Why an M&A project fails on cultural aspects ?

This article explores the question: why do transformational projects still fail — and so predictably — when they neglect the human and cultural dimension, particularly in mergers and acquisitions (M&A)?

To answer this question, I look at the situation from the perspective of those who live and observe it every day: managers and employees, HR directors, general management, but also M&A consultants.

I have carried out an investigation in the field and I am exploring the phenomenon: the aim is to show where and how it happens, why it is not a surprise, and how a more detailed understanding of human and cultural dynamics could radically change the outcome of projects.

When a transformation project reveals what the organization didn't want to see

After 20 years in supporting teams at the heart of organizations, I have observed a recurring phenomenon: in major transformations, and more so during mergers and acquisitions, the same signs appear:

Team fatigue. Overload of managers. Contradictory injunctions. Shifting strategic visions. Cultures that do not meet.

And a field that is exhausted trying to hold together what has not been thought out together.

We often speak of a "management crisis". But in mergers, as in complex transformations: the crisis is not managerial, the crisis is organizational, the crisis is cultural.

A merger is not the simple addition of balance sheets or technologies. It's the collision of two ways of operating, two professional histories, two cultures — with their codes, their reflexes, their visions of "good work."

Just as a major transformation project is the collision between something that disappears with another form that emerges.

The data confirms it: 70 to 80% of mergers and acquisitions do not meet their objectives. And experience shows us that transformation projects always come up against the same pitfalls.

The observation is simple: people are competent in their individual roles... but it lacks:

1.              alignment between the links in the value chain - a synchronization

2.              exchanges, cooperation and anticipation between all the actors concerned - Systems thinking with awareness of its impact on stakeholders

When this organizational and cultural dimension has not been anticipated, the field takes care of it very quickly: misunderstandings, resistance, loss of meaning, blockages in execution, erosion of trust. The "unsaid before" emerges and makes itself known.

While the deal has been meticulously prepared in its legal, operational and financial aspects, the cultural dimension – although decisive – often remains implicit, postponed, or considered as a subject "for later".

Why is this choice made?

When I was a young consultant, I thought that the bosses were not competent and that they were only trained in finance and above all that they had an unparalleled political sense and survival. During the first merger I experienced as an HR employee, I had the impression that each department was exchanging Pokemon cards to place their protégés. Some had acquired the human dimension and saw "further".

With years of hindsight, I realize that my observation was too simple and that the phenomenon is more societal and cultural than managerial.

But then, for what reason(s) do the same logics repeat themselves despite the accumulated experience and the results observed?

I don't draw any conclusions but offer a course of testimonies

1.              teams and their managers

2.              of HR Director

3.              of leaders

4.              financial consultants specializing in M&A

After each testimonial, I share questions that can help to think at each level of the organization.

The objective is to have an operating framework to allow anticipation, to create dialogue to allow projects to optimize their economic, social and environmental impacts.

It is not possible (or fair) to follow a single modus operandi for all organizations. This is determined by the actors in each situation. The first step is to ask yourself the right questions.

Before going through all this, first a brief reminder of what an M&A is

What is an M&A?

A merger-acquisition, or M&A, refers to the coming together of two companies to join forces and gain strength, competitiveness or development capacity.

If you merge two teams or create a synergy between two activities in your company, I classify this project as a (internal) merger

For the external, there are two main forms:

·       Merger: two companies come together to form a new one, combining their teams, resources and practices.

·       Acquisition: one company buys another, which must then adapt to the culture and operating methods of the parent company.

For teams, these operations often create uncertainty: restructuring, changes in roles, new working methods, changes in management, cultural adaptation.

For shareholders, they are generally perceived as opportunities: synergies, economies of scale, faster growth, strategic strengthening.

When the field reveals what the deal did not provide

When an M&A unfolds without any real cultural and organizational preparation at the human level, the signals from the field are surprisingly constant, from one organization to another.

Once the integration is launched, the first signs quickly appear. These are not spectacular crises, but small frictions that accumulate: meetings that get longer, decisions that are delayed, working methods that clash. On paper, everything seemed coherent. In reality, everyday life is seizing.

