Chapter Summaries
Achieving Post-Merger Success:
A Stakeholder’s Guide to Cultural Due Diligence, Assessment, And
Integration
J. Robert Carleton
Claude Lineberry
Achieving Post-Merger Success. Copyright © 2004 by John Wiley & Sons, Inc.
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Cultural Assessment and Integration Flowchart
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2
Presentation Contents
PART 1: MERGERS, ACQUISITIONS, AND ORGANIZATIONAL EFFECTIVENESS
1.
MERGERS, ACQUISITIONS, AND ORGANIZATIONAL CULTURE
2.
THE ORGANIZATION AS A SYSTEM
3.
ORGANIZATIONAL SYSTEM ALIGNMENT
PART 2: CULTURAL DUE DILIGENCE AND ASSESSMENT
4.
OVERVIEW OF CULTURAL DUE DILIGENCE
5.
PERFORMING CULTURAL DUE DILIGENCE
PART 3: CULTURAL ALIGNMENT AND INTEGRATION
6.
ALIGNING AND INTEGRATING THE EXECUTIVE GROUP
7.
ALIGNING THE MANAGEMENT GROUP
8.
ALIGNING THE TOTAL ORGANIZATION
9.
SUCCESS MEASURES
10.
SUMMARY AND CONCLUSION
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Part 1
Mergers, Acquisitions, and Organizational
Effectiveness
CHAPTERS
1.
2.
3.
MERGERS, ACQUISITIONS, AND ORGANIZATIONAL CULTURE
THE ORGANIZATION AS A SYSTEM
ORGANIZATIONAL SYSTEM ALIGNMENT
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Chapter One
MERGERS, ACQUISITIONS, AND ORGANIZATIONAL
CULTURE
Achieving Post-Merger Success. Copyright © 2004 by John Wiley & Sons, Inc.
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Introduction
• The pace of mergers and acquisitions
around the globe is increasing.
• Forming alliances – mergers, acquisitions,
alliances, etc., is the growth strategy of
choice for large and small companies.
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Chapter One
Mergers, Acquisitions, and Organizational Culture
The M&A Report Card
• The failure rate of M&As is unreasonable,
unacceptable, and unnecessary.
• Between 1965 and 1997, some 55-77%
of M&As failed to deliver their anticipated
results.
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Chapter One
Mergers, Acquisitions, and Organizational Culture
M&A Failure Costs
• Average 3% loss of equity
• Loss of external focus
• Low staff motivation and morale
• Loss of key executives and staff
• Loss of brand focus
• Decreased customer satisfaction
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Why Mergers and Acquisitions Really
Fail
• Culture clash is primary cause
What is generally done about it
• Little or nothing at all
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Why so little effort to manage culture
• Arrogance that no culture issue exists
or
• Belief that, if culture clash exists, nothing
can be done about it
This could be interpreted as
malfeasance!
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Prevailing wisdom is wrong
• Body of knowledge exists
• Experience
• British Airways – the first successful
large-scale corporate transformation
• Many other examples
But …. still the exception, not the rule
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Misunderstanding of culture
• What is meant by corporate culture
 Culture has many components
 A manifestation of an overall system
 Cannot be dealt with in isolation
 Almost every aspect of an organization affects
its culture
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Definition of organizational culture
• Many different definitions
• “the way we do things around here”
A critical aspect of organizational survival
and success
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Chapter One
Mergers, Acquisitions, and Organizational Culture
Culture and performance – hard data
Kotter & Heskett – comprehensive
study
• Adaptive vs. non-adaptive cultures;
 Revenue increase of 682% versus 166%
 Workforce expansion of 282% versus 36%
 Stock price increase of 901% versus 74%
 Net income increases of 756% versus 1%
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Chapter One
Mergers, Acquisitions, and Organizational Culture
National Versus Organizational Culture
Outside scope of this book, but;
• Well-researched subject
• Different national cultures add complexity to analysis of
corporate culture
• References:
 Rhinesmith (1996) A Manager's Guide to Globalization
 Medina-Walker (2002) The Guide to Cross Cultural
Success
 Hofstede (1991) Culture and Organizations
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Chapter Two
THE ORGANIZATION AS A SYSTEM
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Chapter Two
The Organization As a System
Organizations are systems and obey the
following:
• The behavior of each element of a system has
an effect on the behavior of the whole system.
• The behavior of the elements of the system, and
their effects on the whole system, are
interdependent.
