Winning the business culture wars - Business Works
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Winning the business culture wars

Jim Hayward, Senior Partner, Baringa Partners Regardless of how hard a company works at developing a distinctive and valuable corporate culture, times of change will inevitably present a challenge. Expansion of any sort places stress on company values and the business world can all too easily place company culture at the bottom of the agenda when focussing on the short-term goals.

This is never truer than when expansion comes from a merger, or an acquisition. Even when the culture is seen as a key asset brought by one or both partners to the agreement, it is often a low priority when planning for the future.

Over the past thirty years, both the financial services sector and energy industry have borne witness to this kind of thinking throughout a seemingly endless dance of mergers, de-mergers, re-mergers and divestments. System integration and functional synergies are endlessly discussed, but the way in which people will actually work together has merited limited conversation. As a result, the expected benefits of the corporate marriage have taken much longer to materialise than initially expected. In the worst-case scenarios, corporate divorce has been the only answer.

This extreme dénouement is, of course, rare. There have been successful mergers, although they tend not to make the headlines. But as business and transformation consultants to major players in both industries, Baringa has observed first-hand the role that culture plays in the ongoing success of the new organisation. Having been through a merger ourselves, we now have even more personal experience of how – and how not – to merge two cultures.

The Baringa case study

The fact that many businesses underestimate the value of culture in their organisation is often an underlying problem when mergers begin to take shape and even contributes to the reason some fail. In essence, developing the right culture is a statement about how your people can expect to be treated and motivated and how they are expected to behave and contribute in response.

At Baringa we have put a great deal of effort into creating a collaborative, supportive, challenging, but respectful culture that survives the fragmentary effect of having the majority of our people working on client sites for most of the week. Our partners have always felt that one of the most potentially damaging aspects of professional services and consultancy work is that the relentless focus on client needs causes the company itself to lose definition and eventually value. People can become focused solely on their own needs and what is required to meet their client’s goals, to the point where sharing information, best practice, advice and support breaks down.

Choosing to abandon the typical consultancy model brings obvious benefits: attracting, keeping and motivating people to achieve the best results improves our recruitment and ability to retain the best talent in our business. It enables us to deliver on our objectives and has led to significant, but sustainable growth.

Consequently, we have seen reduced staff turnover and have a higher number of recruitment referrals than the industry average. These are benefits that businesses cannot ignore. They allow us to attract and retain the best people in the industry, which sees us secure interesting, industry-leading work, which in turn supports our company culture which benefits clients: a virtual circle of rewards and success. As a company we have been recognised as a great place to work and been awarded the accolade of Best Consultancy in our industry and we have no doubt at all that the two are related.

Integrating cultures

Everyone within our organisation has understood and contributed to our strong culture and it became a key element in our own merger discussions with Redpoint Energy. There were powerful business reasons for the two companies to join forces, and we didn’t want all that potential to be scuppered by culture wars and misunderstandings.

A merger is often a period of crisis for a corporate culture because it is a period of uncertainty for the people involved. Different management teams may bring different management styles, expectations may change and ordinarily job losses are a real possibility. Since FUD – fear, uncertainty and doubt – is the antithesis of what our company stands for and what our people rightly expect, we needed to make sure it didn’t infect any part of the business throughout the process.

We also had to recognise that great people had chosen to work for Redpoint and were motivated because of their culture, just as our culture was a key factor for our staff. If we forced one on the other, the merger would immediately start to destroy rather than create the inherent value in both companies. What we wanted to produce was a brand new culture that incorporated the best bits from both and came up with a new vision that was, by definition, even better.

We can’t claim to have got it right one hundred per cent of the time, but the following advice is based on what we have learnt both as third-party consultants and first-hand participants in corporate mergers.

Understand your culture

Any management consultant will tell you that you cannot manage what you cannot measure. The strongest cultures are those that have been defined, written down, explained and shared. But every company has a certain way of doing things and a series of shared attitudes and expectations. For the merger to proceed as smoothly as possible, it is worth reviewing these to gain some insight into how your company delivers value. Then you’ll be in a better position to negotiate which elements you wish to keep and which you are prepared to lose.

