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HR mergers and acquisitions
Integrating cultures and leveraging diversity
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Key takeaways
Today’s session is designed to provide participants with the following:
► Pragmatic way to look at culture
► Culture assessment tools
► Understanding of key focus areas of culture during Mergers & Acquisitions (M&A)
► Activities to help identify and integrate culture
Integrating cultures and leveraging diversity
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M&A … and culture
Integrating cultures and leveraging diversity
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► Uncertain strategy and priorities
► Unclear organization and understanding of purpose
► Excess focus on difference between company norms
► Reduced confidence in leadership
► Reduced teamwork and group efficiency
► Uncertainty over recognition and salary
► Reduced motivation and likelihood of retention
► Uncertain job security
► Lack of clear roles and responsibilities
► Lack of communication among employees
Culture’s impact on integration success
*In 2014, 85% of failed acquisitions were attributable to the mismanagement of
cultural issues.
Integrating cultures and leveraging diversity
Typical negative M&A results
**Source: Industrial Management
Leadership unclear
18%
Poor integration
21%
Wrongfocus16%
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Culture’s impact on integration success
Integrating cultures and leveraging diversity
Articulate gaps
between current and desired
cultures
Identify
desired
culture
of one
company
Deliver “culture enabler”
recommendations
for next steps needed
to address gaps
and achieve desired culture
Drivebehaviors
with culture enablers =
Assesscurrent
culture
of both
companies
Delivers overall
value and supports integration
goals
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What is culture?
Integrating cultures and leveraging diversity
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How culture is defined …
Integrating cultures and leveraging diversity
ValuesWhat is truly important to an organization
Beliefs
The common understanding of where we are going and how we are going to get there
Operating practices
The way an organization conducts its
day-to-day operations
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Components of culture
Integrating cultures and leveraging diversity
Reminders that keep people in touch with their purpose.
These visual cues make sure no one loses sight of the big picture.
They are the physical expressions of culture.
Cues
Repeated behaviors that establish a community.
They tell the story of the culture and reinforce values.
Rituals
Applauds those who bring company values to life and make their company culture great.
Recognition
Actions that are guided by values.
They are the collective set of what people say and do.
Behaviors
Beliefs about what’s most important, and what’s not.
They shape culture and guide behaviors.
Beliefs
Connects daily work to the vision.
It’s the center point around which all other culture initiatives spin.
Purpose
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Culture/organization diligence framework
Integrating cultures and leveraging diversity
Context
Target
specific
Objective: Understand the
operating environment (external and
internal) of a company that shapes
the way the organization functions
and produces the results we are
hoping to sustain as a buyer.
Macroeconomic
Country/culture
Organizational culture
Team culture
Individual
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Moving from ‘cultural fit’ to ‘cultural add’
Integrating cultures and leveraging diversity
► There is a shift from finding “culture fits” to leveraging differences and looking
for the “culture add”.
► Understanding your culture allows you to guide and expand the direction of
your company’s culture.
‘Cultural fit’ ‘Cultural add’
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Culture assessment tools
Integrating cultures and leveraging diversity
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Homegrown tools
Integrating cultures and leveraging diversity
Basic questionnaire Heat map Spider chart
Assessments can range from informal (interviews, focus groups, observations)
to rigorous validated diagnostic tools.
Analysis resulting from diagnostic tools can be used to determine gaps among
two cultures or to identify gaps between current and desired states.
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Fee-based tools
► Denison Organizational Culture Survey (DOCS)
► Organizational Culture Inventory® (OCI ®)
► GlobeSmart ®
Integrating cultures and leveraging diversity
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Key focus areas during a deal
Integrating cultures and leveraging diversity
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HR overview of M&A stages
Integrating cultures and leveraging diversity
Pre-sign/announce
• Due diligence: The goal is to understand every aspect of the company, concerns, risks or key talent.
• Legal diligence• Key employee
negotiation• Purchase
agreement negotiation
Sign to close
• Planning for the close: The two HR teams will work together to start planning for integration.