• However subgroups of the elements are formed,
each has an effect on the behavior of the whole
and none has an independent effect on it.
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Chapter Two
The Organization As a System
System thinking awareness
• Almost all agree organizations are systems
• Little awareness of what this means at
executive level – executives must:
• represent and champion their function
and
• be an advisor to the CEO of the group on overall
organizational system effectiveness
A critical skill during change
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Chapter Two
The Organization As a System
The individual as a performance system
Geary Rummler’s six areas of analysis critical to
understanding individual performance
• Performance
specifications
• Task support
•Skills & knowledge
• Consequences
•Individual capacity
•Feedback
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Chapter Two
The Organization As a System
Winning the battle while losing the war
Without systemic thinking:
• Rational changes in one department can
cause adverse effects in another
• Net result is worse than before the
change
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Chapter Two
The Organization As a System
Non-systemic working puts individual
team needs before the needs of the
whole organization
• Unresolved conflict between departments
and teams
• Members of senior management teams
thinking only within their silos
Optimizing each part of a system does not
optimize the system.
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Chapter Two
The Organization As a System
Synthesis before analysis
When examining a “problem area”:
1. Understand how the problem area fits
into the overall system and how the
overall system affects the problem area
2. Analyze the problem area
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Chapter Two
The Organization As a System
Culture is not a system component, but:
• It is embedded in the system
• It is a product of the system
• It cannot be taken out of the system
or dealt with in isolation
Culture is a result, not an element, of the
overall organization system.
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Chapter Two
The Organization As a System
Daily managerial behavior
People notice
• Not what managers say, but
• What managers do
"What you do speaks so loudly that I
cannot hear what you say!"
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Chapter Three
ORGANIZATIONAL SYSTEM ALIGNMENT
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Chapter Three
Organizational System Alignment
Organizational Alignment
Based on diagnosis – data-based, not
solution-based
• Systemic and systematic
• Organizational Scan process
• Helps determine best and most effective
actions to take to resolve the issues
confronting the organization
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Chapter Three
Organizational System Alignment
Systemic approach
Two keys to effective change:
1. First - ascertain what factors, both formal
and informal, are driving the current
system
2. Second - plan for altering or modifying
those factors needed to support and
sustain the new desired performance
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Chapter Three
Organizational System Alignment
Organizational Alignment Model
EXTERNAL ENVIRONMENT
MISSION/VISION
• solid, proven, and
highly intuitive
diagnostic template
for initial diagnosis
of the
organizational
system drivers
STRATEGIC GOALS
OBJECTIVES
VALUES
INFRASTRUCTURE
(Structure, Systems,
Processes, Policies, etc.)
ACTIVITIES
PRACTICES
BEHAVIORS
RESULTS
STAKEHOLDERS
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Chapter Three
Organizational System Alignment
Organizational System Model
• A model to sort out the complexity
considering an organization as a system
• Gives guidance as to what to look for and
where to look
• Incorporates the industrial engineering
model of work with the sociological model
of work
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Chapter Three
Organizational System Alignment
Organizational System Scan Model
CONDITIONS
Combines the
•Industrial
engineering model of
work - a set of
conditions exists
within which a process
operates to deliver an
output
ORGANIZATION
With the
•Sociological model
has work being
performed by people
within an organization
WORK
OUTPUTS
Direction
Systems
Results
-
-
- Success Measures
- Profitability
- Competitive Position
- Stakeholder
Satisfaction
Business Situation
Mission/Vision
Strategy
Structure
Goals
Values and Beliefs
PEOPLE
PROCESS
Planning
Policy/Procedure
Support
Information Systems
Budgeting
Monitoring
LeadershipManagement
Productivity
- Ideal Values
- Actual Values
- Climate
- Objectives &
Demands
- Expectations
- Politics
-
Resources
Methods
Products/Services
- Workload
- Schedules/Cycles
- Tools/Equipment
- Data/Information
- Physical
Environment
- Work Processes
- Resource Allocation
- Process Monitoring
- In-Process Correction
- SOP's
- Product/Service Delivery
- Customer Satisfaction
- Quality
