Four Steps to make a Merger Work

Apr 27 2015

One of the most difficult operational issues is the merger of two corporate cultures.

If you are running a micro-business or even a small business at the smaller end of SME’s, you might think this does not apply to you. I disagree.

From time to time small businesses will “merge” with another culture. You may buy a business that is already operational and with staff who have been there for some time. In this case you will need to “merge” your personal business culture with that of the business you just bought. If indeed you already run a business, you might buy a smaller one – that’s a merger of two cultures. Perhaps you are in a situation where one of your competitors or colleagues suggest you “get together” – that’s an obvious merger.

Whatever the situation, if you are faced with having to put together two people or two groups of people, it is not a simple equation of 1+1=2. Different organisations have different values, different processes, and different ways of doing things that are justifiable to each. The key is to get together and start working efficiently as soon as possible.

Mergers can be successfully managed if you understand some key success factors and there is actually a “formula” that you can apply.

The key success factors of a merger are:-

Effective planning and execution
An overall and well communicated vision of why this is taking place
Effective and quick alignment and integration
Fast and focused transition.

I summarise the implementation of these key success factors as “Plan well, Fit Quick, Work Quick, and Grow Quick”.

“Plan Well”:-

All of the planning must be led by the “leaders” (not necessarily owners or managers) of the two cultures, who understand and can explain the vision of the merger, why it works for both, and how it can benefit all. They then need to work together, and with others to plan for the implementation. The areas that need attention during initial planning are:-

An agreed compelling vision;
An implementation plan to fit the two parts together quickly;
An implementation plan to get the merged business working “as normal” as quickly as possible; and
An implementation plan to then grow the merged entity into new areas as soon as possible.

The strategy for the merger from start to “bedded in” needs to be planned out at this time, and while it should be monitored and will probably change during implementation, the direction needs to be clear at the outset.

“Fit Quick”:-

In this phase, the first rubber that hits the road, the objective is to implement processes so that the two cultures integrate quickly and feel “like one”. This is not just about choosing which of the two systems or procedures to use from here on. The greatest strengths of any organisation are rarely their systems, but rather the people working in them. I once worked for a small lean consulting firm which merged with a major consulting firm. Where we once worked long hours in expectation of “fun” rewards like awards nights and instant recognition as an esprit de corps, the bigger firm operated under strict reward systems based around promotion (hard to get) and monetary rewards. Within days, the office emptied at 5pm.

The Fit Quick phase needs to look at:-

How the new vision translates to the new brand, working culture and value systems – the “how we do things here” principles.
Staff engagement in the new merged business, how rewards and recognition are handled, how communications plays out, how changes are expressed – something as simple as weekly wages being converted to fortnightly pays could derail staff engagement.
Teams and team structures, taking the most engaged and efficient parts of each team – not necessarily the best of the old, because what was working “at best” may not work as well in a merged culture.
Functional responsibilities – who does what and who reports to whom.
An analysis of individuals’ strengths and weaknesses within a combined structure – they may be sitting in the right seats in the bus but are they the right people to be in those seats?
Detailed HR issues like variations to contracts, equalising packages, and so on.

“Work Quick”:-

Whether or not one set of systems and procedures is more dominant than the other (more than likely!) the integrated teams need to work effectively within the new systems as soon as possible so as to recoup costs of integration. The Work Quick phase is aimed at getting the integrated teams knowledgeable about the systems that will not be used while integrating the best of the more dominant systems as soon as possible.

This phase is best dealt with by creating Merger Implementation Teams in appropriate areas comprised of people from both previous organisations. Their role will be to:-

Look at each process, system and procedure to decide which to use
How to convert data and sub-processes from one to the other
Provide detailed implementation and training plans
Supervise and lead the conversion, including phase out of systems that will no longer be used.

In doing this they should be reviewing:-

IT and data systems
Manufacturing/service processes
Tangible assets and machinery
HR and leadership procedures
Physical location and supplies
Communications systems and brand engagement
Training

“Grow Quick”:-

People often forget this phase, which often emerges some time after the merger. Having planned an efficient merger and implemented plans to get the two parties to work well together, they then allow normal business processes to “carry on”, forgetting that the purpose of any merger is to become better than the sum of the two parts.

This growth phase that leverages the merger has to be deliberately worked on or the momentum will disappear. It is critical that in this phase the business leaders lead from the front, talking about the vision, explaining why growth through leveraging is good for everyone, and bring others along through engagement with the journey.

In this phase the areas that need to be designed are:-

Comparative selling prices and cost structures and selling propositions;
Strategic marketing plans;
Advertising and external branding;
Vision and internal branding;
Integration of divisions and teams including especially sales teams;
Expansion of products, services and locations.

Even though you might think that your business isn’t big enough to worry about “corporate culture”, believe me, in any circumstance where you need to put two groups together, it is critical in order to get the best of the merger. In working through the four phases in a deliberate manner you will be well on your way to a successful merger.

With proper planning and the right people it is possible to avoid the pitfalls and implement a successful merger initiative.

If you visit the free resources section of www.teikoh.com you will find a white paper on merging corporate cultures as well as a merger action plan template.

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