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How Cultural Diagnostics Contribute To An Effective M&a Integration
How Cultural Diagnostics Contribute To An Effective M&a Integration
To drill more deeply into the data and test the accuracy Respectful Arrogant
policies and activities contributing to the perception Strategically oriented Short-term oriented
At the same time, the acquirer also sought input on Figure 2. Acquired employees’ perceptions of both companies’ cultures
ways to maintain, and even strengthen, the attributes
of the acquired company that had shaped its more Formal
entrepreneurial culture. This was particularly important Scattered Entreprenuerial
since part of the rationale for the purchase was
Intuitive Risk avoiding
tapping into new sources of creativity and innovation
to expand the acquirer’s product line.
Unstable Respectful
Arrogant Stable
Bureaucratic Focused
Informal
1.
“Once
“ integration kicks
.8
in full force, it’s useful to
take a baseline measure
.6
of how well the process
-.2
Quality Efficiency Innovation Customer service Brand
Buyer current culture Target current culture Buyer future culture Target future culture
At the same time, the analysis revealed two important To support that goal, we identified the specific cultural
gaps. First, although both sets of leaders agreed attribute that explained the difference between the
that innovation would be very important in the future, buyer and target cultures in this regard: giving local
the diagnostic results and follow-up analysis showed employees the authority to make on-the-spot decisions
that only the target’s culture currently supported affecting customers.
two attributes important to innovation — diversity of
Given the sophisticated analysis and interpretation
thought and opinion, and a bias for action.
attainable with the CAT diagnostic, we typically initiate
Neither of these attributes, however, was present to a series of facilitated dialogues with the relevant
any extent in the acquirer’s culture. Given leadership’s leaders to dig deeper into the results and identify
shared agreement on the importance of innovation for the actions required to drive alignment between the
the combined entity, preserving these elements of the emerging culture and agreed-upon strategies.
target’s culture and expanding them into the broader
In the above example, we worked with the leadership
merged company became one of the top integration
team to determine what aspects of the target’s
priorities.
culture produced the bias for action so important to
A second gap appeared in the area of customer innovation. We also explored the rationale for the
service. The acquirer’s leaders saw customer service buyer’s belief that customer service would be a critical
as far more critical to future success than the target’s differentiator in the future.
leaders did, which is why the diagnostic results
Through this work, the combined leadership team was
showed the buyer’s culture to be more closely aligned
able to come together on a shared vision and strategy.
with this strategy. So the challenge for the leadership
This understanding led to a series of action steps
team was to:
that involved changing certain review and approval
•• Develop a shared vision of the relative importance processes, and removing some of the structural
of customer service as a basis for competition barriers to rapid decision making. Both of these
•• Find ways to engage the target’s employees and initiatives helped drive a culture focused on innovation
embed this attribute in the new culture and customer service.
Confirming the Integration Process We also used the results of this survey to identify the
top statistical predictors, or drivers, of employees’
Once integration kicks in full force, it’s useful to personal motivation to make the new company a
take a baseline measure of how well the process success. In this case, we identified three motivational
is working — and learn where and to what extent drivers that carried across employees of both the
course corrections could be necessary. A relatively merger partners:
straightforward survey such as our Merger Monitor is
well suited for this purpose and can be repeated on •• Confidence they could achieve desired career
a regular basis (e.g., every three months) to assess objectives at the new company
changes over time. •• Belief that the new company will deliver higher-
quality products and services than either of the
This diagnostic, unlike the others we use, asks direct legacy companies
questions about the progress of the integration, •• Perception that leadership will confront and resolve
drawing content from a combination of validated issues arising from the integration
questions from Towers Watson’s employee opinion
database and deal-specific items. Common topics Interestingly, while these issues were equally
include: important to employees across both legacy
companies, we found distinct differences in their
•• Understanding of the deal’s rationale views about whether the new company could deliver
•• Level of personal commitment to the new on these motivators. At ABC Company, employees
organization were far more positive that product quality would
•• Confidence in the integration’s success improve. At XYZ Company, however, employees had
•• Clarity of merger-related communications more confidence that leadership would take them
•• Confidence in leaders’ ability to manage integration successfully through the integration.
successfully
•• Impact on one’s role and career development Armed with these insights, the leadership team
prospects could identify not only what to focus on in building
new processes — career development and quality
We used this diagnostic recently during the merger programs, as a start — but also which areas should
of two large manufacturing companies, administering be a particular focus for each group of employees.
20 questions to a representative random sample While focusing on all three areas would help increase
of employees from both companies. The findings the commitment of all employees, there was a specific
highlighted several key issues for follow-up, as need to help XYZ Company employees understand
well as some important differences across the two how the company planned to improve product quality
companies. and delivery, and a similar need to demonstrate
Specifically, employees from ABC Company were to ABC Company employees how leadership would
significantly less confident that their company’s address integration issues. This led to a more
strengths would be maintained in the new entity than segmented and efficient approach to managing
were employees of XYZ Company. At the same time, the integration process as well as a better way of
more of the ABC employees also believed leadership determining the right communication and change
was doing a good job communicating about the merger management strategies for all employees.
than did their colleagues at the other company.
towerswatson.com