- Quantity
- Service Levels
Practices/Behaviors
Selection/Development
Reward/Recognition
Skill/Knowledge
Motivation/Feedback
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- Performance Levels
- Morale
- Empowerment
- Loyalty/Commitment
- Business Awareness
- Continuous
Improvement
30
Chapter Three
Organizational System Alignment
Organizational System Scan Model – additions
•Experience, research, and advancements in the understanding of organizations showed
an adjustment was needed
•The development of another row of three boxes, focused on External Factors of the
organizational system
•This new row represents the organization’s perception of and direct response to the
external environment in which it finds itself operating
EXTERNAL
FACTORS
CONDITIONS
PROCESS
Marketplace
Investment
- World
Economy
- Geopolitical
Climate
- Regulation
- Competitors
- Technology
- Location
- Business
Cycle
- Strategic Alliances
- Partnerships
- Mergers & Acquisitions
- New Product
Development
- Privatization
- IPO
OUTPUTS
Positioning
- Market
Share/Dominance
- Economies of
Scale/Scope
- Reduced
Vulnerability
- Increased
Revenue
- Globalization
- New Markets
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Chapter Three
Organizational
System
Alignment
• The organizational
system model
reflecting our
current
understanding of
the dynamics of an
organizational
system
CONDITIONS
EXTERNAL
FACTORS
ORGANIZATION
PEOPLE
WORK
OUTPUTS
PROCESS
Marketplace
Investment
Positioning
- World Economy
- Geopolitical
- Climate
- Regulation
- Competitors
- Technology
- Location
- Business Cycle
- Strategic Alliances
- Partnerships
- Mergers & Acquisitions
- New
Product Development
- Privatization
- IPO
- Market
Share/ Dominance
- Economies of
Scale/Scope
- Reduced
Vulnerability
- Increased
Revenue
- Globalization
- New Markets
Direction
Systems
Results
- Business Situation
- Mission/Vision
- Strategy
- Structure
- Goals
- Planning
- Policy/Procedure
- Support
- Information Systems
- Budgeting
- Monitoring
- Success Measures
- Profitability
- Competitive Position
- Stakeholder
Satisfaction
Values and Beliefs
Leadership - Management
Productivity
- Ideal Values
- Actual Values
- Climate
- Objectives &
Demands
- Expectations
- Politics
- Practices/Behaviors
- Selection/Development
- Reward/Recognition
- Skill/Knowledge
- Motivation/Feedback
- Performance Levels
- Morale
- Empowerment
- Loyalty/Commitment
- Business Awareness
- Continuous
Improvement
Resources
Methods
Products/Services
- Workload
- Schedules/Cycles
- Tools/Equipment
- Data/Information
- Physical
Environment
- Work Processes
- Resource Allocation
- Process Monitoring
- In-Process Correction
- SOP's
- Product/Service Delivery
- Customer Satisfaction
- Quality
- Quantity
- Service Levels
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Chapter Three
Organizational System Alignment
Uses of the Organizational Scan Model
Purpose
•To gather current data on the
"organizational situation," as
perceived by its functions and
people, for use in decision making
by top management
•The Organizational Scan clarifies
organizational intent and direction
and captures information about
the "real organization’s"
alignment with that direction — its
values and belief system, day-today life, priorities — in short, its
culture. It also assesses
relevance and helpfulness of
organizational systems, policies,
and procedures.
Benefits
•Provides the CEO/Top Management
with an efficient and comprehensive
diagnostic scan of the organization at
all levels
•Identifies areas of potential greatest
leverage for increasing organizational
effectiveness as desired
•Indicates priorities for action to
move/transform the organization,
which focuses and facilitates planning
•Provides an assessment of the
organization's readiness for change,
and the adequacy of the organization's
leadership and management to effect
that change and, perhaps most
significantly
•Enables the alignment of the
organization's strategy, culture, and
infrastructure to the business reality
confronting it
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Chapter Three
Organizational System Alignment
• There is very little in organizational life that has
broader impact and a greater number of potential
changes in daily operations than the merger of two
organizations into one new, integrated
organization, as happens in a merger or
acquisition.
• This is system change at its fullest, where a system
model like the Organizational Scan Model can be
extremely valuable.
• The issues are many and complex, and an
organizational system model can be invaluable in
helping to sort out and organize all of the data and
information that must be considered.
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Part 2
Cultural Due Diligence and Assessment
CHAPTERS
4.
5.
OVERVIEW OF CULTURAL DUE DILIGENCE
PERFORMING CULTURAL DUE DILIGENCE
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Chapter Four
OVERVIEW OF CULTURAL DUE DILIGENCE
Achieving Post-Merger Success. Copyright © 2004 by John Wiley & Sons, Inc.
