How to Address Culture in Post-Merger Integrations

What's one of the biggest mistakes companies make during a post-merger integration (PMI)?

Culture impacts everything in business operations. It influences what members of the organization value, how they set priorities and make decisions, what types of individuals are successful, and how people behave in the face of challenge or crisis.

When executives do not understand the cultural differences between two organizations and their implications for the PMI effort, they risk being blindsided by those differences, which can impact the results of the integration. By contrast, taking the time to analyze in detail the cultures of the two organizations, with eyes wide open, will put them in a position to:

  • Define the culture and behaviors necessary for the companies to work together and win.
  • Design an approach for transforming the culture to meet their objectives.
  • Anticipate and plan for the likely reactions from employees at both organizations.

What is the right culture for the new company? The answer will vary depending on the situation and the specific opportunity at hand. But in any PMI, the first step in defining the new culture is to identify the cultural differences between the two organizations, even before the deal is closed.

Using insights gained from the cultural diagnosis, the integration leadership team can decide what type of culture they want for the combined entity. The new culture may combine the best of both worlds, or it may adapt the two existing cultures in a way that supports the new organization’s strategy.

Here are four focus areas for driving a culture transformation:

  1. Leadership Behavior and Communication. Leaders must be committed to building a new culture and leading by example. Through frequent face-to-face meetings, leaders should ensure that everyone throughout both organizations understands the desired behaviors and the role these behaviors will play in supporting the new company’s objectives. Regular pulse checks can measure progress in the culture change and identify any areas of resistance.
  2. Management Appointments. The process of selecting the upper two or three layers of the new organization during a PMI can send a strong message about expected behaviors in the new culture. The acquirer should introduce appropriate systems and criteria for recruitment, incentives, and promotions—along with the key performance indicators.
  3. Organization Design. The organization’s structure should be aligned with its strategic and business imperatives. In order to make the organization structure work, the acquirer has to create job descriptions that include key roles, objectives, and accountabilities, as well as articulate the capabilities and behaviors required to execute those roles. This task is closely linked to the appointments process.
  4. Change Management Tools. Employing a wide range of change management techniques can stimulate cultural change. The key is getting employees from both companies to talk and collaborate often in work and nonwork environments in order to understand each other better and to forge and strengthen relationships. Other possibilities include role-playing, boot camps, and temporary or permanent transfers.

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Learn More About Culture and PMI

Meet BCG Experts on PMI and Culture

  • Post-merger integration
  • Change management
  • Culture change
  • Large-scale reorganization and transformation
  • Leads BCG’s M&A and post-merger integration work in North America
  • Organizational design
  • Transformation programs
  • Cost efficiency and process improvement