There is so much talk lately about acquisitions and mergers.  Seems like everywhere you turn, someone is buying someone or merging with another.  Big seems to be in.  I'm good with that, but with all the focus on the money end, I bet few are thinking about how bringing two cultures together will affect their bottom line.

Let's start with some statistics:

• 70% of mergers and acquisitions fail to achieve their anticipated synergies
• 50-90% fail to meet financial expectations
• 50% suffer an overall drop-off in productivity for the first 4-8 months
• 'People problems' are cited as the top failure factor in mergers and acquisitions

^{[Some information above is from "Culture Management in Mergers & Acquisitions" by SquarePeg.  You can download the PDF here.]}

There are a variety of reasons why mergers and acquisitions fail (TechCrunch has an interesting list - which includes more than a couple of the 7 Deadly Sins), of course.  But the one that often goes under-recognized is the role of organizational culture.

I suppose in some ways it's not surprising that 'culture' isn't addressed more often or more thoroughly:  Typically, the people driving an M&A are the $5000 pinstriped-suit, Bluetooth-obsessed finance guys (and they do seem to be predominantly male) who are more comfortable with variables they can quantify, like shareholder value, than they are with more qualitative concepts like 'organizational culture'.

Except that it's not actually all that difficult to quantify the cost of a culture fit misfire - it's just a matter of breaking it down into its component parts.  Let's look at some ways to do this.

Loss of top performers:

In my experience, it's the loss of senior A-list employees that can cause the most lasting damage to a merged or acquired organization.  It's not just at the VP-level, either.  Losing senior managers - the ones who've been quietly ensuring that their departments run smoothly and productively, but who are often ignored during a flashy M&A and who are left reeling from a sudden, dramatic change in organizational culture - can leave gaping holes in an organization that take months, and sometimes years, to fill.

But let's quantify the loss.  Assuming we lose 5 senior managers with an average annual salary of $110,000 each, and using a turnover calculator from Drake International, this represents a cost of $5.7 million.  (Sure, Drake's a staffing company and they're a little biased, but even the most conservative estimate here is more than $2 million - and that's just 5 senior managers, not the employees who follow those managers to their new employers.)

Loss of market confidence:

If there's one thing M&A people love, it's Driving Shareholder Value.  But culture clash can mean a drop in shareholder value, as Microsoft's acquisition of Nokia last year has demonstrated.  There are probably other more recent one's, but I particularly like this one.

Loss of productivity:

Mergers and acquisitions can cause productivity losses even in the best-case scenarios.  An unaddressed culture fit problem can make the problem much, much worse - and exponentially more costly.

Let's think about it this way:

• 5000 employees
• Each of them spends 30 minutes a week for 3 months overcoming culture fit challenges (either in increased meetings or decreased work product)
• That's 32,500 hours in lost time
• At a blended cost of $150/hour, that's $4.8 million

It's not difficult to quantify the cost of ignoring the ROI of culture in a merger or acquisition.  The bigger question is:  Why are the M&A drivers leaving so much money on the table?  It isn't hard to manage, you just have to pay attention to it and put people on it that understand both culture and business.

I think we can all agree that a positive organizational culture is good for business:  It makes people more productive, it ensures that top performers want to join the organization, it reduces turnover, and it has an important halo effect on the consumer brand.

And a positive culture is palpable.  We can all think of times when we've walked into an organization and the 'buzz' is unmistakeable.  People seem friendly, there's a hum of activity, and you think to yourself:  "This is a business that's really going places."

It's easy to think that this 'buzz' is organic, a natural outgrowth of an accidentally great group of people or set of economic conditions which favor the product/service the company is selling.  But nothing could be further from the truth.

The best workplace cultures do seem organic, because they seem genuine.  People who are happy in the workplace tend to communicate that happiness to visitors, and it's hard to fake a positive 'vibe'.  However, in an economy where people rarely stay in one job for more than 7 years (and often change jobs every 2-3 years), organizations can't rely on accidentally assembling a good group of people who will maintain a positive culture over the long term.  The culture needs to be bigger than any single person or team in order to survive.