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Chapter Four
Overview of Cultural Due Diligence
Due Diligence
• The investigation of one party by
another party to gather information
that will assist in decision making and
risk analyses
• In conjunction with transactions
between people or companies
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Chapter Four
Overview of Cultural Due Diligence
Traditional Due Diligence considers;













General Corporate Information
Management
Industry, Market, and Competitor Assessment
Financial Information
Assets and Facilities
Intellectual Property
Rarely if ever gives any
consideration to the dynamics
Contingent Liabilities
of the two organizations’
Tax Information
cultures, their degree of
Legal Information
compatibility, or the potential
Insurance
culture clash problems that
are almost sure to arise after
Sales and Marketing
the deal is done.
Customers
Strategic Alliances
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Chapter Four
Overview of Cultural Due Diligence
The case for CDD
• Culture clash is the main reason why some
55-77% of mergers and acquisitions fail in
meeting their intended results
• By assessing the characteristics of both
organizations’ cultures as soon as possible
in the merger process, potential culture
clash problems can be predicted, prioritized,
and focused on in a comprehensive Cultural
Integration Plan
• Proactive problem solving in advance
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Chapter Four
Overview of Cultural Due Diligence
Cultural Due Diligence is appropriate in a number of
key business situations, including:
• When considering mergers and acquisitions as a growth
strategy
• When selecting a target company for merger or acquisition
• When finalizing the decision to do the deal or not with a
target company
• Immediately after execution of the Letter of Acceptance by
the target company
• Immediately after finalization and approval of the merger or
acquisition
• As "cultural triage" after the merger or acquisition becomes
effective, to deal with culture clash problems that surface
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Chapter Four
Overview of Cultural Due Diligence
CDD activity sequence
• Acquirer self-assessment
 Objective assessment of “own” culture
• Assessment of target companies
 High-level initial CDD of a number of target companies
• Detailed cultural assessment of selected target
company
 A full and detailed cultural assessment of the target
company and comparison with that of the acquiring
company
• Alignment/Integration Planning
 Informed, data-based design of the overall
Integration/Alignment Plan
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Chapter Four
Overview of Cultural Due Diligence
CDD by attributional model
• Off-the-shelf survey type assessment
• No single assessment model of organizational
culture exists
• Lack granularity or depth in their findings
• Does not differentiate between value-based and
non-value-based differences
• Daily behaviors still need to be determined by
interview, focus groups, and observations
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Chapter Four
Overview of Cultural Due Diligence
CDD by customized assessment model
• Based on a functional model of culture
• Comprises
 Interviews and focus group
 Workplace observation
 Document review
 Subsequent web-based large-scale
customized surveys
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Chapter Four
Overview of Cultural Due Diligence
CDD cultural domains
Typically, the data is organized and presented within
the following cultural domains, where the organization's
culture is on display every day.
1
2
3
4
5
6
Intended Direction and
Results
Key Measures
Key Business Drivers
Infrastructure
Organizational Practices
Leadership/ Management
Practices
7
Supervisory Practices
8
9
10
11
12
Work Practices
Technology Use
Physical Environment
Perceptions and Expectations
Cultural Indicators and
Artifacts
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Chapter Four
Overview of Cultural Due Diligence
CDD Deliverables
•
•
•
•
•
•
•
•
Detailed Cultural Profile of Both Organizations
Baseline Perceptions of Various Constituencies of Both Organizations
About Current Culture and the Merger or Acquisition
Specification of Cultural Similarities Within the Twelve Cultural
Domains
Specification of Cultural Differences Within the Twelve Cultural
Domains
Prediction, Specification, and Prioritization of "Culture Clash"
Problems and Their Impact on the Merger
Specification of Degree of Difficulty in Integrating the Two Cultures
Specific Recommendations on Avoidance and/or Minimization of
Culture Clash Problems in Integration
Integration Road Map for Implementation of Recommendations
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Chapter Four
Overview of Cultural Due Diligence
Legal restrictions to due diligence
• Full CDD can generally only occur after
Letter of Intent or Acceptance
 Access to people in target company limited
before this
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Chapter Four
Overview of Cultural Due Diligence
Pre Letter of Intent or Acceptance
activities
1. self-assessment of the acquirer
2. high-level estimate of the probable
cultural characteristics of potential target
companies
3. assessment of the potential compatibility
with target company executive teams
4. information to inform recommended
retention strategies for key people at the
target companies
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Chapter Four
Overview of Cultural Due Diligence
Self-assessment of the acquirer
Identify and manage
• Things that are not going all that well
internally, have not been dealt with, and