• Determine what will change/remain the same
• Timing of changes
• Communicate changes to employees
Stabilize (days 1-100)
• Close: You are now one company so the goal is to align businesses into one organization.
• New employee training
• Payroll transition• Benefits
alignment
Optimize (days 100+)
• Long-term transition: The goal is to make sure the new company is integrated into the organization for long-term success.
• Goal setting• Employee
surveys
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Key steps
Integrating cultures and leveraging diversity
Understand the target’s culture
Determine your cultural integration goals► Retain, migrate or hybrid
Confirm transition timeframe and measurement
Develop and implement plan
Follow up and track results
1.
2.
3.
4.
5.
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1: Understand the target’s culturePre-sign to announce
► Interview leadership team (face-to-face), site visit
► Cultural interview guide
► Side-by-side analysis of culture
► Compile a well-rounded view of the culture of the company (with both quantitative and qualitative data):
► Documented policies and procedures
► Organizational charts/job descriptions
► Training and orientation materials
► Employee retention data
► Recruitment standards
► Company demographic data
► Climate survey data
► Tenure data
► Key employee interviews
Integrating cultures and leveraging diversity
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Organizational culture: the EY model
The culture tool comprises the following 10 pillars.Each of these pillars has questions across various themes covered by that pillar.
Com
munic
atio
n
Form
aliz
atio
n
Sourc
e o
f identity
Achie
vem
ent o
rienta
tion
Socia
lizatio
n
Outc
om
e o
rienta
tion
Team
orie
nta
tion
Ris
k a
nd in
novatio
n
Org
aniz
atio
n fo
cus
Pow
er d
ista
nce
Organization’s focus toward business Organization’s focus toward people
10 pillars of culture tool
Pillars that determine organizational culture
Integrating cultures and leveraging diversity
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Outcome orientation
Risk and innovation
Communication
Formalization
Team orientation
Organization culture – business focus
Organization emphasis on long-lasting results. Often decisions are made keeping in mind the long-term implications.
Long termShort termOrganization emphasis is on short-term and quick results. Often decision are taken to meet immediate objectives without factoring long-term implications.
ConservativeInnovativeEmployees are uncomfortable in unfamiliar situations and try to avoid taking risks.
Organization actively supports new initiatives taken by the employees. Employees are free to voice their ideas and opinions.
Open ClosedPolicy-level decisions are shared across organization. Open and genuine communication exists across levels. There is also a high degree of transparency.
Employees get to know more information through unofficial channels. Employees are diplomatic and try to avoid confrontation.
Rigid FlexibleThere is flexibility in rules and procedures at the workplace to suit various work-life situations.
There are standard rules and procedures that govern work activities and outputs (extremely system and process driven).
Team SelfEmployees prefer and working alone. Employees are ambitious and compete for advancement.
Success is more attributable to the team than to an individual’s contribution.
Integrating cultures and leveraging diversity
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Achievement orientation
Source of identity
Socialization
Organization focus
Power distance
Organization culture – people focus
ResultEmployees are often under pressure to achieve results wherein there is a tendency to get things done at all cost.
ProcessOrganization gives importance to adherence to process and procedure. It’s acceptable to take time to complete task; however it should be done correctly.
ProfessionEmployees associate themselves more with their profession than with the organization.
OrganizationEmployees associate themselves with the organization and have a strong sense of belonging.
Formal
Job
InformalEmployees are not able to connect personally with their colleagues.
Organization encourages informal ways of communication to create a sense of belongingness among employees.
Organization values work and jobs more than individuals.
PersonOrganization Is equally concerned about its employees as it is about work. Work is not done at the cost of the employee’s interest.
HighTop management/senior employees are not approachable.
LowEmployees at all levels can freely discussideas with superiors; positions do not matter while working.
