TalentMap, December 12, 2011
By Jeff Chan

From Hermann Hesse (Human life is reduced to real suffering only when…two cultures…overlap), to Peter Drucker (Culture eats strategy for breakfast) to Herb Kelleher of Southwest Airlines (Culture is the most important focal point for leaders) and Lou Gerstner, former CEO of IBM (The thing I have learned at IBM is that culture is everything), important thought and business leaders have recognized that culture  is an essential consideration —  even more important than strategy — to any organization’s success.

Corporate culture is a general social understanding that includes beliefs, assumptions, values and perspectives shared by an organization’s members.  In turn, it affects behavior within the organization in areas such as management style and ethics. Standards in dress codes, reaction to changes, and work environment would fall under the corporate culture umbrella.  At core, corporate culture is the way people get things done in the organization.

Many frameworks or models help identify and understand organizational cultures.  There is no right or wrong culture. But it must be one that fits both an organization’s needs at a particular stage in its evolution  and one appropriate to the types of people the organization needs in order to accomplish its strategy.

Although employee engagement is not intended to substitute for organizational culture, it does measure how employees respond to the culture and other more physical elements of their work environment. As the following chart using TalentMap’s 12 employee engagement dimensions shows, it does align well with the four common dimensions of culture described by Nathalie Delobbe, Robert Haccoum and Christian Vandenberghe[1] and thus can be used as a proxy for culture without introducing a new survey tool.

For their part, Canadian healthcare providers, under pressure to rein in costs, are turning to a variety of means to more efficiently deliver services.   One strategy has been to merge. While the hospital mergers since the Ontario Health Services Restructuring Commission recommendations have had mixed results, the voluntary merger of two community health providers – Toronto’s New Heights Community Health Centres and York Community Services – has proved an unqualified success.

Indeed, 18 months after its approval, Unison Health and Community Services has met or exceeded all its financial, operational, patient outcomes, customer satisfaction, and employee engagement goals. A key to that success, according to Sean Fitzpatrick, CEO of employee research firm TalentMap, was identifying and addressing culture-related risk throughout the merger process.

‘Of all the requirements for a successful merger or acquisition – including strategic rationale, rigorous due diligence  and capturing planned synergies – bridging the culture gap between the organizations is the one most often overlooked and under-valued,’ says Fitzpatrick.

In Unison’s case, the boards and executive leaders identified and explicitly considered corporate culture as a key success factor but also a potential barrier in their planned merger. More notably, they utilized TalentMap’s employee engagement surveys as a culture assessment tool, supplemented by focus groups, merger-related surveys, and their own observations, in both pre-merger planning and post-merger integration activities.

Bridging the Culture Gap

The general lessons learned from the Unison success are applicable to both private and public sector organizations:

• Despite their many failures, mergers and acquisitions need not be feared. If well-planned and executed, the benefits of a strategically sound merger far outweigh the inherent risks.

• The parties must fully understand and commit to the merger’s objectives and benefits.

• Organizational culture needs to be considered in the due diligence process before the final decision to merge. It can also be used as a tool to assess merger barriers, and identify the most effective implementation levers during the pre-merger and post-merger processes.

• Effective change management is essential, particularly related to stakeholder identification and communications.

The Unison merger also offers lessons specific to public sector organizations:

• Merger benefits, although different than those in the private sector, can be just as quantitative and financially-driven. For example: cost reductions in labour from eliminating duplication; increasing purchasing power and therefore lowering costs; decreased capital needs; faster, higher-quality processes; better resource utilization; lower funding requirements from the government, and; income tax increase avoidance.

• Stakeholders and their expectations and priorities are more complex and diverse, and often in conflict. There exist not only shareholders, clients and organized labour, but also governments and political masters and voters to satisfy. There is also the potential for more personal and emotional interests from the public and media.

Combining resources in a formal merger may be the preferred method to achieve revenue growth and service delivery expansion goals, increase economies of scale or scope, gain influence, reshape the industry or sector, or bring better management to under-performing organizations. Despite the reports of merger and acquisition failures – those where the transaction failed to deliver expected results or worse, destroyed value – there are now many prescriptions and tools for improving the odds of success.

The Unison merger team identified a new tool for overcoming the organization culture divide. That tool: the application of the TalentMap employee engagement survey to assess cultural differences between organizations, and to improve merger pre-planning and post-merger integration management.

We hope the lessons learned from the Unison merger can provide the extra courage and confidence needed for healthcare Boards, executives and governments to consider mergers and acquisitions as one of the most impactful opportunities for facing the challenge of doing more with less.

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TalentMap is a consulting firm that designs and deploys employee surveys, and provides consulting support to help Canadian and US clients improve employee engagement, organizational performance, and consequently, business results. TalentMap surveys more organizations than any other in Canada.  Jeff Chan is Principal of Growth Alchemy Group and is a strategic advisor to TalentMap.

[1]  Measuring Core Dimensions of Organizational Culture
www.uclouvain.be/cps/ucl/doc/iag/documents/WP_53_Delobbe.pdf