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Advisory Services/ June 2018
June 14, 2018

Cultural Considerations for Mergers & Acquisitions

As we approach the end of the first half of 2018, the number of healthcare organization mergers and acquisitions (M&A) is at a record-breaking pace. As we discussed in our January 23, 2018, blog post entitled M&A Success Dependencies: It’s Not Just About the Bottom Line, one of the critical measurable factors that dictate whether a merger or acquisition is a success is culture. Do the different cultures of the organizations meld together well? Was employee satisfaction measured and monitored?

Let’s discuss what should be considered to help the combining of cultures.

  1. When you communicate the merger or acquisition to the staffs of the organizations, emphasize that you are forming a partnership. Leadership from both organizations should provide information on how employees of each organization will benefit from the partnership. Areas to highlight include the possibility for career growth, bringing communities together, and expanding horizons to incorporate new ideas from new colleagues.
  2. Usually, before the news of a merger or acquisition is made public, decisions have been made behind the scenes with regards to leadership. In some cases, a senior leader of one organization becomes the leader of both. Instead of the acquiring organization coming in and cleaning house, consider keeping the leadership team in place and instill a mindset of growth. Removing leadership can be intimidating and could hinder any enthusiasm for the acquisition.
  3. Incorporate organizational culture, don’t impose it – As we discussed above and in our previous blog post, culture is one of the most important factors when determining the success of a merger or acquisition. If the acquiring organization comes in and immediately tries to impose their culture, you’ve failed. If a committee of representatives is not implemented to help bring multiple cultures together, you’ve failed. The leadership from both organizations should identify a single cultural component from the acquiring organization and incorporate it. This could then be viewed as the first step in bringing the organizations together.
  4. Encourage managers from both organizations to be the voice of the change. Typically, when speaking of leaders, the two that are most important for M&A are executives and team leaders.  While executives are the voice of the organization at large, an argument can be made that managers and team leaders are more critical when navigating change.  They are the voice that employees hear on a daily basis and if they view and relay the M&A activity in a favorable light, it will only benefit the culture of the new organization. Empower your frontline leaders in a manner that will allow them to speak favorably of the change.  Provide talking points and avenues for communication that will answer their questions and the questions of their employees.

It is imperative that you continue to cultivate the new organizational culture long after the M&A activity is complete. Are managers and leaders from both organizations leading through the change? Are employees of the new organization assimilating to the new arrangements? Is morale dropping? Are synergies failing to materialize between the combined staffs? Are important leaders or staff members starting to leave for new opportunities? If you are not paying attention to your culture, then before you know it, you will see some unexpected costs that are unrelated to finances.

When it comes to mergers and acquisitions, there are usually well-developed plans and toolkits for handling operations and financials. Results are carefully measured to see if goals are met. When it comes to integrating cultures, however, it is challenging, if not impossible, to measure directly. Do organizations approach both situations with the same enthusiasm? Who is accountable if there is a culture-clash? Do leaders know what to do about it when or if it happens?

Some questions to consider are:

  1. Was a plan put in place to integrate the cultures?
  2. Was there research done to identify differences between the two organizational cultures?
  3. Did you define the culture you wanted to build?
  4. Was there a plan put in place to measure the integration and sustain it?

Integration of cultures is not something that can take place over-night and isn’t something that should wait until the ink is dry on the contract. Once an agreement is verbally agreed upon, leadership from the organizations should immediately put a committee together and start working on integrating the cultures of the organizations. Employees are smart. They watch leadership to gauge the organization.

In a recent article published by Healthcare Finance News, more than half of senior executives cite market share as the primary driver behind their moves toward consolidation. The article references a recent study by West Monroe and Mergermarket where over a third of the respondents said their most significant error was not detecting a mismatch in work cultures.

If employees are informed about a merger or acquisition, in which modern technology is very likely, they need to see that leadership is committed to building a culture that excites them. If they don’t see a future of growth and an organizational culture that is positive, then the administration has a far worse problem on their hands.

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