1.              Some symptoms expressed by the teams:- "We don't really know how to decide anymore",- "We don't understand what is expected",- "We have the impression that the rules change without being explained",- "We feel evaluated through a culture that is not ours."

This daily reveals what the deal had left aside: the way people experience change, adapt... or resist.

In general, employees and managers say the following:

1.     A loss of adherence and motivationResistance, gradual dropout, façade positivity... the commitment erodes and gives way to a form of silent withdrawal: "I try to stay focused, but the truth is that my priorities have changed: I have young children and a house under construction. I still come to work every day, I do what I have to do, but inside I dropped out."

2. The drain of talent and know-howThe best people leave, key expertise disappears, and the company loses part of its operational memory: "We have lost the people who know the job, now I work with interns and fixed-term contracts"

3. An anxiety-provoking climate and growing tensionsConflicts, loss of trust, feeling of being "locked in": the atmosphere is tense and relationships are weakening: "I feel like I've been imprisoned", "I'm made to understand that we've been bought out and therefore I just have to keep my mouth shut", "now decisions are political, before I had my network and I knew who to turn to for information"

4. Unclear roles and insufficient resourcesMissions change, priorities shift, goals seem unrealistic — and teams lack the time or tools to succeed: "I don't know my goals. I don't know if my business will continue any longer. My boss asks me to write to her on this subject."

5. An increased risk of burnoutManagers lose credibility due to a lack of stable benchmarks, and teams and their leaders are exposed to real burnout: "I no longer feel efficient, I hesitate in my decisions and I can't sleep at night"

6. A cultural break that is difficult to live withRegrets, feelings of regression, misunderstandings around values and mindset: the merger sometimes has the effect of going back in time: "We went back 15 years. Everything I created was "thrown away". They say it's not useful"

7. Growing isolation of managersStuck between top-down decisions and the needs of the field, they lack spaces to share, understand and be supported: "My problem is to be able to maintain credibility in front of the teams. I don't know what to communicate and when I receive information, it changes every 5 minutes. I can't afford to communicate in these conditions"

What managers are looking for above all: staff, meaning, teamwork

Since I've been doing my job, I haven't seen managers or teams want to give up out of disinterest or selfishness. What everyone is looking for, in the end, is to find what they have already known: a committed, high-performing team that is satisfied to work together — a collective that cooperates and regains its energy.

When the first signs of dysfunction appear, the first needs expressed are generally to have properly staffed teams, with competent people, in sufficient number to ensure the workload.

Once this condition has been met, the next question concerns motivation and cohesion: how to rebuild links, restore momentum, recreate a collective capable of moving forward together?

Those who give up are because they have lost hope and have looked for a new opportunity to continue on their way.

Here are some simple and effective questions to feed your team exchanges

This is contained in a 2-hour workshop:

1.              What, in our daily lives, has seized up the most since ...?

2.              What is creating more confusion today: in our roles, our priorities or our decisions?

3.              What have we lost — in practices, in reference points or in culture — that made us effective?

4.              What weighs on us the most at the moment (fatigue, tension, unsaid, demotivation)?

5.              What do we need first to work well (resources, clarity, support)?

6.              What are the 2–3 simple actions that would immediately improve our daily lives?

7.              What would help us become a close-knit and confident team again?

8.              What first concrete step can we take together this week?

Take the conclusions of this discussion and talk to your HR or management.

As HR

Imagine that you are an HR director, and since the merger, requests have been pouring in. Staffing, operational support, reorganization... No wonder, you knew that. And yet, here you are. No budget to recruit (because you were asked to reduce the staff), no margin to support the teams (there was the awareness day for "ready, trained and positive"), the two-half-day training on the "leader at the top" and the workshop during lunchtime "let's be zen and efficient " for the change agents of each department. but you can feel that this may not be enough. 

