The Critical Element:  People

 Part III of
Beat the Odds of Mediocrity
Integrate a Three-Pronged Strategic Approach

Studies have shown that more than 25 percent of companies that either acquire a new company or merge with another company fail to achieve the goals set for the merger. The biggest reason is the difficulty in merging the cultures of the two companies.

 Acquisitions are justified on the potential value they are anticipated to create.  Many look good on paper, yet value is not created until AFTER the merger is complete.  Value is achieved when people from the combining organizations collaborate to create the expected benefits.  This collaboration relies upon the will and ability of people in the merging organizations to work together toward a new strategy.  It is critical then that the integration process include strategic integration of the two cultures in order to achieve efficient processes and financial success.

The moment an acquisition closes, an intense drama begins to unfold between the new owners and their new employees.  On the one side are the acquirer’s managers, who almost always believe they can run the acquired company better by injecting new capital, new technology, new resources, new energy or new ideas.  On the opposite side are the employees of the acquired company with a script saying that when companies are purchased, the acquiring company often puts its own people in charge, changes policies and procedures, and consolidates.  Therefore, they walk onto the scene feeling anxious, insecure, uncertain and even angry for being let down by their previous owners.

The company making the acquisition must realize that it is impossible to integrate an acquisition and still maintain the same organizational culture, climate and structure.  Too often, the buyer tries, unsuccessfully, to bend and mold the acquired company into its structure and culture.  The end result is two dysfunctional organizations with no common elements holding them together.  Dysfunctional organizations do not operate at peak efficiency. 

What will almost always destroy the potential benefits of an acquisition?

• “We bought you. You didn’t buy us. This is the way WE do things around here!”
• Promises made early on not kept.
• Low levels of communication from senior management.
• Leaving the acquired company to continue without any tie-in to the parent company’s strategy.
• Trying to adapt the acquired company into the existing organization without addressing rational and cultural issues.
• Not determining potential cultural barriers before the acquisition.
• Not addressing cultural barriers after the acquisition.

At this point, company management is at risk, exposed to the difference between potential value and the real value until real value is actually created.

How then is it possible to successfully integrate two cultures and take every advantage of the potential value of a merged organization?  The answer lies in careful assessment, planning, implementation and tracking of a process, which facilitates merging people and developing new teams.  Key players must spend as much time or more planning this cultural integration as they spent putting the deal together!

Organizational leaders set the stage for success or failure.  Leaders’ responsibilities include developing and communicating a compelling vision, outlining expectations, and providing the resources and training which allows the team to accomplish desired results.  This is no different than in any other organization - the bottom line is that effective leadership significantly increases the odds of having an effective integration.

The successful approach calls for a blending and merging of the two companies’ climate and culture focused on the achievement of the new strategic goals and vision, which have been defined.  Several things need to happen after the acquisition to ensure success:

• People in the acquired company must NOT feel as though they’ve been bought (even though the company has been).
• High level of communication downward from management dispelling any fears on the part of the people and providing a vision of the new direction.
• High level of communication sideways among the people, especially between both organizations.
• High level of communications upward so that management knows whether the “merge” is working.
• High level of involvement throughout the new organization (starting at the top) dealing with both strategic as well as structural issues.

Strategic actions include:

• Detailed analysis of the two company cultures including vision, values and management style.
• Determination of how the company should be managed.
• Discussion and decisions regarding organizational values and articulation of those values.
• Definition of specific behaviors and actions that will reinforce the values within the organization.
• Strategic thinking and business planning for the new organization.
• Development of department plans to support organizational objectives.
• Clear communications to employees about expectations as well as their role in the integration process.
• Facilitation of employee development to close gaps between desired and actual results.
• Development and implementation of performance tracking and feedback mechanisms.
• Process for employee involvement in continuous improvement efforts.

When an acquisition is made for all of the right strategic reasons, tremendous synergies can be achieved.  For this achievement to be realized, strategic, operational and cultural issues need to be identified as early as possible and addressed in a coherent manner while creatively involving people, at all levels, in the development of strategy and implementation plans.

Concepts partners with presidents, CEO’s and business owners to align organizations and the visions of their leaders in order to achieve significantly improved business results.  Allison can be reached at results@mgmtconcepts.biz or www.mgmtconcepts.biz

Look next month for how to develop and maintain a competitive advantage through acquisition activity … close the gap between current and desired performance by aligning structure and processes with people and strategy.