The Opportunity to Create a New Culture in M&A

Another reality of the recovery is continuing mergers and acquisitions, especially on a global scale. As discussed in a recent Workspan magazine cover story:

“According to a KPMG study, 'Eighty-three percent of all mergers and acquisitions [M&As] failed to produce any benefit for the shareholders and over half actually destroyed value.' Interviews of more than 100 senior executives involved in these 700 deals during a two-year period revealed that the overwhelming cause for failure 'is the people and the cultural differences.' Difficulties encountered in M&As are amplified in cross-cultural situations, when the companies involved are from more than one country. …

“Companies routinely underestimate the value of integrating cultures and its stickiness. Increasingly companies have realized the folly of this approach. Low morale, resignations, unionization, expensive retention Band-Aids, political infighting and outright conflict lead to a sapping of energy and an inward focus rather than competing in the market. …"

Merging companies requires merging company cultures as well as bridging the geographic cultures in global acquisitions. In some M&As, this may involve new geographic cultures never before encountered, which creates potential for serious cultural gaffes and misunderstandings.

I’ve written before on five steps to unite company cultures and goals on acquisitions. But in geographic cross-cultural M&A scenarios, it’s just as important to create and offer a single “language” of recognition that communicates consistently and clearly to all employees, from both original organizations, the company values and objectives.

Use a merger or acquisition as an opportunity to launch a new culture of recognition for all employees.

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?

Turn Around “Crummy Jobs”

Lindsay Blakely wrote a strong article on the “Five Signs You Have a Crummy Job.” Blakely ties her five signs to “recession putting your organization in a chokehold,” but really, we’ve all seen these situations happen in perfectly good companies for a variety of reasons. Three of the signs Blakely identifies can be dramatically impacted by strategic recognition programs used effectively.

Blakely’s Sign 1: “Budget Ax Severs Emotional Ties” and Sign 3: “A Climate of Fear Sets In” are very closely intertwined. It’s true that when costs – and, more importantly, people – are cut due to recession, an acquisition or other reason, the people remaining lose trust in their leaders and in the organization itself. What once may have been a collegial environment becomes suddenly politically charged as everyone looks out for themselves first. By making a smart move to reinvest in a strategic recognition program, company leadership sends a strong message that all employees are valued. Such a move will also help the company once market conditions improve as remaining employees may remain more loyal to the company and less likely to jump ship – a common occurrence when trust is lost in tough times.

Sign 5: “Innovation Comes to a Standstill” is particularly troubling. If the good ideas stop flowing, how will the company outperform competitors and succeed in the market? Companies thinking strategically will certainly reinvest in programs that encourage innovation to take advantage of the downturn to potentially seize market share. Strategic recognition is once again a strong motivator, especially if the program is structured to properly measure and track recognitions by divisions or regions as well as by employee and group. This gives senior management insight into where the good ideas are coming from so more of now scarce resources can be directed in that area.

Leaders, are you taking advantage of this down market to drive your business and advance your employees? Share your tactics for success.

Uniting Company Cultures and Goals during Mergers & Acquisitions

In my last post, I discussed the fears that employees usually experience when an M&A is announced and the importance of maintaining consistency for employees throughout the process. These needs for validation, consistency and a clear plan for the future can all be addressed through a strategic recognition program, easing the transition period and keeping employees engaged and performance high. My five steps to smoothing the M&A transition process through recognition are:

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. When done correctly, recognizing behaviors, actions or attitudes that are tied to a specific value will help those values come alive for all employees, creating a more meaningful and memorable impact. Designate recognition ambassadors within both merging companies to encourage and demonstrate appropriate use of the recognition program.

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. By seeing familiar and trusted leaders encouraging positive appreciation moments throughout the merged organization, employees from both companies will begin to notice and acknowledge the valuable efforts and contributions from their colleagues in the other company.

3) Any strategic program requires measurable goals to track success. Frequency, timeliness and appropriateness of the rewards are critical in recognition programs. 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) Prior to program launch, confidentially survey employees on current job satisfaction; engagement level in their current roles; level of concern with the M&A relative to job retention, potential culture change and leadership; understanding of the values of the merged entity; and how those values translate to daily behaviors. Conduct the survey again periodically to measure improvements in these and other predetermined critical-to-success areas.

