The Importance Of Corporate Culture

The Importance Of Culture In M&A

The Importance Of Culture In M&A

The Importance Of Corporate Culture

Failure to address corporate culture is the key barrier in up to 85 percent of failed M&A transactions. Similarly, more than half of the respondents in a recent survey by IntraLinks said that corporate culture is the most important factor leading to deal success. These examples demonstrate that problems arise when two companies merge but do not agree on how work will be done. Here’s our guide to the importance of culture in M&A.

Identifying Company Culture

Despite their knowledge that corporate culture is important, many organizations struggle with how best to convert an appreciation for cultural differences into a definitive plan of action to execute a transaction successfully. Ideally, senior leaders are engaged early in the process, ensuring a clear understanding of cultural differences and identifying and prioritizing specific actions that will inform, influence, and accelerate the integration effort.

Addressing your company’s culture at the earliest possible point is essential to focusing your integration efforts. As organizations navigate the earliest stages of a deal (for example, strategy and planning, target identification, and preliminary due diligence), they should engage leaders on the topic of corporate culture and set a baseline for their own organization. Companies must specify the behaviors required for success; identify the non-negotiables, or areas where change is not welcome, and ensure corporate alignment on aspirational cultural attributes.

Understanding Your Target Company’s Culture

When considering M&A targets, you should apply a cultural lens to test inter-organizational “fit,” identify potential red flags and inform the negotiation process. Publicly available information (such as annual reports, news articles, and employee blogs) can provide meaningful insight into the target’s corporate culture even before a company approaches the target.

 

Once your company isolates an M&A target and begins due diligence, it can apply its preliminary understanding of the target’s culture to the formulation of a deal thesis and an integration strategy. In order to fully understand your M&A target, you must look into not only the company you’re looking to acquire itself but also the individual employees it’s comprised of. This understanding often impacts the degree, depth, and timing of integration activities.

Success In Cultural Integration

The keys to addressing culture in M&A transactions are to begin the process early, engage leaders, and use data to inform integration planning. The final step before actual integration is to choose wisely — place bets on interventions that will have the greatest impact in the near term.

Team leaders and those in charge of their company’s M&As must have the discipline to start early and get the businesses to take ownership (the position from the businesses’ point of view and make it second nature). You should also try and engage leaders and work with key company-talent to help put in place all of the necessary drivers of change. Understanding a company’s culture, for M&A purposes or otherwise, is a comprehensive effort, so the more talented people you include in the discussion, the better!

Contact Culture-Strategy Fit today at 1-800-976-1660 for comprehensive cultural help with your next M&A.

Strategies for Shaping Culture Part 3

Strategies for Shaping Culture Part 3

In our prior two Strategies for Shaping Culture blogs we discussed three strategies that lay the foundation for shaping culture for future success and two strategies that accelerate it. This leaves the question of how to sustain changes to culture so that early attempts don’t fizzle out. This blog discusses six ways to support, embed and sustain culture development so culture is continually being shaped to fit strategy and goals.

6. ALIGN THE ORGANIZATION SYSTEM – Support desired behaviors

Architect structures, processes, and artifacts to reinforce behaviors For new behaviors to take root, a work environment is needed where these are supported and positively reinforced. To expect otherwise is unrealistic. For example, if there is the expectation that people will make decisions that benefit other groups but at times negatively impact their own department, then the right goal setting, measurement and reward structures need to be in place to support this. Identifying the elements of the ‘system’ that support and impede the desired behaviors is the first step. Taking action to align these elements with a focus on those that are most critical for adoption and sustained change is an essential part of any enterprise culture development plan.

7. MAKE IT DESIRABLE – Tap into intrinsic satisfaction

Use positive feedback Most people want to do well, put in a good day’s work and be proud of their achievements. Research shows that people have a powerful desire to do what is right and want to hear that they are on the right track from their manager and particularly their colleagues on a regular basis. Build in lots of feedback loops. For example, to close the weekly team meeting, ask who needs to be recognized for demonstrating behaviors important to the desired culture. Allow time for people to learn about the behavior and how it was applied.Build pride in individual and team accomplishment. Research reveals that people whose work requires conceptual thinking are motivated by purpose, autonomy, and mastery. Help people tap into these three powerful factors for intrinsic motivation. For example, you might realize that the new behavior is going to create some pain before it becomes a habit. Make mastery fun by creating a game around it, increasing individual and team targets over time, posting daily results and having some friendly competition across groups. What could be an unpleasant learning situation can become a source of pride in individual and team achievement.

Build pride in individual and team accomplishment Research also reveals that people whose work requires conceptual thinking are motivated by purpose, autonomy, and mastery. Help people tap into these three powerful factors for intrinsic motivation. For example, you might realize that the new behavior is going to create some pain before it becomes as Make mastery fun by creating a game around it, increasing individual and team targets over time, posting daily results and having some friendly competition across groups. What could be an unpleasant learning situation can become a source of pride in individual and team achievement.

Conduct culture pulses Conduct regular short culture pulse surveys focused on culture priorities and share the data. Give groups their results. While this provides reinforcement that positive actions are making an impact and guidance and where to focus on next, it also leaves nowhere to hide for those groups who are opting out of the change.

