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Influencer QA

How to Effectively Merge Company Cultures

Dear David,

My company has recently been acquired. Historically, we have enjoyed a great culture, a profitable business, and high employee satisfaction ratings. I’m concerned that when we integrate into the new company, we’ll lose our “secret sauce”—our unique cultural differentiators that have helped us be successful. Do you have any advice for how to avoid this, or at least how to influence the parent company’s culture for the better?

Sincerely,
In Fear of Losing a Good Thing

Dear In Fear,

An organization’s unique culture can be a powerful driver of success. At the same time, there are often elements of a culture that hold back the organization. This mix of challenges is especially apparent during mergers and acquisitions. The different cultures have different strengths and weaknesses, and you want to emerge with the best of both.

I’m going to use one of our clients, a healthcare organization, as an example. We’ve worked with this organization as they combined several formerly independent hospitals, each with its own culture.

Culture lies below the waterline. We use an iceberg metaphor to illustrate the relationship between the visible parts of an organization and its more hidden cultural elements.

Above the waterline is the tip of the iceberg you can see. In an organization, this includes explicit goals, strategies, structures, processes, and systems. This is the organization’s not-so-secret sauce. These are the parts that are talked about the most. They are planned, tracked, and evaluated. They are on every leaders’ radar screen.

Our healthcare client had a very explicit above-the-waterline goal and strategy. They wanted to become a “destination” health center—a place that would draw patients from several states. This explicit strategy guided their structure (they built a children’s hospital, cancer and heart centers, and a medical school, and purchased several regional community hospitals); it guided their processes (implementing integrated IT systems); it guided their reward systems (creating incentives that encouraged community hospitals to refer patients to their centers of excellence); and it influenced its people policies (switching from using community physicians to using employed physicians).

Below the waterline lies the bulk of the iceberg you can’t see. In an organization, this includes implicit norms, values, hidden assumptions, unwritten rules, and behaviors. This is the organization’s secret sauce, its culture. An organization’s culture often goes unseen, unrecognized, and undiscussed. It’s like the adage, “fish discover water last.”

An organization’s culture is often derived from local regional norms, professional practices, values the founders held, and the like. It’s a source of great strength and vitality, but can also include contradictory and unproductive elements.

Because culture lies below the waterline, it is often ignored or neglected by leaders—especially during times of change. And this is certainly the case during mergers and acquisitions.

Here is the problem: most leaders focus too exclusively on above-the-waterline strategies for change. Yet, the most typical dangers—the obstacles that sink change efforts—lie below the waterline. Change plans run into cultural norms, and as Peter Drucker is credited with saying: “Culture eats strategy for breakfast.”

Our healthcare client also had to deal with many cultural elements. For example, many of the community hospitals they purchased felt as if they’d been “taken over.” Many of these small hospitals had been founded by religious orders (from several different religions), and saw their secret sauce as being a sacred sauce—not something they wanted to lose.

Identify Your Secret Sauce. While culture includes norms, values, hidden assumptions, and unwritten rules, it is expressed through behaviors. Behaviors are the key. The rest—the norms, values, etc.—are the influences that create and maintain the behaviors. When dealing with culture, we begin with behaviors. Specifically, we look for what we call vital behaviors. These are behaviors that are linked to many others. They are nodes in a network of behaviors. When you move a vital behavior, it brings many other behaviors along with it.

We helped our healthcare client identify vital behaviors related to patient safety, quality of care, patient experience, and employee engagement. In this case the senior team identified two:

1. Speak up whenever you have a concern, regardless of your role or position.
2. Hold each other accountable, regardless of role or position.

These vital behaviors were the secret sauce the overall organization needed. Some of the different hospitals and professions within the organization already demonstrated these vital behaviors at a highly reliable level, while others didn’t as much. And the influences—the norms, values, hidden assumptions, and unwritten rules that supported or undercut the vital behaviors—were different for each part of the organization.

Conduct a Six-Source Diagnosis. Identify the influences that are keeping problem behaviors in place. Look for obstacles in each of the Six Sources of Influence™.

For our healthcare client, the data helped senior leaders identify the obstacles that kept people from speaking up and holding each other accountable. But we wanted more involvement in the assessment process. We brought together groups of opinion leaders and formal leaders from across the hospitals and had them identify obstacles. Altogether, more than five hundred formal and informal leaders participated in these workshops. And these workshops weren’t outsourced to consultants or HR. The entire senior team led each workshop—sending a powerful message about their priorities. Below are a few of the obstacles participants identified:

• Some people didn’t want to “hold others accountable.” They saw that as management’s job.
• Some people didn’t know how to speak up without sounding disloyal.
• Some people didn’t want others from “lesser professions” to hold them accountable.
• Some accountability conversations required management support or support from respected peers. This support was spotty in places.
• People thought promotions went to those who “kept their heads down” and “stayed out of trouble.”
• There weren’t many times, places, or opportunities for feedback and accountability conversations.