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 has your experience been during an M&A? Was it successful? Did you feel left out of the communication loop? If you were a leader during the process, what worked well and what would you consider doing differently next time?

Using Recognition to Sustain Performance through Mergers & Acquisitions

It seems to me that the possibility of a merger or acquisition is on the lips of more and more people today. Any major change in the workforce is disruptive and frightening for employees, but M&As typically dramatically affect the performance of the merged organization, which usually falls short of projections. This can largely be attributed to the fear and uncertainty the average employee feels when an M&A is announced. Employees fear their positions may become redundant, the new organization will not appreciate their skills and contributions, or that the company culture will change drastically. These fears lead to reduced employee engagement in their daily tasks and lost productivity as people become consumed by worry.

To allay these fears and positively impact employee engagement during a time of upheaval, leadership of both companies must look beyond the technology, departmental and other functional integrations and focus on the emotional and psychological needs of the employees for validation, consistency, and a clear plan for the future. The need for validation is rooted in employees’ fear that a new boss from the “other” company may not appreciate their expertise or efforts or even fully understand the value of the job function being performed. All employees in any situation need validation that their efforts are appreciated and valued, but this becomes more true in the uncertain atmosphere surrounding M&A.

Maintaining a consistent work environment during the M&A transition process is equally critical to employees. While maintaining full consistency in job role, supervisor or even job location may not be possible as the details of the merger are finalized, employees require consistency in communication and company culture to remain productive in their current role.

Employees fearful of culture change or job loss often try to regain control of their personal situations by preemptively resigning. Top performing employees who may feel trapped between the two companies never fully engage in the merged entity, resulting in reduced productivity. By establishing and communicating a clear plan for the future of the merged organization, leadership will also manage these retention challenges more effectively.

In my next post, I’ll give five steps to smoothing the M&A transition process through recognition. You may also want to check out a recent webinar we co-hosted with Terry Cain, vice president of operational excellence for Avnet, which is grown through dozens of mergers and acquisitions in recent years.

Building the Business Case for Strategic Recognition

Avnet’s Vice President of Operational Excellence Terry Cain recently joined me in a webinar to explain how to build the business case for strategic recognition programs. You can request the recording here.

In this webinar, we discuss how to bring recognition programs to the level of a strategic investment that changes the very culture of a company – and how Avnet achieved just that.

The first step to building a business case for recognition is to set the right AMBITION for global strategic recognition to achieve:
• Culture Change
• Support for the Company’s Mission and Values
• Employee Motivation
• Employee Engagement

Avnet’s main challenge was figuring out how to keep a growing and culturally disparate global workforce united through times of drastic growth and acquisitions in the electronics market. In the last 10 years, Avnet has grown through 59 acquisitions to more than 12,000 employees in over 300 locations in 73 countries.

Avnet set their recognition ambition to create a unified company culture with recognition and rewards based on a desire to improve the company, increase innovation, foster a consistent employee experience, and unite all employees globally in a locally relevant way.

To build the business case for strategic recognition and achieve this ambition, Terry Cain knew – as with any strategic operational excellence initiative – executive buy-in and sponsorship was critical to bring this program to a high-level, strategic business and ROI opportunity for Avnet. Key to securing executive buy-in was changing the belief system of the C-suite, management and the company. In the webinar, Terry discusses in more depth how to ask the right questions so that these key executives and leaders come to desired belief system themselves.

Terry also describes how he and his team worked to balance the needs of all the stakeholders – employees, customers, suppliers and shareholders – to achieve this ambition for strategic recognition.

Terry and I wrap up with a discussion of how Avnet successfully applied Globoforce’s Tenets of Strategic Recognition:
1. Clear, Global Strategy
2. Executive Sponsorship with Defined Goals
3. Alignment with Corporate Values
4. Opportunity for All to Participate
5. Power of Individual Choice

Feel free to download the recorded webinar. I’d like to hear from you about your ambitions for recognition in your company. What would you like to see happen in culture change and employee engagement?