April 8, 2021 at 5:52 pm #118806
The easy path to culture change management is often to allow the target company to run autonomously for some period of time and then decide how to fold them in or slowly take over the assets or value and then finally close the target site. Thoughts on pros and cons for this approach?April 8, 2021 at 6:29 pm #118807
Michael Maggiotto JrParticipant
@lcastle21 – Great question. Apologize if this is a tad lengthy, but you ask a meaty question of which there is no simple answer. Every transaction is different and there is no one right answer. Appropriate human capital due diligence should identify cultural challenges early in the process prior to deal closure and integration implementation. Under most typical circumstances, it is far better to integrate the cultures quickly. People – the most important asset for any company – feel more connected, remain more engaged, and stay with the company longer (retention) post-integration when the cultures assimilate quickly. Employees tend to prefer certainty over ambiguity. While there will always be a certain amount of uncertainty (haha… certain uncertainty…) in business, internal conflicting cultures is among the most common reason for deal failure in the 1 – 3-year period post integration. Many reports from Mercer, Deloitte, Towers Watson, and other prominent consulting firms going back over 15 years reflect that human capital challenges of culture, retention of key employees, and loss of intellectual property (i.e. failure of knowledge transfer and retention) are among the top drivers of these transaction failures.
That said, I would first suggest that you look to the transaction thesis. Can the thesis objectives be achieved with a slow cultural integration or will a slow cultural integration wedge the organizations farther apart and prevent attainment of thesis objectives? Think of an hourglass integration where the companies are far apart when they discover the potential for integration, the neck when they come together during the transaction but just don’t quite meet up to become one organization, then wedge apart forming the bottom bulb as they realize this merger just won’t work.
Then you have to look at the infrastructure – systems, technology, processes, policies, and people. Are there unique challenges that will delay cultural integration, any concrete reasons that would support the necessity of slowing the cultural integration? Growing pains, fear, the general attitude from slow adopters of “I don’t want to” are not good reasons. It may be difficult, but a properly devised communication plan combined with iron-clad commitment from top executive management, all of which should be devised and obtained prior to transaction close, should overcome most such obstacles.
One final element to consider, what exactly is a speedy versus slow cultural integration? There is no uniform, generally accepted time-line that equals speedy or slow. Transaction complexity plays an enormous part. Appropriate consultation by the HR teams, using data collected during human capital due diligence, should help the transaction team estimate the timeline for cultural integration. Just know, it is not an exact science. The success of cultural integration will take strong emotional intelligence from leadership at all levels of the organization(s) integrating. This should be a key behavior trait assessed in leadership talent that will be retained post transaction.
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