Culture Shock
By Kevin Featherly

Kevin Wilde remembers the first time he transgressed against a new corporate culture. Several years ago, Wilde left General Electric, where he had helped guide employees through a number of company acquisitions, to become the chief learning officer (CLO) at Minneapolis-based General Mills. One day, about a week into his new job, he addressed his fellow General Mills managers in a meeting, pouring out his thoughts on several issues he felt needed to be discussed. Behavior like that was routine at GE. But it wasn't at the Midwestern food giant, and the reaction he got was markedly different.

"Everyone froze and the body language got weird for a few uncomfortable minutes, and then we sort of carried on," Wilde recalls. Later, he realized he had violated an unspoken General Mills cultural more. "I was just bringing up a new idea that might challenge the current thinking—but without letting some people in the room know I was going to do that," he says. In General Mills's culture of "Minnesota nice," he says, it's considered customary to give a heads up before speaking out. General Mills is open to new ideas, he says. "But first they want you to say, 'I want to talk about it, just so you know.'"

Corporate culture, to borrow Wilde's phrase, is the water in the fishbowl of any business. Employees are immersed in it, inundated with it, but unconscious of it—at least, until things change. When one company acquires another and the water from those two corporate fishbowls is combined, it often results in a shock to the system for everyone involved.

When General Mills acquired fellow food giant Pillsbury in 2001, it fell to Wilde to shepherd employees across the cultural gap, partly through training. "The role that training can play is in educating leaders on the new demands and new rules of making a merger or acquisition work—giving them the competencies or skills to make the new team win," Wilde says. "The culture can either turn positive or negative on you—and you [as a trainer] will cast a shadow on that."

In 1999, a Harvard Business Review study found that only 21 percent of companies that undertook a merger or acquisition ultimately judged it "a clear success." A decade earlier, Chicago management consulting firm A.T. Kearney determined that 58 percent of mergers just flat-out failed. Other studies indicate that about a third of the time, a company's value leaks away within 18 months of merger activity.

In many ways, steep merger and acquisition (M&A) failure rates result from poor strategic planning, says Mark Mendenhall, a business scholar at the University of Tennessee in Chattanooga. Companies merge when they simply shouldn't. Often, he says, an undetected force—incompatible corporate cultures—plays a major role.

"If anything, the due diligence before mergers and acquisitions all pretty much focuses on financial or other kinds of operational variables, and the feeling is that we can sort out all the culture-merging issues later," Mendenhall says. But that, he insists, is backwards. "Integration issues need to be looked at as part of due diligence," he says. "One of the interesting things we find in the research literature is that the way executives manage the post-merger integration is more important than the pre-merger factors."

That puts a premium on bringing the two unaligned cultures into sync. A key part of that, he says, is identifying and executing the right kinds of training—but not without knowing how training fits into the overall picture. "Training is only one of a lot of other factors," Mendenhall says. "If training isn't philosophically and conceptually fitted in with those other factors, it probably won't do any good at all."

When the gears mesh, Mendenhall says, training can be crucial to a successful acquisition. But when they don't, human resource departments wind up spinning their wheels, with company training officers left to clean up the resulting mess.

Doing it the Wrong Way
Rick Galbreath, president of Bloomington, Ill.-based management consulting firm Performance Growth Partners, can tell you all about messes. For 25 years, Galbreath worked in human resources at several Fortune 300 companies, often helping to steer companies through mergers and acquisitions. "I started this years ago," he says, "by doing it the wrong way."

In those days, he says, the typical method of preparing staff for an acquisition was for executives to put out a bland message to the troops, while giving senior managers a little more detail through memos that mandated a secretive approach. There was little latitude for speaking openly to fretting employees. Most of the resulting communiqués contained only inspirational blather about "one plus one equals three and all that tripe," Galbreath recalls. People often felt they were "being treated like mushrooms," he says. Worst-case scenarios were often realized.

