Up to 75% of acquisitions fail to meet their strategic objectives. Often, these transactions unintentionally destroy rather than create the value sought. We know that managing diverse company cultures and initiating inclusive cultural change is a key factor associated with successful acquisitions. However, in managing complex cultural integration challenges, the Chief Diversity Officer (CDO) is often underutilized.
Central aspects of the CDO role are to help an organization draw on a broad mix of talent and foster an inclusive environment to make the most of differences to achieve strategic objectives contributing to the bottom line. Integration of a major acquisition is very much aligned with these purposes as a mix of employees from two different company cultures come together. It becomes even more relevant when an international transaction brings together diverse national cultures.
What does organizational cultural diversity look like? Organizations differ in many ways that can strongly impact on how work gets done. Consider just a few examples:
- Does your organization value careful planning or speed to implementation?
- Do you reward individual stars or teamwork?
- Are decisions made unilaterally at the top or democratically though consensus with everyone?
No company or national culture is objectively right or wrong, but when two companies come together with contradictory perspectives about how to create conditions for success, their cultural differences can clash. Even more, these differences can interfere with performance unless they are thoughtfully and proactively addressed. To tackle these challenges requires having a clear understanding of what you need to achieve together in the future and planning the culture that will enable you to get there together. Several paths are possible, including:
- Requiring acquired employees to fully assimilate by taking on the culture of the acquirer;
- Operating as separate entities that intentionally stick with their different original cultures; and
- Designing a new culture, incorporating some of the best of both original cultures, to chart a new path for future success.
Each of these paths are viable options, but you need to be strategic and deliberate about what will make both the integration and the overall business successful, and what cultural elements you need to enable that success. Once a thoughtful decision has been made, you’ll need leadership from experts in diversity and inclusion, cultural intelligence, and change management to implement it.
Here are a few of the ways I’ve employed diversity and inclusion (D&I) strategies to help integrations succeed:
1) Include D&I analysis early in the due diligence process. Highlight cultural similarities that can be leveraged and differences that can be an asset. Identify differences that may be problematic and offer recommendations to address them. If the cultures are too far apart to bridge, discuss that risk with key decision makers.
2) Facilitate a Cultural Design Lab to proactively and strategically define a cohesive, inclusive culture for the future organization and systemically embed it for ongoing success.
3) Provide practical learning designed to build cultural competence on both sides of the transaction.
4) Equip leaders with a straightforward, practical, step-by-step process to provide surgical, custom engagement and retention solutions addressing the diverse preferences and styles among critical top talent.
5) Provide leaders with easy, practical suggestions for creating a sense of belonging and inclusion among all employees.
What results can you expect?
One successful integration that I supported using D&I solutions like these led to a record number of innovation launches and a revenue increase of 66% in the year following the acquisition. Leaders reported that the integration was “very successful” with “highly motivated” employees who “highly identified” with the new company.
On each of the 14 employee engagement drivers, engagement scores from acquired talent were high, and in eight cases, results were significantly higher than the global high performing company norm, which translated into positive retention and performance outcomes. Of course, embedding D&I into the integration was not solely responsible for these results, but the organization agreed that D&I played a critical role in this successful integration.
More generally, organizations employing D&I to address cultural diversity in integrations can create value by:
1) Increasing the ability to inclusively welcome acquired employees and clearing a path to prosper from the differences they bring;
2) Decreasing undesirable turnover by welcoming top performers into an inclusive culture focused on a positive future;
3) Enhancing productivity and performance by refocusing employees away from clashing differences and toward collaborative opportunities;
4) Strengthening communication, trust, and engagement by replacing cultural distractions with cultural clarity;
5) Creating an inclusive, cohesive, high-performance culture allowing innovation to flourish;
6) Achieving quicker, stronger integration of strengths and best practices across both organizations;
7) Accelerating readiness to move forward to seize current and future opportunities; and
8) Taking advantage of heightened openness to change to strengthen your D&I initiatives and demonstrate D&I as a business enabler.
As companies grow through mergers and acquisitions, they change. Integrations bring new possibilities, new expectations, and new choices, and employees look to leaders to engage them in new ways. In the midst of the complexities inherent in corporate transactions, forward-thinking organizations that engage D&I expertise to manage diverse company cultures and inclusive cultural change can realize great results.