are not desirable to take forward into a
new, merged operation after an acquisition
• Areas within the acquiring company that
are less than supportive of an acquisition
in general
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Chapter Four
Overview of Cultural Due Diligence
High-level estimate of the probable
cultural characteristics of potential
target companies
•
•
•
High-level assessment of the target
organization's culture
Very detailed review of any documents that
directly or indirectly give indications of aspects of
the organizational culture
Compare notes with other, non-culture, DD teams
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Chapter Four
Overview of Cultural Due Diligence
Assessment of the potential
compatibility with target company
executive teams
•
•
Series of visits, meetings, and social
events in the pre letter period
Enable objective assessment of future key
managerial positions
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50
Chapter Four
Overview of Cultural Due Diligence
Information to inform recommended
retention strategies for key people at
the target companies
•
•
•
Structured interviews of key people – both
managers and individual contributors
Understand what they value in their
current organization
Enable design of strategy to engage their
hearts and brains in the new merged
organization
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Chapter Four
Overview of Cultural Due Diligence
Assessing degree of difficulty of cultural
integration
• Preliminary estimate of the degree of
difficulty and resources required in
integrating the two companies possible
• Allows intelligent and informed
comparison with several potential target
companies
• Informs the design of the eventual full
CDD of the selected target company
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Chapter Four
Overview of Cultural Due Diligence
Getting it right – H-P / Compaq merger
• CDD early in the merger process
• Cultural integration team from the start
• Studied previous merger problems
• CDD and cultural integration planning
played a major role in this successful
merger
• After a full year of operation, success
measures of the new hp are positive
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Chapter Five
PERFORMING CULTURAL DUE DILIGENCE
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Chapter Five
Performing Cultural Due Diligence
The CDD Process
• Qualitative
 Interviews
 Focus groups
 Workplace observations
 Documentation review
• Quantitative
 Web-based survey(s)
 Related to domains or characteristics of the
culture identified from the qualitative process
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Chapter Five
Performing Cultural Due Diligence
Typical components of a CDD process
1. Qualitative - High-level interviews
2. Quantitative – Web-based surveys to sample of
the whole population
3. Qualitative – Interviews across the
organizations
4. Quantitative – Web-based surveys to entire
populations
Each stage is informed by the previous
stage(s)
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Chapter Five
Performing Cultural Due Diligence
CDD Data organization
Typically, the data is organized and presented within the
following cultural domains, where the organization's culture is
on display every day.
1
2
3
4
5
6
Intended Direction and
Results
Key Measures
Key Business Drivers
Infrastructure
Organizational Practices
Leadership/ Management
Practices
7
Supervisory Practices
8
9
10
11
12
Work Practices
Technology Use
Physical Environment
Perceptions and Expectations
Cultural Indicators and
Artifacts
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Chapter Five
Performing Cultural Due Diligence
1. Intended direction and results
• Ascertain, from the top of the
organization on down, what the company
intends to accomplish
 What is the business plan about, what is the
strategic intent and purpose of the
organization, what results are expected from
the business activity of the organization, and,
most importantly, how are these things talked
about, described, and communicated?
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Chapter Five
Performing Cultural Due Diligence
2. Key measures
• What the company measures, why, and
what happens as a result
 The key measures say a lot about the manner
in which the company and its executives and
staff are driven, particularly when the
consequences for each measure are
considered.
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Chapter Five
Performing Cultural Due Diligence
3. Key business drivers
• What are the primary issues driving the
business strategy? Is the focus on
competitive edge and, if so, how is that
defined — price differentiation, quality,
market share, service, reliability, or
what?
 This tells you how the company views its
industry and its subsequent efforts within the
industry – that is, how it defines success
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Chapter Five
Performing Cultural Due Diligence
4. Infrastructure
• How is the company organized?
 For example, are people expected to “go
directly to whomever you need to talk to” or
must proprieties be observed between
different levels or functions? Are business
units supposed to drive their business
priorities first and foremost and respond to
corporate, staff, or other unit needs when
convenient, or vice versa?
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Chapter Five
Performing Cultural Due Diligence
5. Organizational practices
• What formal and informal systems are in
place and what part do they play in the
daily life of doing the work? How much
flexibility is allowed at what levels in
which systems? What is the relationship
between political reality and business
reality?
