Culture evolution during acquisitions, integrations and restructures

It was like a nuclear winter. Those that survived envied those that had departed.

Quote from a senior leader during a major acquisition

Most organisations going through acquisitions, integrations or restructures have very clear business targets and goals to achieve. They often talk about the importance of a unified culture and typically recognise that people will be impacted in terms of redundancies and redeployment. Yet almost every integration we have been part of, or observed, have vastly underestimated the cultural implications of bringing together or restructuring different organisations with differing culture and context.

The result is that often these events can lead to stagnation or even devolution in culture rather than an event which helps the organisation to bring its purpose to life more powerfully and become more adaptive.

This article explores some of the common root causes that lead to diminished returns from transformations. As you read this article, it is important to note that the stage of evolution of the organisation’s culture has an impact on its ability to successfully transform or integrate. As culture evolves, its capacity to adapt with greater agility, partner with other organisations and consider a co-creative approach to mergers and acquisitions increases.

Getting to the root cause

Human beings experience a wide range of reactions and emotions through significant transformation. Ignoring the power or contextual differences that exist, as well as the personal and interpersonal aspects of transformation, has the potential to derail or significantly diminish the benefits of the transformation.

To be able to identify and surface the deeper underlying issues is essential in order to address them. In the context of integration, the following typical root causes can significantly diminish returns from transformation:

Us vs. them mentality

In most acquisitions or mergers one party has a controlling interest. This can lead to a perception (which may have some truth) that those in charge of the change will favour their own people, products and methodologies.

Pre-existing relationships often mean the directors in charge receive “inside stories”, representing only one side of what is going on. As it becomes clearer that these whispers are happening, the people who are being “whispered about” can lose trust in the process and withdraw.

An internal (ego) focus can lead to competition and politics amongst the various factions as they jostle for power and privilege in the new world.

As culture evolves, a greater ecological rather than ego-logical approach is embedded in the organisation, assisting people to be curious rather than afraid of the “other”. As culture evolves, the self-awareness and altruism with which people are expected to behave and make decisions in their daily work, sets the organisation up for better conversations which embrace diversity through mergers, acquisitions and transformations.

Personal security

Many people have not yet learnt to hold security as an internal state and many organisational cultures reinforce this. Therefore, when external factors, such as job security are activated, people may take things personally and default to safety or certainty. They often focus on what is outside of personal control and feel helpless, and overwhelmed, leading to a loss of resilience with impacts on outputs, health and wellbeing.

The limitations of personal capacity to navigate the transformation

As transformations provide significant challenges, it requires a lot of personal resources and capacities to navigate effectively. Unlike a move to a new organisation, where people may feel a greater degree of choice, there can also be a sense of change being imposed, which can bring with it begrudging acceptance, subtle resistance or outright defiance.

This can lead to a lack of energy or will to start again and go through the necessary re-integration to a new way, new teams, and new expectations. A sense of loss for those that have departed can contribute to the difficulty moving forward.

And for some, it may be too much coping with all this while facing into a perceived lack of resources and a sense that energy is being diverted away from what is “obviously important” for people during the integration.

In more adaptive organisations, change is recognised as a constant. The individual, social and structural elements of the organisation are hard-wired to continually transform, and it is recognised that challenges are part and parcel of evolving.

Flawed integration of the different systems, structures and processes

Choices of processes or systems during an integration run the risk of being based on the personal preferences of those in charge rather than what is in the best interest of the new organisation. Yet, choices must be made; failure to properly integrate processes, products and systems can lead to duplication, confusion, conflicting priorities and a reduced effectiveness; ultimately leading to diseconomies of scale.

As organisations become more adaptive, their systems, processes and structures are created with a focus on adaptive capacity, customer and community value and with a future orientation. This provides clear principles for product and systems rationalisation and makes system integration and adaption far easier.

A perceived betrayal of trust

The well-intended statements of the acquirer about the importance of genuine integration of all parties often don’t get borne out in practice. This can be for all the reasons above, and it can be because the communication has tried to put a ‘positive spin’ to ensure people stay engaged and committed. When people are experiencing severe levels of anxiety about the impact on their personal circumstances, they can also become extremely sensitised to any departure from what they have been told. Trust can be broken very easily at these times.

As responsibility is built and expanded as a key capability, people take greater responsibility not only for speaking up but being self-aware about the impact of their communication and the way they interpret messages.

A sense of cynicism about the purpose and motives of the integration

We have heard acquirers use language such as “we have successfully transferred the assets over”. In one such organisation, the business was able to ‘transfer the assets’ but left behind the hearts and minds of the acquired organisation. The consequence was a mass exodus of highly capable people and a destruction in the value of the cultural capital that was essentially paid for as part of the acquisition.

During mergers, acquisitions and transformations it becomes even more important to focus on the purpose and essence of the organisation and how this transformation can better bring the purpose to life for the benefit of customers and community. We wonder how many transformations might be different if this discussion was more central to the process.

Arrogance or superiority of the acquirer

When the acquirer (or the acquired) perceives themselves, rightly or wrongly as more advanced or better, treasures of the other organisation may become lost. Thus, as an organisation evolves it needs to be vigilant not to drink its own cool-aid. Regardless of what stage of evolution the organisation is at, there are likely to be very positive aspects of both organisations that can be leveraged for the good of the whole.

To identify the root causes of challenges in transformation and integration is an important first step to enable the organisation to progress. Our next article focuses on ways to harness the energies underneath these roots to enable cultural evolution through mergers, acquisition, transformation and integration.

If you’re a change leader or culture practitioner who would like to become more adaptive and courageous in guiding cultural evolution, consider joining our next Practitioner Accreditation program. This is a 12-month journey starting in October 2018.