Navigating Post-Merger Culture: How to Get It Right

The selling company hit pay dirt! The buying company got its acquisition prize! How do the cultures of these two different enterprises align? Is it a natural fit or a forced one? Are there stark differences in culture? Will the goals shift from cash flow to profits for the acquired enterprise? Will there be more acquisitions? Who will get the promotions, and who will be shown the door? For those of us who have lived through both sides of mergers and acquisitions, these are important questions, with even more important answers.

“Do not use your spurs until you have pointed your horse’s nose the right direction.”

Here are five (5) principles to keep in mind when leading a post-merger culture:

1. The powers who actually know the truths and decisions post-merger may not be able to share them until the appropriate time. This is frustrating for both the acquirer and the acquired. So, it is understandable that some discussions will happen at a high level, very confidentially, and then be shared later in an effort to meet the goals of the newly combined entity. This, in and of itself, strains trust. Keeping this in mind as a fixed situation, it is important for the acquired team members to be patient, show support, and have faith. It is important for the acquiring executives to have empathy for good team members who are probably looking for comfort and may have to wait a spell for it. So both sides seeing the situation and showing support and empathy is the fastest way to get moving into the new world.

2. Changes will happen, and it will rattle the culture. Why? Because the newly formed merged enterprise now has a merged culture. In many instances the original founder/visionary of the acquired company exits in the deal. This person is usually very inspirational and bigger than life. This leaves a hole in the culture. Take for example a tech company being acquired by a profitable parent enterprise. The culture change may be intentionally minimized, and the tech culture embraced, but not at the expense of the ultimate goals of the newly merged enterprise. In such acquisitions the goals are usually trying to mature, transition, and grow into a profitable tech company that actually shows a profit, or trends appropriately to satisfy profit goals of the acquiring parent company. This will take new leadership, new creativity, possibly expanded footprint/product offerings, or possibly consolidated footprint/product offerings. The bottom line is that change will be required, and that change is neutral, assuming good leadership. The real focus should be on “why” and where we are going.

How big is the culture difference between the two enterprises? What is the plan? Is it total surrender of the acquired entity? Is it total surrender and hands-off of the acquiring entity? The new executive team needs to figure this out fast and get ready to sell it up to the board of the parent company, and down to the team members of the acquired culture. 

3. Why? Where are we going? This is where the new leaders of the merged enterprise should focus their communications at the appropriate time, but as fast as we can. There is an old saying, “Do not use your spurs until you have pointed your horse’s nose the right direction.”  Before we can communicate it, we need to assemble the leadership team and the C-suite to begin the collaborative effort to answer these questions. Therefore, the urgency is in assembling the brain-trust to aim, collaborate, debate, and then make decisions. Consider the following:

• Engage acquired talent. We paid big money for the people, too. Listen to them.
• Who are we now? What is the adapted vision of the firm post-merger?
• Why did this merger occur? What is the dream, now? What are the core values of the post-merger enterprise?
• Why have certain people exited and certain new persons been hired at the top? What is the structure of the new enterprise? Every team member is asking, “What is in this for me? Do I fit here, now?” We need to help answer that.
• Where will we now go? Why? What are the goals for 10 years, 3 years, 1 year, and each quarter this year?

4. Master of the obvious, common sense gap analysis of the following:

• Culture gap? How big is the culture difference between the two enterprises? What is the plan? Is it total surrender of the acquired entity? Is it total surrender and hands off of the acquiring entity? The new executive team needs to figure this out fast and get ready to sell it up to the board of the parent company, and down to the team members of the acquired culture.
• Based on the culture gap, there will be a leadership personality gap. What is it? Did we release the pied piper everyone followed to the prize? If so then there is a vision and persuasion gap that is almost like a death for the remaining persons in the acquired company. Do not ignore it. Put it on the table with the new team and figure it out. It takes a person to replace a person. So, it may well be that the CEO tasked with merging the two cultures is a strong, persuasive, visionary him/herself. As all good executives have learned, we must hire our weaknesses. If there is a people gap here, hire smartly and remember the people followed a person this far. They may need a person on the C-suite team they trust and will follow. It can be a new player. It can be a legacy player. It needs to be the right player, loyal to the new vision and CEO. It needs to be addressed.
• What is the incentive now? What is the next prize? Align all team members’ roles and compensation with the new vision, core values, and goals of the company. Make sure they are not being paid to resist by the old compensation model. Remember, though, that money and compensation are neutral at best. Money can go negative quickly, and the fear of being messed with financially is fierce to people. So be smart. Do not step over a dollar to pick up a dime.
• Who are the “leaders within the ranks” that the CEO and his/her executive team can informally engage to provide positive, supportive, and hopeful leadership to the rest of the team? This is often overlooked by top executives in change management mode. There is nothing more powerful than the respected team members who will and are already aligning to get on the same side of the rope with the new CEO/Executive team. Just be smart here, too. Watch for counterculture cobras who are not really on the side of the new team. We cannot have a tug-of-war in a healthy business. If we do, it should not last long. (See King Cobra in the Baby Crib… – previous blog post).
• Is this change/decision really worth the fallout it may create? Ask this question with and to each other on all decisions.
• Over-communicate the good news, the vision and the “why.” Say it seven (7) times, seven (7) ways, then do it again. It takes time and repetition.

For right or for wrong, people can unite, focus, communicate and act in such a way that there is nothing they cannot accomplish together. This is an incredible force that we must harness for the good of our enterprise. We must also be weary of effective counterculture efforts that become aligned, unified and powerful.

5. Be open and honest at the senior table. Then be as open and honest as possible during the transition phase. Speak as one unified voice as an executive team, old-timers and new-timers alike. Be cautious of any leaders who fake loyalty and alignment, and then work behind the back of the CEO and other executives. Trust and health are very related. So make both a goal, and try to be trustworthy. Address counterculture swiftly.

An interesting example of unity, alignment, and total buy-in by a large culture is the one of the Tower of Babel and the people of Babylonia. It is said by God in Genesis 11:6 “Look!” he said. “The people are united, and they all speak the same language. After this, nothing they set out to do will be impossible for them! 7Come, let’s go down and confuse the people with different languages. Then they won’t be able to understand each other.” As a CEO or top executive, consider the wisdom of this statement. For right or for wrong, people can unite, focus, communicate and act in such a way that there is nothing they cannot accomplish together. Merging cultures also includes finding a common language and effective communication style in the new world. If we do not speak the same language and get in rhythm, then we cannot be powerful. If we do speak the same language and get in rhythm, then we can rock! So, consider the merger may have disrupted the communication prowess. We need to find the new one. This is an incredible force that we must harness for the good of our enterprise. We must also be weary of effective counterculture efforts that become aligned, unified and powerful.

In closing, there are two sides of a merger. Both must unite, get aligned, get on the same side of the rope and pull together. This will take some great leadership, some great leadership within the ranks, and a culture that is inspiring to all. There will be uncertainty, risk, and fear. These are the briar patches and deep woods we must walk together in a post-merger culture optimization. The CEO, the top executives, and the people will need a common goal, vision and passion around which they will unite, communicate effectively and prosper. These are tricky times. As an Executive Advisor I can help the top executive and his/her team succeed in this exciting scenario. The opportunity is tremendous if the end result is a united and merged culture that sincerely teams up and delivers the intent and dream of the merger.

Until next week, cheers!