In the midst of the upheaval of a merger or acquisition, those who intend to thrive must mine both organizations’ cultures for treasure—and preserve the bounty.
Mergers and acquisitions can be powerful tools for boosting the economic success of companies. But the outcomes of these deals are determined long after managing board members have signed the papers and celebrated their success. It falls to leadership teams and middle management to design and execute the day-to-day details of integration — and to grapple with the associated challenges.
In a merger, a core integration team determines the overarching organizational design and initial steps, but this plan leaves plenty of room for customization of organizational structures, such as the intradepartmental chain of command. The stakeholders responsible for the minutiae of integration — from leadership teams to team leads to intraorganizational peers — must also set the direction for organizational culture.
These stakeholders must contend with profound challenges. In theory, each organization’s business continues to run as normal until day one of the integration, but in reality the execution of daily business is quickly disrupted by paralyzed resources and preoccupied staffers. Amid such insecurity and instability, stakeholders must shape their teams’ future prospects, while some also strive to expand their resources and sphere of influence.
The Incubator Model
Facing these conditions, stakeholders either leave the organization entirely or find themselves playing micropolitical power games. In order to pave the way for a successful post-integration business, they must find ways to engage their peers and encourage them to remain.
In effect, this resilient cohort of stakeholders functions as an incubator. In the process of acting in their own self- interest, these key players create tailored conditions that preserve the power of the merging teams and at the same time have the potential to boost synergy between the two entities.
This incubator functionality has the benefit of guiding key stakeholders on the hunt for treasure in the organizational cultures of both merging companies. It also helps uncover the pros and cons of preserving — or abandoning — existing
systems and processes, both on the team level and at a larger scale.
With so much up in the air, integrations develop a sort of momentum, as management, leadership teams, team leads and other players take advantage of the flux to shape the future organization. In order to respond to this turbulence, leadership teams must give up previously established working routines.
Mining Organizational Cultures for Treasure
A merger presents a profoundly valuable opportunity to hunt out the most valuable elements of two organizations and to benefit from the best of each. The starting point of this treasure hunt must be to identify the practices of teams and departments which made their work smooth and successful. These habits are embedded both in formal structures and informal culture.
Typically, organizations emphasize the value of formal processes, but we would argue that the informal routines that provide a handy way around formal rules are often where an organization’s most valuable treasure can be found. Through shortcuts, makeshift practices and workarounds, workers find ways to increase efficiency and fill in gaps left by inadequacies in the formal structure.
Due to their very nature, the underlife and hidden culture of an organization can only be explored through close observations and conversations with intraorganizational peers. Stakeholders are best served by using unofficial meetings and chats over coffee to figure out the essentials that need to be preserved.
These stakeholders must identify the team members who played key roles in designing the operations and practices of the organizations before the merger. They must ask: How did these workers and their teams work together in daily business? In what ways, both formal and informal, did they make decisions about internal collaboration and the use of resources?
This research into how each organization’s work was previously structured is a key step in any integration. The formal and informal practices that determine an entity’s success are quite complex, so we recommend using a heat map to provide orientation.
Heat Maps Guide the Hunt for an Organization’s Hidden Treasure
A heat map is a tool to explore variations in work processes. The following questions must be answered from within an entity’s internal perspective — what we would term the staffers’ “local rationality.”
- What challenges have been dealt with successfully (e.g., launches, recruitment, cross-functional work)?
- In what way were these successes the result of formal structures (e. g., standard operating procedures, job profile, chains of command)?
- What deviations or informal routines can explain the unit’s focus and course of work (e. g., shortcuts, informal deliberations, alternative sources of information)?
- How much guidance and/or leeway did team members receive, and did this contribute to their success?
- How did individuals’ abilities influence the outcome? Were there key players who shaped discussions and mobilized followers?
Having identified key responsibilities, communication lines and relevant actors, the stakeholders shaping the practices of post-acquisition organizations must choose wisely where to preserve existing practices and where to encourage integration (either as an interim solution or as a long-term goal).
It is crucial to keep in mind that any change in the formal structure will have unintended consequences on informal practices since they are mutually intertwined. Establishing a direct reporting line, for example, can speed the flow of information — but it can also eliminate the hearsay that previously kept many additional players well-informed. A prudent designer of structures could compensate for this change with the addition of a weekly meeting, for example.
An Incubator Provides Conditions for Development
As they determine how to proceed at the organizational level and also at the team level, stakeholders within an incubator-style setting may wish to consider four models of levels of integration and their pros and cons:
This framework reminds us not to think of an acquisition as a one-way street. It is a common mistake for one organization to attempt to fully integrate the other. The homogenization that comes with such an effort can eliminate the very qualities that made entities and teams successful in the first place. On the other hand, if organizations are given too much autonomy, redundant structures can slow processes and drain resources. Steering a team or department by setting strategic goals doesn’t offer managers much control of how things are done, but it does enable the team or department to carry on working the way it did.
Integration vs. Autonomy
Balancing this trade-off prudently is the most challenging leadership task on all levels of an organization undergoing integration. As they grapple with this undertaking, stakeholders must maintain one key strategic goal: to weigh the advantages of streamlining processes against the potential losses of eliminating structural variations. Streamlining requires deeper integration, while supporting a diversity of approaches requires greater autonomy.
As they undertake this monumental task, stakeholders must identify and support the treasures hidden within each organization’s culture. They must take advantage of the incubator model as they identify practices to be preserved and those that should be integrated. By investing in this process, decision-makers can give the integrated organization the best chance possible to maintain the power of both entities while identifying areas of potential synergy.
is a Senior Consultant at Metaplan and a keen adviser on topics from integration to autonomy.
DR. SEBASTIAN BARNUTZ
is a Partner at Metaplan. He designs organizations and organizational hacks with clients.
We thank Arie van’t Riet for the permission to use one of his works for this article: Frog and water lilies,coloured X-ray.
(No animals were harmed. Arie van’t Riet only uses subjects that have died naturally. www.x-rays.nl)