HR mergers and acquisitions - Cloud Object Storage...HR mergers and acquisitions Integrating...

HR mergers and acquisitions

Integrating cultures and leveraging diversity

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Key takeaways

Today’s session is designed to provide participants with the following:

► Pragmatic way to look at culture

► Culture assessment tools

► Understanding of key focus areas of culture during Mergers & Acquisitions (M&A)

► Activities to help identify and integrate culture


M&A … and culture


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► Uncertain strategy and priorities

► Unclear organization and understanding of purpose

► Excess focus on difference between company norms

► Reduced confidence in leadership

► Reduced teamwork and group efficiency

► Uncertainty over recognition and salary

► Reduced motivation and likelihood of retention

► Uncertain job security

► Lack of clear roles and responsibilities

► Lack of communication among employees

Culture’s impact on integration success

*In 2014, 85% of failed acquisitions were attributable to the mismanagement of

cultural issues.


Typical negative M&A results

**Source: Industrial Management

Leadership unclear

18%

Poor integration

21%

Wrongfocus16%

Culture’s impact on integration success


Articulate gaps

between current and desired

cultures

Identify

desired

culture

of one

company

Deliver “culture enabler”

recommendations

for next steps needed

to address gaps

and achieve desired culture

Drivebehaviors

with culture enablers =

Assesscurrent

culture

of both

companies

Delivers overall

value and supports integration

goals

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What is culture?


How culture is defined …


ValuesWhat is truly important to an organization

Beliefs

The common understanding of where we are going and how we are going to get there

Operating practices

The way an organization conducts its

day-to-day operations

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Components of culture


Reminders that keep people in touch with their purpose.

These visual cues make sure no one loses sight of the big picture.

They are the physical expressions of culture.

Cues

Repeated behaviors that establish a community.

They tell the story of the culture and reinforce values.

Rituals

Applauds those who bring company values to life and make their company culture great.

Recognition

Actions that are guided by values.

They are the collective set of what people say and do.

Behaviors

Beliefs about what’s most important, and what’s not.

They shape culture and guide behaviors.

Beliefs

Connects daily work to the vision.

It’s the center point around which all other culture initiatives spin.

Purpose

Culture/organization diligence framework


Context

Target

specific

Objective: Understand the

operating environment (external and

internal) of a company that shapes

the way the organization functions

and produces the results we are

hoping to sustain as a buyer.

Macroeconomic

Country/culture

Organizational culture

Team culture

Individual

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Moving from ‘cultural fit’ to ‘cultural add’


► There is a shift from finding “culture fits” to leveraging differences and looking

for the “culture add”.

► Understanding your culture allows you to guide and expand the direction of

your company’s culture.

‘Cultural fit’ ‘Cultural add’

Culture assessment tools


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Homegrown tools


Basic questionnaire Heat map Spider chart

Assessments can range from informal (interviews, focus groups, observations)

to rigorous validated diagnostic tools.

Analysis resulting from diagnostic tools can be used to determine gaps among

two cultures or to identify gaps between current and desired states.

Fee-based tools

► Denison Organizational Culture Survey (DOCS)

► Organizational Culture Inventory® (OCI ®)

► GlobeSmart ®


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Key focus areas during a deal



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HR overview of M&A stages


Pre-sign/announce

• Due diligence: The goal is to understand every aspect of the company, concerns, risks or key talent.

• Legal diligence• Key employee

negotiation• Purchase

agreement negotiation

Sign to close

• Planning for the close: The two HR teams will work together to start planning for integration.

• Determine what will change/remain the same

• Timing of changes

• Communicate changes to employees

Stabilize (days 1-100)

• Close: You are now one company so the goal is to align businesses into one organization.

• New employee training

• Payroll transition• Benefits

alignment

Optimize (days 100+)

• Long-term transition: The goal is to make sure the new company is integrated into the organization for long-term success.

• Goal setting• Employee

surveys

Key steps


Understand the target’s culture

Determine your cultural integration goals► Retain, migrate or hybrid

Confirm transition timeframe and measurement

Develop and implement plan

Follow up and track results

1.

2.

3.

4.

5.

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1: Understand the target’s culturePre-sign to announce

► Interview leadership team (face-to-face), site visit

► Cultural interview guide

► Side-by-side analysis of culture

► Compile a well-rounded view of the culture of the company (with both quantitative and qualitative data):

► Documented policies and procedures

► Organizational charts/job descriptions

► Training and orientation materials

► Employee retention data

► Recruitment standards

► Company demographic data

► Climate survey data

► Tenure data

► Key employee interviews


Organizational culture: the EY model

The culture tool comprises the following 10 pillars.Each of these pillars has questions across various themes covered by that pillar.

Com

munic

atio

n

Form

aliz

atio

n

Sourc

e o

f identity

Achie

vem

ent o

rienta

tion

Socia

lizatio

n

Outc

om

e o

rienta

tion

Team

orie

nta

tion

Ris

k a

nd in

novatio

n

Org

aniz

atio

n fo

cus

Pow

er d

ista

nce

Organization’s focus toward business Organization’s focus toward people

10 pillars of culture tool

Pillars that determine organizational culture


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Outcome orientation

Risk and innovation

Communication

Formalization

Team orientation

Organization culture – business focus

Organization emphasis on long-lasting results. Often decisions are made keeping in mind the long-term implications.

