At first, the acquisition was just another day in a fast-moving, frequently changing environment. Having transitioned from a traditional autocratic organization sliding toward bankruptcy to a cutting-edge (some would say over-the-top) highly distributed workplace and a rising star on Wall Street, these employees were used to facing tough challenges and dealing with dramatic changes. So it was no surprise that although they had concerns, employees went out of their way to accommodate their new shepherds and become part of the fold. This was a group of employees who had worked there the same as their fathers and grandfathers. Employees had raised the company from the ashes, so many had developed fairly strong emotional attachments to the business. Even so, they responded surprisingly quickly when called on to replace every vestige of the old with names and representations of the parent company.
The rest didn’t go so well. “Experts” soon began to appear from out of the parent company headquarters organizing teams charged with improving processes and creating efficiencies. Keep in mind that this was an organization that was fully entrenched in continuous improvement. Core workers had already improved productivity and reduced costs substantially while setting industry records nearly every month. Employees saw the initiative as a rehash of work they had already done, but they tried to be good sports about it and dutifully cooperated with the attitude that any opportunity to further improve would be a good thing.
That’s when the signs really began to appear. First, the improvement teams found their work constantly challenged, recommendations questioned, and their anointed “experts” pushing pre-conceived solutions on the group. In an egalitarian culture where core workers were used to being valued as the experts, the shift was not well received. When push finally turned to shove, those from the parent company made it clear that senior management had actually made some decisions about certain process and organization changes, so it really didn’t matter what the teams came up with—and the empowerment veneer shattered.
From there, employees struggled to hold on to the belief that what they were experiencing was merely the pain of working through new relationships and cultural differences. That is until the new owners installed their managers and programs into every major department of the organization and began bypassing the very systems that led to the acquired company’s unique workplace culture and its remarkable success.
Despite efforts to indoctrinate employees in the “shared vision” of the new company through large group meetings, employees were demoralized. Having been stripped of their sense of accountability and purpose, their commitment and desire to succeed left.
How did the acquiring company get to this point? Here are three failures we can identify:
1) Failing to understand the unique and highly effective culture of the acquired organization and its ability to generate such remarkable results. Allegedly, the parent company acquired the business in large part for its people technology. But they didn’t allow it to continue. Knowing how their own culture and operating practices contradicted the culture of the acquired company would have helped them better anticipate many of the problems created by their changes.
2) Relying on the same model for integrating cultures used when acquiring other, more traditional, businesses. This business was unlike any previous acquisition making their integration strategy of the past no longer relevant.
3) Failing to access the single most important and powerful factor in the entire process: trust. Prior to the acquisition, this organization had made a dramatic shift from a traditional autocracy to highly empowering management that depended on trust. By injecting traditional management practices into the acquired organization, fear soon replaced trust across the board.
Like so many merger and acquisition stories, this one had an ugly ending destroying a legacy and throwing thousands of employees out of work. The parent company eventually closed the doors of this business altogether joining the ranks of the reported 83% of mergers and acquisitions that fail.
Indeed, neither the statistics nor the results are pretty, and show little promise of improving. As we move into a new era of M&A activity requiring often disparate cultures to somehow integrate, hopefully there will be those involved who can recognize and respond to the signs both before and after a merger leading to happier outcomes for both shareholders and employees.
Trying it on for fit: Here are some guidelines for successful culture integrations:
1) Do your due diligence. Understand intimately the cultures of both organizations; it should drive your decisions for integration.
2) Consider all the options. Don’t get stuck on a particular integration model. What makes sense in one acquisition may not make sense in another. In some cases, the decision may be to not completely integrate. In another, to promote the acquired company over a particular segment of the whole (reverse acquisition). Or, it may be necessary to squelch the deal altogether because there’s no credible plan for success.
3) Use every mechanism possible to build and sustain trust throughout the workplace. Be loyal to employees. If you must reduce employees, do so in a way that minimizes the impact. Communicate plainly with transparency, and make acquired employees a part of decision-making and implementation wherever possible.
Send an email and let me know what you learn from your experiences. I would love to hear from you!