 For example, how are budgets developed and
managed?
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Chapter Five
Performing Cultural Due Diligence
6. Leadership/management practices
• What is the balance between leadership
and management approaches with staff?
What are the basic value systems about
employees? How are people treated and
why? How is the business plan
implemented through the management
system? How are decisions made?

Which approach is predominant in each area /
department of the company?
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Chapter Five
Performing Cultural Due Diligence
7. Supervisory practices
• What dynamics are involved in the
immediate oversight of the performance
of work?
 Supervisory practices have a major impact on
employees’ feelings about the company and
the work they do. The nature of the
interaction between the employee and the
immediate supervisor is one of the primary
climate-setters for the culture of the
company.
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Chapter Five
Performing Cultural Due Diligence
8. Work practices
• How is the actual work performed?
 Is the emphasis on individual responsibility or
group responsibility? What degree of control,
if any, does the individual worker have on the
work flow, quality, rate, tools utilized, and
supplies needed?
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Chapter Five
Performing Cultural Due Diligence
9. Technology use
• What is the company's technology base,
and how is technology used?
 This must be considered in relation to both
internal systems and equipment, as well as
the services and products provided to
customers. How current is the technology
being utilized? What are people used to in
relation to technological support/resources?
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Chapter Five
Performing Cultural Due Diligence
10. Physical environment
• How do the workplace settings differ?
 Open work spaces versus private offices, high
security versus open access, buildings,
furniture, grounds — all can have a bearing
on how people feel about work and the
company. Changes in these areas,
particularly if they are perceived as arbitrary,
can result in bad feelings for years.
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Chapter Five
Performing Cultural Due Diligence
11. Perceptions and expectations
• How do people expect things to happen?
What do they believe is important? What
do they think should be important, versus
what they perceive the company feels is
important?
 Strongly held beliefs (perceptions) can be at
the core of their inability to work together.
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Chapter Five
Performing Cultural Due Diligence
12. Cultural indicators and artifacts
• How do people dress and address each
other? What is the match between formal
work hours and actual hours spent
working? What company-sponsored
activities exist and what are they like?
 Social norms form an important part of
organizational culture.
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Chapter Five
Performing Cultural Due Diligence
Values and Beliefs, and Myths, Legends,
and Heroes
• Often referred to in cultural assessment
• Not included as specific domains
• In actuality, these are imbedded in the 12
domains
• More effective than direct questioning
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Chapter Five
Performing Cultural Due Diligence
Qualitative data most important
• Rich in anecdotes and examples
• Provides breadth and depth
• Gives personal meaning to the culture
• Eases the task of cultural change
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Chapter Five
Performing Cultural Due Diligence
Cultural assessment
• the comparison of data and information
about the cultures of the two companies
involved in the merger or acquisition
• Inputs
 Qualitative CDD data
 Quantitative CDD data
 Cultural data form Legal, Financial, and other
due diligence processes
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Chapter Five
Performing Cultural Due Diligence
Findings
• Typical subject headings for CDD findings
 The merger
 Culture
 Organizational change
 Leadership
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Chapter Five
Performing Cultural Due Diligence
Cultural Alignment and Integration Plan
• Includes
 Summary of CDD activities and data sources
 Summary of the results of the CDD activities
 Summary profiles of the cultures and subcultures of each company, together with any
geographical cultural differences
 The key cultural synergies between the
companies
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Chapter Five
Performing Cultural Due Diligence
Cultural Alignment and Integration Plan
• Includes (cont)
 Identification of areas of probable culture
clash between the organizations
 Whether Company A and Company B can be
merged to create a new organizational culture
 The estimated difficulty of cultural integration
and the scope of the time and resources
required to accomplish the integration
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Chapter Five
Performing Cultural Due Diligence
The Cultural Alignment and
Integration Plan specifically:
 Addresses the leading cause of the failure of
mergers and acquisitions - culture clash
between the two organizations
 Provides detailed information that will
facilitate development of an efficient and
effective Cultural Integration Plan, which
addresses the second major cause of failure lack of speed in integrating
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Part 3
Cultural Alignment and Integration
CHAPTERS
6.
7.
8.
9.
10.
