Mergers, Culture Shock, and Communications
By Andrew Goldberg and Tim Orr, Metropolis Group 360 and Senior Strategists
M&A activity is again poised to grow as the global pandemic recedes. Historically low interest rates and lots of available cash make M&A an attractive short-term workaround for companies facing slower growth, risks to market dominance, and various internal barriers to change. Like all change activities, M&A objectives collide with a big barrier–the inability to harmonize business cultures. One reason for this we would argue is a misunderstanding, and often a misuse of communications as an enabler of change. Our view is that communications can, indeed must, play a significantly greater role in creating an inclusive and motivating environment that shapes better and quicker post-merger results.
No M&A event is precisely the same. But what remains consistent is the importance of understanding cultural challenges, particularly through an emotional and psychological lens. Communications can be an enabler in putting on a better path those employees in the combined company who feel at risk, unacknowledged, disempowered, and defensive.
In prior articles, we focused on three areas where communications and management behavior can play a significant role in the alignment process:
Understanding and utilizing influencer networks, generally comprised of a small percentage of employees with an outsize impact on the behavior of their peers.
Communicating through more emotional and empathetic language and narratives.
Bringing together influencers in a “no-fault” environment to co-create the purpose, strategies, values, and communications of the change the company must execute to succeed.
An M&A Communications Approach
With these principles in mind, planning for culture integration begins even before the merger closes:
Identify and enlist critical influencers early. Top management of large firms often find it difficult to see the organizational hierarchy to know who the actual influencers are. This situation is compounded in a merger where both sides lack sufficient transparency into each other. A methodical, premerger culture analysis is critical. And part of that process should be peer-to-peer surveys that locate those individuals seen as most helpful and empowering within the system. Those individuals should be brought together to help envision and build communications for the post-merger company.
Management’s merger communications strategy and training need an internal dimension. Commonly, management communications on a merger is focused on explaining its virtues to external audiences. Executives are often well trained for this purpose. However, the messages that are employed are not necessarily targeted or persuasive to internal audiences that may be under significant stress. Utilizing the collaborative process above, corporate communicators can help senior management convey messages that are more motivational and inclusive, and are also frank and authentic.
Balance speed with insight. Top management inevitably wants to realize efficiencies and synergies quickly. Yet effective change arises from allowing the necessary time to observe, listen, experiment, and act on communications coming back from the organization. Pulsing the influencer network through regular communication provides an alert and remediation process for dealing with employee disaffection, disengagement, and defection.
Feedback, “fail early”, and the flexibility to change. Experience often shows that the ability to experiment, even if it leads to early failures, is important to long-term success. Not every company has the flexibility to adopt a fail-early approach, however. This is where influencer feedback and a continuous communications loop are important. Management needs to have the courage and flexibility to react to anecdotal information from the system when a workstream is heading off the rails. The list of companies whose formal network carefully disguised critical weaknesses is long. Acting on communication from the Influencer network offers the opportunity to acknowledge mistakes, change early, and re-set as often as needed.
Communicate frankly and empathically. Honesty and transparency are always important. But employees are not necessarily reached through the language of pragmatism. They also want to know whether they are valued, listened to, actually empowered to make change happen. Pulling in corporate communicators into the operational strategy and execution process is essential. Communicators understand how to shape business processes and objectives into compelling and persuasive narratives that motivate employee behavior.
Management KPIs should reflect culture factors: Elsewhere we have discussed how management should be evaluated not only on financially quantifiable results, but also on areas such as trust, values, and loyalty. Some of these are captured to a degree in 360 evaluations. But they can also be applied more generally to see whether management is moving organizational behavior in the right direction.
Ultimately, communications as a discipline and as best practice is underemployed in the M&A process. Early incorporation of communications as a lever in post-merger culture change can make the difference between gridlock and transformation.