Measuring cultures in Mergers

How to make a Merger successful?

 A sign of unity

It is often stated that most mergers and acquisitions fail to meet their overall business target. Due diligences are made and the companies are turned upside down and inside out, firstly to ensure that all that needs to be known is known and secondly that the businesses (to be merged or acquired) will be a complement to, or add value – with a target that 1 plus 1 should at least equal 3.

So what is the problem, why is it that most mergers don’t succeed and meet their targets?

Where do you focus?

According to our experience, the main focus during the merger is to build a clear strategy, draw out a new organisational structure and ensure that the right systems are in place – What we call “the logic agenda”. In other words we tend to focus on the things we can control and the areas where we have the knowledge.

However, it is suggested that the key reason to why most mergers and acquisitions fail is related to company cultures, thus meaning that if we are to succeed with a merger we need to include both management styles and competencies during the due diligence process – A “Culture due diligence”.

Carrying out a “Culture due diligence” will provide us with information regarding what cultures we are dealing with, the core capabilities and the behaviours of the management that we have at hand to run the merger. If we know this we can estimate the true cost, time and investment needed.

If we tend to focus on things we can control and things that we have knowledge about this then leaves us with two questions?

  • Can we control culture?
  • Do we have the knowledge to be able to identify, measure and deal with different cultures?

If we can define the culture we want, we can also measure it, we can of course then get a picture of our current and future state. What are the current states of the companies we are merging with or acquiring? What culture do we want? The same culture as one of the existing companies, or a completely new culture with the behaviours that we are lacking today?

The implementation process

If the cultures are similar there will be no (more than usual) additional challenges when introducing changes. We have a management with the behaviours and styles that will maintain the culture we want, but what if the cultures are very different?

In this case, if the cultures are very different we need to decide on what the future culture state of the merged company should be and the “Culture due diligence” would then include a map of the different cultures together with a business case for the transformation process – The knowing-doing-being process.

We need to understand what the true business impact will be and how to manage the process from the current state to the desired state as efficiently as possible, this will then of course mean more than just managing the logic agenda, this means that we also need to have plan for leading the cultural change (the behavioural agenda) and keeping people motivated during the transition (the emotional agenda).

If we have a cultural gap and consequences:

What will happen if we have a big gap and we don’t do anything about it:

  • People will leave during the process – incurring cost for recruitment and loss of competencies
  • People will be frustrated during the process – loss of work hours – negative focus covering an extended period
  • People will not understand the “new way of working” – old and new working methods will coexist – no value will be added
  • People will not understand the “new way of working” – with the best of intent people will work to keep the old way just because they want things to continue to work

If we know there is a gap we can foresee these obstacles – if we can foresee them we can evaluate them and estimate the total cost for the transaction, for instance:

  • Activities to keep key people motivated
  • Cost for recruiting new people
  • Development for mangers
  • Development for core competencies needed to run the new company
  • Realistic time frame – unrealistic time frames lead to stress and stressed people tend to have a higher resistance to taking on-board new ways of working

The most important part is that we can communicate to people what they can expect from the process and manage those expectations.

Management competencies and style

The definition I like to use when defining organisational culture is “the sum of the behaviours of the most dominant people defines the culture”. So who are the most dominant people?

  • The leaders
  • The informal leaders
  • The heroes – the people that others tend to look up to and are visible on intranet, internal magazines, blogs etc.

Therefore if you can define those behaviours you can define the culture. If you can define your culture you can measure it; if you can measure it you can manage it.

It is also important to introduce the management competencies in to this part and look at the skills and competencies needed to run the merged companies in the way we are aiming for in the business plan. For instance the company might be twice as big as before, how many of the leaders are equipped to handle that (or to grow in to that level)? The new company may need to be more innovative and market oriented than before, what will happen then if the managers in the old companies are just moved in to existing positions in the new company?

So part of the cultural change process will include moving managers not only from a previous experience position to new positions, but also looking at future capabilities (the ability to learn and grow). It will also be just as important to look at the management styles, so that in the new organisation you select people not only with the right competencies and a good track records, but that also have the right management styles from the beginning. For example, a manager with 25 years experience running a hierarchal line organisation successfully will have huge difficulties to run a matrix organisation (even more difficulties if he/she doesn’t get the right level of support to understand the behavioural transformation he/she needs to do).

Running the merger process with the culture you want

Very often companies use external consultancies to help them in the transformation process and they in turn don’t take into consideration the most important part – You need to run the merger process with the style of the culture you want. This means that you need to choose supporters that are supporting you in the ways you need in order to establish the new culture, otherwise you may end up with a clash between the consultancies way of doing things and your desired new culture.

Finally

From our personal experience, helping your managers get some insight in to these areas will then change their way of running the change process and will significantly change the business impact.

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Mastering the Feedback process: Part 2

Part 2: The Feedback session (Approx. 40-50 min)

Begin by showing and explaining very quickly how to read the report. This should not take more than 2-4 minutes. This is to avoid any logical confusion. Even if the report is very simple, people can sometimes misunderstand things! Then check if the person understood it all.

