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?

Studies Prove Rude, Egotistical Bosses Lower Productivity

A recent study found the effects of rudeness in the workplace, especially superior to subordinate, have immediate and long reaching impacts. Even “second-hand rudeness” – observing rude behavior happening to others – significantly diminished performance. Cited by Human Resources Executive, the study found:

“Simply observing discourteous behavior can erode the ability of fellow employees to think creatively, solve problems and act as team players. Victims of rudeness were negatively affected by the behavior with severe effects on creativity and the ability to solve problems. Even if they just imagined rude behavior, the results were the same and affected their memory.”

A Bnet report of a study on narcissistic, self-centered bosses is just as damning:

According to the researchers, employees working under self-centered bosses reportedly:
• Had lower levels of job satisfaction
• Saw their stress levels increase over the previous year
• Were less appreciative of their work and organization
• Had lower levels of effort and performance
• Were more prone to sadness and frustration at work

What’s the solution? I think the co-author of the rudeness study, Amir Erez offers a start:

“HR leaders need to change the atmosphere in the organization, and create the climate that this behavior is just not acceptable. Managers may be concerned about long-term effects, but here we see that just one incident affects productivity.”

It’s more than “creating a climate” – it’s changing the culture into one where rude, selfish behavior is not accepted and instead appreciation and recognition of effort is the norm. Creating these cultures of recognition must start at the top with the CEO setting the tone and the example for his/her direct reports to follow.

What’s the culture in your organization? Is it given to rude and selfish behavior? How high up does that tone rise? Or is it more appreciative? Do you see your CEO and senior executives demonstrating those desired attributes of a positive culture?

Talent Management for the Global Imperative

Strategy+Business recently published an excellent article on the “Talent Innovation Imperative”, dissecting the old approach to talent and how to apply new strategies to greater effect in today’s far more demographically and gender diverse workforce. The authors cite startling statistics on the “urgency of the talent problem:”

“Surveys conducted by the Center for Work–Life Policy (CWLP) show that between June 2007 and December 2008, the number of employees expressing loyalty to employers plunged from 95 percent to 39 percent. The number trusting their employers fell just as dramatically, from 79 percent to 22 percent over the same time period.”

What’s the solution? Quoting the authors’ four key steps:
1) Stem the leakage of the highest-quality people even as they reduce overhead.
2) Reinspire employees and reinvigorate morale.
3) Realign the company’s talent practices with its strategic priorities
4) Revamp their talent model to reflect changing demographic trends

The new 21st century talent model is for a global, diverse workforce and offers these benefits (again, quoting):
1) Allows a much broader group of people to assume positions of responsibility
2) Promotes innovation, growth, and breakthrough performance by integrating the needs of the business with those of individuals
3) When aligned with a clear and focused corporate strategy, allows top management to optimize compensation, training, and other expenses; maximize the productivity and performance of the workforce; and gain competitive advantage

The results of a “talent culture” are broad, but one I’d like to focus on is engagement. The authors highlight the primary factor of engagement as “employees who feel respected, valued and recognized” – a feat many companies failed to achieve under the old model and have little hope of achieving in the far more globally diverse, but team integrated company cultures of today. Success in meeting this critical factor of engagement relies on understanding what defines appropriate respect, validation and recognition in every culture, empowering employees anywhere to show that respect and give that recognition to their colleagues across the boundaries of culture and geography, and then making it personally meaningful and memorable for every individual.

If this is the talent engagement model you are embracing in the 21st century, our white paper “The New Era of Strategic Recognition: Engaging Multi-Generational and Multicultural Teams in the 21st Century Global Workforce” (available for download here) offers guidelines for success. Our market research on “Engaging the Global Workforce: Bridging the Gap between Finance and Talent Management" (available for download here) offers insight into global HR and Finance leader perspectives.

Realigning Your Workforce with Your Priorities

Layoffs, mergers, acquisitions, restructuring, reorganizing – all outfall of the recession in the majority of companies to some extent and all creating the greatest challenge facing organizations in 2010 – alignment. The massive organizational upheavals leave so many employees floundering in what to prioritize and what really matters. In the midst of these organizational changes, many companies also changed or adjusted their strategic objectives to align with the new priorities, but in doing so neglected to tell the employees how their work and specific tasks should also change to achieve those revised objectives.

Towers Perrin found in a June 2009 report:

“A company’s success depends on its people. But their collective power stems, in part, from an organization’s ability to point them in the same direction and importantly, in a direction that is aligned to the organization’s business strategy. When an organization’s leadership, workforce and culture are aligned with its strategic priorities, people can be a major source of sustainable competitive advantage.”

Chief Operating Officers and their teams are responsible for making their organizations run smoothly and efficiently. Communicating revised company goals and the important role each employee plays in delivering against those objectives is critical to achieving that objective. Human Resources is a key partner in creating and implementing the solution effectively across all units, all divisions, all employees. Together, the COO and HR can bring employees into alignment with the company’s objectives.

One of the most effective and positive methods for creating alignment is through strategic recognition. These highly structured programs encourage employees to notice, acknowledge and praise the exceptional efforts and behaviors of colleagues that reflect the company values in achievement of the strategic objectives. In this way employees are not only reminded of the values and objectives with every recognition they receive, but it also becomes very real to them how they are helping to achieve those objectives in their daily tasks. Simple tracking and reporting mechanisms allow leaders to review dashboards showing where employees may be lagging in their understanding. These analysis tools then enable targeted intervention where additional training may be needed.

How aligned is your organization today? What steps are you taking to get your employees aligned with your priorities within their new organizational structure?