Mergers Fail when Cultures Clash

William Wallace, a 13th century Scottish warrior who led the Scots in the First War of Scottish Independence yelled, “Freedom!” just before he was beheaded for treason. The attempted “merger” of Scotland with England was less than successful because the cultural differences were large enough to cause a war.

I have been involved in acquiring four companies over the past five years and while no wars have erupted, I can attest to the fact that cultural integration is the most nebulous and the most challenging. When cultures clash the hoped for synergies of an acquisition or merger disappear very quickly.

Early in my career the company I worked for was acquired by a company of roughly the same size. I worked for a franchise-owner and the culture was aggressive and individualistic. People were highly paid when they performed. The company that bought us was a corporate entity and the people that worked there were focused on career growth and therefore they were much more team oriented. There was never any effort to merge the cultures and as a result for years it was the source of friction between people who still identified with the past more than the future.

At Softchoice we have made mistakes with integrations and we have done things right. Based on what we have learned from five acquisitions I boil it down to a simple 5 steps on how to make sure your cultural integration goes right!

My 5 Step M&A Solution for Cultural Integration

1. There has to be a Cultural Integration Plan

There has to be an understanding that time and effort must be expended in identifying cultures and then planning the integration. Huge effort is put into systems integration, payroll and benefits harmonization, organizational structure but often very little effort goes into the actual cultural integration. There are good things and bad things about any culture. A cultural integration plan allows the people joining your firm to say goodbye to the elements of their old culture that they no longer want. The plan should also recognize a change for the acquiring company – those activities that drive great culture should make their way into the broader organization. The key test with the parts of the integration plan is, “Does it build trust?”. Everything either builds trust or destroys it.

2. Use an Objective Approach

At Softchoice we have used tools from Human Synergistics in conjunction with consulting firm AchieveBlue. We didn’t use these tools to decide if we would buy the company – we used them to understand the culture of the company that we would be walking into on the day of the announcement. We wanted a transparent process that was data-driven because we could share the data and work through it honestly in coming up with our integration plan.

3. Start Discussions on Culture Early

The most effective results are those achieved by making the culture an early and ongoing part of the conversation. In two of our acquisitions we performed a cultural survey post-acquisition. While the process was helpful I can tell you that we made some mistakes that could have been avoided had we understood the culture prior to acquisition. In our most recent integration we had the results of the cultural audit weeks before the intended purchase date and discussions with the disclosed managers really helped us to understand the culture we would be walking in to.

The discussions with managers in particular yielded some very interesting conversations which were even more important when it got to their beliefs. Fundamental disagreements about beliefs are very hard to overcome in an acquisition. Best to know about these potential disconnects and to plan for them.

4. Brief the Acquisition Team

Even your best intentions can be thwarted by an unknowing manager or employee who assumes that cultures are similiar. Employees in a takeover scenario are ultra-sensitive and even the smallest thing can be seen as an early indicator of bad intentions. Make sure all the people who are interacting with the newly acquired employees are briefed on cultural miss-steps. I can tell you that the work involved in rebuilding trust after an inadvertent comment can be enoromous – something you don’t need when every second counts.

5. Engage the New Employees

I believe that sharing the results of the cultural survey is important. My ability to share the results either pre or post acquisition has yielded the most helpful understandings of culture and allowed for us to build plans that allowed for common ground to develop. Giving people and their managers specific direction on what is changing and what is not, along with the clarity on WHY it is changing builds trust.

Summary

Buying companies and going through the pain of integration is not for the faint of heart. One of the largest assets in an acquisition is the employees themselves. Unless you want them to become modern day William Wallaces the only proper approach is to recognize the prime importance that culture plays in the integration dynamic. After all, these days the people in the company being acquired can just yell “Freedom!”, skip the beheading and head for the exits!

This post originally appeared in Nick Foster’s CultureXbrand blogNick loves helping people to see the connections of culture and brand.  He also believs that behind the culture of any company are the values and beliefs of its leaders.  You can read more of Nick’s thoughts on connecting culture with values and brand in his blog.

About Nick Foster

After 18 years with Softchoice, Nick foster now works with organizations to help them become best workplaces. He is also a volunteer with Developing World Connections, and the team leader for the International Project in India.