"If you take the average manager who is not a very good communicator in regular circumstances, and you add this whole [M&A] issue to it, they are totally hopeless," Galbreath says. "The more hopeless they are, the more hopeless other people become." At that point, resumes get polished and productivity nosedives: "People are sitting around talking about the issue, worrying about what's going to happen."

In Galbreath's experience, it matters little whether the companies involved are huge or tiny—the same issues arise. For example, when his Fortune 300 company acquired a small Massachusetts-based tech firm one-tenth its size, everyone involved said the acquisition was a masterful decision that would produce a great fit. But then the deal was actually consummated.

"It was a botched wedding, and the children were ugly," Galbreath jokes. "The politics started. There were closed doors. Cadres started planning to knock each other off. We lost some of the major players on both sides. In a tech company that was traumatic." The primary failure was that cultural issues were not recognized beforehand, and they weren't dealt with afterward either.

In his current role, Galbreath takes a different approach. He takes the time to train key employees from both companies, emphasizing candor. Not surprisingly, he puts a premium on communication; for example, he tries to get clients to reveal any layoffs up front, for instance, and to get them over with quickly.

Once the consolidation process begins in earnest, he launches into training assessment, starting with a series of critical conversations and due diligence analysis of the respective organizational cultures. "You design some reasonable data-gathering process where you talk and look over employee surveys at each organization," Galbreath says. "You might look over some appraisals. You might do some focus groups." From there, he says, the merged company can identify the training challenges it faces, what changes are needed, and a time line for them.

Once a training program is decided upon, Galbreath says he does several things routinely: "First, we pull the senior managers together and provide them with an overview of what they can and can't say. Then you give them an overview of traditional communication theory, and finally some practicum on communication. We need to get them into a comfort level with launching those very important conversations."

Typically the biggest impediment is that the companies involved don't see cultural training as a serious need beforehand, he says. "The second biggest is that when they have thought about it, people just don't know what to say. They don't know how to approach this as a meaningful dialogue in an honest way."

If executives don't deliver the real story, Galbreath says, employees will fill the gap themselves—and their speculations won't be based on rosy scenarios. When things are allowed to get to that point, Galbreath is convinced, the seeds for a completely failed merger are sown. Sometimes, he says, there is simply nothing even the best trainers can do to help make a bad deal work.

"I think reality has to seep in here," he says. "You're not going to make a bad company a good company overnight. If you've got two bad cultures, you're not going to make a good one. I've told people, 'You know, you're lousy, and the other people are lousy. We can't help you.'"

A New Language
Maureen Taylor, president at SNP Communications in San Francisco, has a similar approach. Her main training regimen involves courses on public speaking to help directors, executives and vice presidents from both sides get on the same page. "When people right away start to learn and speak the words of the new culture, they become attached to it faster," she says. "That's where training can help."

Some people in the acquired company might resent being forced to speak and think in lockstep with their new bosses. "They have to deal with that," Taylor says. "It's the new people who have to adapt, not the old people."

David Austin agrees. The chief operating officer at Contextware, a software company in Annandale, Va., Austin is a veteran of many mergers. His company produces portal-style software that helps businesses through mergers and acquisitions by identifying how employees should be performing business tasks and enabling the information to be shared across company boundaries.

Austin advocates moving training way up on the M&A to-do list. "That creates a couple of opportunities," Austin says. "The first is to be able to convey information about cultures and best practices. That can help add productivity to the transaction, ease the nerves of the acquired company's staff, and ensure that you don't miss a beat as you're pulling the company together."

Take the General Mills example. Lots of training was required after a merger that doubled a major corporation's payroll overnight. It started with company leaders. "The way we did that training was to bring people into a room, across boundaries," Wilde says. "I remember one of the officers coming out of our senior session and he said, "You know, I really feel part of this management team now.' So the way that you do the training can be as important as the topics that you're covering."

