Deal Law Wire - Norton Rose FulbrightA clash of cultures is one factor that contributes to unsuccessful mergers and acquisitions after closing. Often, management tends to be so focused on other aspects of a successful transaction that the integration of culture is overlooked.

What is culture?

Culture refers to a set of values and beliefs that inform the behaviour and attitudes of a workplace. In Professor James Heskett’s book, The Culture Cycle: How to Shape the Unseen Force that Transforms Performance, he explains that culture can account for 20-30% of the differential in corporate performance between competitors. Culture can increase the rate of employees that remain in an organization, which decreases the costs of recruitment and training. It can increase employee productivity and morale. In turn, these factors all lead directly to greater customer loyalty, better customer relationships and improved sales.

In a recent article, Bill Howatt, chief research and development officer of work force productivity, explains how companies can shape workplace culture. Senior management play a key role in shaping culture, managing culture and integrating cultures in the event of a merger or acquisition. The following three steps should be kept in mind for senior management to effectively facilitate the joining of cultures:

Assessment

When companies come together, the differences between them might be so fundamental that it leads to frustration, confusion, and ultimately low productivity and morale amongst employees. It may even lead to employees leaving the company altogether. It is important to note these differences upfront so that integration can be adequately facilitated.

Implementation

Once the differences between the organizations have been properly assessed, it is incumbent on senior management to communicate their vision for the merged company, which includes expressing their expectations with respect to standards of behaviour, short term goals and long term goals. The alignment of cultures at this stage is integral to future success because it shapes how the organization will operate moving forward. Positive attitudes and behaviours begin with senior management. Employees play the most important role in shaping culture because they represent the majority, therefore it is important that they perceive senior management’s efforts as genuine and well-intentioned.

Tracking progression

Using various tools to measure culture will provide for a mechanism of accountability by ensuring that progression is tracked. Some tools include the use of employee surveys to measure employees’ perceptions of culture, stress levels, health and productivity. Other objective measures include employee absenteeism, the number of reported conflicts and complaints within the company, the percentage of employees leaving the organization and the number of applications received for job postings. All of this will provide insight for the organization to measure their success, reflect on strategy and redefine their goals if necessary.

For more, please see our previous posts on this topic by visiting here and here.

The author would like to thank Sadaf Samim, Summer Student, for her assistance in preparing this legal update.

Stay informed on M&A developments and subscribe to our blog today.