Managing The Cultural Transition Of An Acquisition

An acquisition is not only about strategy and growth. It’s also about making employees confident and comfortable.

By Deborah Carter-Gordley

Acquisitions are used in our industry as a way to accelerate growth. But contrary to the promising growth outlook that an acquisition may provide a company, many of them fail to achieve the anticipated strategic and financial objectives.

Valley National Gases started its acquisition process back in 1973. Needless to say, after 74 acquisitions, we—like most acquiring companies—have hit some rough spots as we’ve worked through this history. We’ve also learned much and continue to improve our process.

When Valley National Gases looked into the various dimensions that can cause an acquisition to fail, we found that the failure was often attributed to various HR-related factors, such as culture and management differences, poor motivation, loss of talent and uncertain goals. To make an acquisition successful on all counts, we now incorporate a transition management process through which these differences in culture and management can be addressed.

This article looks at some dimensions an acquiring company should consider in order to make the process more positive, efficient and comfortable for all the newly acquired employees. It also describes Valley’s transitional approach during the integration following the acquisition.

Similar Values Are Key to Success
The integration of two cultures starts well before the purchase agreement is signed, announcements are made, or employees are worked through a new hire process. It starts when management makes contact with a potential company owner. All the “basics” involved in determining whether a potential company is a good fit are analyzed, i.e., geography, customers, sales, synergies and potential. During this review, a look at values can come into play.

We define values as those core beliefs that guide daily actions and decisions. When there are similarities in values between the two companies, the acquired employees and their counterparts have an easier time getting in sync with the business processes and work procedures to be integrated. The internal questioning that may go on in a newly acquired employee’s mind as to whether the “new way” makes sense is lessened if it’s linked to a common purpose supporting a shared value.

Does a potential acquisition hold and act on many of the same values the acquiring company has in its culture? This is a question that can be informally observed as management works with the potential seller. Since the number of employees you can interview may be limited during due diligence, you can see what’s important by the owner’s safety focus, past expenditures, company structure, employee benefits, incentives and what types of performance are rewarded.

Managing the Transition
It’s not the change itself that is the challenge in the integration of cultures; it’s the transition from employees’ present culture to a new one. This transition is the psychological process people go through to come to terms with the acquisition and changes in management style, focus and/or personnel. The change is almost external to the transition. So it’s important to focus on managing that transition. At Valley, we use William Bridges’ book Managing Transitions as a model, and every manager who’s involved in an acquisition, like our region managers, the executives involved and the A-Team, have read this book and reviewed the three stages of transition. The “A-Team” is a group of very experienced employees who have expertise in Valley’s various operational processes and procedures. They can enter into the transition process at several different stages. Their use of this model adds a very necessary personal and emotional dimension beyond the integration of systems and procedures. In our case, all the members of the A-Team and many of the management team have experienced being acquired at some point in their careers. This enables them to understand the stress that a newly acquired employee could be going through and how their experience can steer these “new” employees through the rough spots.

Getting New Employees to Let Go of the Old Culture – First Introductions
The first stage of the transition management is getting the employees to let go of their current organization and open to a new way and approach. Recognizing that employees have had very limited interaction with any of the acquisition employees during due diligence, this first meeting is an important one. The day the agreement is signed, the new owner and the past owner should work together on a press release and on the written communications to be sent out to all employees. Depending on location and number of employees, the first meeting may be a face-to-face dinner with a manager the night of the announcement or the next day at an all-employee meeting at each location. It’s very important that the previous owner is there with the new owner in these first meetings, if possible. The more they work with the new owner in these initial meetings, the more employees get reinforcement on why they felt the new owner was the best choice. The past owner can help during the various presentations to highlight the similarities in values and culture between the two organizations.

At this meeting, it’s critical for managers to review who the new company is—its culture and values—to answer the critical employee questions and to define what the next steps are going to be. You can not over-communicate during this meeting. The first meeting in fact marks an ending with the past owner and the beginning with the new team.

The new employees’ questions are important and emotional. They ask, will they have a job? What salary, benefits, job location, reporting relationships and key procedures will change? Many of these questions are about the way things used to be addressed and handled, which often relate to culture and how that might be different or the same as the new owner’s approach. Managers must answer as many of these questions as they can. If they can’t answer a question at that moment, find out and get back to the total group. At Valley, we’ve developed FAQs that we initially give out to employees and then as additional questions are asked and answered, we publish a next edition with contact names and numbers always provided

Acquisitions represent a transition, and it is this transition that generates very different emotions among various employees. Employees from the new owner’s company typically feel excited about the new challenges that the integration brings. Employees from the acquired company may have very different reactions, such as feeling anxious, uncertain or even hostile as they go through the transition. The key is not to let the uncertainty drag on without answers, so work hard at communication.

