Many organizations see their survival and growth in acquiring other companies. AT&T just bought Time Warner, CVS might purchase Aetna and Amazon recently added Whole Foods to its portfolio. The economy-of-scale, overpowering or eliminating competition and expanding new IP, tools and customer bases are just some of the attractive reasons why this year companies have plowed more than $2 trillion into acquisitions. However, after the headlines have faded and celebratory parties are over the real work of integration begins. First and foremost, the priority is not to disrupt the relationship either legacy company has with its customers. The show must go on. Assessing, eliminating and aligning parts of human resources, accounts payable and receivable, sales processes, accounting, reporting structures, all get kicked into high gear. But, the underappreciated and often missed issue is cultural integration.
The number one reason for failed mergers and acquisitions is a clash of cultures. According to a KPMG study, “83% of all mergers and acquisitions failed to produce any benefit for their shareholders and over half actually destroyed value. Interviews of over 100 senior executives involved in these 700 deals over a two-year period revealed that the overwhelming cause for failure “is the people and the cultural differences.” In my experience working with dozens of medium to large organizations across several industries, most organizations don’t put enough emphasis on cultural integration during their due diligence process. One large healthcare company is just now broaching the subject of culture 4 years after they bought one of their competitors. How people work, aligning them to a new culture is seen as an afterthought. Aon Hewitt said in a recent study that “33% of respondents blamed ‘cultural integration issues’ as the reason their deal failed”. A Marsh Mercer Kroll study found that “50% of respondents cited ‘organizational cultural differences’ as the most significant post-deal issue they faced”.
In the work we’ve done with cultural integration, we learned the hard way by not assuming anything. For example, what we mean by “culture” has different meanings for different people. After several attempts at defining culture, we found one that works the best: Culture is how things get done, fueled by vison, strategies, goals, values, decisions and behaviors.
Secondly, it’s important to develop a roadmap for the entire process but remain flexible to allow for new insights into process along the way. Lastly, it’s important to define who guides the organization through the process. If an internal organizational development group is the keeper of the process, they have to define when they are providing content, as a participant of the organization, and when they are facilitating the process. Blurring of roles and ownership can stimulate silos and derail the process. This is why it is often advisable to bring in an outside organization who specializes in culture transformation to facilitate the process in a neutral manner.
I will get into the process we developed much by trial and error and referring to best practices, and success stories from other experts in other blogs. In short, this process has 6 stages, or the 6 “E’s”:
1: Evaluate the current state.
2: Engage change agents.
3: Envision the future culture.
4: Elevate a burning platform.
5: Empower people with a roadmap.
6: Excel progress.