In his classic song “Changes,” the late David Bowie tells of the inevitable changes we all face over time. Just as people face changes, organizations also must deal with transitions during the business life cycle. One of the most dramatic adjustments a company will ever make comes during and after a merger or acquisition. During this tenuous time, the successful assimilation of the two joining cultures is paramount to the organization’s ability to thrive. The establishment of a unified corporate culture enables the new entities to bond to advance the company. The speed of change in today’s modern business world is alarming. With or without a merger and acquisition (M&A), success in this dynamic environment requires companies to adapt to technological advances, leverage a diverse workforce, compete in a tight labor market and stay nimble in a global economy. The effectiveness of a workforce is determined by the ability to attract and retain quality employees who ultimately defi ne business outcomes and drive success.
According to LinkedIn Learning, 56% of organizations struggle to keep high-potential, top-performing employees. That’s a daunting statistic for any organization, especially those undergoing signifi cant changes due to a merger or acquisition. Layer in the uncertainty and transformation associated with an M&A transaction, and you have a complex web of business and people requirements, all needing to be managed concurrently and in a tight timeframe. From the long list of priorities, where should business leaders begin to focus their efforts? The need to integrate and optimize the employee base is critical at this stage and demands a strategic plan. Otherwise, the process becomes an overwhelming task doomed to fail.
While seemingly obvious, if business owners want their companies to succeed, they must create a workforce dedicated to that mission, actively contributing time, energy and talents to achieving specific corporate objectives. Organizations need engaged employees who are committed to advancing the company to the next level. In fact, organizations with highly engaged employees have an average three-year revenue growth 2.3 times greater than companies whose employees are only engaged at an average level, according to research from the University of North Carolina’s Kenan-Flager Business School. The level of employee engagement measures the emotional commitment the employee has to the organization and its goals. This emotional commitment means engaged employees actually care about their work and the welfare of their company, pointed out Kevin Kruse in a 2012 Forbes article.
Disengaged employees are costing the United States from $450 billion to $550 billion each year, according to Gallup. The “2017 Gallup State of the American Workplace” report found that better engagement leads to as much as 21% better business profi tability. In an M&A environment, the need for engaged employees is amplifi ed as new groups are coming together with new or updated combined missions, expectations, people and processes — and even new management. It is a transitional time that requires stellar change management strategies to keep people focused on outcomes, not on the fear or uncertainty of what their new world looks like. So what is the glue that holds all of this together and drives an effective merger or acquisition? How do leaders optimally engage their employees amid tremendous change? What is sticky enough to pull people together and positively affect customers, sales and profi tability?
Corporate Culture as Glue
It starts with corporate culture. According to Inc. Magazine, “Corporate culture refers to the shared values, attitudes, standards and beliefs that characterize members of an organization and defi ne its nature. Corporate culture is rooted in an organization’s goals, strategies, structure and approaches to labor, customers, investors and the greater community.” Leaders in the organization must begin the process of post M&A assimilation by studying their corporate culture — dissect the elements and determine what is driving desired behaviors. What makes people work hard and stay committed to the organization?
In an M&A environment, the combining businesses must evaluate the cultures of each distinct organization and determine which characteristics made each company successful (or not). The identified positive behaviors and habits will serve as foundational building blocks that root the many layers of change management required in any successful M&A action. Therefore, from a human capital perspective, the goal in the M&A process is optimizing the new culture in order to drive engagement, and ultimately business success.
Culture is a daunting concept. It is comprised of repeatable processes, consistent behaviors and an elusive gut feel that people experience in their dealings with the organization. Workers want to feel connected to their workplace, and culture helps drive that connection in spoken and unspoken ways.
So what elements of culture are most effective at driving engagement? What makes a culture so great it pulls people in, ties them to the organization and elicits a sense of dedication and loyalty?
Certain organizational habits, when implemented and practiced regularly, will lead to a terrific culture in which people want to go to work and achieve results. In an M&A environment, the key becomes quickly identifying and capitalizing on the most impactful elements of a desirable culture, and driving them throughout the new organization.
Workers want to feel connected to their workplace, and culture helps drive that connection.