Align recognition and rewards Keep recognition simple, local and targeted at demonstration of desired values and behaviors. When extrinsic rewards are needed to accelerate culture change, focus on the outcomes desired (delivery of goals and targets).

8. MAKE IT PERSONAL – Tap into values

Talk about the link to personal values Most culture development efforts rely on personal and group motivators and let the value of personal experience with desired behaviors reinforce new ways of doing things. At times, however, there are people who are uninterested in the behaviors or resist changing their beliefs. In this case, connecting the desired behavior to an individual’s personal values can be a powerful means of helping them see how this can be positive for them. Have discussions with such individuals around organization purpose and how their personal values connect to this. Talk about what they want personally, long-term, from their lives and allow them to make their own links between desired and current behavior. Refrain from lectures or advice as this is unlikely to change thinking; this must be a dialogue. If there is no alignment between personal values and the desired culture, behavior change will be difficult to sustain.

9. NO EXCEPTIONS – 100% consistency, no excuses

Demand consistency Reinforce adoption of new behaviors and practices and demand 100% consistency – no exceptions and no excuses. Consistency builds trust and connectedness important for agility, collaboration, innovation, and productivity. When progress is slow, provide support such as coaching by the manager or an internal or external coach.

Address non-compliance As the saying goes, the chain is only as strong as its weakest link. Without consistency, groups cannot effectively work in concert and deal with complex emerging issues and inter-dependencies. Take action when needed with individuals whose behaviors weaken culture. While each leader got a chance at Ford, Mulally and his top leaders made tough people decisions in order to shape the culture year by year.

10. STORIES – Forget the PowerPoint presentation

Tell stories The best way to shape a culture is to have everyone experience what it is like. Immersion is great but too often this is not possible. Create a vicarious experience by telling about your own experiences. People need to know two things: Will demonstrating these new behaviors be worth it? How does this apply to me?Get others to tell their stories Stories

Get others to tell their stories Stories explore what the behavior feels like and create an empathetic reaction in the listener. We become gripped by what was on the person’s mind, the details of what it was really like and the results that were achieved. Encourage others to tell a complete story, making sure there is clear link between the desired behaviors and the purpose and business outcomes desired. Draw out the storyteller to explain how specific behaviors brought better results. Let listeners work through the two big questions: Will it be worth it? Can I do it?

Use pilots Pilot significant changes and evaluate early behavior change to see if the behaviors are having an impact and create the outcome desired. Use early stories from these pilots to provide proof of gains ahead to those who have not yet bought into the culture change. From these, identify unintended consequences, barriers and/or gaps in support early so they can be addressed.

11. SKILLS & SUPPORT – Build competence and confidence

Build mastery New behaviors require learning which can be painful. Immerse people in demonstrating new behaviors frequently and stick at it for at least three months so habits form. At Ford, former CEO Mulally drove transparency and information sharing every day for years until everyone valued and demonstrated it.

Provide support Don’t forget about recovery support to help people get back on track when they drop new behaviors. Dig into what is impeding the desired behaviors. Leaders, peer coachesand external coaches are all social supports that can be part of gaining mastery and consistency. HR can play a key role in setting up networks of peer coaches and external coaches to support those trying hard to shift behaviors and practices.

These are some of the most powerful strategies that we have uncovered for shaping culture more intentionally for future success. If you have a strategy to share with our blog readers, feel free to comment.

Strategies for Shaping Culture Part 2

Strategies for Shaping Culture Part 2

In our previous blog we talked about three strategies to start the process of shaping culture proactively to deliver strategy and goals. The first strategy, Create a Future Focus described the need to paint a picture of the future culture and how it will support longer term success. The second strategy, Assess Your Culture, described the value of having a cohesive view around culture strengths and development needs that comes from a broad and deep assessment of culture through a culture survey or deep dive assessment of the way the culture operates to support strategy and goals. The third strategy, Set Culture Priorities, described the need to narrow focus to one or two culture priorities for collective focus across the enterprise. These strategies are the foundation for a process that can accelerate and imbed culture change much more quickly than previously thought.

This blog discusses the fourth and fifth strategies, Create Your Culture Playbook and Use the Amplifying Effect of Leader Behaviors, both of which accelerate culture change.

4. CREATE YOUR CULTURE PLAYBOOK – Make It Explicit

Engage one group at a time For Ford’s culture turnaround, former CEO Alan Mulally started with his Executive Team and then engaged Product Design. In most companies, the development of a playbook for strengthening the 1-2 culture priorities starts with identifying the practices, norms of behavior and beliefs that the Executive Team commit to work on for the coming months – their Culture Playbook. They then sponsor the development of Culture Playbooks with each of their leadership teams who then engage their own teams. In this way inter-connected Playbooks develop that reflect local practices and norms of behavior but align with enterprise priorities.