Much of the program, he says, has gone well, and some elements of the post-merger training continue, three years later. He admits that in some areas, training fell a little short, particularly when it came to easing ex-Pillsbury sales staff into the fold. Six months after the acquisition, on the eve of the first post-merger national sales conference, Wilde conducted an opinion survey of the combined sales force. Scores were consistently high on issues like commitment and belief in the merged company. But on a key question, "I know how to get things done around here," former Pillsbury employees gave an alarmingly low rating.

"It was surprising to see that the Pillsbury people felt less able and knowledgeable on how to get things done," he says. "We thought we had done enough to integrate the Pillsbury sales people on how to make the call, how to make things happen. That just shouted to us that we hadn't. So we did some things at the conference and since then to look at how you make sure you have all the formal and informal connections to make things happen." Six months later, he says, another all-employee survey showed ex-Pillsbury employees had reached parity.

The Buyer and the Bought
For Gene Frank, chief knowledge officer at Fairfax, Va.-based SRA International, post-M&A training has become something of a lifestyle. SRA is a federal government contractor that employs between 500 and 700 workers. It has been on an acquisition binge since 2001, acquiring five companies. Two of those acquisitions, Touchstone Consulting Group and Galaxy Scientific Corp., took place in 2005 alone.

Frank notes that there's one key abiding principle when it comes to mergers and acquisitions. "There are no mergers," he says, "only acquisitions. One way or the other, one or the other of the two companies is going to emerge dominant."

As such, he says, his company shops very carefully when weighing acquisition targets, and investigates exactly what kind of culture the other company operates under. While there are legal and strategic barriers to that process that make it difficult to really grasp another company's inner culture, Frank says there are ways to get a telling glimpse.

"Cultures, in terms of values and ethics, either come from the senior management of the company or not at all," he says. That means that early detection can begin with something as simple as treating the other company's leadership to a meal. "It's almost like the first time you have dinner with someone, when the whole dance starts. It's a courtship," he says. "You can gain an awful lot [of information] just by hearing the senior managers of the company react to certain things, what they say is important about their company."

Post-deal, the training starts. Incoming workers are assigned to take several quick classes on specific things that everyone needs to know—how the phone system works, how SRA's timecard system works, and so forth. That, Frank says, is the easy part of training.

Passing on cultural values is a whole different bailiwick. That starts when incoming employees take the same orientation classes that any new SRA employee takes, usually in groups of 20 or 30. This is their introduction to the new culture they will work in. But Frank says he has learned over time that incoming employees have already been instilled with a corporate culture—their old one—and that they take as much pride in it as SRA employees take in their company's. That allegiance can't be simply rubbed out.

"The fact that SRA is different is very difficult to train people in," he says. The problem, he says, is it's not simply a case of passing on hard information, like how to access the phone system. "You're talking about a different business model," he says. "Any training that tends to be abstract at that conceptual high level is more difficult."

However, since his company mainly concentrates on buying companies for the new skills their existing employees offer, retention is the trainer's primary one goal. So while there has to be a dominant party in an M&A, there also has to be sensitivity. That needs to be integral to training, he says.

"We try to teach people about SRA, and simultaneously during that process, we're also dealing with the senior and sometimes midlevel people to find out what they bring to the table, and if there are aspects to their culture that we might want to keep," he says. In 2001, when SRA bought the Marasco Newton Group, SRA discovered that its new management consultancy had a strong tradition of charitable contributions and community service work. "We adopted some of that tradition," Frank says. "That made them feel good, showed respect for their culture and made SRA better."

Noting that care and consideration are two parts of making training effective in helping to merge two corporate cultures, Austin emphasizes again that the chances for failure are much higher when those aspects of a merger are ignored. "Training is very often thought of as the proverbial redheaded stepchild of the corporation, but it's necessary," Austin says. "There can't be anything more unsettling to a business than a merger."

Reprinted from Training magazine- VNU Publishing