Overcoming the Challenges of Merging

Different Corporate Cultures

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Laura Kellers Queen, EdD

Former VP and CHRO, G&W Laboratories, Inc.

HR Strategy and Innovation Summit, January 21-23, 2016

The Current State of M&A

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M&A activity reached a new high in 2015 – 7,500 deals worth $4.5

trillion USD, volume up 8% since 2014, deal value up 37%, eclipsing

the record set in 2014;

Mega deals (valued at $10 bil+ USD) were up 130% in 2015;

Announcement effects for acquirers has been positive for the first

time ever;

New deals are seen as “cross-selling, creating new customer

opportunities, and transformation”;

“Companies may also be getting better at integration and capturing

deal synergies”.

McKinsey & Co, M&A 2015: New Highs and a new tone, December 2015

50% - 90% of Deals Fail to Achieve

Expectations

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… all too often from a startup’s perspective, the good news is that

entrepreneurs, option-holders and investors cash out, but the bad news

is that the employees find themselves in an oxygen-starved

bureaucracy and the startup’s customers end up confused or even

orphaned. And from the acquiring company’s perspective, it’s all too

common for the business advantages they sought – some combination

of access to new products, access to new markets or geographies,

market share increases, growth faster than purely organic growth,

and/or economies of scale – to simply fail to materialize.

Jim Price, University of Michigan (2013)

Share your Experience

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On a scale of 1 – 10 (poor –to- smashing

success) rate your M&A experience(s).

Share among your table groups, “What

contributed to your experience(s)? +/-

Are there common themes at your table?

Why Deals Have Failed

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Misreading the new Company’s culture;

Communication – not clearly or enough, or the right mechanism;

Sub-optimal relationship building across combining organizations;

Lack of focus on Identification and retention of key talent;

Lack of strategic alignment;

Wrong motivations for the deal;

Valuation or deal structure is off;

Unmanageable growth;

Integration for the sake of integration;

Focus exclusively on synergy targets

M&A capabilities are not strong enough

Importance of Culture

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“Culture is…highly significant for how companies and other organizations function: from strategic change, to everyday leadership and how managers and employees relate to and interact with customers as well as to how knowledge is created, shared, maintained and utilized.” (2007, Mats Alvesson)

Culture

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The underlying values, beliefs, assumptions,

shared meanings, myths, stories, legends,

artifacts and symbolism of groups, teams and

organizations. Efforts aimed at

understanding organizations using traditional

methods of due diligence and asset valuation

don’t approach ‘culture’ deeply, if at all.

Artifact (or artefact): [ahr-tuh-fakt] (noun)

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a man made object that has some kind of cultural significance

Strengths/Capabilities-Based

Approach

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Enhance the breadth of assessment to include strengths,

capabilities, and opportunities for maximizing deal outcomes AND

puts people at the center of the process

The approach:

1. Builds relationships;

2. Improves communication;

3. Unlocks the core strengths, capabilities and opportunities to

leverage for enhanced deal value;

4. Creates opportunity for learning, transparency and trust.

Diagnostic Methods

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• Appreciative Inquiry

• Organization Network Analysis

• Talent Assessment

• Storytelling and Narratives

• Sentiment Analysis

• Employee Engagement Surveys

• Culture Analysis

Appreciative Inquiry

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“Appreciative Inquiry focuses us on the positive aspects of

our lives and leverages them to correct the negative. It’s

the opposite of ‘problem-solving.”

White, T.H. Working in Interesting Times: Employee morale and business success in the information age. Vital

Speeches of the Day, May 15, 1996, Vol XLII, No. 15.

AI Outputs: Strengths and Opportunities

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Cohesiveness: “Everybody here wants the best for all

departments – we are accountable to each other – we

are all in this together and we are transparent with our

communications – dirty laundry and all. We do whatever

we can to keep things running/working.”

Internet Speed: internet speed is slow at the site and

requires that staff members travel to another operating

location, 10 miles from here to participate in webinars in

order to get speeds fast enough to stream video/audio

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Leveraging the Output

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Weekly Communication Briefs: Each week a set of communication briefs was posted/distributed to the leadership team and all of the newly acquired employees addressing items of concern and employee questions.

• I am enrolled in an Employee Stock Purchase Plan (ESPP) with [former Company], what will happen with this program?

• Will we get new uniforms with the [New Company] logo? • Will we still have the ATM machine at our location? • Will [New Company] allow smoking on our campus? • What will happen to my salary/wage after the end of “continuation

period”? • Will we continue to receive recognition (cakes and reward checks) for our

service anniversaries?

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Unit showed a 40% reduction in historical

backorders, and an increase in production capacity of

120% in the first 90-days post-acquisition;

99% employee retention rate in first 90-days post

acquisition;

First product launch under new ownership occurred

within 7 months of closing;

Completed first year-end $2.2mil+ to plan

Operating Unit Performance Bonuses vs.

Retention Bonus Program

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Comprehensive history and values program designed using

participant facilitated learning map technology. Deployed to all

newly acquired team members within the first quarter post-

closing.

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Following this conference… • How might your approach to M&A integration change? • What are you most excited to try?

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Dr. Wayne Dyer

If you change the way you look at things, the things you look at change.