Starting With Culture When Going Ahead With A Re-Org Or Merger

Activision recently completed its acquisition of King Digital, the company behind the highly popular mobile app Candy Crush Saga. $5.9bn was spent on an acquisition that is being deemed as a way of “accelerating Activision’s move into mobile gaming”. On paper this deal makes perfect sense, as both are highly successful and profitable. Complementary products and prowess, good income, what could go wrong?

A lot, is the answer. Acquisitions that seem like a match made in heaven, usually crumble and fail to materialise.  Sometimes the acquired company is allowed to remain ‘independent’ within the new corporate framework, those acquisitions seem to work well most of the time.

With such acquisitions you will tend to see key employees leaving as well as products faltering. Sometimes an acquired company is spun back out, wounded, in the hope that it can continue on its own as it used to, with the acquisition of Nokia by Microsoft a good example.

The key issue is that the decision to takeover or merge companies is often made with the logical brain, the part of the brain that can explain things and in a way that make them sound like a good idea. However, logical thinking forgets the fact that people need to work together every day, whilst sharing information and integrate in order for the acquisition process to effectively work.

Culture Clash

M&A experts highlight culture clashes as the main reason why mergers fail, with culture being something that is formed over time and is based on the shared experiences of everyone at the company. Culture is a collection of subtle factors, it is the habits and patterns of behaviour that become the everyday norm and the way in which a particular company operates.

• Do you wear a shirt and tie, or is it more casual?
• Are you expected to respond to an e-mail straight away?
• Is the company driven by engineering, marketing or sales?

The list continues and differs for every company. The problem with cultures is that they’re very difficult to change because for the most part, people are very objective to change.

Internal Re-Orgs & Mergers

However, the good news is that occasionally, culture integration is taken into consideration during a merger or acquisition between large companies. Although it is rare, it does happen and ‘culture experts’ make a living on advising how to effectively integrate cultures in the workplace.

We Must Do Better

The issue is that the majority of senior managers spend their time thinking about, profit, markets and products and fail to spot that its people who make the company successful. In most companies, the incentives are in alignment with business measures, such as market share for example. Employees are just resources in that pursuit of business metrics. Research shows that those businesses with substantial employee engagement reap the benefits, such as a 20% in profits. Usually, the responsibility of engaging employees will tend to fall on the HR department (Human Resources), which in most cases is underfunded and has little to no influence within the company. A habit which needs to change.

Hard work must go in to identifying potential areas for friction within the merged company. Plans must be made to make the process of integrating cultures as smooth as possible, rather than just expecting people to get along and work together easily. If one culture is given permission to dominate, that needs to be established and made clear from the very outset, with a severance package being prepared, in the event that a change of culture is going to be a problem and certain employees decide to leave.

As long as re-orgs, mergers and acquisitions are being executed without any consideration to cultural integration, then companies with potential will carry on being killed.

With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.