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Jonathan Chocqueel-Mangan

Tyler Mangan

Managing Director

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HR’s critical role in shaping company culture post-M&A

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As soon as a merger or acquisition is announced, the culture of both entities begins to change as people start to think about, and behave towards, their immediate environment in a different way. 

This means that HR directors need to act quickly to help guide these changes and ensure that the transaction fulfils its original aims.
 
All too often, in the early days of an announced merger or acquisition, however, we see HR directors focused on trying to identify who will hold key positions in the new entity.
 
While, of course, this scenario is politically sensitive and of significant interest to shareholders, there are also thousands of people who will have just as significant an effect on the long-term success of the deal. Instead paying attention to the new organisation’s culture from the outset is perhaps one of the best investments you can make.
 
It has been argued that it is not possible to determine an organisation’s culture, that you can only guide its emergence and hope that it will support the new entity’s vision and strategy. There is no point in setting up a task force, which comes up with new values and behaviours if, from the outset, members of the top management team are not considered to be role models, for instance.
 
As one senior HR director in a large consumer goods company put it: “Sitting everyone down in a large conference room and showing them a video set to loud rock music won’t make much of a difference – except to prove to staff that the senior executives don’t get it.”
 
In our experience, gained from supporting a wide range of post-merger integration programmes in media, banking, consumer goods, pharmaceuticals and telecommunications companies, creating a new culture is not about ‘creating a new culture’.
 
The right processes and capabilities
 
It is instead about establishing the right processes and capabilities to lead to a new culture. It starts with forming a senior leadership team that understands this proposition and is prepared to show others what the new organisation is really going to be about.
 
For example, when Virgin Media was created by the merger of NTL, Telewest and Virgin Mobile, the top team sat down and decided what their goals would be over the following three years. They looked beyond the potential synergies, even though that was what shareholders were most focused on, and explored what it would take to build a scalable organisation that provided a world-class customer experience and market-leading products and services. 
 
As the team found its feet, discussions about what it meant to be ‘sales-focused’ rather than ‘customer-focused’ had an impact that made itself felt throughout the business.
 
The main drivers of an organisation’s culture, meanwhile, can be found in its key management processes, which include planning and budgeting, rewards and performance management. We would all accept that budgeting procedures, for example, have a far greater and more sustainable impact on corporate culture than most interventions undertaken by HR.
 
When Nordea was formed from the simultaneous merger of five banks based across the Nordic region, the new chief executive recognised that changing the planning process was an opportunity to inculcate new behaviours and begin to create a new culture. 
 
By involving staff from all areas of the new entity as well as all of the former brands from each country, employees quickly began to see how the newly-integrated organisation would really work. They were also provided with some real evidence to this end and as back up to an extensive and professional communications programme.
 
Of course, deciding who is to fill the senior roles within a newly-formed organisation will inevitably send out signals about what the culture will be like.
 
Go beyond the norm
 
Following the creation of AstraZeneca by bringing together what was a former division of ICI with the Swedish family-controlled Astra Pharmaceuticals, for instance, considerable thought was given to ensuring that senior executive positions were filled by people who were capable of taking on roles that were twice the size and reach of their previous positions in an organisation that was twice as big.
 
But candidates also had to be able to understand and empathise with a diverse range of people from widely differing cultures and backgrounds. Their first key goal then was to envisage what they wanted their shareholder report to say in three years’ time, before working backwards to set annual objectives for themselves and their teams in order get there. 
 
As in the case of Virgin Media, the synergies, while difficult and challenging to achieve, were perceived as non-negotiable.
 
On the basis of all of this, we believe that HR’s role should extend well beyond the norm of filling senior management posts. As soon as the deal is announced, HR should seek to understand and influence changes to management processes such as rewards, governance, planning, performance management and the like in order to ensure that they have a positive effect on culture and the long-term success of the new organisation. 
 
HR must likewise ensure that these processes are based on the new entity’s aspirational values and motivations and that executives are not chosen for technical skills alone, but for leadership skills that will help to promote these new values and behaviours.
 
As a consumer goods client once said: “Most investment in ‘culture’ post-merger or acquisition is no more than a Chinese takeaway: You feel full for an hour and then need a proper meal afterwards to keep going.” 
 
But HR has an opportunity to ensure that the concept of culture is recognised and taken seriously, not as a celebratory afterthought, but as a critical enabler for ensuring that the transaction is successful.
 
 
Jonathan Chocqueel-Mangan is managing director of leadership consultancy, Tyler Mangan.

One Response

  1. Company culture is organic

    This is a great article. I think that although company culture is such an important part of any business it needs to constantly change to meet the demands of the world it operates in. When businesses merge, there needs to be give and take from both sides and communication is key here. Thanks for the interesting points.

    http://www.thelivingleader.com

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Jonathan Chocqueel-Mangan

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