Mergers: Impacts of a culture mismatch

CASE STUDY 02

Merger & Acquisitions: Impacts of culture mismatch.

BOARD BRIEF:

Our shareholders are displeased with the results post a merger. Engagement is low. Employee churn is high. Help.

LESSON

Due diligence is critically important to assess the cultural
fit and organisational resilience of teams prior to a merger.

If not prior, it should be one of the first steps upon a merger to identify future risks. While widgets have a recognised value and can be easily valued, the unidentified “people” risks in a business can bring a new merger to its knees within months.

PROBLEM IDENTIFIED
Significant cultural differences, values and behavioural norms. Lack of strategic direction impacting on acquired business/brand.

 

OVERVIEW
A national organisation acquired a financially stricken business with a strong client base, products and services. The acquisition was controversial and highly debated. Significant investment went into planning the merger, however upon the acquisition, strategic gaps arose, and resourcing and leadership support was absent. While financial due diligence was undertaken, no due diligence was undertaken to test the “cultural” fit of the organisations. One was highly transformative, with a well established intimate team with a strong work ethic, where speed to market and critical decision making was critical. The other was a slow behemoth with significant cultural issues in management and leadership, causing significant staff and customer churn, legal action and payouts. The culture of the behemoth was eroding the culture of the acquired, smaller organisation.
Our first priority was to focus on the internal People + Culture audit of both organisations and address the compliance issues with a focus on policies and procedures. Significant awareness around respect@work and psychological safety was conducted with all internal staff and stakeholders. Strategic realignment and leadership workshops were conducted with board and
leadership teams to identify key priorities and draft governance processes for boards. Ongoing team resilience training and psychological safety training and advocacy programs were rolled out with teams and team leaders.

Our performance was measured by – engagement in the survey and workshops. Strategic outcomes, increased team psychological safety, number of compliance resolutions, increase in employee retention.

Work continues to be ongoing with this organisation with a spilling of the board and new management team.

Significant work done with frontline teams and managers who were buffering staff from board and leadership team fall outs. Trust levels in the management team were four times higher than that of trust of the management team and board

WHAT WE IDENTIFIED

  • Strategic direction was at odds within shareholders and stronger more vocal shareholders
  • Significant leadership positions were vacant resulting in over work by management
  • WHS compliance issues resulting in a WHS “improvement notice”
  • Churn rate of over 48% of membership
  • More than 59% churn of employees and a reputation for “paying matters to go away”
  • Pay inequality
  • Lack of trust in the leadership team and vote of no confidence in the board
  • Lack of policies and procedures to meet compliance
  • Lack of branding strategy and identity
  • Low levels of psychological safety – the newly acquired organisation was at dangerously low levels of psychological safety across all indexes – belonging, learning, contributing and challenging. This had a direct correlation to client advocacy scores and recommend scores from employees.

RISKS AVERTED

Risk of prosecution.

with regards to psycho-social hazards

Churn Reduced

14%

reduction

in churn

RESULTING IN An POTENTIAL COST OF 

$1.9 million

0

_

factors
identified

Seven factors that were
previously unidentified, with a potential risk of death or injury under uniform WHS legislation were uncovered. They carry a maximum penalty of;

FOR COMPANIES

$1.5 million

FOR INDIVIDUALS

$300,000

17

churn

forecasted

%

RESULTING IN A POTENTIAL COST OF 

$246,400

Productivity lost.

$1.4

million

per annum

Due to Psychologically unsafe or disengaged team

OUTCOMES

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