M&As are notoriously hard to do well. In fact, according to Harvard Business Review, between 70% and 90% of mergers and acquisitions fail. That’s daunting data. But the question that is still lingering is “why?” We believe we know—at least in part.
Executives leading a merger or acquisition must manage the many variables suddenly thrust on the organization. The result is an overwhelming task of whack-a-mole, where only the most visible and immediate issues get the attention. Unfortunately, in this deluge of difficult decisions, leaders miss the severe risks that inevitably crop up on farther horizons. Culture is at the top of the list. Too few of these leaders understand the importance and influence the integration of multiple companies’ cultures can have on the ultimate success or failure.
Recently, a colleague who frequently talks with executives commented that almost everyone exclusively focuses on financial outcomes regarding mergers. She summarized the lack of awareness around culture in these events this way: The people make the products, not the other way around.
Culture must be understood and addressed as a significant element of any merger or acquisition if they are to succeed. A focus on culture can mitigate the risk of a deal tanking.
CULTURE CLASH
Four organizations merged to create Bonterra, the world’s fastest-growing social good software company. The nascent executive team understood the importance of defining a strategy, but they also saw the company’s birth as a unique opportunity to design its culture. That’s why Chief People Officer Terilyn Juarez Monroe approached Great Mondays to co-create a culture platform. It would be Great Mondays’ most complex program to run.
Great Mondays’ partnership with Bonterra started two months before announcing the newly-formed company’s name. When we began, we were introduced to the employees of “GoodCo,” the temporary name to refer to the four merged social impact software companies. The investors and executives saw the potential in bringing together these four entities because of their shared target and industry, providing software to support social good organizations. Even with this in common, they arrived with different visions and values.
Navigating the culture of merging organizations is complex. One reason is employees live with a lot of uncertainty. Because of that, they tend to mentally and emotionally hold on to their legacy company for stability. We observed this apprehension during our first values workshop. When the ambassadors introduced themselves, they identified their original company; they couldn't or wouldn't say "GoodCo."
Add to this rapidly changing environment that many employees were strangers. Some were even unsure if they would continue; would a larger company be the kind of place they would thrive? These are a few of the common culture-related challenges that accompany M&A transactions. Not that a competent leader can’t correct these issues, but if they aren’t, seemingly minor schisms can quickly grow into more significant problems.
Employees have little insight into a merger or acquisition, which can be unsettling. In this instance, they suddenly became part of an entirely new company. In our experience, working with an organization’s leadership and staff to create a unifying culture platform—a documented, agreed-upon strategy—can go a long way to ease these troublesome anxieties, divisions, and gulfs.
VALUES CONNECTED TO PURPOSE
To provide a sense of ownership and control during the Bonterra M&A process, we advised that leadership delegate the creation of the new company values to employees. For most projects, including this one, we work with influential employees nominated by senior leaders. These are our Culture Ambassadors because they embody the best version of the company. We see them as the ideal culture brought to life.
Creating new values is rarely a smooth process. It was the first time most of the employees met each other, and inevitably there were difficult conversations when ambassadors didn’t agree or had differing views. But this is to be expected. We need diverse opinions, experiences, and beliefs. For this client—and arguably for all companies defining their values—gathering representatives from across the organization is critical.
During our work, the ambassadors uncovered a rallying cry they could align to and get behind. Asking this helped us identify what mattered to them most. They turned Bonterra’s purpose statement (We power those that power social impact) into a question: What can we do to power those who power social impact?
We co-developed the following four values and statements to help Bonterra employees make culturally-aligned decisions.
ELEVATE DOERS OF GOOD
INNOVATE COURAGEOUSLY
CULTIVATE INCLUSIVITY
APPRECIATE THE JOURNEY
Defining an organization’s Purpose and Values is the first step in ensuring a culture can not only endure but support a merger. However, the work must continue for the culture to come to life. Employees across the organization must understand, embrace, and model the behaviors. Ultimately, inspiring actions among their peers drive the evolution of culture. This is Culture Activation, the second critical piece of launching a unifying culture program.
AN INVITATION TO PLAY(BOOK)
As proud of the work as the Great Mondays team is, we always encourage our Culture Ambassadors to be the voice of their culture. In this case, we asked four ambassadors to present to 1,000+ staff during an online webcast one of the values and a related personal experience illustrating its importance to them.
After the launch, we co-designed a Culture Playbook. This digital document goes deeper into the values through stories, exercises, and prompts. We included activities to help employees learn how to apply the values to their day-to-day decision-making. Our goal is for these questions to help employees learn to enact the four values from their first day at the company to their 10th work anniversary.
PUT CULTURE IN DRIVE
We wrapped up the exercise by creating a high-level Culture Roadmap with CPO Monroe and the project team. This tool documents the culture-related engagement activities over the next 18 months to foster alignment and shared understanding.
The Culture Roadmap development process was co-created with those who would be the primary users from the People and Marketing teams. Over two working sessions, we utilized Miro, Great Mondays’ preferred collaboration tool, to evaluate the responsibilities to activate Behaviors, Recognition, Rituals, and Cues. We listed and sorted tasks on sticky notes in workshop style, added specific start and end dates, and assigned ownership for continuity.
FROM CULTURE CLASH TO MASH
Again and again, we see failed M&As caused by a lack of investment in creating a unified culture. Executives need to hold themselves accountable when bringing people into a company. They must see employees as the key to a successful merger or acquisition, not just resources that get dragged along.
Creating a new culture takes time. Great Mondays advises our clients to use the Components of Company Culture—a six-part framework that builds momentum to become a self-reinforcing system. The first three Components are about creating the vision for the culture, while the second three are about bringing the culture to life. Together they create a system that enables leaders to design and manage how people engage in the organization.
While merger and acquisition growth strategies are prevalent within the tech industry, companies of all shapes and sizes must be mindful of how company culture plays a role in its success. Great Mondays is here to help.
If you want to learn more, read how Bonterra’s working to build its corporate culture here.