Marrying Two Business Cultures---What to Consider When Merging Companies

By Priscilla Kohl, HRTools Staff Writer

Rear-View Mirrors Function Well in Traffic Situations

Have you ever noticed those warning signs when you’re merging onto a busy multiple-lane highway? It doesn’t really matter what the warning sign says about whose responsibility it is to yield. You will look out for yourself first. 

Merging your company is a little like merging lanes at 70 mph during peak traffic time; your life and future are in your hands. However, the rear-view mirror helps only in traffic situations.  Like most business scenarios, awareness and preparation are the keys to a successfully-merged business kingdom.

Merging Business Cultures

Merging companies have also been compared to entering into a marriage.  When two people marry, they are merging cultures possessing unique backgrounds, values and histories.  When two companies merge, the same principles hold true. As with any type of merger, it is important that the decision-makers respectfully communicate expectations, goals and boundaries.

If you are a business owner, you have worked hard to establish your brand and reputation, both of which reflect your company culture and goals. You have earned credibility and customer loyalty.  All these intangibles matter greatly to you and to your employees and customers---present and potential.  

Companies merge for business reasons and goals; primarily to increase market share and revenues and to strengthen their resources.  When a company merges with another, everything is at stake.  How will their culture affect yours?  How will their people adjust to your culture?  Will they buy into the new company ways, including its philosophy and values?  How will the merged employees behave and will they be productive and service-oriented after the merger? 

As Dr. Kent Rhodes, author of Making Mergers a Growth Strategy, said, “When companies merge or go through an acquisition, the lack of a cohesive culture in the newly merged company can break a deal." 

Ways to Prepare for the Cultural Adjustments

While you cannot make or force the affected employees to feel happy about a merger, there are ways to prepare for and anticipate issues before they are overwhelming or unsolvable problems.  By doing your due diligence, you will have a much greater chance of spearheading a successful merger, one that will also earn the buy-in of a greater percentage of the employees.

Before a merger takes place, here are some suggested areas and issues you will want to prepare for and review: 

• Benefits regulatory issues (i.e., COBRA and Internal Revenue Service [IRS])
• Deferred compensation plans
• Employee contracts
• Employee handbook
• Employee relations
• Executive compensation
• Form 5500 and other documents pertaining to plans protected under the Employee Employment Retirement Income Security Act (ERISA)
• Fringe benefits
• Gathering information pertaining to all benefits
• Gathering information pertaining to compensation
• Golden parachutes
• HR policies and procedures
• Incentive compensation
• Insured and self-insured plans
• Operational questions
• Organizational charts with key employees’ positions
• Payroll issues
• Pending employee relations lawsuits
• Pension plans
• Profit-sharing plans
• Salary administration
• Severance packages
• Stock option plans
• Stocks
• Summary Plan Description (SPD)
• Supplemental or excess pension plans
• Welfare plans

In addition, you will want to consider the following federal compliance areas:

• Office of Federal Contract Compliance Programs (OFCCP) (affirmative action programs, Executive Order 11246, etc.)
• Equal Employment Opportunity Commission (EEOC) (EE0-1 reports, pending charges, etc.)
• Occupational Safety and Health Act (OSHA) (OSHA-200 logs, reviewing accident rates, etc.)
• Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), Age Discrimination in Employment Act (ADEA) (pending charges, potential charges)
• Wage or hourly charges or audits

As one final word of advice, it is always wise to consult an attorney who specializes in the complexities of mergers and acquisitions. 

Source: Society for Human Resource Management

 Merging your company is a little like merging lanes at 70 mph during peak traffic time; your life and future are in your hands.