Understanding the corporate cultures is a critical and often overlooked aspect of M&A due diligence. A leading indicator about corporate culture clash are the core business values listed on their respective corporate websites. If the core values indicate corporate cultural differences exist and these differences are not probed further, it could determine whether the deal is successful or not.

Core Values: A Warning Sign of Misalignment?
A recently announced high profile merger has some signs of potential corporate culture misalignment based on their different core values. One organization’s core values listed on its website highlights its talent as a competitive differentiator while the other focuses externally on its outstanding market leadership and track record of delivering for clients. Both approaches have been validated by the success of the organization; they have just taken different routes to achieve their success.

Corporate Culture A + Corporate Culture B = Corporate Culture C
When a new corporate culture is formed, it’s critical to anticipate how the changes will impact post-merger performance. Will the divergent approaches be harnessed properly to enhance the merger value or will they be a source of angst resulting in lost value? The core values are a leading indicator but without data they are just a hunch problems may arise. To know for sure, the corporate cultures can now be measured and compared quantitatively to dig deeper and reduce the risk of a failed merger.

Corporate Culture Due Diligence Questions To Ask
By asking the right questions, the merging firms can learn more about their corporate cultural differences to better anticipate how the people involved in the merger will respond. Corporate culture due diligence questions measure:

• Buy-in vs Dig-in:  Forecast whether leaders in charge of carrying the message truly buy-in or if they are secretly digging in which will be disastrous.
• Will the talent-driven firm respond to change differently than the market-driven firm?
• Executive vs Employee Gaps: Which group is furthest from buying in to the new business culture – the executives or the employees?
• How will the acquired firm’s adjustment to a different way of success measurement and reward impact performance?

Talent Analytics Removes the Guesswork from Post Merger Integration
Fortunately, technology exists today that facilitates measuring and comparing corporate culture to address these questions.

By using Talent Meters, the robust talent visualization engine inside Advisor, merging organizations can leverage key talent insight to inform critical business decisions which ultimately influence success or failure of the merger. Talent analytics-guided business decisions lead to cost savings, retention of key employees and ultimately a better business outcome – a successful merger.

Apply Talent Analytics to Measure and Compare Corporate Cultures

These firms and the myriad of others going through mergers have two choices:

• Ignore misalignment warning signs and continue to rely on hunches when determining how merged talent will adapt to change and hope for the best; or
• Learn more about misalignment warning signs by measuring and comparing the two corporate cultures for instant insight.

For your client’s next merger, which approach will you advise?

Mike Kennedy is a Technical Evangelist at Talent Analytics Corp. He can be reached via mike@talentanalytics.com.

Learn More about Talent Analytics in M&A

The next Talent Analytics webinar on October 5, 2011 at 12pm EST will discuss how Talent Analytics can be used to enhance M&A post merger integration. Register here.