Build a Six-Source Change Plan. The teams identified five to ten robust strategies in each of the Six Sources of Influence. Below are a few examples of the strategies they identified:

• Personal Motivation: Have staff rotate into areas they support, so they experience the challenges by standing in others’ shoes.
• Personal Ability: Formal and informal training in speaking up and holding others accountable. Create scripts for specific patient situations.
• Social Motivation: Have managers and opinion leaders lead the training to show their support.
• Social Ability: Identify physician champions to support the norms on each unit.
• Structural Motivation: Create small and simple rewards to recognize people for speaking up.
• Structural Ability: Create regular times and places for crucial conversations. Use posters, screensavers, coffee cups and the like to remind people of the new norms.

The organization tracked this initiative at three levels:

1. They tracked how the six-source strategies were being implemented.
2. They tracked the vital behaviors, using a quarterly pulse survey that assessed whether people were speaking up and holding others accountable.
3. They tracked the results—impacts on patient safety, quality of care, patient experience, and employee engagement.

Their results have been stellar. They’ve achieved dramatic reductions in hospital-acquired infections and patient falls; they’ve improved several key measures of quality; they’ve moved into the top ten percent on patient experience scores; they’ve reduced turnover; and they’ve achieved consistently high scores on employee experience.

This has been a lengthy answer because I want to do justice to your question. We create our organization’s culture, but the “we” needs to include senior leaders, managers, supervisors at all levels, and opinion leaders from across the organization. It is truly a team effort. We at VitalSmarts have helped several organizations navigate this journey with great success. At an individual level, I suggest you begin by reading our book Influencer and attending Influencer Training.

David

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David Maxfield

David Maxfield is a New York Times bestselling author, keynote speaker, and leading social scientist for organizational change. For thirty years, David has delivered engaging keynotes at prestigious venues including Stanford and Georgetown Universities. David’s work has been translated into twenty-eight languages, is available in thirty-six countries, and has generated results for three hundred of the Fortune 500.
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5 thoughts on “How to Effectively Merge Company Cultures”

  1. My company seems to have a rarer strain of the problem. After several years of poor performance, we were bought by a multinational corporation. Many of us were anticipating large changes and new opportunities, but instead we’ve been pretty much to our own devices, with no dramatic management housecleaning or new directions. In three years, only a small handful of our employees have even interacted with anyone in other divisions. How can those of us at the ground level motivate upper leadership to accelerate integration?

  2. David, everything you say makes sense for the acquirer. But if you are in the acquired company, the acquirer holds all the cards. I worked for a small (25 employees) manufacturing company in the healthcare field, and we had a culture that absolutely amazed our customers, our distributors, our vendors, and yes, even ourselves. It was the envy of our industry. We doubled our business in 5 years from $5MM to $10MM.
    Within months of being acquired by a huge public held corporation, our culture was destroyed. Most employees were let go (“escorted out the door”, quite literally), distrust quickly spread among the distributors, and although the brand still exists under the corporate umbrella, that is now all it is. The culture we had is gone, and the volume of business has grown far more slowly than when we had it.
    Had they bought us and left us and our culture alone, they’d have put more money in their stockholders’ pockets, which for a public corporation is the goal. But as you say, all they did was look at the iceberg above the water line. Too bad – they missed an opportunity, and hurt a lot of good people in the process.

  3. David, I love the culture model you describe and the processes to meld the cultures through the six source strategies. And…I agree with Kit and Dan above that if you’re the acquired company, such strategies most often are at the whim of the acquirer. And, usually there’s no consideration of cultural integration.
    The primary effort internally in the aftermath of M&A seems to be expense reduction by consolidating, centralizing, or outsourcing support services. Not making the effort to understand, honor, embrace different positive aspects of both (or all) cultures has long lasting negative consequences for all parties, the symptoms of which are usually conflicts between individuals, departments, and the defection of talent. I experienced being acquired and having acquired companies, even merging operations of five companies in a single day. Painful for all parties.
    So I subscribe to your view, David, but would love to hear how the acquired can influence the acquirer in undertaking the six source strategies or even just being seen and valued for their contributions. Thanks!

  4. Excellent post, David (as always)!

    I have a client who’s struggled with this issue for the past couple of years … thankfully coming to resolution now. 🙂

    Your post inspired me to create a visual, along with my own post that posits the iceberg metaphor isn’t just about M&A—every company has to deal with it.

    You’ll find it here: http://bit.ly/1HGJyfo

    Enjoy!

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