-organization

https://www.fastcompany.com/90361545/this-is-how-tesla-can-improve-its-company-culture

https://www.forbes.com/sites/forbescoachescouncil/2016/10/17/the-importance-of-team-building-events-after-mergers-and-acquisitions/?sh=2475c351f5f8

https://www.pwc.com/gx/en/services/deals/trends.html

https://www.pwc.com/gx/en/issues/workforce/hopes-and-fears-2022.html