Merger of Public Sector Banks
A merger provides a unique opportunity to transform a newly combined organization, to shape
its culture in line with strategic priorities, and to ensure its health and performance for years to
come. By establishing a clear fact base and understanding of the existing company cultures,
leaders can use a common language to set the cultural direction for a high-performing new
company. An aligned top team can begin to role-model the specific behavior needed and to lead
a clear, coherent program of initiatives that communicate and embed the
behavior more broadly. By tracking the effect of these initiatives, companies can take further
action
to correct the course as required.
To reap the benefit, cultural alignment should be central to the merger integration.
Building a better organizational culture through mergers: Addressing the unseen forces
Understanding culture, and proactively managing it, is critical to a
successful integration. This requires a comprehensive approach.
Cultural factors and organizational alignment are critical to success (and avoiding failure) in
mergers. Yet leaders often don’t give culture the attention it warrants—an oversight that can
lead to poor results. Some 95 percent of executives describe cultural fit as critical to the success
of integration. Yet 25 percent cite a lack of cultural cohesion and alignment as the primary
reason integration efforts fail. How can companies address culture more effectively during a
merger? How can the transformational opportunity a merger offers lay the groundwork for a
healthy, high-performing organization?
To Understand and address culture in mergers and focuses on the actions needed to combine
operations and deliver value. This approach has been refined over more than 2,800 mergers in
the past five years.
What is culture?
Culture is usually defined as one (or a combination) of the following: national cultures (German
versus American, for example), artifacts (such as a suit and tie versus jeans), and employee
engagement (including satisfaction levels). We believe that these definitions of culture are red
herrings and instead take a very practical view, which can transcend national boundaries. We
define culture as the outcome of the vision or mission that drives a company, the values that
guide the behavior of its people, and the management practices, working norms, and mind-sets
that characterize how work actually gets done. A company’s vision and values are almost
always clearly defined during a merger, usually by the CEO, with input from the leadership
team. The real challenges come in managing and aligning how work actually gets done. At this
level, misunderstandings, friction, and tension can make it difficult or impossible for teams to
work together effectively
and can jeopardize the success of the deal.
There are three key steps to understanding and managing culture during a merger:
Diagnose how the work gets done:
As early as possible in the merger process, leaders must learn about the culture of each of the
companies involved. What is the “secret sauce” of the target company, and where are its
“pearls.
A scientific approach is required to diagnose culture. The leaders’ gut instincts are not sufficient
to understand it fully at either company. A variety of diagnostic approaches, ranging from
management interviews to employee focus groups to surveys, are available. Surveys can
engage large numbers of employees and give people from both companies a voice. While one-
Merger of Public Sector Banks
on-one interviews and targeted focus groups can offer more specific insights, they are less
effective at identifying organization-wide trends or “pockets” of differing
behaviors. For a holistic view it is best to use a combination of diagnostic approaches.
Goal is to generate a fact base about the existing cultures and to build a single common
language around this understanding. What are the similarities? What are the opportunities?
What differences could cause friction?
Set priorities .
Drawing on inputs from the diagnostic, the top team should develop a point of view about the
shifts. This alignment ought to include target-company leaders where possible, since leadership
alignment and role
modeling are critical for successful implementation. To set priority, a series of “from-to” shifts
need to be initiated for the change plan defined by Key Performance Indicators.
Hard-wire and support change
Post diagnosis and identification of coherent themes and initiatives, it has to be hardwired to the
operating model and daily practices of the new merged entity. Formal structures are not always
the best way to influence an organization, and executives do not always understand who the
real influencers are. By identifying the most influential employees, leaders can recruit them as
change agents and give them the training and skills they need to be effective in this role. This
could include changing the company dress code, to match that of the acquired company, to
signal the change on both sides. Additional employee surveys and focus groups
can monitor the effect on workers. KPIs should also be monitored regularly. The top team
should own the process, holding theme leaders accountable and proactively addressing pain
points. Companies often fall short when they try to realize their cultural aspirations during this
third step. They should track the implementation of themes and initiatives with the same rigor
they use for financial targets.
Lastly, putting in place, a structured merger communications plan, is pivotal.
Several best practices are critical to develop a structured merger-communications strategy.
Focus on business objectives. Energy should be directed to protect and build business
value.
Start early and tailor. Messages should address the stakeholders’ evolving needs. If you
cannot communicate decisions yet, explain the process.
Govern tightly. Executives should be directly engaged through clearly defined roles and
processes.
Be conscious of culture. If, for example, bottom-up thinking is part of the core culture,
top-down messaging may not land as well.
Be consistent and compelling. All communication should be of high quality and
repeatedly reinforced in multiple channels. Communicate five times more than you think
you need to.
Humanize the message. Address what people really care about, in a tone that is
responsive to the mood and situation, not overly formal and legalistic.
Merger of Public Sector Banks
Animate your leaders. Actively align leaders, middle managers, and customer-facing
staff so that they communicate effectively and consistently. Do not outsource this work to
the communications function.
Stay up to date. Keep the IMO and the deal team and major workstreams connected, so
that information is up to date and that communications are as proactive and effective as
possible.
Be responsive. Collect and respond to feedback regularly and quickly.
Companies often make the merger-communications plan a low priority because of other
pressing needs. Some outsource the work entirely to the HR and communications functions—a
missed opportunity for the integration team and executive leadership. A structured focus on and
investments in communications, with the support of senior leadership, have been shown to yield
great benefits: a motivated employee base and engaged vendors, partners, and other
stakeholders, all supporting the newly formed company’s success.