How to Plan a Successful Cultural Assessment in M&A

Let’s start off with hearing a little bit more about your background.

I’ve been with Corning for eight years. I started off in the Shared Services Group as a Project Manager, I have a Six Sigma Black Belt and I specialize in change management. Two years ago, I moved over to the Corporate Development Group and joined the M&A Integration Center.

We were tasked with an objective to launch a center of excellence and integration across Corning and I have been doing that for the last two and a half years. Before Corning, I served in the US military for nine years as a healthcare manager and as a recruiter, and after that, I worked at General Motors.

Tell me about Corning’s integration center.

Corning’s Mergers and Acquisitions Center has been around for maybe two and a half years. It has four core people and around twenty-four part-time integration leaders that work out in the field amongst different businesses of that group. We support Corning’s integration team informing their strategy, we offer team training and we offer integration leadership training.

We have a section called performance tracking and also early-stage integration support. We gather best practices and keep track of lessons learned so that all of the active integration teams, past and future teams can refer back to this material.

Can you tell me why is the cultural assessment important for an M&A deal?

Cultural facts can be deal killers. It’s important to understand how different the two company cultures may be and what impact that can have on integration.

In the beginning, when it’s time to launch integration it’s important to sit down, look at, and try to understand the personality of the company we are acquiring and how they work. If we don’t pay attention to some of these factors it can actually kill the deal.

When during the M&A process do you start considering culture?

As early as possible. During the exploration period and the diligence period, the team should be paying attention to the different nuances that the acquiring company is showing.

It is difficult to get access to some of the cultural information early on, but one thing teams can do is pay attention, be mindful and listen to what the employees and leaders from that company are saying about different matters. If we can have a short survey on cultural fit early on that can be helpful in identifying important elements.

What are other possible areas where you can start assessing culture early on when there may be only a few people aware of the transaction? What are some cultural cues that you could see early on?

One thing that comes to mind is their management staff. Some companies have a hands-on management style where they are very involved from the top-down, whereas other companies may have an indirect management style. When you are dealing with them early on during the diligence period you can tell how they operate and you want to be very mindful of that. 

There are also different decision-making styles. Some companies tend to make decisions at the top and then there are others who empower their managers to make decisions. This is important because once you acquire a company, you will want to know what type of decision making their employees are used to in order to know how to approach them.

Are there situations where you wouldn’t want to do a cultural assessment?

We always have to look at the deal type, the strategic value, and a reason for doing the deal. Sometimes you know upfront that the acquired company will be left as a standalone and in this type of situation you wouldn’t need to do a comprehensive cultural assessment.

However, I still think it is helpful to show how people at the acquiring company work to meet their objectives so that when we interact with them it’s done in a way that is perceived as positive and supportive to creating value. 

What is your approach to conducting a cultural assessment?

I researched various approaches to this work and coupled my findings with my Six Sigma Black Belt background to create a wide-ranging cultural assessment framework.

I typically have five key sections to my cultural assessment report, an executive summary, similarities and differences section, cultural themes section, a paradox section, and a recommendation section. All of this information is gathered via one on one interviews, focus group sessions, surveys, and offsite observation.

Can you walk me through this checklist and elaborate on each section you just mentioned? You mentioned an executive summary. What goes into that?

An executive summary presents an overview of what the whole report would detail and it provides more information of the purpose, the objective, the approach, and the conclusion of the assessment. It is a one-page view at everything you are about to dig into. 

Tell me more about the similarities and differences section.

This section highlights key similar attributes that companies share, and it also highlights the key differences between company cultures across a spectrum of touchpoints such as management style, decision-making style, financial accountability, or work environment.

Is it structured and rigid or freer? What is the customer service approach? What is the adaptability to change like? How has the company experienced change in the past? What are employee demographics like?

You mentioned a few different approaches to start collecting this information. What do you typically do?

The first thing would be a one-on-one interview, where I would work with the HR or the leadership team in order to identify key people in different roles, not just senior leadership, but also mid-level managers and also front line employees to help identify people and give me a broad array of answers. 

I would also do focus groups, where we may sometimes get the people who are from the company who are working on the integrations to participate. We’ll do surveys, typically one to three surveys, where we ask very specific questions and then calculate how the people responded, and we’ll also do on-site observations.

As a part of the integration leadership team, you will have the privilege of spending time at that location, so it’s important to watch what they do and take notes on how they work. 

These are interesting approaches. What do you think is the most effective?

If I had to pick, it would be a one-on-one interview and the survey. In one-on-one conversations, people are very honest and truthful, so I see great value in that approach. I also see value in surveys because it allows you to look at it from across the board.

Are you looking at who’s opting in and completing the survey? Do you pay attention to the demographics or you are looking to get more general high-level information?

I like to target a specific participation rate. If I have 95+ percent participation then I am confident at the results of the survey versus when I only get half the people participating. I actually work with leadership to make sure that we have everyone participating. 

What about the focus groups? What’s your dislike around that or how come that wasn’t one of the top choices for you?

It’s not a dislike. The focus group sessions are actually great in helping us to work together as a team. Sometimes it offers you a chance to see what the other side really thinks about you and gives you a chance to look at some of the gaps or red flags together and discuss how you can move past them.

