July 7, 2017
Merging two companies can be a smart move from a business development perspective. However, the most promising deal will fail if the two parties cannot bridge the cultural divide and adapt to the new set-up.
According to estimates, 50-80% of all mergers fail from a business perspective, simply because there is not enough focus on the cultural integration of the two organisations*. Take the merger of Daimler-Benz and Chrysler as an example. The organisational culture at Daimler-Benz was described as “conservative, efficient and secure” while Chrysler was said to be “bold, diverse and creative”. On paper, the two companies could have been a great match. In reality, the integration failed due to insufficient attention to cultural differences.
Nonetheless, successful culture integration or culture change is possible if two guiding principles are kept in mind. Firstly: change needs to be driven from the top. Actively managing change is a leadership responsibility and should not be seen as a “necessary evil”. Secondly: any post-merger integration or change is different. There is no single best way, no secret sauce or golden rule. Companies need to adjust to the specific circumstances and take into account both organisations’ employees, managers and organisational culture.
But how does one change a culture? How can we merge two distinct cultures or create a new organisational culture? Clearly not by simply defining new values, putting up a few colourful pictures and sending out some fluffy phrases. Culture does not happen overnight and cannot be rolled out by pushing a button on executive level. It takes time and needs to evolve within the company – and more importantly: together with the company.
Sustainable change can only be achieved by involving all employees in a collaborative manner. It is important to create an environment where conversation and exchange are encouraged and to actively facilitate a dialogue between employees, managers and across the two companies. Both organisations need to feel that they are actively involved in the change process. Recognising and addressing potential challenges or resistance at an early stage is crucial. People rarely lack the imagination to develop an organisational culture. In most cases, they are not ready to tackle obstacles that are in the way of a successful change.
Every culture change is a people change. It is the job of the management board to inspire and motivate their teams to follow and support the change – despite frequent and long-lasting changes and reorganisations the company has gone through already. The foundation is an inspiring vision and the prospect of a motivating future. People need to understand why the change is essential for the future success of both companies, what their personal benefits are and which behaviours are expected from them. This can only be achieved if the leadership team engages in a regular dialogue with all employees around the topic of their joint culture.
The best way is to reach employees with emotional messages: Personal stories will bring the new situation to life. Board members should take the time to regularly communicate important information face-to-face. Conversations like these inspire people and create trust.
The importance of getting employees on-board should be highlighted as well: If employees feel that they are involved in the process and that their opinion counts, they believe that they can actively contribute to the change. This creates enthusiasm – not mere obedience.
Ideally, the first weeks after closing are used to win employees’ hearts and minds, for example by organizing “welcome roadshows” at different locations. Information booths about the company’s vision and strategy are set up, allowing employees to interact and get information about the new direction of the company. Involving employees can mitigate their concerns as they take an active part in the transformation and its implementation, making it a personal matter.
The role of leaders in times of change is essential. It is one thing to implement a new strategy, roll out a process and maintain operational stability. It is another to lead employees and other stakeholder groups through the change, to act as a liaison and to be a role model for the culture change. Enabling leaders to take on this role needs to be the highest priority. The sooner the leadership team is empowered to fulfil their roles the better – ideally, this needs to start way before the merger.
Leaders need to be enabled to take ownership for alleviating anxieties of employees, building trust and enthusiasm, actively collecting feedback and escalating or reacting to it appropriately. They can only act as true multipliers if their behaviour sets a pattern for the aspired culture. Therefore, the development process of the joint culture has to be co-created closely with leaders as it has to be lived by them to the fullest in order for successful change to take place.
An effective way to create buy-in and generate support of this crucial group is by organizing dedicated leadership conferences. Getting everybody in the same room to discuss the joint culture and road map ahead can be very impactful to activate leaders as ambassadors and enable them to drive performance and change.
Culture is no separate item on the agenda. Behaviours and mind-sets need to be integrated in the broader context of the organisation and all its areas: from the board, to the finance department, incentive and bonus systems, as well as management reviews and recruiting criteria.
When the integration is successful due to active change management and the right measures of communication, one thing becomes blatantly obvious: The organisation will move faster and with less pain through times of insecurity. Mastering the cultural challenges of a merger puts the organisation in a good position to also achieve business success. Because one thing is clear – no company wants decreased productivity due to insecurity among the workforce, nor the outflow of talent, the loss of customers, damage to the company’s reputation and credibility, or stagnating integration efforts.
* Philip H., Marks & Mitchell Lee, Mirvis (2003). Managing the Merger: Making it work. BeardBooks