Companies put a lot on the line during a merger or acquisition. But often, these high-risk, high-reward initiatives fail to yield the potential gains projected on paper.
In many cases, the issues are less about the facts that are clear on paper — revenue streams, buildings, product portfolios — than the fuzzier, less predictable elements that make up a company’s culture. And that’s only become more apparent in the past two years: As many as 75% of C-suite executives agree getting talent and culture right during an M&A has become more important than ever since the Covid-19 crisis began.
Since M&As are becoming a more common strategic growth tool (M&A volume reached a record high of $5.8 trillion in 2021), it’s essential to get the question of company culture right, as it often makes the difference between success and failure.
b1BANK, the fast-growing community bank where I serve as chief human resources officer, has an award-winning culture we’re very proud of. We’ve also acquired four financial institutions in recent years (with a fifth expected to close at the end of this quarter), and it’s definitely been a learning experience.
Start From the Top
It’s a lot easier to merge two cultures if they are already pretty well aligned, particularly at the leadership level.
As part of our exploratory process with candidates for mergers, we pay close attention to executive leadership styles and focus on companies with similar values and decision-making styles to ours.
Once a deal is in motion, we make sure to communicate intentionally and frequently with the acquired company’s full leadership team, empowering them to share their expertise on questions around culture and talent. During our acquisition of Pedestal Bank in 2020, for example, we worked directly with the CEO to identify incoming high-potential talent.
We also prioritize communicating the culture to incoming leaders from the acquired bank. When we announced our merger with Texas Citizen’s Bank in 2021, for example, b1BANK invited their team to a banking center management summit that included training, networking, and socializing. And before that, when b1Bank acquired Richland State Bank in 2018, we invited Richland employees to a company-wide event where we rolled out the Guiding Principles that define our culture to help them feel like part of the team.
These events created opportunities to bring together all managers from both companies so that those from the acquired organization could get a preview of what the parent brand was all about. Once incoming managers learned what to expect from the new company’s culture, they were better equipped to build confidence within their teams.
Remember All of Your Stakeholders
Without effective communication, the whole process of merging company cultures falls apart. The b1BANK people team maintains a close line of communication with each group of people involved in the M&A. We know that if we leave any gaps in information, employees fill them in themselves (and their minds often stray to the worst-case scenario).
During our recent M&As, we implemented Tuesday talks — weekly meetings with a set topic and time to address specific questions and concerns. We gathered anonymous thoughts and questions beforehand to make sure we weren’t leaving any concerns unanswered.
One surprising revelation that was uncovered: We spent a lot of time and energy communicating with the incoming team, but we didn’t consider the impact the changes were having on our current staff. It turns out some of our legacy b1BANK employees had a lot of anxiety about losing their jobs, too. And while it was never our intention to replace legacy team members, we didn’t articulate that to them clearly. For the next M&A, we’re amping up internal communication with existing employees to alleviate those concerns before they arise.
Acknowledge the Painful Parts
M&As are designed to increase efficiencies of scale, and job cuts are often part of the process. That process can be tough on morale.
We’ve done our best to mitigate that damage through empathy and transparency. And we allocate our own HR team members, tools, and resources to help those employees find their next opportunity. We intentionally keep this work in-house, rather than outsourcing it to a third party. It may have been cheaper and more efficient to hire a vendor, but I felt like it was important to keep this process close to protect the culture.
Helping employees who are losing their jobs is the right thing to do, of course, but it also helps us protect our employer brand. Employees who stay are able to see the parent company’s commitment to support the workers being let go. We wanted to make it clear, based on our actions, that our people are our top priority.
The bottom line when blending cultures during an M&A is to act from a place of empathy. I’ve begun asking myself “What does this mean for me?” for each person involved. It’s a more time-consuming and challenging approach to juggle when you’re potentially doubling your workforce, but designing the experience from a place of empathy leads to more authentic communication and better long-term results.