M&A Success hinges on Workplace Culture
With market conditions emerging from the cold winter of the GFC, 2014 saw a 7 year high in Merger and Acquisition (M&A) activity. The rewards for successful M&As are enviable, increased status, phenomenally accelerate growth, and the chance to corner the market. However, most M&As fail to deliver, with an estimated 50% to (an unbelievable) 90% of M&As performing below expectations. On paper most of these deals seem like they should have succeed. There were sound strategic arguments for bringing together customer bases, leadership teams, staff with complimentary technical skills, financial capabilities, products and services, and market positions – How could they have failed? The answer lays in something that the auditors missed during their thorough due diligence process. The material strategic advantage that each business sought to gain by combining their powers was created by different groups of people, and these different groups of people were guided by different (sometimes vastly incompatible) workplace cultures.
Workplace culture, or “the way we do things around here” guides every action that people take while they are at work. When planning an M&A venture, workplace culture should be given the same level of consideration as business strategy, as it is through workplace culture that business strategy becomes business reality. Architects of successful M&As do two thing well; 1) they understand the workplace cultures of all business involved, and the differences that matter, 2) they priorities creating a shared way forward.
Identify cultures, and the differences that matter
Every culture is different, but not every difference matters. To reiterate, at the outset of M&A activity it is important to acknowledge that the material strategic advantages that each business is seeking to gain by combining their powers, has been created by different groups of people, and the business successes and failures of these different groups has been achieved due to unique workplace cultures. As a result some key questions arise:
- What is the culture of each business involved within the M&A?
- How has this culture lead to the individual business’s success or failure?
- What elements of each culture are compatible, and how will this support the new venture?
- What elements of each culture are incompatible, and how will this effect the new venture?
Answering these questions is not as easy identifying each participating business’ bottom line, but it is possible with the use of dedicated cultural assessment inventories, semi-structured interviews, and focus groups.
Agree on a shared way forward
While material strategic advantages such as intellectual property can be acquired, you can’t “buy” a new workplace culture, rather it must be built. Building a united workplace culture following M&A starts with key leaders defining a shared Mission, Values, and Behavioural Norms so that expectations are clear, and everyone within the new venture “speaks the same language”. At this point leaders should decide whether one of the “original” cultures will become dominant, subsuming the other, or whether a more blended approach will be taken.
Beyond establishing a new direction leaders must establish systems of accountability to ensure that the mission, values and behavioural norms are practiced on a daily basis. Without rigorous systems to hold all members of the new venture to account there is the very real risk that people will slip back into “old ways of doing things”. If this happens, the exciting new mission, values and behavioural norms become as worthless as the paper that they are written on.
Many M&As have high financial potential and make good business sense, but this potential can only be realised if Workplace Culture is given the attention that it deserves.
At HR Business Direction we are able to assist you with building a winning workplace culture following M&A. Contact us here.
Alistair Kerr MPsychOrg; PostGradDip Psych; BPsych
Organisational Development Strategist | Psychologist
alistair.kerr@hrbd.com.au
07 3890 2066
www.hrbd.com.au