It opens up the channels of communication.

I had a conversation with a CEO of a company recently about onsite observation, and he mentioned that it would take him 5 minutes to walk around the office to get a sense if there was a cultural fit or not. What is your approach to onsite observation like?

That is true. You can get an idea very fast. For example, you can look at the way they follow their health and safety regulations or the way they interact with one another and the language that they use. During my visit, I try to engage with employees at all levels. It’s not that much about sitting down and taking notes, but about engaging with them, learning about them and getting to know them and letting them get to know us. 

Going back to your checklist on your cultural assessment one of the other items was cultural themes. Can you tell me more about that?

In this section, I highlight key threads or key things about the culture that emerges from the data collection. Oftentimes I find that employees' responses to various questions will support a conclusion about how they work together. 

For example, in one culture, employees share close relationships and get along very well. Knowing this information is important because it can imply that they will share private sensitive information such as salary, bonus benefits, or strategic plans.

If your company is quiet about this type of information you will want to point out that sharing such information is not OK in your culture and you may even want to document it or write the norms and policy around that. 

Let’s talk about paradoxes. What does that mean?

This is the section that calls out certain cultural behaviors that seem to contradict one another. For example, in one assessment I learned that employees responded very highly that creative thinking is encouraged at their company.

However, they reported at a very high rate that they didn’t feel like they could make independent decisions.

That just didn’t seem to match up and at this point, it became important because as we assigned people into leadership roles and realized that many did not feel comfortable with making decisions, we had to take an extra time-out to talk to them and encourage them to go ahead and make decisions because that wasn’t the norm for them. 

Is there anything else that would follow?

Sometimes I like to make a little list of items that employees of the acquired company are looking forward to by joining the new company. I point all those out because to me those are the benefits, at least from their perspective. I also like to jot down things that they are concerned about.

It is important to be open, watch and learn from the newly acquired company because just because they are acquired doesn’t mean everything in our culture is the best so maybe we need to adjust.

The tail end of this would be the recommendations. Tell me what that entails.

This section lays out a prioritized list of actions to be done to help ensure culture alignment is attained so that cultural issues won't be a reason why synergy goals aren't met or turnover is experienced.

I assign a timing to each task, I assign an owner to each task and I may even do a “heath map”, where priority tasks are marked red, important tasks you have little time for are marked yellow and those that can be pushed out green. 

When you are doing recommendations, it's important to make sure the leadership is supporting the recommendation. Once you assign these tasks, most integration teams will have a cadence, they come together as a team to give updates on how each area is progressing. 

What caught my attention is that you are doing the cultural assessment, but you are not passing the ball. You stay with it and manage the actual execution of it.

Yes, and I do think that is important because you want to have someone managing it that really knows and understands the work. So, even if you end up with ten different action items owned by ten different people, you need a person pulling it all together, just like with any other project.

What are some common missteps that stunt cultural assessments?

Sometimes there is a focus just on senior leadership. They tend to go to senior leadership to learn the things about the company, how the company ticks and works, and when you do that, you are getting a very limited view.

There is a big disconnect between the executives at the top and the people on the front line and executives at the top sometimes have no clue what the people in the front lines think. This is why it is important to look at people across a broad spectrum and not just leaders.

How do you close that gap?

You have to work with HR upfront to truly understand the demographics of the workforce. Once you understand the makeup of the employee group then you know how many to target for each group.

That way you can make sure you have a fair and balanced representation of your culture assessment, but the only way you would know that is by working with the HR leader. 

Does this typically fall under HR for the cultural assessment?

It all depends. Sometimes HR will probably be the function that is tasked with this by default, but oftentimes you will find that HR managers have not been trained for this kind of work.

The person doing the cultural assessment needs to be experienced in that, but no matter who does the assessment, there always needs to be a strong partnership with the HR sector, even if HR is not in the front lines executing the work.

The change management person and communications group should also be part of it. Those three functions should be working together, having meetings on a regular basis, and talking about different findings. 

What would be the best approach to drive the importance of making sure that there is a strong alignment on the cultural assessment part?

You need to have these conversations up front because at the end of a day mergers and acquisitions are about people and you have to drive that point home to senior leadership.

It is not about numbers, because you are dependent upon people to make those numbers happen and make those objectives. The more you educate senior leaders on that people piece, you’ll see better results there. 

How much weight should be put on the financial aspect percentage-wise versus the cultural aspect percentage-wise?

It’s always different. A lot of times, if the financial numbers match up they are going to do the deal. For me, if early on during the diligence we notice there are a lot of gaps in the culture, I’d spend some time assessing those gaps and doing work to bring cultural alignment.

Even if we go into a situation where we know the cultures are vastly different that doesn’t mean the deal won’t be successful. It just means we have to do a lot of work, so you want to know the amount of work you will have to do in this area up front. 

What’s the craziest thing you’ve seen doing cultural assessments?

I know of a situation where employees at the acquired company got together on a regular basis to go to the strip club, which was considered an after-work event. It was a ritual and an establishment that most companies would not approve of.

This was their major concern and they wanted to know, being acquired, would they lose their right to go party at a strip club together. 

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