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Setting Them Up for Success: Acquisition and Transition in the Organizational Culture

In a post for the PitchBook Blog, The Keystone Group’s Jeff Alvis writes on how inattentive/poor culture integration is “one of the main reasons industry leaders cite when they describe outcomes that, in retrospect, were unnecessarily or unknowingly ‘set up for failure.’”

Jeff Alvis, The Keystone Group

Jeff Alvis, The Keystone Group

The following post was written by Jeff Alvis, a Director at The Keystone Group.

There are more than a few stories about the M&A process that looked so good on paper, but never had the chance to live up to its potential. Inattentive or poor culture integrations is one of the main reasons that industry leaders cite when they describe outcomes that, in retrospect, were unnecessarily or unknowingly “set up for failure.” Historically, many executives tend to dismiss culture as too soft-skills oriented, too touchy-feely to include in a serious assessment of potential risks and opportunities. For the same reason, it’s glaringly absent when implementing plans to reach a desired post-close culture.

This may be a failure that’s hard to recognize because it seemed like it was being addressed. Although avoidance and distancing—ironically—are based on an awareness of those very touchy-feely factors we perhaps hope to avoid dealing with, no one dared to look corporate culture directly in the eye. All the phrases included reassuringly true but generically bland statements, like “We share the same values” and “They have good people.” And all the safe cliches were the same: “Safety is our number one goal” and “People are our number one asset.” So what could possibly go wrong with such a superficial gloss?

Until that rubber hit the road, and only in motion do many companies discover that their underlying operating practices—and even the rationale for them—reflected unwritten rules, and choices and behaviors and communication styles, that turned out to be incommensurable. These aren’t isolated problems to solve, because culture infuses every department and desk drawer in it. They include fundamental questions: How are decisions made? How are people rewarded and compensated, and why? Is there truly a customer orientation, or is the enterprise guided by a low-cost provider mentality? What does an adherence to process and systems mean? What gets people in trouble?

The topic is worthy of much discussion, but a few simple things will help you start down the right path:

  1. Identify where you want to end up. Take a look at the process endpoint, and consciously decide what cultural features are important enough to carry with you into a new paradigm. Identify what you’ll want from the target and what things are open for debate, and clearly communicate the difference. If there are critical aspects of your culture, business practices and reward systems that must prevail, make those clear as early as possible during diligence and in the pre-close planning process. You’ll ultimately be glad for the transparency, because nothing saps morale post-close more quickly than those “don’t worry, we won’t” platitudes that are violated immediately after the deal closes. Be candid and direct—people expect and deserve it.
  2. Learn as much as possible about how the target works and what has made them successful. By focusing on process and really listening when you ask, “How do things get done around here?”, you’ll likely understand what is important enough to be preserved—or, if you plan changes, a better understanding of the inherent risks and how to best approach those changes. This evaluation can be enhanced by using an analytical tool, such as the Denison Consulting Organizational Culture Model. We have used it many times to bring a more objective view to complement the interpersonal communication. Above all, make sure your people are looking and listening alongside the target, and sharing that information as the integration progresses.
  3. Use people from the target to lead integration planning teams/project management office. There is no better way to get buy-in from the target and to see their folks in action than to honor them with team leadership. They will learn about you and carry your message back to others in their company. Don’t be deceived by how simple this sounds. It’s that important.
  4. Make Day 1 an event. The target is expecting clear, direct communication about what will happen. Don’t be afraid to treat them as adults; they are. Make them feel part of your team and tell them what you know. Make the investment in planning for what you want the day to look like. Enlist your allies to ensure the integration is that beginning that gets remembered.
  5. Post-close, it is critical that senior leaders spend meaningful time with the target. One of my clients reminded me of this recently, after we helped his team through a major acquisition by a European firm. While the deal was successful by most measures, he told me the biggest mistake we made was not having active, direct senior-level involvement for a sustained time after close. While people were moved into key positions with the other company, some were ineffective because we failed to properly understand and rationalize the underlying practices.

Instead, set your people up for success! There is nothing better than a deal with an effective cultural transition. By focusing on it early, often and consistently, your chances for that success will improve.

Jeff Alvis is a Director of The Keystone Group, focusing in the areas of mergers and acquisitions, profit improvement and business strategy.

Featured image courtesy of Wikimedia Commons user Henry Mühlpfordt.

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