How to Assess Your New Culture After a Merger or Acquisition

Mar 06, 2018

M&A Culture Fix

One of the most high-profile and difficult mergers in recent U.S. business history was between airline behemoths Continental and United.

The merger created numerous headaches in its attempt to blend two companies with different cultures. Because of these differences, there was an extended period of operation normalization in which the leadership worked to restore the faith of customers who were caught up in the cultural shift.

Consider the following timeline: the merger was approved in 2010, the new company was officially recognized by the FAA in 2011, and four years later, the United was still declining in the Airline Quality Ratings, the rate of on-time arrivals, and customer satisfaction.

What do the most recent Key Performance Indicators (KPIs) indicate? The latest Airline Quality Rating Report ranked United a distant No. 8 in the United States. Additionally, Customer Satisfaction ranked No. 9.

Perhaps the United and Continental merger will take longer than expected to produce positive results tied to KPIs. Maybe there are some things they could have done differently. Lets explore what lessons can be learned from United to ensure your company has a smoother takeoff following a merger or acquisition.

The New Company Must Truly be a New Company

The culture and subculture of any company are the intangibles that make the company unique. When two companies come together to form a single entity, each culture and subculture needs to be assessed to establish a cohesive, new culture.

The central issue is that to truly form a completely new culture, individuals and teams cannot hold on to the way things were done before the merger.

In the Continental and United example, both companies were firmly entrenched in their way of operating. It was not just in the C-Suite. Employees all the way down to ticket agents and baggage handlers had their preferences for how to follow procedures and execute tasks.

Assessing culture in a merged company is like navigating a plane. You need to know where you are before you can determine where you are going. Without a baseline understanding of the culture and subcultures, your new company will be tugged and pulled in numerous different directions, never getting off the ground.

The size of the company -- whether an international brand like United or something on a smaller scale -- does not change the process. Sure, a larger company will have more subcultures to assess and therefore there will be more work to find the gaps and align with the overall culture, but the underlying process is the same.

Step 1 in the Process of Assessing the New Culture

The first step in the process is choosing the best tool to gather information about the culture and subcultures.

You need an objective tool that allows you to assess each individual in the newly formed company. Then, using the information that you gather, you can understand the individual factors that form one culture and the various subcultures.

The most reliable tool available is an assessment based on the science of axiology. Using this type of assessment allows you to gather data to support decisions and recommendations.

As an HR manager, you do not want to rely on "what you thought" or "what you heard" when assessing the culture -- you need data to help remove emotion from the decision-making process.

Without data to support your conclusions, it opens the door for mistrust, which is very difficult for employees to recover from after the upheaval of a merger or acquisition.

To avoid a negative emotional reaction from employees in the new company, wait for the dust to settle before administering the assessment. Perhaps wait 90 days once employees have adjusted to their new seats and emotions have evened out.

Then, introduce the assessment with the message that it will bring team members together by aligning with the new culture, not used to lay off individuals. Be sure to frame it positively and clearly so that there is no room for interpretation or fear.

Four Additional Steps in the Culture Assessment Process

The process of assessing the culture of the new company includes these additional steps.

- Find the gaps to close. The assessment will identify the competencies of each individual in the new company. Using this data, you need to find gaps between the culture and individual competencies.

For example, if a baggage handler competencies aligned with Continentals culture but not in the new United culture, it is important to provide training or coaching to help the employee align with the new culture. Otherwise, the baggage handler will likely underperform or could become disgruntled, affecting the subculture.

- Establish a mindset that everyone is part of one company. Whatever happened before in the previous companies does not matter now.

In the airline example, it does not matter how Continental handled baggage compared to how United handled baggage. To achieve universal buy-in, it is vital that a new process is established and clearly communicated for how the new company will handle baggage.

A recent Bloomberg article on the airline merger captured this similar problem for flight attendants: Everything from baggage handling to aircraft reliability suffered. And even today, some labor issues remain beyond the companys control. The former Continental and United flight attendants ... are sharply divided over whose work rules to adopt.

The goal is not to determine whose rules to adopt. The goal is to establish new rules for all employees in the newly formed company. That is the path to get teams working together toward a common goal.

- Arm the C-Suite with "we" statements. The new executive team needs to be forward-looking in their communication to managers and employees.

At this stage in the merger and acquisition process, employees are still concerned about their job security and still need to be assured of their security. If the executive team talks about how things were done in the previous company, it sends the wrong message.

It is important that you provide executives with "we" statements that touch on cultural issues within the new company. The assessment will help you identify overall gaps for executives to address. The goal of communicating these common themes is to create a clear path to move forward as one collective entity.

- Establish a culture of patience. Wholesale change is not going to happen overnight. It could take 12-18 months to complete the process of forming a completely new culture. Or, in the case of the airliners, it could still be an ongoing process several years later (hopefully not the case).

A culture shift requires clear communication throughout the process, driving toward a common goal to create unity. Your role is important to keep employees on the right track through training to close gaps and ensure that no one will be left behind in the process.

How ZERORISK HR Can Support Your New Culture

Having employees take an assessment is an important piece of the strategy. ZERORISK HR offers the ZERORISK Human Capital Audit to support this process.

The Human Capital Audit is designed to identify the culture, strengths, and gaps within the overall company and subcultures. The means for achieving this level of understanding starts with having each person take the ZERORISK assessment.

Using the assessment results for each employee, you will be able to identify the strengths and weaknesses of each team, identify training and development needs for employees, and discover ideas for how to create more effective teams that align with the new company culture.

You can set up a live demo of the Human Capital Audit so that you can see the program in action. We believe this is a valuable resource for companies to assess their culture to achieve business objectives and reach KPI targets.

ZERORISK helps organizations build great cultures by identifying, developing, and retaining top talent. The ZERORISK Hiring System blends a revolutionary behavioral science with state-of-the-art technology to reduce unwanted turnover and improve employee performance. For more information contact us at (800) 827-5991.

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