ALIGNING AND INTEGRATING THE EXECUTIVE GROUP
ALIGNING THE MANAGEMENT GROUP
ALIGNING THE TOTAL ORGANIZATION
SUCCESS MEASURES
SUMMARY AND CONCLUSION
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Chapter Six
ALIGNING AND INTEGRATING THE
EXECUTIVE GROUP
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Chapter Six
Aligning and Integrating the Executive Group
Cultural integration is an essential
factor in:
• Implementing the new organization's
business plan
• Getting support of and commitment to
the plan rapidly from the organization's
people
• Primarily an issue of organizational
alignment
NB: At this stage, a target company has been selected and
the merger or acquisition is going to happen
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Chapter Six
Aligning and Integrating the Executive Group
Aligning the Organization
• Clear mission and vision (intent and purpose)
• Align, with the mission and vision:
 Infrastructure (policies, procedures, internal systems)
 Strategy (goals, objectives, and daily tasks)
 Culture (values, practices, daily behaviors)
in order to achieve desired organizational
results
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Chapter Six
Aligning and Integrating the Executive Group
Alignment priorities
• Alignment process
 Best begun at the top of the organization
 Greatest amount of effort and time spent per
employee is generally at the top of the
organization
 Least amount of time required per person is
at the lower levels
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Chapter Six
Aligning and Integrating the Executive Group
Nine-step alignment and integration process
1. Review business plan and overall organizational intent
2. Discuss with CEO to achieve ringing clarity on
organizational intent and business plan
3. Complete a CDD and assessment on both acquiring and
target companies
4. Review results with CEO and plan work sessions with
executive group
5. Conduct issues-based team-building sessions with
executive group of the new organization
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Chapter Six
Aligning and Integrating the Executive Group
Nine-step alignment and integration process
6. Conduct all-managers sessions with all managers in
the new organization
6.a - If necessary creation of Tiger Team to
investigate and resolve infrastructure issues
7. Conduct feedback-based planning sessions for
executives and managers
7.a - Follow-up sessions as necessary
8. Conduct all-staff sessions
8.a - Follow-up sessions as necessary
9. Conduct work process re-engineering sessions as
needed
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Chapter Six
Aligning and Integrating the Executive Group
Review of all the findings of the organizational scan with the senior executive,
including identification of all broad systemic and alignment issues that require
immediate resolution and time-sensitive issues that require immediate resolution
before any further cultural integration activities can be initiated
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Chapter Six
Aligning and Integrating the Executive Group
These time-critical issues and opportunities should be the first activities engaged
in by the merged operation. You might say these represent the “low hanging
fruit” that can be leveraged for immediate positive impact.
Once the immediate time-sensitive issues covered in the first part of the
integration plan are dealt with, or at least well begun, the alignment activity
needs to follow in very short order.
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Chapter Six
Aligning and Integrating the Executive Group
Arguably the most critical aspect of leadership and management in a cultural
integration effort is the development of a mission, vision, strategy, and cultural
values for the new organization and their communication with absolute clarity
Issues-based team building focuses on the individual and collective behavior
and effectiveness of the new organization's executive team in providing
direction, motivation, guidance, and clarity to the new organization
Generally three to five days of intensive work
Outside facilitation experienced in the program is required
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Chapter Six
Aligning and Integrating the Executive Group
Issues-Based Team Building
• For senior executive team
• Achieve ringing clarity on vision, mission,
strategy, and cultural values
• Identify time-sensitive issues
• Needs honesty and candor to achieve real
agreement
• Outside facilitation best
• Further meetings may be necessary
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Chapter Seven
ALIGNING THE MANAGEMENT GROUP
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Chapter Seven
Aligning the Management Group
It is the management group, ranging from senior managers to first-line
supervisors, who are the primary drivers of organizational behavior.
Their day-to-day behavior is quite possibly the most powerful form of
cultural communication and influence in the organization. It is important
that all managers in the new organization be absolutely clear on and
committed to where the organization is, where it is going, why it is going
there, and how it will get there.
Outside facilitation recommended is.
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Chapter Seven
Aligning the Management Group
All Manager Session
• Attended by;
 All who manage people, whether as managers or
supervisors
 Significant individual contributors
• Achieve clarity on mission, vision, strategy,
cultural values – presented by members of the
executive team
• Understand consequences of failure, collectively
and individually
• Work out how to pass on this information to the
teams
• Identify practices for the cultural values
• Highly participative cross-functional process
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Chapter Seven
Aligning the Management Group
All Manager Session 2
• Managers group and regroup for maximum
interaction to create a valid all manager result
• Collect issues coming out of discussion
• CEO final briefing




Results of session
Issues collected
Need to communicate to teams
Explain that the chosen practices are the basis for
future 360-degree feedback sessions
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Chapter Seven
Aligning the Management Group
The investigation and resolution of any infrastructure issues that have surfaced
during the CDD or in the issues-based team building or all manager session by
3-10 person "Tiger Teams"
Involves lower level management and staff directly with issues
Teams model quick and definitive action
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Chapter Seven
Aligning the Management Group
The all managers session is not sufficient to achieve significant
modification in day-to-day manager behavior to effectively implement
the new management practices that support the new organization's
values.
