The challenge of merging two corporate cultures

Teik Oh

The most challenging change management initiative is the proper management of a successful merger between two organisations. While the actual steps and processes in themselves are not uniquely different or any more complex than any other business reorganisation, the cultural environment in which a merger takes place creates a very different situation.

Unlike any other change management engagement where disparate groups at least work under one singularly identifiable organisation, a merger brings together two totally unique groups with different core values and working environments that need to go through the same change and emerge united. In a merger, while there are usually areas of “fit”, it is unlikely that the deeper indicators of corporate culture such as corporate history and corporate experience will have any but the most remote of matches.

Mergers and acquisition transactions are usually entered into to gain advantages yet the vast majority of these transactions are done with scant thought on how best to maintain the strengths of both parties and indeed to use them to synthesise greater strengths. Accounting models are not the best indicators for merger success; in a merger 2 plus 2 rarely equals 4.

The prime objective of a merger therefore, is to make the sum of the parts greater than the whole, in as quick a time as commercially possible. To achieve this, both soft and hard systems need to be considered, new processes generated, others dismantled. A poorly planned merger, no matter how small or simple (“let’s get together and we’ll work it out as it goes”) will lead to an unmitigated disaster.

Whilst identification of the critical success factors of a merger and planning is fundamental, the merger needs to go beyond the financial efficacies of the transaction and even beyond the perceived advantages of a marriage, into the construction of a post-merger reality.

In any merger, the discovery of a new corporate culture can evolve into one of three results being a balanced integration (rare), a dominant culture and system, or a dominant system with a balanced integrated culture. The planning for any successful merger must at least attempt to achieve either the first or the last, depending on the strengths of each party and in particular the efficiencies of their systems. Based on this objective OTS Management uses a four-stage process to achieve merger success, a methodology we call FitQUICK ™:-

Stage One: Plan Well

All planning needs to be led by leaders of the two organisations, the people who can explain why the merger is taking place, how it fits into the longer term strategy of the combined entity, and the compelling vision of the future that is to come.

Depending on the strength of leadership, this need not be a time-consuming initial phase but it does require a great deal of time to stay “in touch” and on top of the processes. The issue however, no matter how long it takes, is to plan well and plan in appropriate detail. Planning then needs to continue throughout the whole process, but as cultural integration is substantially achieved, more and more detailed planning can be handed over to the integration teams then eventually the functional teams and in time morph into normal strategic planning processes.

Stage Two: Fit Quick

The purpose of Fit Quick is to get both teams and cultures to integrate quickly and feel like one.

If the primary purpose of a merger is to create a greater organisation, then the greatest strengths of both teams need to fit together quickly. The greatest strengths of any organisation rarely lie in systems or even customer lists but usually in their people who are the source of efficiently working systems and the relationships with the customers.

The Fit Quick phase needs to look at:-

• The new vision, brand and corporate culture including value systems and guiding principles (the “how we do it here” elements);
• Staff engagement with the new identity and entity, the one-team reflex (something as simple as weekly pays being converted to fortnightly pays could derail a merger);
• Teams and team structures – analysing and taking the most workable (not necessarily the “best”) parts of both team structures;
• Functional responsibilities – creation of a new and/or blended organisation chart to identify roles, responsibilities and reporting lines in order to clarify “the new way” as soon as possible;
• Analysis of individuals’ roles and where they sit (physically and by responsibility) ensuring people are physically identifiable in discrete integrated groups and the best people to populate the new organisation chart from either party are identified;
• Detailed Human Resources issues such as legacy staff contracts, packages and benefits to equalise to a “norm”.

Stage Three: Work Quick

Whether or not any one set of systems and procedures is more dominant than the other (more than likely) the integrated teams need to be able to work effectively within the new systems and procedures as soon as possible so as to recoup the costs of the merger, reduce inefficiencies and downtime, shorten transition periods, and start to take advantage of the previously identified strengths. The theme of the third phase “Work Quick” is therefore to get both teams knowledgeable about the new (or dominant) systems while integrating the best of the less dominant systems quickly so as to improve overall efficiency.

This phase is best dealt with by creating Merger Implementation Teams in appropriate areas comprised of people from both the merged organisations. These Merger Implementation Teams or MIT’s need to look at each process, procedure and system and decide which to use, how to convert data and processes from one to the other, and then provide recommendations and detailed implementation plans to management. The MIT’s also need to supervise and lead the actual implementation of the revised systems including training and re-training and data and process transfer.

In many areas decisions can be made swiftly, particularly where there are dominant systems. However where necessary it is important to take the time for some detailed analysis to ensure that the best of both are considered and integrated.

As the MIT’s recommended best practice systems may include parts of both the merged organisations, the Work Quick phase needs to identify local “experts” as points of referral to the “new people” who are new to the adopted systems. In this phase product experts need to be revered and supported.

Stage Four: Grow Quick

The fourth phase usually commences some time after the merger, allowing Fit Quick and Work Quick to establish some ground rules and identifiable results, and quite frankly, to allow some emotion to settle, in what is likely to be a stressful period. Obviously, not too much time must pass since the primary purpose of any merger is to “be better, be larger, be more competitive”.

The theme of Grow Quick is to leverage the merger to, firstly, keep the combined customer base, then to expand it, increase sales and grow profits, outcomes that will achieve the real advantages of the merger. This phase needs leadership at the highest levels of the integrated organisation, usually at senior executive level. This phase will require concentrated focus on the strategic objectives of the merger and the compelling vision of the new entity. For this reason, the senior executives who conceived of the merger, its advantages and the vision will need to lead from the front. Often, executive management identify the solid and real reasons to merge, but then expect the merged organisation to automatically realise what those often subtle advantages mean and follow through almost by accident.

As in all organisations striving for best practice, the people with the vision need to talk about it, communicate and explain what it means; bringing others along with them by the strength of the compelling vision.

Looking towards the immediate to medium term future in Grow Quick, the areas that need to be designed in congruence with the vision are:-

• Comparative selling prices and cost structures;
• Strategic marketing planning;
• Advertising and external branding;
• Vision and internal branding, the Unique Selling Proposition;
• Integration of divisions, sales teams and manufacturing teams and locations, physically moving people from both organisations around where necessary so that there is a mix of people servicing a mix of previously separate customer bases;
• Grow new service lines, products and service capabilities using the synergies of the merged organisation.

Conclusion

In working through the four phases, organisations are put well on their way to a successful merger. However two key steps need to be reiterated. The first is to ensure that there is an agreed Vision for the new entity, one that is compelling, engaging and sufficiently quantified to be the central pillar around all strategy and integration. The second key step is selecting the right person or people to lead the overall implementation and the Merger Implementation Teams, and to track the execution. The mergers that do best tend to have such leadership.

Clearly, with proper planning and the right people it is possible to avoid the pitfalls and close a successful merger initiative.