Winning With Culture During M&A Integration


It’s time to wrap up this series on culture with a final issue highlighting a few practical suggestions for helping you win with culture during the course of a broader M&A integration effort. We will certainly move on to other important topics, but given the poor track record of dealing with culture within the M&A community, we felt compelled to do what we can to help turn this tide. This need was highlighted by the analysis we did on our survey, the State of M&A Integration Effectiveness™ 2014. Of over 150 very sophisticated and experienced acquirers responding to the survey, 77 percent indicated they were either poor, very poor or average at effectively managing culture during M&A. 

"77 percent indicated they were poor, very poor or average at effectively managing culture during M&A."

This is a hugely important and complex topic that we can’t deal with definitively in this short series, but as you have seen, that’s never stopped us from trying! Here’s a quick recap of the ground we have covered in this series.

As many of you can attest, our viewpoints expressed in these columns are grounded in practical experience – hard-won “lessons learned” in many different, and often quite challenging circumstances. Throughout this series we have tried to maintain our objectivity and encourage you to explore and adapt from among the many outstanding culture models, expertise and methodologies widely available. At the same time, we’ve tried to illustrate these points with insights and practices we know to be true from our own work experience with culture during M&A. With this in mind, let’s discuss ideas for more effectively incorporating culture into a broader M&A process.

1. Who should “own” culture during M&A?

We’ve seen and led a variety of initiatives where this has been answered differently based on a strong historical association with culture development initiatives prior to M&A. Sometimes the best answer is HR, sometimes ODCM (organizational development and change management) and sometimes the IMO (integration management office). But the single best answer is almost always “key executive leadership”!

In designing an integration governance approach, we advocate the use of a principal “deal sponsor,” or that senior-most executive with direct P&L responsibility for the acquired business. That role, or the closest equivalent in your integration model, is the ideal candidate to lead the culture analysis, development and integration effort. Now, this is not an independent or isolated effort. Any successful culture effort during M&A will be cross-functional and well-supported by the subject matter experts including the IMO, HR, ODCM and outside advisors. But to be sure, anything other than this level of senior executive accountability and ownership is not likely to be effective.

2. How do you gain alignment on the desired “to-be” cultural attributes that will be most effective at establishing a high-performance culture?

This is a multi-part answer. Let’s assume that in your M&A discipline, culture is developed as a target screening criteria and it is adequately assessed and analyzed during due diligence – both informally at first, and then more formally via a competent survey comparison when access is possible. Then it is managed during integration as a high priority objective. That’s great, but culture success during M&A is achieved by a top-down, executive level guidance with superb bottom-up enterprise-wide implementation. If that is to be accomplished, alignment must begin at the Game Day Strategy Summit, or your organization’s equivalent approach for defining and confirming the overall integration strategy approach, framework, key decisions, objectives, resourcing, messaging, timeline, and the like. One exercise that we illustrate at the Art of M&A Integration executive training sessions with the M&A Leadership Council is the use of a “concept of operations” exercise.

While the concept of operations exercise is typically conducted to help key leaders evaluate alternatives and establish directional guidance on the major business integration issues such as what will be done with specific product, facility, functional, system, process and organizational issues, a similar exercise should also be conducted with respect to culture.

For example, at the Strategy Summit, a “cultural concept of operations” would evaluate both qualitative and quantitative culture assessment data gathered during the targeting and due diligence phases and review key findings, potential flashpoints and a gap assessment on key cultural attributes. But instead of focusing the discussion on “right / wrong” or “us / them” comparisons, this session can only be effective when specific directional decisions are made with respect to the desired “to-be” culture.

For illustration purposes, how do both organizations compare on key cultural attributes such as customer orientation, performance accountability, visionary leadership, workforce engagement and degree of collaboration? And specifically, what should we do in each cultural attribute to move the combined entity toward high-performance? In each attribute – and the associated cultural practices designed to establish that attribute – should we preserve, leverage, consolidate, integrate or transform? In what time frame? What are the legitimate best practices that the combined entity can adopt and leverage for maximum success? What values and behavioral expectations need to be recast to support the cultural objectives, etc?

3. Where should culture fit into the overall M&A integration governance/task force model?

First, it goes without saying that unless and until culture is adequately scoped into the overall due diligence and integration playbook, objectives and charters, any cultural effort is likely to be mostly overlooked and ineffective. Once culture is on the M&A agenda, however, where does it fit best? Again, as discussed above, we have seen varied responses to this. Sometimes HR writes this into their scope and charter, sometimes in communications and change management, and sometimes the IMO. But in our view, the ideal home is with the Executive Steering Committee.

If the Deal Sponsor, or equivalent role, owns culture, then the Executive Steering Committee is the natural location for managing culture assessment, development and integration efforts. While supported by the IMO and internal subject matter experts, the Executive Steering Committee should ideally be tasked with culture as a core responsibility and deliverable that they are accountable to the organization to drive and manage as they would with any other major integration objective.

Finally, as with any major change initiative, and as illustrated in this week’s downloadable resource, Leverage Points for Culture Integration & Change, winning with culture during M&A will require you to pull out all the stops and incorporate every aspect of a well-managed strategic initiative. In addition to the right culture leadership and senior level alignment, culture will only be successful when you establish how culture is essential to achieving your most important strategic imperatives and mission-critical business outcomes.

Add to that mix the extreme importance of coaching and supporting leaders through this process; providing superb change management, communications and training; implementing a variety of incentives and support systems to reinforce the desired behaviors; and, of course, metrics, feedback, fine tuning and accountability.