Long termShort termOrganization emphasis is on short-term and quick results. Often decision are taken to meet immediate objectives without factoring long-term implications.

ConservativeInnovativeEmployees are uncomfortable in unfamiliar situations and try to avoid taking risks.

Organization actively supports new initiatives taken by the employees. Employees are free to voice their ideas and opinions.

Open ClosedPolicy-level decisions are shared across organization. Open and genuine communication exists across levels. There is also a high degree of transparency.

Employees get to know more information through unofficial channels. Employees are diplomatic and try to avoid confrontation.

Rigid FlexibleThere is flexibility in rules and procedures at the workplace to suit various work-life situations.

There are standard rules and procedures that govern work activities and outputs (extremely system and process driven).

Team SelfEmployees prefer and working alone. Employees are ambitious and compete for advancement.

Success is more attributable to the team than to an individual’s contribution.


Achievement orientation

Source of identity

Socialization

Organization focus

Power distance

Organization culture – people focus

ResultEmployees are often under pressure to achieve results wherein there is a tendency to get things done at all cost.

ProcessOrganization gives importance to adherence to process and procedure. It’s acceptable to take time to complete task; however it should be done correctly.

ProfessionEmployees associate themselves more with their profession than with the organization.

OrganizationEmployees associate themselves with the organization and have a strong sense of belonging.

Formal

Job

InformalEmployees are not able to connect personally with their colleagues.

Organization encourages informal ways of communication to create a sense of belongingness among employees.

Organization values work and jobs more than individuals.

PersonOrganization Is equally concerned about its employees as it is about work. Work is not done at the cost of the employee’s interest.

HighTop management/senior employees are not approachable.

LowEmployees at all levels can freely discussideas with superiors; positions do not matter while working.


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Comparative culture analysis Pillar analysis: retail and wholesale company A vs. subsidiary A


Retail and wholesale

company A

Subsidiary A

Comparative culture analysis Pillar analysis: large technology firm A vs. start-up

What do you notice

about this picture?

Large tech firm

Start-up


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2: Determine your cultural integration goalsSign to close


Visioning exercise

Educate the integration teams

Culture wall exercise

Culture visioning and alignment workshop

Objectives of the culture visioning and

alignment workshop are to identify:

► What is the combined organizations

aspirational culture?

► Which behaviors need to change to achieve the

intended outcomes and deal rationale?

► Which drivers are most relevant to influencing

the right behaviors?

► What specific actions are required to make

these changes a reality?

Leading practice

Culture wall integration kickoff activity


An activity used by a number of companies is incorporated into the integration

kickoff session with integration leads from both companies.

Form two groups: Acquirer and Target.

Teams stand next to their “culture wall” and

they are asked to do the following:► Pick five words that describe how you

see your company’s culture

► Pick five words that describe how you see

the other company’s culture

► List three behaviors that you observed

that influenced your view of the other

company’s culture

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3: Confirm transition timeframe and measurementSign to close


September 1 October 1 November 1 December 1 January 1 February 1 March 1

FY16/17

Leadership assessment

interviews

Culture

interviews and

survey

Leadership

workshop TBD

Working across cultures -

interviews and workshop design

August 1

Working across cultures -

execs and select

managers

Company A people

processes

Working across

cultures - managers

New employee

orientation

Employee group buddy program

4: Develop and implement planStabilize

Integrating Cultures and Leveraging Diversity

Target group Business needs Program Owner Consulting

partner

Date Participants

Execs

Understand challenges and gain

insights in leading cross-cultural

teams

Working across

cultures

half-day program

JanuaryExecutives and select

managers

Understand the differing cultures

of Company A, Company B and

Company C

Win as one

interviews and

survey

August-

November

Execs, managers and EEs

from Company A, B and C

Managers

Understand the cultural

differences and their impact on

daily management

Working across

culturesFY15/16 All Company B managers

Use Company A processes to

manage teams

Company A

people processes

Business

calendarAll Company B managers

Employees

Successfully onboard to drive

productivityNEO/onboarding October

All employees from

Company B

Understand the differing cultures

of Company A and Company B

Win as one

interviews and

survey

August-

November

Execs, managers and EEs

from Company A, B and C

Company A – buyer Company B – seller #1 Company C – seller #2

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5: Follow-up and track resultsOptimize


1. Cultural ambassadors

2. Employee engagement

surveys

3. Incorporate the long-term

culture activities into the

business plan

4. Encourage leaders to own

culture

Program goals:

► Accelerate the onboarding and transition of the former employees

of Company B

► Demonstrate and act upon the Company A culture

► Possible activities:

► “Make connections”

► Proactively help new employees make connections with

individuals on the Company A team (adopt a handful of people

and shepherd their onboarding process)

► Feed the spirit and the mind

► Initiate and implement periodic “luncheons or get-togethers”

to give/get information

► Spread the word

► Where and when the need arises, cascade key messages

Best Practice

Summary: overview of steps for cultural integration


Build acquisition context

and rationale

Understand degree of operational integration at the

organizational level and determine the extent of cultural integration required to achieve

the anticipated business outcome

Determine the degree of cultural alignment

Create a compelling culture vision

Define future cultureIdentify behavioral

driversDefine cultural change

measuresPlan rollout

Develop communications

approachImplement road map

Key activities summary

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In conclusion


► Change the way you talk about culture

► Leverage different lenses

► Think long-term

► Leaders own the culture

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver helpbuild trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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