So how do you ensure that your positive culture seems unforced but also survives today's job transiency?  Here are 5 tips:

1. To thine own self be true.  The reason the best cultures seem organic is because they're based on the actual values and personality of the organization.  Trying to impose a free-wheeling entrepreneurial culture on a blue-chip investment firm isn't going to work - and it isn't going to deliver the benefits you want, anyway.
2. Recognize that a 'culture strategy' is just as important as a sales strategy or human capital strategy.  Your sales team won't just 'accidentally' exceed their targets this year unless you establish a plan to get there; your organizational culture needs the same attention.
3. Remember that a great culture can't reside in a single person or team.  Smaller companies and functional teams often think they've got a great dynamic going on - until one or two of the linchpin people leave, and the rest of the team sort of falls apart.  Yes, some people will naturally have more of an effect on your workplace than others, but culture needs to be embedded across the organization in order to survive in the long term.
4. Be clear and specific.  It's not enough to sort of vaguely say, "We stand for, um, good service and ethics..." once a year at the company Christmas party.  You need to articulate core values and attitudes, and what this means for employee behavior, in order to foster hte actions that lead to a positive culture.
5. Great cultures require a sustained effort.  Want to launch your new-and-improved corporate culture at a big all-employee rah-rah event?  Fantastic - but don't assume that a single event, no matter how exciting, will be sufficient.  As employees come and go over time, you need to ensure that culture-building activities, large and small, are going on all the time, from appropriate onboarding for new employees to monthly updates for long-term employees.

Want to learn more about developing a strong workplace culture that not only survives, but thrives, in a transient employee environment?  This whitepaper offers some interesting case studies about workplace, culture and brands that might inspire you.

journaling  (jûr-n-l -ng)

v.

1.a. The act of keeping a personal record of occurrences, experiences, and reflections on a regular basis; keeping a diary.

I recently listened to a talk given by leadership and psychology lecturer and author Tal Ben-Shachar, formerly of Harvard and now with the IDC in Israel.  Dr. Ben-Shachar cited study after study which demonstrated how effective journaling is for our overall well-being.  In fact, scientific evidence suggests that regular journaling can deliver all kinds of benefits, including reducing stress, helping us solve problems more effectively and resolve disagreements with others, not to mention improving our emotional and physical well-being.

So what does this have to do with change?  Quite a bit, as it happens.

At the individual level it's clear.  If you're in the habit of journaling and something drastic happens in the workdplace (the loss of your job, a major reorganization, the sale of the company, etc.), you'll be better equipped to process the events and move through them more productively.

But what about using the concept of journaling organizationally?  How can journaling help an organization?

Well, of course one way to promote organizational journaling is to hand out notebooks as part of the announcement and encourage people to write about how they feel about it as the change progresses.  It's an interesting idea, and if your company was so inclined I'd tell you it probably wouldn't hurt.  However, you'll get mixed results:  Some people will take to journaling and others won't; some will journal in a productive way, while others won't; still others may be concerned that what they write in a 'corporate sponsored' notebook won't stay private, so they'll write only platitudes, not their real feelings.

On the other hand, what if you take the concept of journaling and use it across the company?

According to Dr. Ben-Shachar and others, journaling actually rewires the brain and creates alternative neural pathways which help an individual cope.  It releases tension and adds a sense of coherence, or narrative, helping individuals make sense of their situation.

Organizationally, we can do the same thing.  After a change announcement is made and people being to think about how it will affect them, I suggest bringing people together and using journaling principles to facilitate communication.  First, give them a chance to write their thoughts down on paper.  Use the 15-minute rule (though others studies show that as little as 2 minutes may be effective).  Then encourage discussion where you, as the facilitator, help them make sense of what's happened within the organization.  (An added benefit of gathering similarly-affected people together is that they can then form an informal support group and see they aren't alone in their situation.)