Next: Ask the person to read the report for 10-15 minutes or so, uninterrupted, in solitude. In the meantime, you’re quiet, doing something else. You can even leave the room if you want to (but don’t go too far away).

After 10-15 min: Ask the client for the report, close it and ask: “If you never were to see this report again, what would you remember from it? What in the report made you glad, surprised etc., and, if you were to be rated again on these statements in six months time, are there things in your current report (showing the report) that you then would like to see differently in the ratings or in comments?”

This will help you see if the person is stuck with something (positive OR negative) and you can then tailor your questions to deal with this, from here, you can proceed with your facilitation. If you are new to these types of facilitation sessions it would be helpful to brush up on coaching techniques such as GROW, Appreciative inquiry etc. Basically, this part of the session aims at helping the client see important patterns and to unlock any defense mechanisms. You, as a professional facilitator, should avoid being prescriptive during this part of the session and mainly use open-ended question techniques!

 

DEFENSE MECHANISMS

Defense Mechanisms are what we use to protect us from what may cause (emotional) pain, which feedback some times does! Examples of some common defense mechanisms – in no ranking order – are:

Humor: Joking about it (Trivializes the subject)

Denial: Typical response: “They (the others) are wrong”

Intellectualization: Finding a seemingly logical (often wrong) and intellectual explanation to why the others have rated you in a certain way. i.e. “It must have been because they did not understand the question” etc.

Projection: “They gave me this rating because they are even worse at…” etc.

Blaming: “The reason I behave in such a way is because the organization/my manager does not give me sufficient time/training/support/…” (fill in blanks)

The art of dealing with people’s defense mechanisms is by no means easy in a feedback session. This guide is too short to discuss how to spot any defence mechanisms with the client and how to unlock them but practice – combined with a good theory understanding – makes perfect as the saying goes!

Finishing the feedback session:
In finishing and rounding off the feedback session you may want to tick off a few but important things with your client such as:

• “What are your takeaways from this session? Aha:s, insights and more…”

• “Is there anything you learned about yourself and how other people perceive your behaviors that you want to start/stop/change or develop further?” (Try to pick two)

• (On each of the two behaviors selected): “What are you going to do – concretely – that will make a positive difference and a movement into the direction you want? How will others notice this?”

• “How do you intend to thank other people for their contribution? What will you say to them about your insights about yourself and your personal commitment to develop yourself further?”

• “When will you do this?” Finish the session by asking the client to what extent the session fulfilled the expectations/purpose that you discussed in the very beginning of the session.

After thanking the client, you should allow yourself 30-45 minutes before you take on the next session. Typically no more than 5 feedback sessions per facilitator in one day is recommended in order to keep high quality standards.

GOOD LUCK!

Part 1: Setting the scene

Mastering the Feedback process: Part 1

A HOW-TO GUIDE FOR PROFESSIONALS

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This guide provides some valuable insights on how to conduct a professional feedback session with a client who is about to see his/her 360 degree report for the first time.

The guide walks you through an easy-to-remember process with some key milestones and hints, it also talks about some common defense mechanisms you may encounter as a facilitator during the feedback session.

Finally, this guide supports you in keeping your eye on the overall objective: That the client – receiving feedback – should get some tangible and valuable insights that he/she can transform into positive actions and behaviours.

Although the guide is detailed in some aspects, it is recommended that the professional facilitator use this guide as a handrail and not as a handcuff. Each session is unique – and so is the style of the facilitator!

Part 1: Setting the scene (Approx. 30-45 min + 10 min)

People usually experience mixed feelings before and into a feedback session. Before the actual session is about to begin – with you as the professional facilitator – many people feel a mix of curiosity, awkwardness, excitement or even worry. Therefore, your first task as a facilitator is to bring down any tension as fast as possible to increase the client’s listening ability and overall receptiveness for feedback.

Here are some milestones:

1. Your preparation (app 30-45 minutes pre-work): Make sure you come well prepared to the meeting. This means having read through the client’s report and memorized some key points such as:

a. Exceptionally high or low scores (absolute comparisons)
b. Notable discrepancies in scores from managers vs. colleagues vs. subordinates (relative intra-group comparisons)
c. Notable deviations, positive or negative, in self scoring vs. others scoring (self-image validity)
d. Any comments in the open text section that support your findings under (a-c) above
e. Any patterns that run through the report i.e. are specific behaviors or competences interlinked in
this report in any way?

 

2. Introduction with client (app 5 minutes):

a. Starting from the client’s state of mind: The feedback session is conducted in a quiet room without interruption. No office landscapes, mobile phones ringing or people entering asking questions etc. Before starting the actual session, try to gauge the client’s state of mind to ensure attentiveness and low stress levels. Simply asking: “How are you today” or: “What were your feelings/thoughts before coming to this session today” will give some hints to whether the client’s mind is receptive or occupied with other things. Also, asking: “Tell me a little bit about your raters and why you chose them” is a good way of exploring relationship status before the actual feedback session starts.

b. Purpose: State the purpose of the session i.e. “That you will get insights to what your strengths are and that you will leave with two things for personal development to work on”. You should also ask the client: “What would YOU like to get out of this session?” At this stage in the feedback session process it is important to point out to the client that there is no competition in the numbers, it’s all about personal development!



