The Economic Benefits of Culture in M&A

A very interesting paper out of Harvard Business School applies economic theory to the culture clash in mergers and acquisitions – what’s the cost and benefit? How do most effectively merge cultures? Defining culture as “the degree to which members have similar beliefs about the best way of doing things,” the model used found that:

“Shared beliefs lead to more delegation, less monitoring, higher utility (or satisfaction), higher execution effort (or motivation), less information collection, less experimentation, faster coordination, less influence activities and less biased communication.”

Think of it this way – culture clash often manifests years after a merger when employees “still refer to a colleague’s pre-merger origin firm as an explanation for his or her behavior.”

So how do you more quickly overcome these “us v. them” tendencies to achieve the benefits of shared beliefs? Acknowledge these differences in culture and the expected outcomes at the outset and plan immediately how to address and potentially overcome them, even prior to the merger finalization.

As I’ve written in more detail here, these five steps will help merger your cultures as well as your business:

1) Merge the two companies’ vision and values into a new statement that is meaningful to employees from both organizations. Then use the strategic recognition program as a positive communication tool of the vision and values to all employees.
2) As with any strategic program, secure executive sponsorship of the recognition program, but be sure to include key senior leadership from both companies in the initial roll-out.
3) Measure: In the special case of M&A, specific goals should be included to track the progress of the merger of the two cultures into one of appreciation across the global workforce.
4) Survey employees prior to program launch and periodically afterwards to determine its effectiveness in achieving culture goals post merger.
5) Launch the program soon after the M&A is announced to engage all employees in this new culture of appreciation, help them understand their continued value to the merged organization, and unite all employees behind the new vision and values.

What other steps do you recommend to smooth the merger process and achieve a unified culture?