Culture is one of the critical building blocks of any business. The question is, how do you build a high-performance culture post-merger? Today’s guest is Sumit Singla, who is among the Top 25 Organizational Design & Effectiveness consultants on Upwork. Sumit explains that communication is the most critical aspect. People look to leaders for the right answers, so leaders have to ensure they engage in two-way communication. With communication, you can ease your team’s fears and concerns and give them the confidence they need to perform. If you’re looking to build a high-performance culture, you’d want to listen to this episode!
My name is Jules. I help host the forum but I don’t do it alone. I have a lot of help from a lovely panel. It is a little tricky around this time of the year. A lot of us are taking a vacation and spending more time with family. It’s so hard to get people together, especially as far as our host. It’s me and Sumit. You’re going to have a great time. I already saw his presentation. We are going to be discussing building what’s culture post-merger. Culture is so important.
The slides that Sumit has are great. They’re also very interactive. I’ll give him a proper introduction for anyone that doesn’t know Sumit and isn’t as familiar. He is one of our regular guest speakers on this panel. Normally, we do also have Char who is an HR expert and professional. She’s also a small business owner. She runs Rocky Mountain Health Advocates. Normally she’s here but last time she was in a cabin. I don’t know if she’s gone back to Mexico. She’s all over the world.
Sam is normally here. He is the reason why we have the show, which is a forum where we get together each week. We have different guests speakers and we take on a range of topics. We like this to be interactive and fun. We don’t want it to be boring. We want to get you engaged and help you in every session. A little bit about Sam. He is not just the Founder of this forum but he’s also the Founder of CompTeam and the CEO as well. He is a reward strategist. He transforms companies through revitalizing rewards programs and compensation programs as well.
We’re going to get to our main speaker. Sumit is no stranger to the forum. He has been on the panel for a long time. He’s been a speaker as well and we’re bringing him back because he has a lot of great stuff to talk about the mergers. He’s going through a merger. A little bit about his background, he is an HR consultant and a people strategist. He has helped many companies around the world and he transformed companies through cutting-edge HR practices. He can help with organizational design, HR transformation and culture building. That’s what we’re going to dive into. Be ready. I love how he’s arranged everything. Thank you so much, Sumit. You get to be our lucky last speaker of 2021. It’s very exciting. I will hand you the floor. We can’t wait to see what you’ll share.
Thanks for the intro. I’m excited to be talking about anything to do with culture. Especially in a merger scenario, culture is one of the building blocks and it can be so critical. Before kicking off, I’d like to ask a question. What percentage of merges succeed, in your opinion?
It’s hovering around that 20% to 70% range or somewhere in between. What’s the answer? I’m curious.
It’s pretty close to what we’ve got here. That is 70% to 90% of all merges fail in the first five years. That number should be making that set-up. Take note, why do companies merge in the first place? If they’re bound to be doomed in a short timeframe of less than five years, why even bother merging at all? That would be the question.
Interestingly, most of the failures are because of culture. When you’re planning a merger, you don’t tend to think of, “Is the culture compatible or not?” You’re thinking of the big dollars coming in and whether it makes business sense or not. You’re thinking of whether it could be apt to destroy a competitor by taking them over and running them into the ground. These are harsh statistics.Culture is one of the critical building blocks of any business. Click To Tweet
The definition of success is important, the expected ROI within two years, which could be a very short timeframe, in my opinion, depending on the size and scale of the merger. The data is for a five-year timeframe, which makes it even worse. Mergers in teams are doomed to fail. I’d like to bring up a couple of mergers in history.
One of the more famous mergers in the automobile industry was Daimler Chrysler. Their troubled history can be summed up by the joke that went around, which was when folks will ask, “How do you pronounce Daimler Chrysler?” They would say, “It’s pronounced Daimler because the Chrysler is silent.” It was intended to be a merger of equals but Daimler was a lot more hierarchical and structured. Chrysler was more spontaneous and open as an organization. They didn’t fit into the Daimler world. Eventually, Chrysler was sold off in less than a decade. The loss resulting from this was about $28 billion. It was a devastating blow for mergers in the auto industry.