Especially since the consultant who leads the trainings seems to be repeating what he said to the company across the street – a slide on brain function and the circadian cycle of recovery, he shares with you nutrition tips as a bonus. An ex-high-level athlete it seems, he communicates a lot about his successes on social networks, he's a friend of Rob, the CEO. He talks about the importance of creating meaning and value for customers. It's reassuring for the management to have someone who relays the messages and who "downs" the information. You found these initiatives nice, as HR you went to say hello to the group of managers at the break, but when you return to the office your situation has not changed, just a few more emails to deal with.

You see every morning that internal resources (including yours) are already stretched to the limit. Every day that passes confirms that the market lacks qualified CVs for your fixed-term contract searches.

Can you feel this frustration? You may experience it every day.

And yet you know that the solicitations of your teams are not whims. They reveal deep needs, essential to keep teams moving.

But you are told no to all these requests due to a lack of budget.

Are you wondering why these "human" costs are locked up in the HR envelope instead of being provided for in a "transformation" envelope from the deal?

You decide to go see your CEO to talk about it. You take a step back to bring something constructive.

Here are 5 questions you prepare before the meeting:

1.              What requests from the teams today reveal a vital need for the continuity of work, and not a simple "comfort"?

2.              How does the lack of resources (staffing, time, skills) concretely put the performance, health and motivation of teams at risk?

3.              What messages or decisions from top management create contradictions that I can no longer absorb alone as HR?

4.              What should I dare to say to the CEO — clearly, factually — about the current human risks and their short-term consequences?

5.              What realistic lever can I activate right now to support managers and teams, even with an equal situation or a small additional budget?

You meet your CEO (*)

(*I have also interviewed CEOs on the subject to get their learnings from transformation projects).

It's Monday morning at 9:00 a.m. and you (HR Director), go see Rob, your CEO

He tells you: "Oh hello, it's great to see you in shape, sit down... and close the door, please." I have something to tell you. Keep it to yourself, I want to talk to you about the merger. ».

"I need you. Help me. Advise me. »

And he begins: we still have good results but I am worried about the following points:

1.              I realize that I wanted to go fast. To show that things were moving forward. Ticking off lists of operational points to be settled, creating synergies, communicating clear results... It has become my daily life. Different types of products to be aligned, urgent decisions to be made, shareholders who are waiting for concrete action and who need to see that things are moving forward.

2.              So I imposed very direct, very operational things. And, without realizing it, I damaged the culture. I realize how the "concrete" can kill integration.

3.              Each member of the Executive Committee who comes back to me with operational issues. I feel that they are cracking and want to embellish the situation and that sometimes they don't dare tell me. They want to show that they are excellent and that the problems are not their fault.

4.              The pressure is increasing. What to do?  Reducing staff. Close projects. Favor one team over another. Putting people at odds because they don't provide solutions. It's tempting sometimes. I'm caught between "not deciding, or deciding everything top-down" because I don't really have a choice, I have to move forward and show results.

5.              Dealing with conflicting interests... On paper, all this seems rational. In reality, I create cracks. I am also aware of the requirement I have imposed.
I expect both a high level of human competence and impeccable technical execution. I thought that HR would succeed in developing skills, creating internal changes to compensate for the voids. But when it doesn't stick, everything gets stuck. And I see it: except for some of the faithful, either people leave or they join in resistance. And then to me no one speaks to me frankly, I have the impression that you say yes to my face but that it's another game that is happening behind the scenes. I feel lonely.

"I hadn't anticipated this violence."

Then he returns to the subject of your meeting:

It's a good idea to create this team dynamic that you propose to me and... Let's start with the Executive Committee:

1.              I now understand that culture has to start with the management team, I thought I could infuse it naturally, almost mechanically. Of course not. If the executive committee and senior managers do not carry the cultural vision and do not embody the structure (the framework), no one can do it for us. Find me a workshop that takes these points in hand and creates an "intelligent" alignment

2.              And I also recognize my blind spots.
In hindsight, I wanted to believe that "the merger was going well". I made shortcuts. I overestimated the tools. Oversimplifying the value chain. Underestimated the hidden costs. And I discovered late the underground resistance, these "sorry, we couldn't do it" that said out loud what I didn't want to see: inertia, soft sabotage, non-adherence. We must address these points to the Executive Committee.

