Is Your Merger Giving “Brady Bunch” Vibes? (Pt. 2)

In the first part of this article series, we looked at the first three challenges businesses face when merging two cultures. Now let’s look at the final four.

Challenge 4: FUD

For the employees in the acquired firm, the first few days of integration are often filled with fear, uncertainty, and doubt (known as FUD). Lots of questions emerge: Why did this happen? Who oversees what now? What’s in this for me? What is my new place in the company culture? What does my career path look like now? 

What makes these deals particularly risky is that integration can be equally uncertain for the acquiring company. They often have very little access to most of the employees until the deal is done, so it can be difficult to assess what kind of culture they will be integrating. 

“An acquired firm is like a box of chocolates,” says Peyton Bowman, M&A Director at Sax, echoing Forrest Gump. “Depending on the level of access to the employees and other details of the company before closing, you don’t know what you’ll get until you buy—then the fun begins.”

Challenge 5: Who Moved My Cheese?

One of the most important parts of the employment relationship is compensation. But not every company compensates people the same way. One company might have lower salaries but higher benefits. Another company offers higher base salaries but smaller commissions. And the list goes on.

“In our experience, aligning the compensation models is a key factor in the success of integration,” says Larry Hartmann, CEO of ZRG Partners. “At some point during the merger process, the different compensation models must come together. And when that happens, those who were comfortable (even thriving) under the old system may have a big adjustment to make.” 

The acquiring company can sometimes be seen as the “bad guy” for taking away benefits, even if there is greater benefit in the end. But if the new employees can’t adapt to the new system, they can feel alienated and disengage from the process.

Challenge 6: Systems Integration

When the integration begins, there are lots of procedural and tactical challenges right away. While the marketing message is often that “nothing is going to change in the short term”, managers can be scrambling to merge databases, learn new software, and establish new workflows. This all translates into a lack of productivity.

Leaders often underestimate how long it will take to get everyone on board with the new way of doing things. You need to expect that employees will not get 8 hours of work done in 8 hours. It might take a year or more to get back to previous levels of productivity. This lack of productivity can take a toll on morale, especially for leaders and managers who weren’t expecting it. 

It may not even be obvious whose systems are superior post-merger. For one of our clients, it wasn’t clear whose systems were being integrated into whose. The redundancies and lack of clarity lead to frustration and conflict. Instead of providing leadership and direction, the leadership let the teams work it out themselves, making the merger even more painful.

Challenge 7: Spreading Like a Cancer

The final problem is the result of the other problems going unsolved. When leadership seems dysfunctional, agency is low, fear rises, and tactical challenges increase the stress level. Employees may start spreading negativity throughout the organization.

Along the way, someone might decide that they hate the new deal, but instead of leaving, they stay and spread their negativity to the team. Next thing you know, people are passively resisting, causing conflict, and openly fighting the leadership.

The Cost of Failure

If the merger was about bringing on talent, and you lose that, you lose what made the deal so attractive in the first place. The smart move is to put together an integration plan well before closing that anticipates these issues and provides strategies for solving them when they occur.

What’s Your Merger Story?

A merger can be messy, even when it succeeds. And there are lots of ways it can fail, leading to major expense and loss of reputation. But it doesn’t have to. Next time you are crafting a deal that looks good on paper, anticipate the human side of the deal and be equipped to build a stronger culture on the other side.

---

Need some help thinking through M&A as a growth strategy? Or perhaps your company needs someone to review your integration plan and see how it can be stronger. Or maybe you need your own Alice, someone with outside perspective and the skills to keep everyone together. RKE Partners can be your partner for a successful integration strategy. Schedule a consultation to learn how.