The other one was much happier. That was Disney and Pixar. Both were into animated films, 2D and 3D animation, but were operating in very different niches. Disney has a lot of children’s titles, a big seller with a lot of those soul-starring short films and even animation for adults. If you look at their catalog now, you’ll see the clear differences in how they operate and how their audience segments are different but there’s no conflict between the two organizations. It’s one of the more seamless mergers that happened in times. When things go wrong, they can go as hardly wrong as the ones on the left. When things work well in a merger scenario, they can be pretty interesting.
Let’s put ourselves into the shoes of an employee. Think about if you were an employee and your company would want to go on a merger, what would be the most important aspect for you? What would be the most question in your mind if there was a merger scenario? Communication, culture, salary, job security.
I’m handling a merger scenario and these are important questions that are coming up from the employee side. Communication nails it. Without communication, no matter what else is happening, it’s bound to fail. Leadership and positivity, yes. The leadership has to rally around the change. They have to be positive. You can’t have leaders having toxic water cooler conversations about doom and gloom all around or sparing uncertainty even though there might be a lot of it. People would look to the leaders for the right kind of answers. Leaders have to ensure they engage in two-way communication.
It needs to be the right focus on culture, which needs to dwell on a little of the past as well as on the future. We come from a great culture. We’ve got a heritage or a history of doing A, B, C things and we need to take it forward into the new organization. Salary and job security are big concerns as well. “Will I have a job tomorrow? Are you planning some kind of restructuring? Will you fire me? Will you demote me to a different role? Will I report to somebody else? Are you going to relocate me?” These are questions around one’s job and, “Will my salary reduce?”
Those are all very important questions, which would be among some of the things that come to mind. Since we’re talking about culture, why is culture so important? Enough and more research has shown that culture has a tangible element to it. It’s not a story of the six blind men and the elephant, where everyone is wondering what the elephant looks like. Culture is very measurable. On the one hand, you might feel mindsets are not measurable. We might feel values are very intangible.
You can surely measure all these cultural aspects. You can translate them into monetary value as well. A lot of surveys have shown that people are happier taking a compensation cut if they get to work in the right culture. Before proceeding further apart, I have one more poll question which is, what exactly does culture mean to you? When you hear about culture or the culture of your organization, what does it mean to you?
Lisa said, “Culture is definable and measurable.” The issue that she sees with mergers most often is that there’s no cultural due diligence to define the differences and expectations on both sides, i.e. be proactive. Deal-makers are all about the financial terms of the deal and rarely will advocate for this, unfortunately.
People tend to think more about what is the financial value of this deal. They completely forget that culture is tangible as well. It’s tougher to measure the value of a certain culture or the loss you would incur in case you don’t fix any of the cultural issues. That’s why at the due diligence stage, you tend to study financial processes, HR processes but you don’t connect all of them to culture, which can lead to disaster much later. What does culture mean to you? It could mean comradery and connectedness. I see it tying in with the earlier themes of communication as well. Is there enough open communication? Is there enough trust-building in the organization?
It doesn’t matter whether you’re an innovative organization or you’re focusing on operational excellence. What matters is the kind of culture that you’re trying to pay and how exactly you are trying to convey it to your people. Leaders don’t see culture. They think it’s a fuzzy mysterious thing. We’ve got this culture rather than a business strategy, but people in that commitment are the heart of your growth and brand.
The intangibility of culture is also because of a lack of communication. We presume that this is the way it’s always been around here without being able to explain why. I don’t know how scientific the study was but there’s an example of scientists who put some monkeys in a cage and the cage was open from the top. The monkeys would try, climb out and escape. Every time a monkey did that, they sprayed the monkey with cold water and the poor monkey would back down.
Gradually, what they started doing was whenever any monkey word started climbing up, they would spray the other monkeys, the ones who would not climb it, with cold water. Eventually, they found that those monkeys would pull down any monkey who tried to climb out of the cage. Gradually, they started replacing the monkeys in the cage one by one to the extent that none of the new monkeys was ever sprayed with cold water, but whenever they’d see any monkey trying to climb out, they would pull the monkey down. They had no understanding of the why aspect of it.
