Maintaining Cultural Alignment After an Acquisition
Businesses looking to fuel new capabilities or strategic growth often embark on acquisitions. Acquisitions are particularly useful when looking to access an audience outside of your primary brand’s reach, infuse your organization with fresh ideas and perspectives, and/or get a leg up in a market that would otherwise be difficult to enter.
But acquisitions can be extremely complicated. The hard aspects of acquisitions — financial details, negotiation points, and legal hurdles — take an enormous amount of effort to navigate. So, “softer” aspects, like ensuring long-term cultural alignment, often fall by the wayside.
Underestimating the importance of upfront cultural work in acquisitions has long been linked to deal failure or M&A underperformance. The hard aspects of a deal always need to be ironed out; cultural work, or “human due diligence” as the Harvard Business Review termed it, can easily be overlooked.
Cultural alignment is key to ensuring the success of any M&A activity. Here’s how strategy leaders can proactively work it into the structures of their deals.
4 tips for ensuring cultural alignment post-acquisition
1. Make culture a key driver of deal success.
The first step in ensuring long-term cultural alignment is people-centered. Rather than just evaluating a deal by financial and legal harmony, make culture a primary metric as your organization plots its approach to the acquisition.
This will come with its own questions:
Which aspects of our culture are most important?
How might these differ from the acquired company’s culture? How might we fill in the gaps, and who might we engage to help us do it?
2. Determine whether the acquired company’s leaders want to be part of the new organization
Getting acquired by a larger company will bring with it some necessary changes — both to day-to-day dynamics and organizational power structures. Some leaders will view these shifts as growth opportunities, and others who have gotten used to the existing dynamics will not want to take part in the change.
If you retain leaders who are not enthusiastic, it could impede the success of the new organization.
As early as possible, identify which leaders are on each side of that equation. The leaders who are enthusiastic about the new direction of the company will be your spokespeople for the rest of the firm, trumpeting the vision and getting engagement from the lower tiers of the organization. If you retain leaders who are not enthusiastic, it could impede this work, and the overall success of the new organization.
For the disengaged leaders, find ways to part on mutually acceptable terms. Have frank conversations with them, provide them with nice packages. Create a scenario where everyone understands that what’s happening is best for both parties.
3. Identify and engage cultural spokespeople.
The leaders who elect to remain with the new organization have an enormous amount of potential. Lower-level employees are likely to respond better to the leaders they know and trust than leaders they’re meeting for the first time.
The leaders who make the transition will be your “culture carriers”: spokespeople for a revised culture.
It’s important to identify which levels of the acquired company need to be included in this process. For smaller companies, it will likely be sufficient to engage a few of their top leaders. For larger companies, you may have to go one or two levels below the executive team as well.
4. Invite the acquired company into values-shaping conversations.
If you’re part of a team, regardless of whether you’re a manager, an individual contributor, or an SVP, you want to feel like you have some ownership stake in the team. You want to feel that you have some say over what’s happening to you and your peers on a day-to-day basis.
“Go beyond the acquired company’s leadership team, and engage as many employees as possible in in-depth conversations of what the new organization should look like, feel like, and believe in.”
Thus, we advise companies to take a bottoms-up approach to shaping the values of the new, unified organization. Go beyond the acquired company’s leadership team, and engage as many employees as possible — digital tools and internal online communities can help — in an in-depth conversation of what the new organization should look like, feel like, and believe in.
Culture is intangible. You know cultural coherence when you feel it — and cultural dissonance is just as apparent. But because it’s hard to quantify, it often falls by the wayside in acquisition strategy.
For successful cultural integration, understand that culture is a key driver of long-term M&A success, identify and engage cultural spokespeople, and drive cultural change and integration from the ground up.