Building Corporate Culture after M&A

Marketing and communications professionals work hard on external marketing, branding, and media relations issues during integration, yet internal communication is also vitally important. Cultural issues can be the toughest challenges to deal with during mergers and acquisitions.

Academics define the term in a variety of ways, but corporate culture grows from experiences shared by employees and the often idiosyncratic language they use to efficiently achieve tasks.[1] [2] While new processes and procedures can be instituted on a schedule, attitudes and social norms will not change overnight and cannot be decreed.

To navigate these challenges, communicators should work closely with top executives and human resources departments to plan strategies and tactics for introducing the values and vision and for continually reinforcing them with employees.

Leadership Visibility is Critical

Leaders can begin the process of meaningful change by expressing—and living—the values they want the company to adopt to promote success and growth. The CEOs of all companies involved will have planted the first seeds during the announcement by defining—to the degree possible—the desired end state of the merger.[3] They may reinforce these messages during town-hall meetings, cross-country road shows to workplaces, or “day one” events commemorating the beginning of merged operations. Such directive communication from top leadership is crucial at the onset of the merger process; as cultural integration proceeds, supportive and job-specific communication from mid- and lower-level managers grows in importance.[4]

Recognizing that corporate culture change can be a long and difficult process, communicators and human resources staff should work together to help employees cope with understandable anxiety, stress, and confusion caused by mergers and acquisitions. This anxiety grows out of uncertainty, a topic widely researched by communication, management, and psychology experts. Some compare the emotions employees go through during a merger with the loss of attachment experienced by an abandoned child or the stages of grief following the death of a loved one.[5] Others note that long-term employees in particular identify strongly with their companies, and a merger or acquisition can disrupt their core identities.[6] If not appropriately addressed and mitigated, reactions to uncertainty can lead to apathy, increased absenteeism, and reduced productivity—which potentially harms the bottom line and threatens the success of the combination.

Employees may use a variety of strategies to cope with uncertainty, but they basically want to know what to expect and what is expected of them. While managers may not always know how a merger or acquisition will ultimately affect each employee’s job, they should share as much information as they can to reduce anxiety. Saying “I don’t know” will be respected and appreciated above speculation or false expectations as long as managers continually provide information as it becomes available. And again, daily demonstration of the values and vision of the newly combined organization will help employees broadly understand what is expected of them, even if uncertainty remains regarding specific changes to individual jobs.

The Type of M&A Makes a Difference

As with branding, the complexity and expense of culture-building efforts can depend on the type of merger or acquisition.

In start-up companies, employees may expect and even welcome acquisition if it was envisioned and clearly described as part of the company’s business plan. Some may even benefit financially if they have exercised stock options. Similarly, employees of companies on shaky financial ground may see acquiring companies as white knights. Such was the case for pilots of an airline acquired by a more fiscally fit carrier. Their disappointment came not when the merger was announced but later, when they learned their seniority would not be credited as favorably as they had hoped in the new organization.[7]

Likewise, brand-acquisition mergers may be relatively easy to manage if the new owners don’t impose too many changes on existing operations. Researchers call these “limited integration” or “preservation” acquisition strategies.[8] [9]

By contrast, the merger of two well-established companies may result in culture wars or power struggles. Some experts even say the “merger of equals” concept is a myth. One company is almost always dominant. While true “best of both” integrations are exceedingly rare, they can be the most successful but also the most fraught with risk.

Companies built on multiple mergers can also face tremendous challenges. Employees face almost constant uncertainty and shifting expectations, and they may be highly skeptical of official lines of communication. However, such circumstances give management the opportunity—perhaps even an imperative—to build corporate culture from the ground up.

FrogDog planned one such campaign for a company that was born in a merger and grew by acquiring another nine companies over five years. This left the organization a collection of companies without a cohesive corporate identity. When a new CEO took the helm, among his first priorities was to develop a set of core values that would plant the seeds of a new corporate culture. FrogDog consulted with the company and developed an employee communication plan to introduce the cultural initiative across its entire network. The plan called for introducing the new corporate values through a preintroduction buzz campaign, a formal launch initiative, and frequent and consistent post-launch communications. Materials included a campaign kit for managers, directors, and supervisors and an announcement video featuring the CEO that was distributed to employees via a minidisk and the corporate intranet. The overall strategy was designed to help create a consistent, shared corporate culture where none previously existed.

Sales Staff Challenges

Companies can face even greater integration challenges when the combined organizations were previously competitors. Sales staff in particular may have difficulty coming to the terms with the idea of collaborating with people they once fought against for sales. If decisions about sales territories and compensation structures aren’t viewed as treating sales staff from both companies fairly, the combined organization risks defections by its top performers.[10]

Also, the sales force maintains the closest relationship with customers, who will clamor for information about the merger or acquisition as soon as it is announced.[11] Therefore, the sales team may require extra attention, training, and teambuilding, in addition to fresh collateral with updated branding.

Don’t Go it Alone

Companies rarely have experts on mergers and acquisitions communications in house, and expecting internal staff to “figure it out” as they go is unrealistic, especially when their plates are already full. As early in the M&A process as possible, organizations should consider resourcing experts to help their teams define strategies for integrating corporate cultures and communicating about the change internally.

For a case study on an M&A communications project, click here.

For more information about company culture and branding strategy in mergers and acquisition situations, read FrogDog’s white paper.

[1] Gerald L. Pepper and Gregory S. Larson. “Cultural Identity Tensions in a Post-Acquisition Organization.” Journal of Applied Communication Research. Vol. 34, No. 1, February 2006, pp. 49-71.

[2] Roberto A. Weber and Colin F. Camerer. “Cultural Conflict and Merger Failure: An Experimental Approach.” Management Science. Vol. 29, No. 4, April 2003, pp. 400-410.

[3] Marks and Mirvis, 2001.

[4] Michael W. Kramer, Debbie S. Dougherty, and Tamyra A. Pierce. “Managing Uncertainty During a Corporate Acquisition: A Longitudinal Study of Communications During an Airline Acquisition.” Human Communication Research. Vol. 30, No. 1, January 2004, pp. 71-101.

[5] David M. Schweiger, John M. Ivanevich, and Frank R. Power. “Executive Actions for Managing Human Resources Before and After Acquisition.” Academy of Management EXECUTIVE. Vol. 1, No. 2, 1987, pp. 127-138.

[6] Pepper and Larson, 2006.

[7] Kramer, Dougherty, and Pierce, 2004.

[8] Marks and Mirvis, 2001.

[9] Schmidt, 2002.

[10] Joann S. Lublin. “Theory & Practice: Selling Sales Forces on a Merger—Careful Planning Helps Keep Both Customers and Top Performers.” The Wall Street Journal. November 12, 2007.

[11] Ainspan and Dell, 2000.