I don’t know whether it’s an actual scientific experiment or not but I remember hearing about it. The idea was that’s how culture manifests itself. It’s measurable but a lot of times, we have no idea why we’re subscribing to a particular cultural element. If only we could start focusing on more measurement, we could start focusing on the rationale as to why we’re doing certain things. It would make culture a lot more of a living body and a measurable entity. That’s what I was referring to as well.
There’s a survey of job candidates and about 7,000 people were surveyed for this. They felt that they would be happy to get a job cut if they could work for a company that has a better culture. There are different bodies of research here. One of them quantifies it and says that the amount of annual salary decrease that people are willing to work for the right culture is about $28,000. This is in the US alone. This was for people who were looking at roles that pay about $150,000 a year. That’s a significant chunk. Potentially, people are willing to take 20% to 25% less money in case they get to work for the right culture. That’s a lot.Talk about creating positivity rather than reducing negativity. Click To Tweet
If we do it the other way round, imagine the incentive for an organization to create the right kind of culture. Instead of paying at the 75th percentile, you could end up paying at 60%. We also save a lot of money by creating the right culture. The reason we’re talking about this here is that merger is a great opportunity to create that kind of culture. There are different models that I’ll come to with two companies, A and B. Company A is our culture and we will completely absorb company B into it.
You destroy or eliminate the unique culture of company B and incorporate it inside company A. It usually happens when the sizes of the two companies are very different. It happens less often in a merger of equals. It happens when you’re a $50-billion company, and you’re taking over a small $100-million company that has 20 to 25 people. It may not make sense for unique subcultures. You might be better off absorbing the culture.
The second one is where you get to maintain separate cultures. You operate with two different cultures but depending on your products and services, you could still have a completely different culture. For example, in the Daimler Chrysler, if they maintain that, it might have had. If there’s a hotel chain that has one set of premium, high customer service kind of hotels, and the other one is more of a budget chain that they’ll take over, maybe they want to operate with completely different cultures because it may not make sense to merge those two together.
At the same time, if you look at the third one where two companies come together and they forge a completely new culture, that is also a possibility. In my hotel chain example, you can have a chain with a great culture saying, “We would like to retain our customer friendliness but at the same time, maybe we can do operational excellence or stick to some principles of financial prudence from the budget chain.”
The last one is where you operate with subcultures and company B gets to retain its own unique culture. Operationally, it’s a subset of A but culturally, it could still retain its own distinct culture. This could be an example of Amazon and Zappos. For a long time, Zappos operated with their own culture where they didn’t have as much of a hierarchy. They were a lot more customer-friendly and they even used to give bonuses to people for leaving. At the end of the first one month, you could quit your job and you would take away a bonus because their philosophy was, “If you don’t want to be here, we think it would be a waste of our money to give you.” They’re happy to pay you to leave. That was what they were doing.
How do you decide what your culture strategy is? Do you evolve both cultures in a similar way? Do you stay separate? Do you have the best of both? Lisa is saying, “Since you need to clarify decision rights and this is the most common form of tension for people, who’s on first?” I can understand that you’re bringing two maybe very different organizations together. How do you navigate that? What if they disagree on one point? One company wants to retain something and the other one wants to abolish it completely. Have you experienced something like that before in a merger? If so, how do you overcome that? How do you find a happy medium for both of the companies?
Quite honestly, it would be great for people to even start having a conversation as step one and say, “We’ve got these two different cultures. How do we bring them together?” Usually, what I’ve seen is more of cultural assimilation where one company says, “These are our five pillars of culture. We want everyone in the organization to adopt them.” From the one itself, they start by saying, “Sign our code of conduct. You can’t do this. If you do that, we could fire you and issue a warning letter.” That’s not a very pleasant experience for all the people who’ve been taken over.