Then Rob makes a request to you:

find me a moment outside with the Executive Committee where we can work on our management team, on our leadership resources and also on our individual and collective blind spots. I need a place and a time for us to address the points.

There are 2 minutes left in your meeting. He looks at you and concludes:

"Today, I understand that what I wanted to prove — efficiency, speed, tight riding — sometimes prevented deep integration. And that fusion, as brilliant as it is on paper, remains fragile if humans are not really integrated into the equation."

Let's put these points as a priority in our agendas and organize a moment between us on these themes.

1. What does our board really need to be aware of in order to understand the human and cultural impacts of the merger?

(What blind spots should we make visible? What risks are no longer sustainable? What weak signals should we name clearly?)

2. What essential conversations does the committee absolutely need to have — even if they are uncomfortable — to create cultural and managerial alignment?

(What should we agree on? What should we clarify together? What inconsistencies or contradictions should be addressed collectively?)

3. What dynamic do we want to create within the committee so that it becomes the engine of integration — and not an amplifier of current tensions?

(What kind of leadership should you embody? What framework should be set? What behaviors should be supported or stopped to move forward together?)

The elephant in the room - what everyone knows

Having a posture of questioning as this CEO does is not trivial. Imagine that your management team has already committed to savings, synergies, value creation.  We showed the best possible scenario to the shareholders. To come back to the discussion and recognize that we will have to invest more in people would be to admit that some impacts were underestimated at the time of the deal or that the leadership in place is not up to the task of implementing the operation.

So the only strategy is to be positive, creative and to keep the machine running so that managers plug the gaps, that employees manage the operations, and plan for automation or outsourcing to do the rest. In this plan, complaints and negative voices must be minimized. If you're on the board, you can buy a little bit of time and one option is to fire Rob and put in an interim cleaner, someone new to run more efficiently.

It is therefore easy to understand that going back on what is wrong requires courage to name things, temerity to go against the current of the prevailing culture, but deep down... It's just lucidity.

The facts: by ignoring the ecology of resources, it is the structure (the company) itself that is weakened: its promise, its brand, its credibility, its performance. And you, on the front line, know this better than anyone.

Another point of view - the specialists who prepare the deals

While doing my research, I went to ask M&A consultants

Here is their feedback, very cash:

We are asked to produce figures. The cultural audit is almost never carried out

·       "It's not in the processes."

·       "Culture doesn't fit into an Excel."

·       "We want to move quickly."

·       "There is no such thing as a cultural auditor." It is the financiers and lawyers who take care of the deal

And they add, almost fatalistic: "We always postpone the subject. But when you come back to it... it is already too late. We often come across the same blind spot in mergers and acquisitions: we audit everything, absolutely everything... We analyse the figures, the markets, the legal risks, but we don't ask ourselves the simplest questions: Are we really going to be able to work together? How does this manager treat his teams? What do his customers think of him? »

When I mention the possibility of systematically offering a cultural audit, the answer is quick: "Financial culture takes precedence. Managers want figures, measurable. The human consequences will be for later — and they will not have to deal with them. »

In the logic of M&A, we go for it: schedule pressure, "delivery" culture, Excel and PowerPoint plans that push us to go straight to the point, to deliver results and produce reports that minimize uncertainty.

We focus on what we are used to measuring and we postpone the rest. And yet, this is where everything is at stake. Without transparent communication, without team participation, without buy-in, we create anxiety, turnover, resistance.

We forget that behind the promise of synergies, it is humans who ask themselves: "What is going to happen to me? Do I keep my job? What sauce will I be eaten? In the end, it is for these reasons that the majority of M&A do not create the expected value. It's a real shame because we could have anticipated it. It would even cost less than the negative side effects created by the current way of doing things. 

And the observation, again and again: what we underestimate the most is exactly what ends up derailing everything.

In conclusion

Let yourself be surprised by the concluding sentence(s) that come to mind.

The preceding paragraphs are based on my experience, research, and the experiences of the people I met.

Maybe you have encountered different situations or do you have another perspective?

What is your opinion? What is your experience?

I would be curious to hear/read you and to share the rest of the reflection/action with you.