“Cream will rise” – how not to manage a merger

The old adage that ‘Cream rises to the top’ is absolutely correct but some organisations stretch this too far and expect this natural biological process to work as a metaphor within their business whilst providing no catalyst or enabling framework.

We were asked recently to engage with a fairly large City organisation that had recognised the changing world and sought to establish competitive advantage through the acquisition of an aligned but very different business.  The parent business was typified as “solid, dependable, mature, and risk averse” and was operating within the tail-end of its growth curve, leveraging long-held relationships to seek to extend what had been an extended period of profitability.  The acquisition was a maverick new entrant with a high focus on challenge, change and service.  It could be typified as “dynamic, aggressive, competitive, risk-taking.”

As a pairing they had a fantastic opportunity to maintain and capture market share through a diversified service offering and segmented approach and that indeed was the case for a few years until the leadership team decided that the commercial opportunities could be leveraged more effectively through a comprehensive merger.

Everything about the two businesses was different – their culture, their working practices, their strategies, their people, even their offices; so we were asked to help create an alignment strategy that would build on the best of each and propel the combined entity into a commercial and reputational position that neither could achieve independently.

Part way through this the CEO decided that managing the alignment was too complex and proposed an ‘organic merger strategy’ which in essence meant – “put the two together and the cream will rise”.  By this he meant that the best leaders would emerge and take control of the situation, driving performance and thereby saving the need for a complex change strategy.

He went ahead with this plan and lo and behold it failed magnificently with the commercial value of the combined enterprise failing to get even close to the previous individual positions and indeed significant loss of talent and revenue.

This was not the first time we had heard the tactic of “let’s just do it and I’m sure it will work out” and indeed, it was not the first time that we had seen a subsequent failure.  But why does it not work?

There are a number of reasons why the “cream rises” metaphor is unhelpful and unproductive:

  1. Organisations are not biological systems with easily definable processes and outputs – they are dynamic systems that require close attention, clear focus and catalytic leadership.
  2. People are creatures of habit and left to their own devices will do as they have done before – performance needs to be strategically aligned and operationally managed by effective leaders otherwise behaviours do not change
  3. Change needs to be carefully designed and managed otherwise people reject the change proposition and perpetuate the status quo for therein lie their comfort zones
  4. Change is difficult and leaders need to grasp this nettle and make tough decisions that provide direction, focus and opportunity for people
  5. Cultures either emerge or are created – if we allow cultures to emerge then we have to hope they are aligned to the strategy whereas if we purposefully create the culture we want the alignment is embedded and performance will flow.
  6. People need to hear from their leaders – you are there for very sound reasons and people need to hear your voice and see that your behaviours are aligned – leaving it to chance is an abrogation of your leadership responsibilities

In summary, taking a simplistic metaphor and using this to drive a complex process like organisational change is lacking in thought, in leadership and in focus.  Your people deserve better so take the time to decide what you want the future to be and then work with them to co-create it in a purposeful manner.

Be insistent about what you want, be consistent in your behaviours and be persistent until you achieve your goal.

The essential elements of a performance culture

 

There is an increasing focus on corporate culture across contemporary organisations, and a growing recognition of its value and importance.  Indeed a recent global survey by Booz & Co reported that 84% of people in business (at all levels) agree that culture is a key to business success and furthermore, 60% placed company culture as more important than business strategy.

This is great to hear but still too many business leaders pay insufficient time and attention to culture and only address it as a problem that needs to be rectified, sadly often with a change programme or new strategy which will ‘unite the workforce.’

I have long argued that leaders ignore culture at their peril and that a fundamental element of a leaders role is to define and drive the performance culture for their business.  In this way we create the culture that we need rather than accepting the prevailing culture as inevitable, or indeed tinkering with the culture through a series of, often disconnected but well-intentioned, interventions that simply create confusion and demonstrate lack of coherent leadership.

So what are the essential elements of an intentional performance culture?

  • It is ‘designed’ as part of the overall company strategy – successive research shows that businesses perform much better when there is a clear alignment between strategy and culture.
  • It is owned and led by the senior team, with constancy of purpose and consistency of practice.  They know and deeply understand that they are role models for the culture and demonstrate this all the time
  • It is defined by reference to how we want people to behave within the business – not a set of ephemeral values that are so often open to different interpretations, but rather a clear and concise definition of what ‘outstanding performance looks like here”
  • It values and respects the legacy of the business to date and uses this a platform to build forward into the future
  • It is defined within the competitive landscape the business operates within and is sufficiently robust to withstand the foreseeable pressures from customer demand and competitor activity
  • It is used as the central defining essence of the business and as the template for recruitment, succession, and development

I recently worked with the leadership team of a global business to help them define their performance culture.  They very quickly understood what needed to be done and crafted a coherent design for their global performance culture.  The challenge, here, as always, is not defining what you want, it is purposefully and consistently modifying your behaviours and work practices to ensure that you live the desired culture – from day one.

Coaching and internal action learning sets helped immensely but all reported the journey to be “significantly harder than they first imagined”.  No surprise at this, and also no surprise that many leadership teams fail en-route as they seek to rise to this most fundamental and important leadership challenge.