PAYDAY Workforce Solutions Blog

Don’t Neglect Culture in Mergers

On Aug 19, 2014

Just because a company can buy another company doesn’t mean the acquisition will work. With the recovering economy creating a whole new job market and war for talent, companies are buying intellectual resources along with market share and corporate assets. While company culture is increasingly important in recruiting and retention, Mercer’s 2013 Global M&A Ready Survey showed that culture is often neglected in mergers and acquisition processes.

Employment Branding Depends on Culture

It’s surprising that Mercer’s survey showed culture is mostly ignored during the M&A process the world over. Employment branding for competitive advantage in talent takes time and resources to develop. Think Zappos or Google culture. Ignoring culture and people issues when buying a company poses some risks. Corporate divorce is a real problem in buyouts and mergers.

People stick to the culture they are used to, either out of loyalty or because they truly enjoy it. When differing cultures are not addressed and handled well during mergers, it’s difficult to integrate teams, processes, and performance results. With more mergers and acquisitions expected according to experts like University of Maryland management professor Susan Taylor and Human Capital partner Lawrena Colombo, culture clash is becoming more of an issue in business success. Companies are turning to strategically designed social recognition solutions to focus merged workforce on the same goals and behaviors quickly and positively during change.

What Can Go Wrong?

When two companies come together, Achievers founder Razor Sulemon says that it’s more about people and personalities than about industries, products, and services. That’s why it’s important to look at culture as part of due diligence to be prepared for what can go wrong.

Tasman Consulting owners Shari Yocum and Niki Lee know from personal experience that when the merger involves large and small companies with very different cultures, there can be resentment, loss of talent, confusion in processes, and differences in benefits that upset people and create distractions and disruptions. They worked on large networking computer company Cisco’s buyout of smaller routers and wireless access point company Linksys, and things fell apart. The two companies ended up parting ways because of the cultural issues that couldn’t be resolved after 10 years.

A study in 2000 by KPMG found that 83 percent of merger and acquisitions fail by not increasing shareholder value. That’s a big number to ignore.

How HR Can Help

Human resources can help manage people issues during mergers by combining the two companies’ mission, values, and vision statements to create a new set of common core values that everyone can use. A social recognition program helps reward the actions, attitudes, and behaviors desired and forges positive alliances necessary for good working relationships and clear company culture.

Before using social recognition, human resources can confidentially survey employees to gauge job satisfaction and engagement, level of concern with the merger regarding job retention, potential culture and leadership changes, an understanding of the values and culture of the merged companies.

Contact PAYDAY for more assitance about mergers.

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