Understand why you are merging

If the merger is solely about buying more market share or client relationships and you can dispense with the people from one of the companies, then cultural integration is unlikely to be top of the list. If on the other hand you’re partnering with a company because there are obvious synergies and opportunities to grow as an entity that is bigger than the sum of its parts then getting culture right is a critical issue – particularly where you expect to derive value from the people on each side.

The trickiest of all is when the merger is about creating efficiencies. Whether delivered through redundancies or attrition, everyone involved will understand that the result will be reduced head count, which by its very definition does nothing to create a cohesive culture. The new company may eventually emerge much stronger, with higher performing individuals and a fully integrated culture built around their goals. In the meantime, there will be a dip in cultural cohesion and communication will be a priority.

Do due diligence

Companies that fail to do proper due diligence on IT systems, balance sheets and the book value of the other party’s operations are rightly vilified if the proposed merger fails to realise its promised benefits. Cultural due diligence is much rarer, but it is equally important. Two cultures that are diametrically opposed are simply not going to merge well. The accountants may have identified value in the proposed deal, but if the efforts required to overcome opposing cultures outweigh that value then it is simply not good business for the companies or their shareholders. Examples can be seen in the financial sector, which has experienced a number of incidents where in some cases culture conflicts have outlived the more prosaic issues caused by system or customer integration.

Merger or takeover

For the smaller partner, it doesn’t take much for a merger to feel like an acquisition and it is easy to lose sight of its individuality as it gets absorbed into the larger company. So it is important to remember that the cultural values each partner brings to the table are not related to the size of the partner, but the usefulness of the ideas. If one company is three times bigger than the other, it does not follow that its cultural input should be three times greater. This is an opportunity to pick and choose the best and most successful ideas from a much wider pool: the source of those values is not that important.

Carry on communicating

Communication before the merger is essential and this should take place at each level of the organisations from directors to the most junior members of staff and explain what effect the merger will have on them. Take time to prepare people. Articulate the benefits. Explain what it will mean to them directly. However, remember that communication also needs to continue once the deal is done. Our own experience is that it is easy to fall into the trap of preparing everyone up front and then getting on with it. That created a potential problem because of the different ways in which the two companies work: Redpoint’s more analytical work often tends to be conducted at our offices. In contrast, the work of the 'legacy' Baringa business tends to be more client-site based, meaning time these staff spend at our offices to be less visibly focused on client deliverables. The risk we faced was a perception that the work done by each is very different; while the reality is more about where they do it. That kind of perception can rapidly escalate, so it is important that all elements of the merger are reviewed at regular intervals as people come to terms with a new working environment.

Take your time

Merging cultures doesn’t happen overnight. It’s more of a natural evolution. You’re going to meet new people, get comfortable with them, learn to trust their judgement and their experience, understand what they do and why. A culture that values openness, sharing ideas and ownership of projects is likely to find this easier than one where a more siloed or deeply hierarchical mentality exists.

In the meantime there are immediate changes that can be made. As part of our merger with Redpoint we moved into new offices so everyone had the same sense of ownership of our shared space. Pair people up who do equivalent or similar jobs to enable understanding of the cultural changes. Ensure each team has pre-merger and post-merger staff to prevent length of service turning into a badge of honour and a barrier to integration. The aim is to get to the point where the joins no longer show. When you view your colleagues as part of the same team, then clients will too.

Perhaps the most important point to remember is that corporate culture is dynamic. It has to evolve as the company evolves: as new people join and key figures pursue new opportunities, as working practices change and new services or products are demanded. If it is to remain valuable, the corporate culture has to stay relevant and meaningful to the day-to-day experiences of the company, its people and the way they work. If your culture is so set in stone that it cannot adapt, then any form of change – be it a merger, acquisition, or setting up in a different country – is going to create huge problems.

If you have the necessary flexibility then you will retain the benefits that a strong, inclusive culture gives you. And a major event becomes just one more opportunity to learn and deliver even greater value to clients and customers.

For more information about Baringa, please visit:

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