By creating a sort of 'live journaling' opportunity, you've accomplished several things at once:

1. You've acknowledged that the announced change is going to affect individuals
2. You've provided the opportunity for individuals to process that change
3. You've provided a forum to express feelings/reactions/fears
4. You've created an opportunity for the team to 're-gel' in light of the new changes (because significant changes can cause even a productively-working team to fall apart)
5. You've created an opportunity to say goodbye and/or establish closure to the 'old way' and progress forward into the 'new way'

Even better, this kind of exercise can be facilitated by a manager or director - you don't have to wait for HR or senior management to approve or schedule an official activity.

As far as I'm concerned, it's simple:  When we know that journaling can have so many pronounced benefits for individuals, there's no reason not to facilitate journaling at the organizational level.

It's all about balancing internal and external focus

The surveys are in; the results are tallied, and you are thrilled:  Compared to last year, your employee engagement numbers are up.  Way up.  You've done presentations on the feedback data, you've set up employee task forces to keep the momentum going, and you know you must be moving in the right direction because everyone says that employee engagement leads to a terrific bottom line.

And yet...

Somehow, the sales force - whose engagement numbers improved the most - still aren't hitting their (very realistic) numbers.  What the heck is going on?

The short answer is that, as important as employee engagement is, it really doesn't help you sell more product.  It's a measure that focuses on the internal, not the external - and therefore will do little to change your sales numbers.

DENISON CULTURE MODEL

According to Dan Denison, success involves a combination of Internal and External focus.  By doing so much work on your employee engagement inititatives, you've successfully transformed your sales force's internal focus.  That's great - you've got a sales force which believes in the organization and has a good team spirit.  But now you need to concentrate on their external focus, because now they have to get out there and spread the word beyond the organization.  

Now that you've got them engaged with the organization, it's time to focus on leveraging that to drive Adaptability (creating change and focusing on customers) and Mission (understanding the goals, objectives and vision).

Employee engagement may be the first step to increased business success - but when it comes to sales, real success happens when you ensure that the internal and external foci are working together.

When it comes to keeping great employees, compensation is still the most important motivator.

Recently I read a couple of articles on Inc.com by Jeff Haden:  "8 Things Your Employees Need Most" and "4 Rewards That Are More Powerful Than Money".

In them, Jeff talksabout how employees are motivated by things like 'freedom', 'mission' and 'rewards' than they are about straightforward compensation packages (i.e. salary and benefits).  He even says "Employees don't want to work for a paycheck; they want to work with and for people."

It's true that not everyone is motivated by the same things, and everyone likes to feel respected and valued in their workplace.  But the reality is that day-to-day intangibles like being asked for input or being recognized for a job well done are short-term motivators that only go so far.  Over the longer term, as your employees look to achieve things in other areas of their lives - taking vacations, buying homes, having children - money starts to assume more importance.

If people really preferred 'people' over 'paycheck', they'd be doing volunteer work instead of spending time in productivity analysis meetings.

The internet is filled with opinions.  The facts are often held within organizations.

Most large organizations, especially ones with turnover and attrition challenges, conduct 'exit interviews'.  When employees leave, they meet wtih someone from HR and discuss their experiences with the organization and their reasons for leaving.

These exit interviews aren't anonymous, so employees - especially the A-list ones, who know better than to burn their bridges - are circumspect.  When they're asked about why they're leaving, they talk about neutral, inoffensive things like "I was offered a terrific opportunity to grow my skills" or "I've always wanted tow ork in a startup environment" or even "The new job means I don't have to spend as much time communting".

However, when you ask recently-departed employees why they really left, and do it anonymously, they paint a very different picture:  The majority say that they left because they wanted to make more money (or a larger compensation package).  But this information is never made public, because what company wants to admit that 90% of their people leave simply to make more money?

(Now, it's worth noting that the second most common reason that top performers leave a job is that they could no longer stand an overbearing or incompetent manager - but this is a distant second to compensation.)

I definitely agree that the intangibles - consistent feedback, rewards and recognition, employee engagement, asking for input and ideas - all contribute to a positive work environment, and a positive work environment promotes productivity, builds the employment brand, and can compensate for things like an inconvenient office location or a high-stress industry.  But in the long-term, below-average compensation will cost you your top performers.