The second meeting usually follows the next day with a continued “welcome aboard” discussion and the completion of the hire-on paperwork. At this second meeting, signup for benefits can occur. Beside reviewing the benefit package, this is an opportunity to answer any and all questions. Most important, stress that theirs was a successful business—that’s why you wanted them to join your team. Each one of these employees contributes to that success and together you can take the business to the next level. Because this second meeting focuses on benefits issues, you can invite spouses to attend so that all questions can be addressed.

At this point, employees have had time for the announcement to settle in. The new owner has introduced more of its managers into the work environment. Initially, there is as little change as possible because you need time to observe, evaluate and assess how things are being done before you can get clear about what needs to change and what doesn’t. Many times, a new idea from an acquisition can improve your whole organization. This observation period also provides an opportunity to see how to merge work processes and skills.

Don’t be surprised by possible overreactions, and acknowledge any “losses.” There may be a period where some new employees show signs of grieving, such as sadness and disorientation, or even try bargaining in an attempt to get out of the situation. Don’t mistake this for bad morale, as it’s a natural sequence that some experience; they’ve been attached to the previous identity possibly for many years, and that doesn’t change immediately because of an announcement and a few meetings. It’s important that observations are made and managers help to make sure the new employees don’t get stuck at this stage; they eventually have to let go. Most do move ahead, but natural attrition may occur. Explaining to the new employees that it’s the company’s job to take care of them, and their job, as always, is to take care of the customer, sets the stage for the next phase of the transition.

The A-Team and Transition Manager – Helping through the Neutral Zone
Following the initial informational meetings, it’s back to work and servicing customers with current schedules and assignments. Many times, these new employees are surprised how “back to normal” things are. They do the jobs they previously had and service their customers in the same way. There always will be some additional training, especially in safety, as well as training in delivery, order placing or filling processes. Most feedback is that these employees are appreciative of the lengths the acquiring company goes through to keep them safe or to make sure they understand these new ways and behaviors.

Things that Can Make an Acquisition Fail Culture Differences Management Differences Poor Motivation Loss of Talent

To make clear what work has to change, the A-Team members are the main communicators. The team will observe as well as begin training on the acquiring company’s approaches where and when appropriate. They also will be instrumental in reinforcing values in all process and procedure training.

If it’s a large acquisition, a transition manager can be assigned who pulls together an advisory group consisting of acquired managers/employees to work at understanding the business, customers and work processes. Both these groups help communicate any changes or decisions, as well as act as communication links back to management from employees.

The “Neutral Zone” is what can be called the point in transition where acquired employees now know and believe the old ways of doing things are no longer in place, but they are not quite confident/competent in the new approaches. Most don’t want to go back to the old way, but the new way isn’t quite comfortable yet either. This is the point where the A-Team really supports, gives feedback, and is accessible for questions. There are times where this Neutral Zone can be very creative as employees are trying new things and may just put an even newer spin on the Valley approach, which benefits all of the team. Employees should be encouraged to work with the A-Team, and if they see a better way in the process, to let their A-Team member know.

Open and honest communication and over-communicating are still management’s focus. With the transition manager, advisory group and A-Team members being on-site full time for an extended period, relationships are built to foster this kind of communication. Be ready to problem-solve and help the new team members.

Launching the New Beginning – Flying Solo
There is a point where the “basics” are in place. Anxiety levels have dropped, and employees are focused on doing their jobs. They are out there servicing customers. They are now feeling comfortable being part of the acquiring company. They may miss some of the old ways, but they are comfortable going forward with the new way, and they are starting to build relationships internally with other company locations and team members. Members of the A-Team aren’t as active and are there to handle questions that occur less often. Soon the A-Team is withdrawn, but they still keep in touch with those who might need them, keeping lines of communication open.

This is the point in time where the transition manager helps the advisory team of managers and employees start to feel familiar enough in using the acquiring company’s approaches. They see the values in play and how they are embedded in all efforts. New employees start to take a more active role in creating their own purpose. They develop their own “picture” of what their group’s role, contribution and goals will need to be aligned with the transition manager’s direction, original plan and budget for the acquisition. There still are integration activities going on, but employees are more actively involved in handling these. They develop goals and objectives for their employees so they all know what part they have to play in this new beginning – their plan. Managers step in and get more familiar with policies and approaches so they can manage these in their work groups.

Culture Comes Full Circle
New employee confidence is growing, and more and more individuals are taking on initiative in daily decision-making, which further reinforces their confidence. They reach out more to other locations and employees and learn even more. They are starting to own what they do, bringing their own personalities and skills to the tasks, yet operating in sync with the values of the acquiring company. They no longer feel as if they are different from the other members of the team. At this point, the business names, logos and past identity start to change. They now see themselves as the acquiring company’s employees and can feel pride in that association.

There is no stated time to complete this process, and some acquisitions take longer than others. However, the average length of time for employees of the acquired company to reach this level of confidence and comfort can take anywhere from six months to a year. It is time well spent.