The integration of corporate culture is essential to a successful merger or acquisition; however, more than half of companies (58 percent) say they don’t have a specific approach to assess and integrate culture. Those companies without a specific approach for culture report a higher-than-normal loss of critical employees during the transaction.
In failed mergers, it’s often not just two corporate cultures that are at odds. Many mergers are global in nature, bringing in differences in national and ethnic culture. The Daimler/Chrysler and Alcatel/Lucent mergers are just two examples that were mired in a conflict of country cultures. Inherent differences had an impact on how decisions were made, how work was organized and how problems were solved. These differences were never resolved and, as a result, performance suffered, key talent resigned, and productivity diminished.
Ensuring that diversity and inclusion are kept in mind during a merger or acquisition can help address cross-cultural integration issues. Senior diversity practitioners are charged with being culturally competent and understanding the internal company culture as well as the culture of the geographic region(s) in which the company operates. As such, these diversity and inclusion team members can alert senior leadership to potential conflicts during and after the merger or acquisition.
“A diversity professional who is a corporate officer of a company can be privy at the appropriate time to the goals and objectives of a merger or acquisition, along with the senior executive of HR,” writes Philip Berry, president of Philip Berry Associates LLC, a New York City-based business consultancy. “His or her early involvement can help plan for the undertaking, along with the inclusion of finance and legal leaders. At any point along the way, it is fruitful to involve the diversity officer so he or she can address the delicate issues of cross-cultural integration.”
Winston Strategic Partners, LLC, a Norwalk, Conn.–based communications consulting firm, recommends considering the following to integrate diversity during a merger or acquisition:
• Identify the similarities between the merged organizations
• Be explicit when identifying the differences between the merged organizations in terms of the company’s business objectives
• Determine which will better serve these objectives
• Be authentic and forth-right in communicating internally the rationale to promote/eliminate certain business practices
• Encourage feedback as changes are implemented
• Leverage members of the organizations who can be the “eyes” and “ears” to represent all segments of the talent pool so every “voice” is heard
• Be flexible enough to course correct, if necessary
In addition to the diversity and inclusion officer, a company’s employee resource groups (ERGs) can play an important role in the success of a merger. These groups can help leaders of the post-merger company understand the culture of the legacy organizations and their employees. ERGs can also serve as a resource to educate employees of the post-merger organization about the new corporate culture. When employees have an understanding of the landscape going forward, workforce attrition in the newly formed company can be greatly reduced.
The following are examples of how companies have leveraged employee resource groups during and following mergers and acquisitions.
Company growth through acquisitions is a business imperative for Johnson & Johnson. The New Jersey-based pharmaceutical company relies on its employee resource groups to assist with the cultural assimilation associated with integrating a foreign company into a U.S. organization. The ERGs have helped the acquired companies to begin to contribute to revenue and growth almost immediately.
“In order to reap the greatest rewards, J&J needs to figure out the best way to map itself into [the acquired] organization and work around its system without destroying the magic of the acquired company,” says Arisa Barista Cunningham, vice president, global diversity, for J&J’s Medical Devices and Diagnostics Group.
During the acquisition of an Israeli company, Johnson & Johnson’s Association of Middle Eastern and North African Heritage were consulted to obtain insights into doing business in Israel. Other employee resource groups, such as the Asian Society for Innovation and Achievement and the South Asian Professional Network and Association, have helped make connections with local governments and businesses and prepare executives for international assignments. Having insight into local cultures can reduce the potential of conflicts that can cause a merger’s failure.
Before the 2007 merger of The Bank of New York and Mellon Financial Corporation, each company had its own diversity and inclusion program supported by employee resource groups. Following the merger, these programs were brought together under the same global and regional governance structures.
The newly formed BNY Mellon supports its focus on diversity and inclusion through the following:
• A Global Diversity and Inclusion Council, chaired by the chairman and CEO
• Regional Diversity and Inclusion Councils in EMEA and Asia Pacific
• Four employee resource groups focusing on women (Women’s Initiatives
Network), multicultural employees (IMPACT), employees with disabilities
(HEART), and lesbian, gay, bisexual and transgender employees (PRISM)
• A Business Resource Group for Returning Military
• An Office of Diversity and Inclusion steered by a new global head of diversity and inclusion
During mergers and acquisitions, State Street Corporation, a financial services holding company uses its employee resource groups as a bridge into the company for employees in the acquired organizations and relies on these groups to assist the human resources team with new employee on-boarding. “The ERGs basically act as a welcoming committee for new employees,” says Mike Scannell, State Street’s senior vice president and head of global inclusion, about the role of the company’s ERGs during mergers and acquisitions. The company uses questions on employee
engagement surveys to assess the effectiveness of its ERG efforts during these transition periods.
Prior to the 2012 merger of Exelon and Constellation, each company had its own affinity groups. Exelon referred to them as employee resource groups, while Constellation called them business resource groups. Despite having different labels, both companies’ groups were focused on fostering a more inclusive environment, serving the community, providing professional and personal development and taking part in recruiting events.
Exelon, the post-merger company, offers eight employee resource groups in cities including Baltimore, Chicago, Houston and Philadelphia. These ERGs represent the integration of the legacy companies’ employee groups and support Exelon’s diversity and inclusion strategy of:
• Raising diversity awareness by strengthening employee connections
• Cultivating an inclusive work environment
• Representing the diversity of Exelon’s marketplace
The 2009 merger of Merck and Schering-Plough made Merck the second largest pharmaceutical company in the world. During this transition, the company leveraged its nine employee resource groups—the Veterans’ Leaders Network, the Differently Abled, the Women’s Network, the Interfaith Network and others groups focused on Blacks, Hispanics, Indigenous people, Asians, and the LGBT community—to deliver diversity
awareness activities to employees of the newly merged firm.
Research has shown that the inability to integrate cultures—both corporate and country—is the cause of most failed mergers. Understanding the internal and geographic cultures of pre-merger companies and then determining and communicating the corporate culture of the post-merger entity can significantly improve the chances of success. Culturally competent diversity and inclusion professionals can serve as an asset in gaining a much-needed cultural understanding during this period of transition.
In addition, an employee resources group can be a valuable tool for companies to learn about the people within their organizations (and the regions from which they hail) and to educate employees about the culture of the post-merger company. As illustrated in this report, companies are beginning to leverage employee resource groups in this manner. Greater involvement of diversity professionals and employee resource groups during and after the transaction can work to minimize the cultural disconnects that often lead to failed mergers.