Successful mergers and acquisitions are a great way to drum up publicity, respect and the potential for huge value increases. But for loyal employees, being merged with another company, often one that they have previously seen as a competitor, can be a difficult experience. These employees are likely to experience initial feelings of denial and anger. Some may not get beyond this stage, preventing the organizations from effectively integrating. Those that do progress through varying stages before they are likely to finally accept and even embrace the merger.
In November 1986, Union Bank of Switzerland, predecessor of today’s UBS acquired Phillips & Drew. At the time of the acquisition, Phillips & Drew, with 60 partners and 593 staff, was the leading dealer of gilts, convertible bonds and other fixed income securities in the U.K. The firm was also a leading asset manager.
UBS had serious issues integrating Phillips & Drew, which it had renamed UBS Phillips & Drew (UBS P&D). The firm lost £15 million when a rush of orders overwhelmed the firm’s settlement system in 1987. Then the bank lost £48 million as a result of Philips & Drew positions in the October 1987 stock market crash. Between April 1987 and February 1988, UBS was required to spend as much as £115 million to shore up Phillips & Drew. The Phillips & Drew unit returned to profitability in 1992 after years of losses. Owing to its performance issues, the Phillips & Drew name was discontinued by 1992 and the business was renamed UBS Limited. However, when hfi began working with UBS in the late 1990s, many employees still referred to themselves as working for Phillips and Drew and had clearly not moved beyond the denial stage.
When a large housing association, Downland Affinity decided to merge with a similar organization Sutton Homes, in advance of any of the usual due diligence, they commissioned hfi to run a culture survey of the two organisations to identify possible points of difference and friction.
Even organizations that look very similar on the surface are likely to have different paradigms which they use to interpret “How the world works?” These need to be explored and mapped. With the help of tools like hfi’s Organizational Culture Questionnaire, executives gain understanding about both organizations’ cultures early in the process, before any tumult unfolds. The culture review gathers objective data on how the employees of each of the merging organizations view their own culture. The data from the Culture Review, is used to design and deliver culture workshops that build a unifying values system whilst resolving areas of conflict. The workshops deliver a framework to translate the culture, vision and strategy of the new business model into operational terms.
The process of cultural integration gives employees a strong perception that they are being consulted, involved and empowered to help shape the new organization. This circumvents the denial process, facilitates cultural synergy and prevents the sabotage which can be a feature of poorly managed integration processes.
Even if combining two organizations makes business sense, integrating cultures is an essential part of a merger. At the end of the day, it is people who do the work. If people do not understand each other and struggle with communicating, work will not be done well.
With advanced planning and knowledge, smooth and swift cultural integration ushers in a strong and successful new organization.
Need support during a merger or acquisition? Contact us today to ensure your new organization survives and succeeds through the transition!