Use new practices to send signals that something needs paying attention to Changing a long established routine that is locking in the old culture and impeding development of new culture strengths can send signals across the organization. For example, at IBM in the 1990’s, monthly reports were cleansed of any incomplete or failed activities. Executives were in the dark. The reports were cancelled and replaced by a new, more transparent approach to monitoring that shocked many. At Ford, Mulally introduced a simple red, yellow, green scorecard for monitoring goals and then had the team work hard at reviewing progress using objective data, without blame fixing. Some changes to routines are signals, some are significant and create upheaval, while others support incremental change. Choose which strategy is needed knowing that transformational change does not come without pain.
Accelerate by focusing on high-leverage inter-related practices Use day-to-day practices and routines to encourage valued behaviors, beliefs and assumptions. For example, for a team wanting to improve execution discipline, this may mean having a Monday morning cross-departmental meeting (a practice) to coordinate work, a Friday team conference call to review progress (a practice) and a monthly feedback session (a practice) to discuss improvements that could be applied to next month’s work. Each of these managing practices focuses on the same two behaviors: being accountable and using constructive feedback, creating the opportunity to rapidly grow capability together. Consider inter-related changes to managing, operating, social or organizational learning practices that will lead to desired beliefs and behaviors.
Focus on the critical few Anyone who has tried to diet or become more fit knows how difficult it is to change habits and routines. Work with leaders and their teams to develop no more than 4-6 specific action strategies (see example above) for the coming three months. List week by week what this will look like in action. When it gets too complex, strip it down and make it more targeted. Roll the plans forward with weekly, monthly and quarterly check-ins. The result of this is a Culture Playbook that is owned by the team that they can measure progress against.

Provide support Working together on strengthening culture is something new for many groups. Facilitation support may be needed to help identify new kinds of practices and related behaviors and also work through beliefs and assumptions no longer relevant to the future, however, groups usually take ownership of managing their Playbooks quickly. Having a facilitator work with the team every three months on assessing progress, what was learned about culture development and what is next can also be valuable support to accelerate culture change.

5. USE THE AMPLIFYING EFFECT OF LEADER BEHAVIORS – Role models

Role model desired behaviors Like ripple effectives on a pond, leader behaviors shape the culture of the organization. Leader behavior tells us what is desired and valued. Help managers lead the way. Invest in leadership meetings, development programs and coaches to improve self-awareness and develop competencies to support the desired culture. This may be having panel discussions during which top leaders share what they are learning about a culture priority such as agility or collaboration, or a global webinar where different levels of employees share what they are doing differently, or team stories to download and discuss at meetings which demonstrate the desired culture in action.

Create a feedback rich environment Use self-assessment, round tables, surveys and feedback sessions to help people understand how their behaviors are perceived by others and what the consequences are of specific behaviors. Focus feedback on strengthening capability for the desired culture and specifically the culture priorities rather than generalities.

You’ll notice we haven’t talked about how to make your culture change stick. That’s our next blog. But if you want to shape your culture proactively, find one or two points in this blog to experiment with and get going!

Increase Effectiveness of M&A Integration

Increase Effectiveness of M&A Integration

Statistically speaking, more than half of all mergers lose value for their combined companies. We will let MBAs ruminate on their case studies, because we know the reason why so many mergers are not as successful as they should be; there is a culture clash. According to a study by Marsh Mercer Kroll, 50% of respondents found organizational cultural differences to be the largest issue they faced after the merger.

The news is not all bad, however. ExxonMobil merged in 1999, and it is currently the 7th largest company in the world. There is a reasonable chance that your child, your nephew or niece has seen a Disney-Pixar movie, such as WALL-E, Brave, or Inside Out.

At Culture Strategy Fit, we want your merger or acquisition to be as seamless as possible. Culture could take your company to the next level, or it could sink you. Check out the following few tips to understand the process for making your big corporate move effective.

1.Understand What You Are Launching In To

Look before you leap. While many managers understand this, they do not necessarily have the information that is critical for establishing synergy. The decision-makers sometimes do not even know what to look for.

Certain factors, as simple as the tone and style of emails, vary wildly from company to company. Communication breakdowns may threaten the efficacy of your business. Any difference could be a flashpoint of contention, so you should know what you will encounter

2. Decide What is Efficacious

When you are in the process of merging, you need to envision what the combined culture will be like. One company may have a unique way of innovating, where new ideas are developed or perfected. The other party may have a process for streamlining their administrative processes that establishes a cahin where value is added at each step.

The directors must decide what they like and what they would like to eliminate in each company. Your company is unique, especially if it has gone through a merger. You must decide what is going to be best for your own company.

3. Execute

Once you have data and know what you want, the only remaining issue is executing. You may decide to reset the timing of some operational chances, or provide training on some communication practices. Additional on-boarding support around decision-making may be vital to your merged company’s success.

Knowledge transfer is key here. Everyone should know as much as possible in order to move the needle. Amplifying your core competencies will be key, and when you have the information in front of you, the way forward is clear.

There are 15 key areas where culture differences have an effect on workplace effectiveness. Combining two companies might make you more agile in the modern business world, or it could mean big losses for shareholders. Since we are so experienced in this field, we recognize how important buy-in, mutual respect, and providing actionable plans are.

If you have any questions about corporate culture surveys, we have answers. Contact the experienced team of Culture Strategy Fit today.