image How to Evaluate Cultural Alignment When Considering a Merger

How to Evaluate Cultural Alignment When Considering a Merger

In the U.S. personal lines industry, mergers and acquisitions (M&A) take time, effort, resources, and skillsets so they run smoothly. A culture clash during and after a merger can make your work even more challenging. That’s why it’s vital to be proactive and take the time to evaluate cultural alignment when considering a merger or acquisition

Why Is Culture Fit Important for Mergers and Acquisitions? 

Mergers are beneficial in the personal lines industry for several reasons. However, when cultural differences clash, the process is affected. In the best-case scenario, productivity slows or is disrupted, and in the worst-case scenario, the deal falls through. Fortunately, by conducting a cultural assessment when considering and planning a merger, you’ll be less likely to deal with this significant challenge. 

What Elements Should Be Assessed for Organizational Culture Compatibility? 

The level to which the cultures of merging organizations can live and work together is called cultural compatibility. Low morale, conflict, decreased motivation, and decreased productivity can occur without a culture match. 

As they say, there are no perfect matches, though you can determine if cultural compatibility or the lack thereof will affect the merger to the extent that it’s not worth pursuing. 

How can you do that? Here’s how to honestly assess both organizations by asking 4 impactful questions. 

1. What Values Are Shared? 

It can sometimes work to your advantage to begin by identifying what is shared between the two organizations merging. What values do they share, and how can you use that to fuel a positive merger and acquisition? 

2. What’s the Shared Narrative Between the Two Organizations? 

Mergers bring on change, which leads to employee stress. It’s important that both companies have a shared narrative about the merger, including its purpose and what it means for them. 

3. What Are the Shared and Differing Company Norms? 

The way each company conducts business, holds meetings, collaborates or not, and makes decisions drives company culture. A culture clash is likely to occur if these elements are different between two organizations. That’s not to say you can’t blend norms and support both organizations in coming together and adopting new norms or keeping some from one organization and some from the other, and so on. You want to be clear going into the process where the pain points will be. 

4. How Compatible Are the Emotional Cultures? 

It’s here that a deep dive into the management styles and philosophies of each organization is important, as well as the communication styles of employees across the board. Generally, psychological safety is a necessity for organizational success. However, not all organizations foster it.  

For example, you might have one company that encourages diversity and wants employees to speak up, share their ideas, and challenge others. The other may have a company that prefers their employees adopt the leadership teams’ ideas and thoughts without hesitation or argument. These two cultures would likely clash if they were merged. 

Building blocks illustrate building a strong culture

Tips To Ensure a Successful Merger Through Cultural Fit 

As you assess and move forward with the mergers and acquisitions process, here are three steps to take to support a successful merger and cultural fit. 

1. Begin Early to Diagnose Cultural Fit Issues 

During your due diligence, ask yourself the questions above and clearly identify how work gets done and what the cultural pain points are between the two organizations. 

2. Prioritize Your Results 

Next, you’ll need to prioritize how to apply what you’ve learned. Which cultural areas work well and will enhance the merger if they continue and what are some of the pain points and meaningful differences that will need to be managed to merge and form a high-performing business?  

Before closing the deal, address these areas and create a plan to move forward productively. 

3. Implement and Support Change 

Once you’re clear on the culture moving forward, it’s time to share what that looks like with your teams and support them through the change

Learn More About Mergers, Acquisitions and Culture Fit 

Now you know how to assess cultural alignment before a merger. But do you know where to find a personal lines leader to partner with through an M&A? At Confie, we have extensive experience and a positive track record in M&A negotiations because we care about people. Learn more about successful M&A cultural alignment and tips in our knowledge center. For more information about Confie, contact us today or call us at (714) 252-2500.