3. Practical but important data (app 5 minutes): Last thing before you enter into analysis of the report together, communicate some practical data to the client such as:

a. The session is expected to last… (i.e. 50 minutes)

b. “My role in this session is being a coach. I will not tell you what is right or 
wrong, but I will work together with you so that you can see the themes 
coming through in the report and therefore draw your own conclusions ”

c. “I (the facilitator) have no idea who – apart from your manager (who is not 
anonymous of course) – gave you what rating/comments in the report”

d. “I operate under strict confidentiality i.e. what you say to me will not be 
told further to your manager, HR or anyone else. However the aggregated and anonymized results of all participating rated persons will be compiled into a report for…” (fill in blank)

e. Communicate to the person what will happen after your feedback session i.e. “The aggregated information will be used for….”

f. Say to the person that it is “up to you to keep your report as confidential as you want to, but since a number of people have put their best efforts and good intentions into rating you, our recommendation is that you say ‘thanks’ to these people and also communicate something on what value/insights/ideas for action their feedback triggered with you”

Part 2: The Feedback session

What is Performance Management?

Simply put, Performance Management is a way to:

i.) Measure peoples performance

ii.) Discuss performance with people, in a constructive way that is perceived as fair

iii.) Make the link visible between performance and compensation/benefits

iv.) Actively develop individuals and teams in order to realize their full potential

What is a structured approach to Performance Management?

The more a company grows, the more we need a simple, systematic and effective approaches that can handle opinions about people in a comprehensive, easy-to-grasp way and (of course) as objectively as possible. Here multi-rater tools can provide a very effective instrument to measure opinions and to provide a framework for discussion.

The benefits of this approach are evident, measuring opinions about behaviours:

  • Creates consistency across the group, everyone has a clear view of the definition of “performance” and “non-performance”.
  • Gives a solid framework for documenting and giving constructive feedback about improvement opportunities, as well as recognition of achievements.
  • Supports salary and bonus discussions.
  • Focuses on the individual’s contribution to the results (the ”What”) and also focuses on the
    way in which the individual is working to achieve the results, such as; being a
    team player, leadership and more (the ”How”)

In measuring performance-related behaviors consistently across the company the company’s Management Team gets a good overview of:

  • The improvement potential for individuals, as well as the company.
  • Where to launch initiatives that tackle areas that could be detrimental to the company’s performance.
  • Insights that can be used for succession planning.

Keeping it simple:

We believe in keeping things simple and as non-bureaucratic as possible. Our tool FeedbackOnline can be used in a straightforward way to measure crucial performance behaviors, the ”How”. Here you can take a look at our Leadership Questionnaire as an example. Similar tools can be added step-by-step to build a comprehensive Performance and Talent management framework that fits your client’s business.

Why culture is a matter of survival and why it must be measured.

Organizations are tempus-dysfunctional in the sense that their communication to customers, stakeholders and employees is primarily preoccupied with the present or the future, more seldom regarding the past (the exception being the immediate past, most often represented by the Annual report).

So what? Why dwell on the past when we can make a difference here and now? Why should we be looking back when we could use that time to plan for the future?

The answer of course is that humans are pattern-searching creatures, a feature that has helped us evolve, survive and rapidly thrive as a species. When put into a business context: by analyzing our past, making plausible conclusions about the main reasons for organizational successes or failures, we discover patterns of cause and effect that ultimately support our decision making going forward, so we hopefully can avoid the old Karl Marx adage “history repeats itself, first as a tragedy then as a farce”. If we dig into humankind’s remarkable evolution and the successes behind it, we find that there is much more to it than just our ability to discover patterns and learn from them.

I recently finished a fascinating book by Dr Yuval Noah Harari from the university of Oxford, “Sapiens, a Brief History of Humankind” (www.vintage.books.co.uk). Through impressive and extensive research he builds a robust case for several human traits that has propelled us forward in Darwinistic supersonic speed over the past 200,000 years. Dr Harari especially points to an era that started approximately 70,000 years ago, an era that he calls the Cognitive Revolution. In the words of Dr Harari, the Cognitive Revolution is characterized by the emergence of fictive language that gave us “the ability to transmit information about things that do not really exist, such as tribal spirits, nations, limited liability companies and human rights”. The wider consequences of this ability was that it enabled “cooperation between very large numbers of strangers”, he continues: “Once cultures appeared, they never ceased to change and develop, and these unstoppable alterations are what we call “history”.

Think about it for a minute: If we jointly share a strong belief in things that do not really exist physically, we start to act and behave accordingly, even if we really are “large numbers of strangers”. Doesn’t this sound like today? The results of these joint efforts can, as business history tells us, be astonishing.