This article was recently published in Workforce Solutions Review provides 4 key strategies that leaders can use to avoid the common pitfalls of merging two organizational cultures. Although the article is written in the context of M&A, its principles apply across many organizational change efforts. A good read for any leader tasked with taking employees through a difficult change.

1. Industry Focus
Taking Uncertainty Pitfalls
Framing value solely in context of the
Strategies
Connect to shared purpose and
(and Sometimes Hostility)
transaction’s financial rationale meaning
Waiting to communicate Communicate context and provide
Out of Mergers and
the filter through which employees
can understand future decisions
Acquisitions
Defining communication as Build communication as an
information sharing alone organizational competency
Failing to provide employees with Enable participation and tap into
opportunities to exert control the wisdom of the collective
By Morgan Marzec, Gagen MacDonald
Figure 1. Strategies to Avoid the Pitfalls.
M
ergers are notoriously difficult. One study found Strategy 1: Connect to shared purpose and
that 83 percent of deals fail to deliver shareholder meaning.
value and 53 percent of deals actually destroy it.1 Communications during the early stages of any deal
When we look for the reasons behind these failures, we focus on appealing to the investment community. And
find an alarming trend: It’s estimated that more than one- that, of course, makes sense because without the support
third of the value of the acquisitions is lost to poor execu- of shareholders, there’s no deal. The rhetoric reaches a
tion. Mismatched organizational cultures, lack of clarity fever pitch in a hostile scenario, in which the acquirer
and ineffective internal communication are among the top must exert pressure on the target’s board and, in some
five reasons for poor strategy execution.2 cases, mobilize shareholders to vote against the board’s
These challenges to effective change management are guidance; while the target company is working diligently
only heightened with an unsolicited bid. During the period to either fend off the advances or raise the bidding price.
leading up to a signed deal, many organizations focus all In either case, both companies’ communications are
of their attention and resources on the mechanics of the intended to sway investors their way and are dominated
legal transaction and fail to involve the change manage- by the language of synergies, market share, building scale,
ment and communications functions in due diligence and efficiencies and projected share value.
blueprinting. This practice often leads to immediate chal- All of these concepts are essential to the acquirer’s
lenges in workforce and cultural integration once the deal message, but alone do not make up the story for the future
does go through, because people and change impacts have company. As the companies battle it out in board rooms,
not been truly considered in the plan’s design. Companies employees are closely following the speculation of newspa-
miss those critical, early opportunities to engage with pers and blogs, trying to predict their personal future and
employees, build trust, and set a positive tone for the get a sense of what it would be like to work for their next
future working relationship – the very factors critical to potential employer. Companies have an opportunity to
inspiring aligned execution. shape the integration story and set the tone from the onset
Leaders tasked with the formidable challenge of inte- – defining and positioning value for the potential merger
grating two organizational cultures in the wake of an beyond the financial rationale of the deal and connecting
acquisition, whether friendly or hostile, must commit to to a shared purpose that is bigger than either company
and quickly foster a collaborative atmosphere. To do so, could achieve on its own.
organizations should avoid four common pitfalls of inte- Years of research in the behavioral sciences show fear is
gration planning: not the most powerful motivator; stellar financial and
• Framing value solely in context of the transaction’s operational forecasts alone will not suffice either –
financial rationale; because people are motivated by purpose, meaning and
• Waiting to communicate; progress. The point is illustrated through one failed
• Defining communication as information sharing hostile takeover attempt in the pharmaceutical industry.
alone; and The would-be acquirer communicated the value of the
• Failing to provide employees with opportunities to potential deal in terms of its “strong strategic logic with
exert control. opportunities for significant synergies.” The U.S.-based
target company appealed to the more fundamental human
The rest of this article provides practical ways to avoid the desire for autonomy and the American myth of the “self-
pitfalls and ultimately inspire the performance that will help made man.” The target company positioned itself as a
realize the full value of your acquisition. (See Figure 1) vibrant entrepreneur – the epitome of the American
www.ihrim.org • Workforce Solutions Review • AUGUST/SEPTEMBER 2012 37

2. dream – while framing the acquirer as an outsider
opposed to these values. The target company was success- There is a period of uncertainty as the
ful in fending off the hostile bid.