Integrate HR Practices
Your policies and systems should support your culture and values too. Do your performance review questions align to your values? Do your rewards and recognition systems reinforce the behaviors you expect from your employees? Similar to the marketing of your values, an organization must synthesize and reinforce those values and expected behaviors throughout the organizational ecosystem. For example, every January, Hodges-Mace hosts an all-employee kickoff meeting. In that session, we not only highlight and reiterate our values, but also show-case stellar examples of employees demonstrating those values both internally and with our customers. From table tents with customer quotes, to posters on the wall, to scrolling examples on the presentation at break, we want to celebrate those who embrace our values. (Hodges-Mace is an Atlanta-based employee technology and communications company.)
We now have yearly “Core Value Awards” when managers nominate employees who have demonstrated specific values throughout the year. Then, a committee gathers to determine the winners with the most outstanding illustrations of living our values. Those winners are highlighted and announced at the all-company meeting. We celebrate their personal leadership and commitment to our values. Then, to keep the momentum going beyond our companywide events, we recognize department successes for those specific team members who go above and beyond their standard expectations. Employees who get praises from our clients are featured on the TV screens around the office for all to celebrate.
Change requires a constant reinforcement. What is expected? How do we achieve it? Why is it important? By aligning your systems and processes to the messages you want to deliver, your opportunity to succeed skyrockets. Employees want clarity, and highly defined systems and expectations provide a road map that creates comfort, allowing employees to focus on their jobs.
The integration of core values into everyday work reinforces and drives the conversation during performance reviews. A continuous effort to live out these core values sets expectations and creates meaningful dialogue during review season. At Hodges-Mace, we embed questions in our reviews that focus on an employee’s primary core value, asking, “Which value most represents you; and how have you demonstrated it?” By opening the conversation between managers and employees, we highlight the importance of our core values and encourage employee performance that reflects them.
In an M&A, it’s especially important to make values a big part of the discussion early to set clear expectations. This allows for a smoother transition, consistent messaging and a meaningful first impression. An example Hodges-Mace currently practices is with onboarding new employees. We have integrated our core values into the training program with videos, small-group meetings with the CEO and a prescribed discussion plan to focus specifically on our values. As with a new employee, an M&A employee is part of the new team. It’s vital to clearly communicate core values from the beginning and explain how they’re lived out within the organization.
Lead with Values
Successful corporate values are ingrained in an organization’s behavioral fabric, playing an important role in driving intentional aspects of culture. According to BusinessDictionary.com, they are the operating philosophies or principles that guide an organization’s internal conduct as well as its relationships with customers, partners and shareholders. When organizations come together in an M&A transaction, the leading organization needs to define the combined values early in the transaction process, setting the tone for expected behaviors and attitudes.
Once new corporate values are identifi ed, the leadership team must articulate them clearly to all employees quickly and regularly, both verbally and in writing. There’s something quite powerful about the written word. HR departments should actively market the updated values in order to drive understanding and adoption of the associated expected behaviors. Starting with the employee handbook, the values need to be included in any relevant HR policies and materials. Additionally, the values need to be actively reinforced visually throughout the office. Consider publishing the list of values on the wall above your reception desk so employees see this every day they come to work. Provide employees (new and/or current) mousepads or other practical swag, again printed with the values. Make the reinforcement of the values an ongoing campaign, keeping their importance top of mind for all employees.
Hodges-Mace did this after acquiring two other companies in 2014 and it has become a powerful reminder of who we are and aspire to be as a company. Another proven way to reinforce values is to publish corporate values on the home page of your website for all to see.
Values need to be actively reinforced visually throughout the office.
Identify and Leverage Culture Champions
Corporate champions define the combined corporate culture and keep people focused, to stay engaged and drive organizational performance. In the absence of certainty, people generally rely on established patterns of behavior. Having a well-defined and intentional corporate culture helps ensure that people remain focused and engaged, even in times of change. Layer on the fact that engagement leads to performance, and you have a winning combination. Here are some characteristics to look for in spotting culture champions. They:
- Have natural credibility and leadership skills.Others follow these individuals. They get results. If they’re not in direct leadership roles, they achieve results through others — through collaboration, and simply by getting things done. You are looking for someone who will be a living example of your organization’s values. Effective champions are found at all levels in the organization, serving as change agents to all types of employees. Companies should leverage these individuals to share core messages in a less formal, yet highly effective manner.
