Companies are not eternal or static entities and can undergo mergers or acquisitions (M&As). Culture is acknowledged as a crucial factor in the success of the process but may not receive the due emphasis.
As per an Accenture study, 75% of C-suite executives agree that getting the talent and cultural aspects of a merger or acquisition right has increased in importance in light of the Covid-19 crisis.
Yeshasvini Ramaswamy, CEO, Great Place to Work India, says in mergers and acquisitions, a focus on people as well as other business issues is critical. The longer cultural issues are allowed to fester, the more they will infiltrate the organisation, disappoint employees, and increase the risk of employee disengagement or retention.
In an exclusive interaction with People Matters, Ramaswamy talks about how cultural incompatibility of organisations can lead to the failure of M&As, the importance of conducting cultural due diligence finalising a deal, and different culture integration strategies that can best serve the company in the long term.
How can cultural incompatibility of organisations lead to failure of M&As? Would you have some examples of where cultural mismatch played a spoiler?
Although M&A is typically done for financial reasons, once completed, the organisations may encounter instability and chaos if the corporate cultures are vastly different. As a result, it is critical to develop and implement a plan that successfully combines the cultures of both organisations seamlessly, thus resulting in M&A success.
It's never a good idea to impose one culture on another. Working at an organisation with a tight standard authoritarian culture, for example, may feel like a jail to people from open working cultures. They gradually leave to hunt for work elsewhere, resulting in high attrition and a loss of expertise and skills.
On the technological front, tech mismatch is another area where a problem might arise if the workforce cannot adapt to new technologies or must revert to outdated abilities.
Kingfisher acquired the airline Air Deccan, which provided low-cost access to newer, undeveloped parts of India. With Kingfisher's takeover, the business strategy and airline crew were a significant mismatch, and currently, neither Kingfisher nor Air Deccan exists, and people can't fly to such undiscovered tiny areas for a reasonable price.
Why is it important to conduct cultural due diligence before finalising the deal?
In mergers and acquisitions, a focus on people as well as other business issues is critical. The longer cultural issues are allowed to fester, the more they will infiltrate the organisation, disappoint employees, and increase the risk of employee disengagement or retention.
Even if the transaction is purely financial, the objective, outcome, technology, and business model must all be compatible for the transaction to be effective. A mismatch would result in turmoil and, ultimately, failure.
How can culture-centricity help reduce the failure rate in M&As?
During M&A, companies should not only analyse the advantages of one company; they should also consider the disadvantages, as strengths may be cosmetic if (there are) problems with both cultures and how they will be reinforced are not addressed.
During this process, a few areas that require special care include ironing out all cultural differences, addressing gaps in all personnel policies, implementing seamless technology, and so on. As a result, striking the correct balance during a merger or acquisition is crucial since it benefits both organisations.
Can you share a few culture integration strategies that can help?
This is an area where both organisations must improve. It entails completing due diligence and determining what works and what doesn't, as well as implementing the best practices for the people and the company.
This necessitates a massive transformation effort that is both time-consuming and necessary. Negatives that have caused problems in the past and resulted in the financial decline and talent loss are also taken into account when selecting the best people and businesses.
Are organisations adapting their culture to meet the evolving needs of the post-pandemic great recovery?
The pandemic has forced everyone to go back to basics: eat properly, sleep well, and maintain a work-life balance that prioritises health, family, and job, rather than just work.
Yes, businesses are adjusting to the changes.
Many outstanding employers, like Google, TCS, and others, have announced WFH, and many organisations are reacting to changes as they relate to their business and people.
Finding the positive aspects of the abrupt culture shift and taking pride in them can help to sustain these behavioural changes in the long run. To retain the proper personnel and avoid the "Great Resignation," an ongoing economic trend in which people willingly depart, it's vital to adapt to change.
How can organisations create an appropriate/salutary environment amidst this uncertainty and disruption?
This is a challenge since, as a rule of thumb, organisations must attract and retain people while also ensuring that deliverables are made on time, in full, and within budget. At this point, productivity models will have to wait a little longer because the pandemic is still ongoing.
Person productivity, effectiveness, safety, and well-being may all be improved by providing the correct platform for each employee, a wonderful culture in the organisation, and a hybrid work environment that allows them to work both in the office and at home. Integration of culture is crucial to the company's success.
How important is it to invest in company culture in the age of unicorns?
The total number of unicorns has increased dramatically in recent years. Because these companies are addressing issues at the grass-roots level, they can draw a broad user base and effect wide-scale change.
From a different perspective, we must recognise that today's unicorn has attained its status as a result of its abilities. As a result, in today's environment, acquiring organisations must employ inventive and new practices to streamline their acquisition process while also benefiting the skill on a deeper level.