Now just imagine if that deal had gone through. companies develop integration plans
Employees of the U.S.-based company would feel that they and determine the operating model
had not only lost in the board room, but lost to a company
that did not share their values or concerns in the world. that will enable the combined
This dynamic would have carried over into the integration
and most likely impeded any efforts for cultural integra-
company to realize its projected value.
tion. Had the global company positioned the merger on a
platform of shared values and purpose – such as meeting
available leading up to and in the early stages of a merger,
unmet medical demands or reaching thousands more
there are a number of ways leaders can successfully
patients with new, innovative therapies – the story around
engage with employees and build rapport, trust and confi-
the acquisition would have been different and may have
dence. For example, when a global chemical company
gained more support from key constituents, including
made an unsolicited bid for a specialty chemicals business,
shareholders.
a contentious, lengthy battle ensued. The acquiring
In any case, the moral of the story is: Values win over
company made smart communication decisions that ulti-
synergies.
mately led to a successful deal and integration:
• First, the acquirer structured its transaction website to
Strategy 2: Communicate context and provide the reach investors and the target company’s employees.
filter through which employees can understand The website included links to the news releases associ-
future decisions. ated with the deal; but more importantly, it provided
There is a period of uncertainty as the companies information about the company’s vision, values,
develop integration plans and determine the operating commitment to customers, and perspectives from
model that will enable the combined company to realize its employees who had joined the company through
projected value. This period is longer and more acute in a previous acquisitions. The testimonials provided
hostile scenario, in which employees of both companies sincere and personal advice on how to be successful at
have endured months of the back-and-forth associated the company, demonstrating empathy for the target
with a tentative transaction. company’s employees, which, in turn, helped to allevi-
In either case, leaders are often uncomfortable ate their concerns.
communicating in the early stages of a merger because • The company also developed a set of guiding principles
they don’t have all of the answers to employees’ basic that provided the context for how integration decisions
threshold questions: Will I have a job? What’s happening would be made in service of the combined organiza-
to my benefits? Will I have to relocate? Successful inte- tion’s larger purpose. These principles functioned as a
gration requires they get over that fear, as 2010 research contract between leaders and employees, defining what
from PriceWaterhouseCoopers shows that the earlier people could expect throughout every stage of the inte-
leaders communicate with employees during a merger, gration. The principles were the focal point of early
the better business outcomes the company will achieve communications and were proactively shared through
(See Figure 2). formal meetings and channels, as employees waited for
the integration plans to be finalized.
• Once integration planning was underway, the
company implemented a series of “open dialogue
sessions.” These sessions gave acquired employees
direct access to senior leaders and the opportunity to
ask questions and voice concerns. Leaders were
coached to handle difficult questions and get comfort-
able saying, “I don’t have the answer to that question
yet.” The discussion largely focused on getting to know
each other and talking about their customers’ experi-
ences and needs. The sessions reinforced leaders’
commitment to building a positive working relation-
ship and gave them personal insight to operational
and morale issues that could prohibit successful
execution of the integration plans.
Figure 2. Early communication leads to improved business outcomes.
The example demonstrates a powerful point: Absent
While answers to employees’ questions may not be detailed information, context is king.
38 AUGUST/SEPTEMBER 2012 • Workforce Solutions Review • www.ihrim.org

3. Strategy 3: Build communication as an
organizational competency. In short, it’s important to remember:
Building on the last strategy, it’s important to think
about communication not as the act of sharing informa- How we act is the strongest
tion, but rather as a critical organizational competency. In communication we can send.
this sense, communication is not just what is said in an
integration newsletter or in the CEO’s most recent
employee address. Especially in the first few months of the
would the integration leads share their preliminary inte-
integration process, employees watch closely to see which
gration plans. The acquirer’s actions served as a poignant
leaders are celebrated, what behaviors are rewarded, how
reinforcement of the company’s commitment to their
they are treated and how that, in turn, makes them feel.
guiding principle of “listen and learn first” through the
This point is especially important with hostile bids. By
integration, and set the tone for the collaboration that
developing leaders’ competencies in listening, rapport-
needed to happen in the months ahead.
building and collaboration, companies can neutralize
In short, it’s important to remember: How we act is the
months of acrimonious rhetoric through a few targeted
strongest communication we can send.
and personal experiences.
