Founder & CEO at Criteria, a pre-employment assessment company with a simple goal: to help organizations make better hires.
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The global economy is constantly becoming more integrated, as the supply chain shocks and economic ripple effects of Covid-19 remind us every day. But globalization hasn’t just led to more companies doing business across borders, international capital flows and interconnected supply chains — it has also led to an increase in international mergers and acquisitions. This is why best practices around managing overseas teams have become increasingly important.
While Covid-19 has been a massive engine of disruption for the global economy, it has actually had several healthy consequences for companies that are interested in merging with an international partner. For example, the overnight shift to remote work — a trend that’s set to persist into the post-pandemic era — has given companies the expertise and digital infrastructure they need to manage teams productively from anywhere. But to leverage the synergies that international mergers can generate, companies have to focus on cultural alignment, due diligence and the establishment of shared goals and metrics for tracking progress toward them.
International mergers can be complicated. There are often operational and cultural misalignments, morale issues and a range of other problems that can have a severe negative impact on productivity. However, when companies create a well-defined integration plan and focus on developing a healthy shared culture, they can navigate around these problems and take full advantage of both partners’ strengths.
It All Comes Down To Culture
When companies explore the possibility of a merger, their due diligence process always includes assessments of a potential partner’s financial health, any relevant legal issues, market opportunities and limitations and so on. How often do they conduct a similar review of the other company’s culture, as well as how that culture will fit in with their own? Considering the fact that culture intersects with everything a company cares about — from the productivity of its workforce to employee retention to customer service — this is a huge oversight.
According to a McKinsey survey, a quarter of executives cite a “lack of cultural cohesion and alignment as the primary reason integration efforts fail.” Even when cultural misalignment isn’t necessarily the main reason for the failure of a merger, it almost always plays a role by making problems more difficult to resolve, severing communication and collaboration between employees and decreasing productivity.
These are all reasons why company leaders have to be proactive about cultural integration. For example, they should adopt a listen-first approach to understanding their partner’s culture and processes — a strategy that will help them determine where they can add value and what’s already working. When companies make integration a top priority by learning as much as they can about a potential partner’s culture and exploring ways to bring that culture into alignment with their own, they’ll build a solid foundation for the future of their relationship.
How To Develop A Healthy Shared Culture
Even when companies are well-suited for a merger, cultural alignment is never going to happen on its own. Right at the outset, companies should work with their new partners to identify mutual values and goals, which should be developed into a coherent company mission, shared with all employees and reiterated often. According to Gallup, just a 10% increase in employees’ sense of connection with their company’s mission can lead to an 8.1% decrease in turnover and a 4.4% increase in profitability. This sense of connection is all the more important for employees who are geographically disconnected from one another.
Different time zones, language and cultural barriers and a wide range of other factors conspire to make overseas relationships uniquely difficult. This is why company leaders have to do everything possible to facilitate integration and ease the burdens of international collaboration. For example, they should set ground rules around meeting schedules to account for different time zones and help employees maintain a work-life balance. It’s also important to avoid the emergence of an “us-versus-them” mentality, which is why companies should give international colleagues ample opportunities to meet in a relaxed setting — via unstructured virtual social events, for instance.
At a time when 83% of employers say the transition to remote work has been successful, there has never been a better time for companies to consider an international merger (or some other form of overseas cooperation, such as setting up a new division). Companies can use the remote communication and productivity tools at their disposal — as well as the fact that employees have never been more comfortable working remotely — to make their cultures as strong as they can be.
Global Companies Have To Be People-Focused
A lack of employee engagement is a perennial problem for companies around the world. Gallup reports that just one-third of employees are engaged at work — a proportion that doesn’t even reflect the pandemic-driven alienation that many workers say they feel. When companies have global workforces, it’s all the more important to make engagement a core focus, as employees aren’t running into one another in the hallway or breakroom — interactions that provide endless opportunities to build relationships and share ideas.
According to PwC, the proportion of companies that say their post-merger employee retention efforts were a “significant success” collapsed from 56% in 2010 to just 10% in 2019. A Bain & Company report found that getting the right people in place was the top challenge companies faced in the merger and acquisition process.
These facts are all relevant to the process of global integration. To ensure that employees are productive and satisfied, companies have to establish the right culture, facilitate communication and collaboration between colleagues and give people a sense of shared purpose in the workplace. The international companies that can use digital tools to put all these elements in place will be the ones best positioned to compete in an increasingly dynamic and competitive global economy.
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