Jessica Kriegel, Chief Scientist of Workplace Culture, Culture Partners.
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When it comes to mergers and acquisitions (M&As), let me be completely transparent up-front. The catalyst for them is almost entirely fiscal. As a result, the leaders of the combining companies are laser-focused on financials in the lead-up to the acquisition and for at least six months after the merger begins.
Being so financially minded, however, means there's little to no thought about the impact on the workplace environment. With the blending of two cultures that comes with M&As, there’s substantial potential for culture clash. There's often turnover, with dissatisfied employees leaving because “Things weren't done that way before” or for similar reasons.
I've seen this up close and personal. In 2012, I was working as a senior training consultant at Taleo when it was acquired by Oracle in 2012. For the next near-decade, my position in organizational development leadership was a vantage point for observing the culture dance. Because I was working on organizational design at the time, as well as talking to hundreds of employees about what they were going through, I gained a lot of insight into the ways that companies and employees adjust to M&As.
3 Approaches To Merging Cultures
From my experience with Taleo/Oracle and years of consulting and organizational culture work on top of that, I've seen three distinct ways that culture is addressed during M&As.
1. Dissolve the acquired company’s culture.
The company that got acquired simply folds into the acquiring company, leaving its individual culture behind. Process-wise, this is the easiest approach to minimize any growing-pain clashes or blowback. However, completely gutting the acquired company's culture is jarring and can often cause existing employees to leave—including top performers. Considering M&As are driven by the acquiring company's interest in getting specific talent, taking this approach puts the success of this transaction at risk.
2. The acquired company retains its culture.
With this approach, the existing "company vibe" is left alone. This can help ensure employees feel like they're still part of "Company X," rather than "Company X, As Presented By Company Y." The cultural connection and established relationships can stay intact—theoretically.
The issue is that change is unavoidable with M&As. In the initial stages, executives are working out the approaches to organizational processes, payroll and financials and the general streamlining of operations. This is an inherently disruptive activity. So while they may tell acquired employees “Your culture shall remain intact,” it might not actually feel that way as things progress. Conflict and culture clashes can—and often will—still emerge.
3. The two companies actively work to blend their cultures.
Instead of erasing the acquired company's culture or taking a hands-off approach, the acquiring company can choose to work in tandem to combine and evolve their cultures. In the long run, this is a healthier approach, as a new, collaborative culture and narratives can emerge from it.
Of course, integration like this can take a long time. Even with a desire to retain as much of the acquired company's culture as possible, there's still potential for clashes, turnover and confusion.
Strategies For Keeping Your Culture Steady
During mergers and acquisitions, having the right strategy, purpose definition and clarity of results will be key. Here are some focus areas to help support employees during any culture shifts.
• Practice Empathy: As with most of life, the first step is just to care. Care about your employees: their lives, career arcs and fears. Show that the people side of the merger matters as much as what the executives hope to make for themselves.
• Be Up-Front About Change: Transparency is key. For example, be honest about potential redundancy in roles, and connect employees with new resources to talk about different roles and career transitions. But also be honest with them about how folding into a bigger company means more opportunities for growth.
• Guide The M&A Narrative: Cultures are built with stories. So be sure to share a story that underlines the value of this change, like what the ultimate goal and hope of the acquisition is, and why it can accomplish something that no one else could. Then, be proactive about telling the story to everyone—internally and externally. When you showcase the value, it makes employees feel better about what’s happening. Existing employees in particular may think, “Oh, these people aren’t coming for my job. They will be adding value. That’s cool!” This creates an environment of psychological safety, which is vital for a strong workplace culture.
• Clarify Your Mindset: A significant piece of successful culture work around mergers is having the right mindset in place. Encourage your people to think beyond what they’ve done so far while still acknowledging what they’ve lost. Explain the growth potential here. Discuss new opportunities, roles and paths, and mention what the larger goals will be going forward. Talk about how this opportunity for increased revenue can lead to more raises, promotions and advancement.
You Can Avoid A Messy M&A Culture Shift
The sheer reality is that change is hard for people, and things can get complicated very quickly during M&As. But it's possible to manage culture shifts without it going utterly off the rails. It's essential that leaders use this opportunity to be honest with everyone involved and show how the merger isn’t meant to destroy the individual beauty of each company. It's meant to be a rising tide lifting all boats.
Did this work perfectly during the Taleo and Oracle merger? Absolutely not. We had hiccups, and some of them lasted for years. Good people left; some not-so-good stayed and got promoted. It wasn’t perfect, and your process won’t be either. But if you promote transparency and the story of a brighter future, it will work out over time—even if some days feel dysfunctional.
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