Become an Outlier: Integrate Your Culture and Accelerate the ROI of Your Merger


Life Sciences experienced a peak of M&A activity in 2014, particularly in the pharmaceutical industry. In spite of initial optimism, mergers across industries receive failing grades 50 to 80 percent of the time. Many of these mishaps are attributed to a poorly managed cultural integration. When organizations fail to establish a newly defined culture, the promised ROI never materializes. Conversely, with the right leadership practices and governed implementation, all stakeholders benefit.

When leaders effectively meld corporate cultures, the benefits extend to all aspects of their business.

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My best clients understand that cultural attributes vary within corporate entities as well as from one organization to another. As an example, in many leading organizations, R&D exhibits a different culture and modus operandi than the clinicians who differ from Finance. A successfully integrated culture does not require a cookie-cutter approach but displays common cultural elements across the enterprise. Wise leaders allow for some cultural diversity while ensuring the essential values are closely adhered to.

Here are my 10 practices for faster cultural integration.

  • Explain the rationale for the merger and outline the benefits.
  • Create trust through transparency – particularly to bad news.
  • Conduct a cultural audit or inventory.
  • Broadly share the results.
  • Co-locate people whenever possible as soon as possible.
  • Define the new cultural environment and its attributes.
  • Celebrate and honor each culture.
  • Identify the changed behaviors expected within the new culture.
  • Reward and recognize the right behaviors.
  • Hold people accountable.
  1. Explain the rationale for the merger and outline the benefits.

Employees will have important questions that should be answered clearly. Why are you coming together? Was one of the organizations facing financial challenges? Were you competing in the same market?

Other questions will focus on the impact of this new entity: Will you be better positioned to compete through increased size or through bringing together complementary service offerings? Are there financial benefits to be made through economy of scale?

By providing a succinct explanation as to why the merger occurred, its impact, and the foreseeable benefits, employees will feel more empowered to become fully engaged in the process.

  1. Immediately begin to create trust through transparency.

Most mergers are expected to deliver financial benefits. If you anticipate staff reductions, office closures, or reduced products or services, communicate this to employees as soon as you can.

If you do not immediately reveal what reductions may be necessary, it erodes trust in your leadership, which you may never recover.

  1. Conduct a cultural audit or inventory.

Your culture can be difficult to detect when you are immersed within it. Engage an expert in corporate culture to define the cultural attributes of each organization. From this you can construct your go-forward culture, adopting the best qualities from each entity.

  1. Share the results and identify both commonalities and differences.

To further increase transparency and demonstrate leadership, share what you learn with the employees. Be candid about the differences, but also be explicit about the desired culture going forward.

Employees will enjoy learning how they are perceived and also about one another, so sharing both commonalities and differences expedites culture bonding and mutual respect.

  1. Co-locate people whenever possible as soon as possible.

In one of the most successful cultural integrations in which I was involved, we relocated people to different offices within the same geographic region so that, wherever possible, each department or division was comprised of people from both organizations. This has multiple benefits. It quickly thwarted the conversations about “us” and “them” because suddenly “they” have a face and a name. It also served to quickly eliminate the broad-sweeping cultural stereotypes associated with the “other” organization.

When you co-locate staff, your employees will experience the pain of the merger collectively. Hardship begets relationships. Additionally, as you adopt practices from one or the other organization, the re-training is much more quickly completed through this co-mingling.

  1. Define the new cultural environment and its attributes.

There will be cultural “casualties”. There always are. As per the above examples, the executive team needs to select the preferred go-forward culture. Most cultural integrations fail when leaders to do not make choices and do not take a stand by defining what will stay and what will go. You cannot continue to operate with both historical styles. When organizations do this, they fail miserably. These are the organizations that seek out my help because they are inefficient, ineffective, and face issues with regulators.

Ask yourself, what cultural aspects do you want to retain going forward? You may discover that one organization has a culture of compliance to process at the expense of innovation. Conversely, you may learn that in the other organization, staff members are not held accountable to meeting reporting requirements or adhering to process, resulting in additional and unwelcome regulatory scrutiny.

  1. Celebrate and honor each culture.

People mourn the loss of their “heritage,” as it is a source of prideful identity. It is always interesting to identify the meaningful symbols. It can be “pins” presented for service anniversaries; it may be holiday parties or summer picnics. Identify the meaningful cultural attributes, e.g. “sense of family,” “pride in our patient care,” “leaders in innovation,” and the symbols and ceremonies associated with these. Select which traditions will remain and which ones will be jettisoned.

 

  1. Identify the changed behaviors within the new culture.

It is not enough to make sweeping statements such as, “We expect everyone to make safety a primary consideration” or “We treat each other and our customers with respect;” you must describe what that looks like. Express what behaviors are expected and emphasize the importance of demonstrating adherence, no matter how often and how broadly you communicate them.

  1. Reward and recognize the right behaviors.

Identify people who are modeling the right behaviors, those who represent the new culture, particularly when it requires a change for them. Share them as positive examples at townhall meetings, team meetings, in your employee newsletter, etc. Send a simple email or phone them to say thank you.

In the first twelve to eighteen months, this is of particular importance. It demonstrates to fellow employees that modeling behaviors in the new culture are appreciated and rewarded. A bonus: such public recognition is aspirational for other employees.

  1. Hold people accountable.

Identify quickly when behavior is not compliant to the new culture. Explain what is expected and how their actions differ. Ensure employees understand the potential repercussions of their behaviour. If they are in a leadership role, the impact is potentially far-reaching. If people do not adopt the new behaviors, you may have to take disciplinary action, as the implications include regulatory mis-steps, financial losses, low employee morale and retention, quality, and/or safety.

Mergers redefine organizations. When executed well, they can energize every aspect of the business. With effective leadership at the foundation, trust is maintained or rebuilt and cultural integration is achieved. As life sciences mergers continue, heed the importance of synergizing original cultures into a new culture.