April 7, 2020
Mergers & acquisitions should always lead to a cultural identity shift. This can range from a complete reinvention of identity and purpose to just a slight shift that includes the new partner: its history, narrative and critical traits.
When this cultural identity shift is not even considered, the original DNA is so strong that it risks pushing out the acquired partner and setting the acquisition up for failure. Assets might not be operated at their optimum, customers don’t feel heard and critical top talent might walk out the door, taking their market and technical knowledge base, and their client relationships with them.
Companies with a strong DNA typically demonstrate the following common traits:
- Even when it’s far back in history, the founder has a name and a face that is familiar to all employees. The originating story is well-known and the current core values are still connected to some of the founding principles
- There is a – often well-intended – sense of superiority. Their own culture, processes and leadership style are seen as best in class. It is what makes them successful
- Leaders have grown up in the company. They have demonstrated that they carry the same DNA, breath the core values and understand the do’s and don’ts to successfully navigate in the company
- With that might come a certain company blindness. ‘The way we do things here’ is not challenged enough. New hires are immediately absorbed by the well-oiled onboarding process and operational rhythm
When M&A leadership teams, decision committees and integration task forces are mainly composed of experts of the acquiring company, the tactical integration plans are solely built based on the assumptions of the dominant culture.
There is a need to really get to know the underlying identity of the acquired organisation
As they get a clear mandate to integrate, find synergies, implement best practices and get a return on investment as fast as possible, there is a risk they overlook the original strategic intent of the acquisition and overwhelm the new partner with an integration overload of dashboards and processes that are not suited to their context and operational reality. This often leads to a prolonged overload on the organisation and a strong internal focus, putting the market connections and client relationships at risk.
It is critical to go beyond mapping the technical base, asset network, HR policies and client-relationship model. There is a need to really get to know the underlying identity of the acquired organisational system, its timeline, the critical events that have shaped its identity, the underlying dynamics currently at play. Taking the time to hear their stories will accelerate the integration process afterwards.
Even when a cultural compatibility assessment has been part of the due diligence phase, it often stays on the surface and does not uncover the deeper systemic dynamics that will show up in the integration phase and might jeopardise integration success.
The systemic principles listed below can be used as a lens to look at both players – the acquirer and the acquired – and understand the cultural identity and dynamics on a deeper level.
As a result, the future desired culture can begin to take shape, not as a copy of the dominant culture, not as a half-hearted compromise between both, but as the one that fits the new combined organisational system.
What was our/their founding story?
What is our/their current purpose, the reason to exist? What is society inviting us/them to do?
What are our/their guiding principles?
Which events on our timeline have shaped our/their identity?
What is our/their narrative that connects all stakeholders to that purpose, that engages them in a dream, in a story, in a new reality?
What is our/their vision, the one that comes with personal commitment and tough choices
Who belongs to our/their organisational system? What does it take to belong?
What is our/their organisational design and how is it tailored to the purpose?
What has made us/them successful? It might be because of a specific agile org chart or highly connected relationship structure
Where did we deviate from what the optimal organisational structure would be?
What are our/their (often unspoken) criteria to define order in decision making? It might be based on job titles, levels, tenure or nationality, on contribution to innovation, outside perspective and job rotation.
How is our/their company’s vitality?
Is there flow, energy, rumble, creative conflict, diversity of thought? A high level of trust, cross-fertilisation beyond the company gates?
What has been the cost of change, and who paid the price?
These are some examples of the systemic questions to be asked. As you are inviting honest dialogues about those questions and jointly uncover the real answers, you can bring to the surface the roots of persistent cultural roadblocks and consciously build the new, leading to a smoother, faster and more successful integration, engaged employees who connect quickly to the new identity and a value- and purpose-based culture that fosters innovation, creativity and a mindset of continuous improvement and transformation.
Mieke Jacobs and Paul Zonneveld are leadership and organisational transformational facilitators and co-authors of new book EMERGENT – The Power of Systemic Intelligence to Navigate the Complexity of M&A