There are different approaches here. It depends a lot on the context. For example, there’s an Indian conglomerate, which has known for its acquisitions. It’s not just more of acquisitions but they’ve got diverse businesses. They own a movie studio, a supermarket chain, a tire manufacturing company, also tea and coffee estates as part of their portfolio. They maintain very distinct cultures. They’ve never tried to amalgamate and say, “This is the one single unique culture that we stand for.” They have identified some core values and behaviors that they value but they’ve never tried to merge the cultures of their tire business with the movie business. That’s a smart strategy.
Normally, forging a new culture is a good approach but it’s very context-dependent. If you’re talking about the merger which didn’t happen, back in 2018, Kraft Heinz was trying to take over Unilever. Unilever is one of the most progressive companies in the world when it comes to things like inclusion, diversity and sustainability. They’ve been talking about a living wage and the fact that they want to educate their vendors on inclusion and diversity. They make everyone in their supply chain carbon neutral. They’ve advocated a new principle called Net Positive which says, “Advocating zero-carbon or minimum harm is stupid. You should be talking about creating positivity rather than reducing negativity or harm.”
Kraft Heinz wasn’t happy because it’s like a juggernaut. It crushes everything in its way and takes over. They felt that the Unilever culture would be destroyed so they voted against the move to acquire them, even though Kraft Heinz was offering massive amounts of money. Since then, Unilever has started doing even better. Technically, it’s not cultural due diligence but in a sense, it is the recognition that those two cultures will not be able to collaborate. It will destroy the organization where there is that cultural conflict.
What do we do to change the culture or make a merger successful? We don’t have the luxury of saying no to a merger because the cultures are incompatible. Typically, some board room discussions will result in a merger being announced. It would then fall upon various leaders and the HR function to figure out, “How exactly do we build a culture? How do we bring two cultures together?”You change by doing something until it becomes a habit. Click To Tweet
Step one, what are the other current cultural elements? What’s the current culture like? What is your envisaged future state? If you see a company like Apple and you’re merging with a company that’s based in China, it makes inexpensive handsets for the mass market and you’re not obsessive about quality. You’re fine with a 90% accuracy rate and giving people refunds or replacing their phones in case they explode or something.
I’m not being uncomplimentary to companies in that part of the world but there are cultural and stark differences in the way some organizations operate. What is your current culture? Do you focus on innovation or low-cost production? In the future, would you like to cut down on a little bit of innovation and focus more on reducing operating costs? Are you fine with exploring 100 ideas out of which you reject 95 but the 5 that you do adopt are absolute winners? How do you keep that innovation engine going? That could be one of your questions.
How do you still be prudent about your costs? How do you ensure that people look up to you as an employer of choice and so forth? What are your current and future cultural elements? How can you appeal to the minds of people and help them make rational decisions about what they want to see in your culture? How do you build an emotional connection? How do you connect them to your culture? How do you talk to their heart? Char is not here, but HR With a Heart model works well here.
Lastly, how do you make this self-sustaining? How do you inculcate those habits where the culture gets adopted? It’s not only as long as somebody is walking you through a set of slides or making you do an activity. It’s more like you start thinking in a particular way and doing something that starts becoming a habit. That’s how one can change.
When we talk about the current culture and envisaged future state, one example here is McDonald’s. McDonald’s is one of the largest fast-food chains in the world. They do get a lot of criticism for their contribution to obesity all around but they are also a very innovative organization, in the sense that they research about five years before entering new geography and think about who all they need to acquire, what kind of tie-ups they need to have with local farmers and local producers, and how they set up their supply chain to deliver a consistent experience all across. Also, culturally, how would they operate with all the partners or companies that they’re taking over to get there.
They’ve won a few awards for innovation as well because they tend to localize their products wherever they go. In India, they would have a different set of products than they would in Singapore, Australia or maybe the US. It’s a very different culture. We already spoke about the hotel chain example where for some reason you’re merging with a company that is into large scale budget hotels for business travelers. How do you bring the two cultures together? Do you want everyone to operate its culture and offer a world-class experience? Do you want to adopt certain elements of the mass market from your low-cost chain or do you want to operate two different ways altogether? How do you foresee your culture? What is it that you want to be baked in both of these organizations?
