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| Mergers & Acquisitions Delhi, a photo by Caston Corporate on Flickr. |
"If the definition of a successful merger is driving up shareholder value, then their failure rate is far north of 50 percent," says Lawrence Chia, a managing director of Deloitte & Touche in Beijing, China.
There are a few contributing factors to the high failure rate, but two in particular stick out:
- Lack of integration of processes, and
- Lack of integration of culture.
When processes aren't fully integrated a newly merged organization might find its divisions working around 2, 3, or even 4 different legacy accounting, billing, or estimating systems, creating prime opportunity for errors and rework. There are cost savings that are missed when the company hasn't changed structurally to reinvent itself as one larger unit - two marketing departments from the two pre-merger businesses may be working on similar projects, and with market messages that reflect the predecessor companies rather than the new combined entity.
Even when we consider the inefficiencies of unintegrated processes, the cultural integration may be a larger factor in successful post-merger results than the alignment of processes. It is more common than not for "mergees" to resent changing their priorities, work habits - and even their core values - to blend into the acquiring company's culture. While all of the desks are up in the air, people jockey for political position in the changed work setting. They play this out in arguments that may be as small but symbolic as the debate over who has dibs on the office with the windows, extra seating area, beautiful view, and 3 plants instead of 2.
Some of the results of this cultural upheaval are
- employee stress revealed in absenteeism or turnover,
- in verbalized or nonverbal demonstrations of suspicion, and
- in overall resistance to change. People feeling threatened are less likely to step out and try new methods, even if the new methods are proven to be beneficial. They hunker down and play CYA (cover your a**) instead of reaching out and taking action.
Even in a non-merged company, silos that separate functional areas can create assumptions that "the others" in functions down the hall or in the other building have work habits and intentions that are somehow substandard or even sinister. These impressions become amplified because of employee concerns about being seen as having been wrong, weak, or behind the times. Nobody wants to lose face.
A well-proven solution for the simpler in-one-company situation is to establish overall goals or themes for focus that are shared across functional lines, reinforced regularly, and integrated with cross-functional development of the company's workforce. A similar approach can work effectively to integrate two or more cultures in a merged organization.
Often an updated strategy complete with articulated core values has to be developed by the combined senior management of the new company to give all employees a flagpole of sorts around which to rally. Sometimes this takes time, because the management focus has been on the dating and the wedding, and not so much focus has been placed on navigating the marriage. But without an external, shared focus it's more likely that the internal inconveniences and conflicts will have a larger (and negative) impact than is necessary.
If there is cultural strife in a merged company, the first place to look for the source is the senior team itself. Certain members of the team may feel disenfranchised because of the way the deal went down, frustrated at losing some of their prior control and authority. Until the senior team is unified under a direction for the new organization and setting the tone by reinforcing it with one voice, the rest of the organization will continue to be at a cultural impasse.
If there is cultural strife in a merged company, the first place to look for the source is the senior team itself. Certain members of the team may feel disenfranchised because of the way the deal went down, frustrated at losing some of their prior control and authority. Until the senior team is unified under a direction for the new organization and setting the tone by reinforcing it with one voice, the rest of the organization will continue to be at a cultural impasse.