- Are energetic and supportive of change and have the ability to articulate the need for a successful integration.When they come across someone who is not moving along in that direction, they can explain why it’s so important that the person change course. They understand the critical importance of buy-in across the board, always leading by example.
- Are empathetic and don’t expect change overnight.They understand that for some it’s more difficult. If it reaches the stage where a person has to be transitioned because he or she can’t adapt to the change, a culture champion will still have empathy and understanding. They know how to make tough decisions about their behavior and are not afraid to communicate to leadership when they see a repeated instance of others not living the values.
Sometimes the best way to seek corporate champions is to let them identify themselves. By doing this, employers allow hidden corporate champions to step up to the plate and take ownership. For example at Hodges-Mace, we ask employees to handle leadership roles surrounding our social and community events. Every summer during our “Summer of Service” charity initiative, we seek a self-appointed team leader to handle outreach with each charity. This identifies these hidden leaders, creates group energy and reinforces the message and intent around our endeavor. Personalizing the process helps drive engagement with the service group within and across departments. Allowing employees to proclaim being a culture champion gives them the authority and engagement they want and allows the employer to see who can be tapped for future leadership opportunities.
Focus on People Development
Employees who don’t believe they can achieve their career goals with a current employer are 12 times more likely to consider leaving. With new employees, the number skyrockets to about 30 times more likely, according to LinkedIn Learning. These statistics shine a light on the importance of helping employees excel in their careers via training and professional development.
Humans naturally want to learn and grow. By supporting employees’ personal and professional growth, managers foster a sense of progression. Managers should help employees align their capabilities with organizational growth. This way, employees feel like they are learning and growing, fostering intrinsic motivation, with employees typically working harder and more efficiently.
It’s important to set the expectation for managers that they need to develop their people. But it’s equally important to put tools and processes in place that can be utilized for professional development. The integration of that expectation into performance management improves the manager’s effectiveness and encourages employee development.
Hodges-Mace has implemented SmartPath, a training and development tool and program that helps employees hone their skills. With managers on board, SmartPath can be integrated into our workforce, pushing employees to their next level of potential.
Commit to Transparent Communications
Effective communication is critical for all businesses and especially critical before, during and after a merger or acquisition. In fact, lack of communication is a key contributor to M&A failures. Large gaps in clarity and communications exist between employees who have experienced a merger or acquisition in the past 12 months and those who haven’t. According to the Quantum Workplace “2018 Engagement Trends” report, these gaps exist around compensation, change management and performance.
Employees at merged organizations need clarity and communication. The Quantum report reveals two themes relating to favorability among merged and non-merged employees: Merged employees don’t have a clear understanding of how the new organizational structure works, and they need more visible signs that the organization values their effort.
Honest communication of roles and expectations is critical in a post-M&A environment. Don’t assume employees understand the new rules. Employees will naturally be anxious about their new work environment at first. Clear and regular communications from the top down will allay uncertainty and help assure that their employer has their best interests at heart.
The best way to ensure clear communications after an M&A is to create very clear speaking points to help all managers relay consistent corporate messages. A well-orchestrated communications strategy puts the workforce at ease and shows the whole organization is on the same journey.
When Hodges-Mace acquired two companies in 2013, it was very important that managers from each organization knew and embraced the company’s new corporate talking points. Clear, transparent and consistent communications helped enable our employees to more easily accept the changes and move forward as a unifi ed company striving toward the same corporate goals.
Success Begins at the Top
The M&A world is alive and well. In 2017, companies announced more than 50,600 transactions with a total value of more than $3.5 trillion.
As addressed here, the success rate of an organization after an M&A is directly related to the workforce’s ability to come together to achieve a shared vision of the newly formed entity. This requires engaged employees who understand and embrace the new corporate culture. This level of commitment begins with a leadership team that communicates these new values and strives to build community and trust.
Suzanne Hough is the chief human resource officer at Hodges-Mace LLC.