The second one is appealing to the mind. Creating a shared vision of what does success looks like. The aspect that Lisa mentioned was leadership positivity. How do leaders convince you about the road ahead? How do they get you excited? How do they define the success measures? It’s one thing to sell a dream about, “This is what the future will look like,” but do we have a road that takes us there? Are we able to find certain milestones which will help us in getting there?”
Lastly, are we having enough dialogue? Do we have enough, genuine heartfelt conversations which help us in understanding what people are saying, what their concerns are, and addressing them? Are we able to influence them to take a logical decision to make this merger success, and participate in a workplace that’s focused on results and outcomes? That’s how it appeals to the mind.
How do you talk to the heart? Step one, sign a covenant. The great thing is in the modern world, we don’t have to sign it in blood anymore. It’s more of committing to a set of shared values. It’s a joint way of doing things. What are some of the pillars that we can agree on which will create a foundation for us to succeed and create a set of rituals? There’s no drawing a pentagon and lighting fires inside. The ritual that we were talking about is very relevant from a cultural standpoint. You’re from that part of the world so I’d like to invite you to talk about it much better than anyone else.
We’re not around the bonfire. We’re not doing a Haka on a field. Maybe we could start something. It’s not bad. I love a bit of Haka. Maybe we could incorporate that into the corporate world and make things more interesting but you’re talking about something else.
It could be a ritual like that as well. When we’re talking about getting people excited about culture, the Haka, which is what the New Zealand rugby team do before they go out onto the field. It’s great to watch as a spectator. I don’t watch rugby but I could watch the Haka.
You can’t see a Haka and not be so mesmerized by their passion. I love the passion behind it too. If you’re putting passion into your rituals, your rituals become your habits and then habits, eventually, turn into the culture because everyone is in alignment with one another and the values of a company.
You hit the nail on the head by talking about passion. The whole point of talking to the heart is to build that emotional connection to talk about, what are the rituals that we follow? What is it that we stand for? What gets us passionate about creating the right kind of culture, passing on the right values and role-modeling them as well? The important factor here would also be to celebrate success. A team that wins together stays together. It’s important to not only be prescriptive in a culture scenario and say, “We’ve got to do this and that. These are our shared values. This is the behavior we’re expected to display.” You are a brand ambassador and so on.
It’s crucial to also celebrate success, to talk about what we’re doing well and what we’ve accomplished. Create those milestones where we look back and say, “We’ve come a long way. We’ve done a fair bit.” Moving on to the last part of it, how do we create the right set of habits? How do we give people the right tools and technology that they can access and make a habit out of it? How do we use things like habit-forming challenges?
Research says that if you do something for 21 days at a stretch, it becomes a habit. If I want people to engage in safer behavior, what kind of challenge can I give them? If I want people to be more creative, can I issue a 25-day challenge where everyone has got to think of a new idea every morning and discuss it with their team? How do you get people to create and build those right kinds of habits?Celebrate success because a team that wins together stays together. Click To Tweet
One of the ways to do it also is to assign commitment buddies. Some people can take a shared pledge. It could be something as simple as creating a culture where we help each other in striking a balance. Let’s say Jules is my leader, maybe I could hold her accountable by saying, “I’ll hold you accountable no more than one email after 8:00 PM in a month. If it’s crucial, we’ll allow you that. Any more than that, I’m going to encourage people to start ignoring your emails.”
That’s how commitment buddies would function and help in creating the right kind of behaviors. People then start believing that the right values and behaviors are not only what you see on a slide or a bulletin board. They’re being practiced by the people who matter. It sets a completely different doing altogether. That’s how we pretty much work towards building the right kind of culture.
I’d like to end the talk with a quote from Simon Sinek. No matter what the business rationale for your merger is or how many billions of dollars you expect to earn, you will not be able to earn the respect of your customers unless you own that of your employees firsthand. That’s why I love this quote from Simon Sinek’s book called Start With Why, “Unless your employees love your company first, the customers never will.” That’s where the workforce experience you’re building and the culture that you’re creating would matter.