A series of feedback-based management-planning sessions is required
to help managers identify the change and development that they need
to model the values and practices on a day-to-day basis.
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Chapter Seven
Aligning the Management Group
Feedback-based planning session
• Individual 360-degree feedback on how managers are
perceived in implementing the new management practices
in support of the new organizational values
• Enhancement of change management knowledge and
necessary skills and knowledge where the CDD or the
360-degree survey has shown a general pattern of
deficiency
• Each manager understands what it will now mean to be a
manager in the new organization and what is now
expected from him or her
• Managers leave with a personal short-term action plan
• Event finishes with CEO forum with Q&A session
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Chapter Seven
Aligning the Management Group
Typical feedback chart
• The manager is rated by self,
boss, direct reports, and
peers on each of the
management practices.
• The numeric ratings focus on
the frequency with which the
manager demonstrates the
practice, and the importance
of that practice from the
rater's perspective.
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Chapter Seven
Aligning the Management Group
Monthly half-day follow-up sessions for at least six months. Reconnect
meetings should be held at 30, 60, 90, and 180 days after the feedback-based
planning session at a minimum, with a 360-degree feedback re-survey done in
conjunction with the 180-day meeting
These sessions are scheduled and run on a team basis, so the group of 5 to 7
managers who were on a team together become an ongoing support group for
individual change. By meeting each month and briefing each other on their
individual progress - successes and problems - in carrying out their action
plans and amending them as necessary with the support of this group,
followthrough is significantly enhanced.
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Chapter Eight
ALIGNING THE TOTAL ORGANIZATION
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Chapter Eight
Aligning the Total Organization
Engages every staff member directly in order to gain their understanding of and
commitment to the new organization by involving them in the reasons for the
merger or acquisition, the direction of the new organization, and the changes
that are required for its success
Carefully orchestrated sessions where the primary presenters are the
organization's executives and senior managers—an outside consultant or
facilitator is required
One-day events, composed of from 20 to as many as 100 people, organized in
groups of 10 facilitated by a manager
.
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Chapter Eight
Aligning the Total Organization
All-staff sessions agenda
• Case for change
• Mission, vision, strategy, values, and practices
• Management 360-degree feedback and action
plan process
• Exercise to create personal engagement in the
change effort – performance improvement
suggestions – must be followed up
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Chapter Eight
Aligning the Total Organization
When there is a need for major infrastructure changes, can either:
• Expanded use of tiger teams
• Large group re-engineering session (This approach is much more
effective in dealing with infrastructure issues that cross multiple
departments or work units across the organization than are smaller tiger
teams or action learning teams)
 Rapid and efficient
 Quick decision making due to complete representation
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Chapter Nine
SUCCESS MEASURES
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Chapter Nine
Success Measures
General success measures
1.
2.
3.
4.
5.
Increase or decrease in share price
Increase or decrease in revenue
Increase or decrease in operating profit
Increase or decrease in profitability
Payback of capital costs
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Chapter Nine
Success Measures
General success measures
6. Recovery of any premiums paid
7. Increase or decrease in productivity
levels
8. Increase or decrease in market share
9. Loss of key executives
10.Loss of key staff
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Chapter Nine
Success Measures
Success measures
• Staff opinion/attitude survey
• Web-based CDD re-survey
• 360-degree leadership and management
survey
• Monitoring cust. serv. and satisfaction levels
• Current organizational measures
• “Listening posts” and focus groups
• Customer interviews/focus groups/surveys
• Other specific measures
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Chapter Ten
SUMMARY AND CONCLUSION
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Chapter Ten
Summary and Conclusion
Achieving Post-Merger Success
• Is possible !
• CDD and cultural alignment are necessary
components
• Stakeholders should be tougher in insisting
on CDD before, and cultural alignment
during, a merger or acquisition
• Board members and senior executive
accountability require CDD and cultural
alignment activities
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