How To Improve Your M&A Cultural Integration for Success

M&A (merger and acquisition) cultural integration is one of the key pillars of success when combining organizations. But M&A practitioners often say cultural fit is the primary reason their deals fail. So, how do you ensure a smooth cultural integration? Companies that manage culture effectively are more likely to meet or exceed their synergy targets. Effective M&A culture integration also ensures people from each company are aligned with their vision, values, and the logistics of uprooting their entire professional set-up. 

Read on for the best practices to align organizational culture throughout the merger and acquisition process. 

What Is M&A Cultural Integration?

M&A cultural integration involves aligning the organizational cultures of companies undergoing mergers or acquisitions. The aim is to align and integrate companies so the cultures work together, ultimately creating a new merged environment that represents the best of both cultures.

Organizational culture is the shared values, beliefs and behaviors that shape how employees behave, interact and work together. Ian Croft, Prosci Director and Engagement Lead in Advisory Services, describes it best in his article about winning trust during cultural change: 

“It is often said that culture is what happens when leaders leave the room. Culture is what you see in the behavior and attitudes of your organization’s people. A culture change first happens in people’s heads, and then it is represented in behaviors that demonstrate the culture.”

Why is culture important in M&A?

There will inevitably be cultural differences when two organizations come together through an M&A. Regional disparities, work flexibility, professional values, and relationship dynamics are some cultural challenges that appear during a merger. 

These differences can cause friction within the organization, impacting the merger’s success—but M&A integration management minimizes these challenges. It considers each company's culture, preventing them from running parallel and creating inefficiencies. 

Not to mention, it considers how people respond to change. The process encourages change leaders to support different cultures as they merge into one, which is crucial for success. 

How To Align Company Cultures and Improve M&A Integration Management 

The best way to align corporate cultures varies depending on your stage within the merger. Here, we outline the best practices before, during and after an M&A to increase the success of cultural alignment. 

Key takeaways

• Before the M&A: Perform a culture assessment – Address cultural challenges head-on by performing a cultural diagnostic in the early planning stages of the M&A. 
• During the M&A: Monitor progress continually – Keep track of your cultural integration efforts to ensure people are adapting and feel comfortable doing so. 
• After the M&A: Review and reflect on integration – Review the successes and failures to identify what went well and what needs to be improved going forward.

Before: Perform a cultural assessment 

Before starting cultural integration, it’s important to eliminate preconceived notions about each company's culture. This ensures you approach the M&A cultural integration without bias, which helps you create an inclusive environment for both parties. 

To do this, you can perform a cultural diagnostic, which assesses the cultural environment of the organizations to understand them better. There are a couple of ways to perform this evaluation:

• Run employee surveys – Generate a fact base about the existing cultures to build a single source of truth. What are their core values? Are there differences that could cause friction? What are their professional relationships like? 
• Understand how work gets done – Get a clear picture of how each company works. What are their management practices and working norms? How do they make decisions? How do they motivate their people? How do they define success?

This information also helps you identify how to bridge the gap between the two cultures, pinpointing what people need to do to fit in. The Prosci Methodology can help with this part of the process.

Using the Prosci Methodology, particularly the "10 Aspects of Change Impact" model, improves assessing cultural differences. This approach looks at how changes influence individuals in various aspects of their work, including their roles, tools, mindset and work setting. Understanding these areas is essential for fully grasping the impact of the change and managing it successfully.

The Prosci Methodology

The Prosci Methodology helps you create clear success criteria for how soon people feel they work for the new entity, not their old employer. For example, how soon they feel at home with the new organization or when they accept the legitimacy of new leadership. 

These are some indicators of the speed of adoption, utilization of the new ways of working, and proficiency in operating in the new environment.

During: Monitor cultural integration progress 

M&A cultural integration is an evolving process. When the merger is underway, keep tabs on progress and ensure things are running smoothly:

• Use the change plan as a guide to monitor progress and adjust the integration strategy as needed.
• Establish a cross-functional integration team from both cultures to closely monitor cultural integration. 
• Address resistance or concerns to support people through the change and ensure they see the value of it.

If you face resistance to change, focus on answering the question: What’s in it for me? (WIIFM).

Making a change is a personal choice, and communications only resonate with the impacted individuals if you address what they care about. To influence their desire to participate and support the change, you must provide a compelling case for why they should support it. 

Answering this question early and often in your communications is a great way to combat reservations or concerns. 

After: Review and reflect on M&A cultural integration

At the end of the M&A integration management process, review the successes and failures of the cultural integration. Reflect on the outcomes of the merger to determine whether it was a successful integration and what to improve going forward.

The third phase of the Prosci 3-Phase Process is a useful framework when reflecting on outcomes. It guides you through reviewing the current state with the ideal state, the sustainability of your efforts, and how to assign accountability. 

Phase 3 – Sustain Outcomes

Throughout this process, transparency is vital to maintain trust within the new culture. If things don’t go to plan, be honest about it to ensure the credibility of leadership. 

Work With Prosci To Manage Cultural Change

M&A cultural integration plays a vital role in combining two companies. It ensures everyone feels comfortable with the new culture, preserving the key elements of their old culture while learning how to navigate an entirely new one.

Managing cultural change is an ever-evolving process. The Prosci Methodology and tools make it easier for you to handle—and grow stronger from change.