You see it anywhere you go. You can 100% see it on an employee’s face or over the phone. You can feel when someone loves where they’re at, and the opposite, can’t stand where they’re at. You can feel and see it. It makes such a difference. The passion and the energy behind anything, the experience they create for their customers just because they love where they are, who they’re working with, and who their leaders are, it’s obvious. It makes such an enormous difference.
I noticed that everywhere I go. Coming from a customer service background, I always look for top-notch quality customer service, whether it’s impersonal over the phone. It’s like night and day. It’s crazy when you start to observe it and go, “They love where they work.” It makes you happy. It’s like energy. We’re all energy. I love those tips.
I started my career with customer service as well. One of the first things we were taught was that even though your customers can’t see you, they can hear whether you’re happy, upset, excited, afraid or distracted. They can hear the smile on your face if you’re happy. The idea was to help people to create a culture where the entire team would be happy and excited about serving customers. The feedback scores did reflect a lot of that. That’s a great point. Thank you.
With the merger you’re doing, are you experiencing any challenges? If so, do you want to share any of those things?
It’s an interesting one and a major clash of cultures because it’s a large conglomerate, which is taking over an entity that belongs to the government. Both the organization have got a lot of rich history. They pride themselves on having done a lot of innovative things and having been a part of Indian history. They’re both Indian organizations but the cultures are poles apart. One of the things that we’re trying to do is create a communication plan for the first 30 days to give people comfort about the fact that their jobs are safe and they’re safe. They’re entering a new world of opportunity and excitement, and they’ll be taken care of.
Getting the tone right, making sure that we appeal to the mind and top of the heart, and we do those aspects well is step one. We’re starting to think about beyond the first 60 or 90 days when the habit formation part of it will kick in. We’re trying to hold steady to these design principles and figure out how we want the culture of the new entity to evolve, and how strongly assimilated will they be in the organization that’s taking over their culture. It’s a pretty interesting project.
It’s nice that you’re at least involving the employees throughout the whole process. It’s interesting because, in the beginning, those were some of the points we touched on. Communication was important and the job security portion. Those two things where you’re telling everyone, “Your jobs are safe. You’re fine. Everything is going to be fine,” and then the communication part like, “How can we help you? How can we have this merger and start to instill new habits whilst also keeping your job safe? I love that we wrapped it in a nice little bow there.
Thank you so much, Sumit. This was such a detailed and thorough presentation. I love the slides. I hope everyone else did as well. We’ve got a lot of thanks. Our sponsor is TMA and Sumit, you have your TMA certification as well.
It’s a brilliant tool. It’s very insightful always to be using it. I would encourage everyone to write to us, ask for a demo, and seek some support in terms of taking the assessment for themselves. We could also talk about how to further deploy it. It’s extremely impactful. Culture kind of scenario could help in trying to figure out a lot more about your people and how you can create meaningful messaging for them.
Are you incorporating this into the merger that you’re doing? Are you using a lot of the applicable tools on this?
Unfortunately, no because I’m involved with a different organization there so they are using some of their in-house tools still.
You are part of a big team. It sounds like a very big exciting merger. You can’t be a one-man show for this one.
It’s a pretty large team. We’ve got about 21 people.
That’s a lot of work ahead.
Thanks for hosting us, Jules.
Sumit Singla is the founder of eleventHR Consulting.
Sumit has been working in HR & HR consulting roles for 16+ years across sectors and verticals and specializes in organization design, wellbeing, storytelling & design thinking, and performance management. In his career with consulting firms such as Aon, Deloitte, and Accenture, he has successfully led programs aimed at total HR transformation for clients.
Recently, as Associate Director for India Consulting at Deloitte, he worked with clients on cultural transformation and HR process and policy design. He also organized and spoke at conferences and events about a variety of topics relevant to HR today.
Now self-employed, he works with clients across the globe on a variety of HR solution areas.