Integrating cultures and leveraging diversity
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Comparative culture analysis Pillar analysis: retail and wholesale company A vs. subsidiary A
Integrating cultures and leveraging diversity
Retail and wholesale
company A
Subsidiary A
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Comparative culture analysis Pillar analysis: large technology firm A vs. start-up
What do you notice
about this picture?
Large tech firm
Start-up
Integrating cultures and leveraging diversity
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2: Determine your cultural integration goalsSign to close
Integrating cultures and leveraging diversity
Visioning exercise
Educate the integration teams
Culture wall exercise
Culture visioning and alignment workshop
Objectives of the culture visioning and
alignment workshop are to identify:
► What is the combined organizations
aspirational culture?
► Which behaviors need to change to achieve the
intended outcomes and deal rationale?
► Which drivers are most relevant to influencing
the right behaviors?
► What specific actions are required to make
these changes a reality?
Leading practice
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Culture wall integration kickoff activity
Integrating cultures and leveraging diversity
An activity used by a number of companies is incorporated into the integration
kickoff session with integration leads from both companies.
Form two groups: Acquirer and Target.
Teams stand next to their “culture wall” and
they are asked to do the following:► Pick five words that describe how you
see your company’s culture
► Pick five words that describe how you see
the other company’s culture
► List three behaviors that you observed
that influenced your view of the other
company’s culture
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3: Confirm transition timeframe and measurementSign to close
Integrating cultures and leveraging diversity
September 1 October 1 November 1 December 1 January 1 February 1 March 1
FY16/17
Leadership assessment
interviews
Culture
interviews and
survey
Leadership
workshop TBD
Working across cultures -
interviews and workshop design
August 1
Working across cultures -
execs and select
managers
Company A people
processes
Working across
cultures - managers
New employee
orientation
Employee group buddy program
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4: Develop and implement planStabilize
Integrating Cultures and Leveraging Diversity
Target group Business needs Program Owner Consulting
partner
Date Participants
Execs
Understand challenges and gain
insights in leading cross-cultural
teams
Working across
cultures
half-day program
JanuaryExecutives and select
managers
Understand the differing cultures
of Company A, Company B and
Company C
Win as one
interviews and
survey
August-
November
Execs, managers and EEs
from Company A, B and C
Managers
Understand the cultural
differences and their impact on
daily management
Working across
culturesFY15/16 All Company B managers
Use Company A processes to
manage teams
Company A
people processes
Business
calendarAll Company B managers
Employees
Successfully onboard to drive
productivityNEO/onboarding October
All employees from
Company B
Understand the differing cultures
of Company A and Company B
Win as one
interviews and
survey
August-
November
Execs, managers and EEs
from Company A, B and C
Company A – buyer Company B – seller #1 Company C – seller #2
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5: Follow-up and track resultsOptimize
Integrating cultures and leveraging diversity
1. Cultural ambassadors
2. Employee engagement
surveys
3. Incorporate the long-term
culture activities into the
business plan
4. Encourage leaders to own
culture
Program goals:
► Accelerate the onboarding and transition of the former employees
of Company B
► Demonstrate and act upon the Company A culture
► Possible activities:
► “Make connections”
► Proactively help new employees make connections with
individuals on the Company A team (adopt a handful of people
and shepherd their onboarding process)
► Feed the spirit and the mind
► Initiate and implement periodic “luncheons or get-togethers”
to give/get information
► Spread the word
► Where and when the need arises, cascade key messages
Best Practice
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Summary: overview of steps for cultural integration
Integrating cultures and leveraging diversity
Build acquisition context
and rationale
Understand degree of operational integration at the
organizational level and determine the extent of cultural integration required to achieve
the anticipated business outcome
Determine the degree of cultural alignment
Create a compelling culture vision
Define future cultureIdentify behavioral
driversDefine cultural change
measuresPlan rollout
Develop communications
approachImplement road map
Key activities summary
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In conclusion
Integrating cultures and leveraging diversity
► Change the way you talk about culture
► Leverage different lenses
► Think long-term
► Leaders own the culture
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