How You Handle the Cultures Will Make Or Break A Merger

It’s human nature to fear and resist change, at least initially. And few experiences invoke more stress or uncertainty than a workplace merger or acquisition.

No matter how rosy corporate’s official line might be a merger is among the most stressful situations employees face. Disinformation, rumors and fear of the unknown can affect even the most highly engaged employees. These factors are toxic to company culture and are a lousy way to kick off any new corporate marriage.

Odds stacked against success

Calm, grounded managers can help temper the turmoil during the uncertainty of a merger, but it’s not an easy task. These are trying times for managers, too, who likely have their hands full preparing for the unknown. But it’s a great opportunity for managers to assert their leadership and to help make the deal a success.

Merger and culture survey chartThe odds are stacked against success. Most research finds that more than 70%  of mergers and acquisitions fail, with cultural differences playing a significant role. A 2009 McKinsey & Company study on post-merger integration found that an overwhelming 92% of employees interviewed following a merger said the process would have benefited from more cultural understanding in the early stages.

“In a culture clash, the companies’ fundamental ways of working are so different and so easily misinterpreted that people feel frustrated and anxious, leading to demoralization and defections,” write Dale Stafford and Laura Miles, partners with analyst firm Bain & Company. “Productivity flags, and no one seems to know how to fix it.”

The role managers play

Managers play a crucial role in trying to beat the dismal odds. The first step is to maintain morale and employee engagement in the face of uncertainty.Engagement change chart during M&A

An  AON Hewitt study on employee engagement during times of corporate change highlights employee engagement’s important role during the preparation stage. During a merger event that will significantly impact a person’s job, the percentage of highly engaged employees is cut in half, according to the study. The percentage of highly disengaged employees, meanwhile, jumps significantly.

Disengaged employees can’t be turned overnight, so an ongoing focus on engagement is crucial.

The Importance of listening

Employees can feel a complete lack of control over their careers during a merger. Even the simple act of listening to employee’s concerns can go a long way toward giving them a semblance of power.

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When Atlanta technology entrepreneurs Aaron Hillegass and Charles Brian Quinn decided to merge their companies, they knew it wouldn’t be simple. The process affected employees from both companies, many of whom resisted changes such as a switch from hourly to salary compensation.

“We thought they’d be excited, but they weren’t,” Hillegass tells Inc.. “They found it scary to have their compensation changed in addition to the merger.”

To assuage those fears, Hillegass’ new business partner, Quinn, sat down with employees to talk through concerns and changes they wanted to make. By listening and giving employees a sense of ownership, the new company avoided defections.

Cultures are often overlooked

It’s never easy to combine two companies with distinct cultures. With so many financial and operational issues to resolve, business leaders often foolishly overlook the role talent management plays in the success — or failure — of the deal.

The Bain & Company survey of executives found that cultural differences are the top reason mergers and acquisitions fail. But technology tools can play a big role to help leaders squash culture problems before they undermine a deal.

The study suggests that leaders rely on technology to take an audit of the culture at both companies, identify differences — no matter how subtle — and develop a plan to integrate the cultures. Employee surveys, mapping work flows, customer interviews are helpful tools in identifying both similarities and differences in the cultures. Of key importance, the Bain researchers found, was employee participation throughout the process.

This article originally appeared on ReWork, a publication exploring the future of work.

Charles is the Senior Director of Analyst and Community Relations at Cornerstone. He came to Cornerstone interested in the ways that technology can impact how organizations evaluate, motivate and value their employees. Charles is a study in permanence, having worked in every dark corner of Cornerstone since the early days of the company more than 16 years ago.

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