We can turn to a global industrial manufacturer for a
best practice. The company had made an unsolicited offer Strategy 4: Enable participation and tap into the
for an organization that would enable it to enter the retail wisdom of the collective.
market in a key region. The acquirer’s culture was domi- In any change scenario, employees’ adaptation and
nated by process engineers. As you would expect, their commitment are related to the amount of time they have
leaders approached the due diligence and blueprinting to process and the perceived level of control they have in
processes with discipline and rigor, resulting in myriad the situation. “Leaders’ adaptation to change is accelerated
spreadsheets that detailed requirements for operational by the high degree of control they enjoy relative to others
integration. With a desire to “make decisions quickly,” in the organization.”3 Through the due diligence and inte-
these leaders were set to storm into the acquired gration planning processes, leaders not only have access to
company in the first few days after the deal closed and information, but the time to process and internalize it.
have their counterparts validate plans and fill in any The challenge often comes when leaders who have
missing information. already worked through their own personal, emotional
Luckily, the executive responsible for driving the inte- cycle of change try to engage others in the organization.
gration process had a personal insight: The plans were so Often leaders expect employees to be closer to where they
detailed that they seemed like a done deal with no room are on the change curve, when in fact, “Many employees
for input or others’ expertise. What’s more, the target do not experience the first wave of change (and thus do
company was known as a retail powerhouse – its vision, not begin the adaptation process) until executives have put
mission, and values all centered on serving customers and the old behind them and are well on their way to accepting
having a strong relationship orientation. He realized that the new.”4 Leaders are ready to move on, just as the reality
these initial interactions would set the tone and define the of the integration hits employees and they realize, “This is
relationship for the rest of the integration. difficult!” (See Figure 3)
To make sure the relationship got off on the right foot,
leaders were trained to raise their cultural sensitivity and
develop their rapport-building skills. The company also
designed a series of meetings for both leadership teams to
engage in candid dialogue about concerns, engage in imag-
ining a collective future and discussing ways to work
together for the benefit of customers and employees. Only
after this series of team building and alignment sessions,
To make sure the relationship got off
on the right foot, leaders were trained Figure 3. The Emotional Cycle of Change.
to raise their cultural sensitivity and To accelerate employees’ acceptance of and adaptation
develop their rapport-building skills. to the change that comes with a merger, leaders should
find ways for them to become involved in shaping the
future direction and exercise some level of control in the
www.ihrim.org • Workforce Solutions Review • AUGUST/SEPTEMBER 2012 39

4. But, our challenge is not to successfully manage change,
Inspiring people on a journey to it’s to lead it. And to do that, I believe we also need to
reframe how we think about strategy. It’s not the manage-
someplace new requires leadership. ment consultant’s binder collecting dust on your book-
shelf. It’s not the plan that’s “done” when myriad steps
you’ve outlined are completed. And, it’s not the intricate
new environment. That is not to say that employees spider map hanging on the conference room wall. Strategy
should define the company’s strategy. Rather, it is impor- is a way of thinking – how we weigh tradeoffs and make
tant for leaders to create opportunities for employees to decisions every day.
provide feedback and engage with the integration strategy In this context, you can see our four strategies in a
in personal and meaningful ways. different light. Applying them will take more than follow-
For example, when a U.S.-based corporation in the ing a series of steps – it’s about your mindset as a leader.
energy sector successfully completed a takeover bid, one of Committing to changing yourself and perspective as a
the first actions the acquirer took was to engage employees leader is the first step on any change journey.
in defining the organizational values and behaviors that
would be critical for the combined company’s success. Endnotes
With a clearly articulated vision and well-defined strategic 1 KMPG, “Unlocking Shareholder Value: The Keys to
priorities as the context, leaders engaged employees in Success,” 1999.
conversations about the cultural traits they needed to 2 McKinsey & Co. and Corporate Executive Council
foster. This approach made employees feel a part of the Research, 2004.
change. Through this process, the integration became 3 Mitchell Lee Marks, “Best Practices in leading Organi-
something employees were involved in, as opposed to zational Change,” The Practice of Leadership, 2007.
something being done to them. 4 Mitchell Lee Marks, The Practice of Leadership, 2007.
It reinforces a simple fact: People are more likely to
accept change if they’re involved in creating it. About the Author
Morgan Marzec is an M&A communications
Closing Thoughts expert with strategy execution firm Gagen
Inspiring people on a journey to someplace new MacDonald. She has served as the change
requires leadership. Although our discussion has been leader for a number of industry-leading busi-
framed in the context of mergers and acquisitions, we can ness transformation efforts. Her innovative
apply the four strategies introduced above more broadly approach to M&A problem-solving has delivered outstand-
across a number of change scenarios – business transfor- ing results and created multiple award-winning programs.
mations, corporate restructurings, the introduction of a She can be reached at m.marzec@gagenmac.com.
new sales strategy, IT system upgrades and transitions...
the list can go on and on.
40 AUGUST/SEPTEMBER 2012 • Workforce Solutions Review • www.ihrim.org