When Companies Merge: Overcoming Policy, Pay, and Culture Collisions

April 11, 2024

Companies Merge

Mergers and acquisitions hold the promise of expanded markets, accelerated growth, and increased efficiency. But the road to realizing these benefits is paved with potential pitfalls. Successfully merging companies means navigating a maze of logistical, financial, and (perhaps most importantly) human complexities. From incompatible policies to cultural clashes, the challenges are numerous and the risk of failure is high. Here’s how two companies can successfully merge and avoid some of these issues. 

In this article, we’ll discuss the following: 

  • What is a company merger? 
  • What are some challenges for human resource management during mergers? 
  • Strategies for success to overcome these challenges 
  • How HR platforms and services can help make mergers successful 

How to Navigate the Phases of a Merger

The Fallout: When Things Go Wrong

Why do companies merge? There are several reasons, including expanding market share, gaining access to new technologies or resources, increasing efficiency, or eliminating competition. But when the dust settles after a company merger or acquisition, employees often face a disorienting mix of competing systems, expectations, and an overall sense of instability. Misalignments in policy, pay, and culture can have some pretty serious consequences.  

For instance, conflicting rules around paid time off, remote work, or expense reimbursement may create frustration and resentment, ultimately hindering productivity. Unfairness, whether real or perceived, in pay structures can lead to low morale, decreased motivation, and the loss of valuable talent. Profoundly different values, work styles, and communication norms can also foster an atmosphere of division and distrust, eroding the collaborative spirit of the new entity—which is typically the ideal that is sought during a merger.  

Case Study: The Disney/Fox Merger 

The 2019 merger between entertainment giants Disney and 21st Century Fox brought together two companies with vastly different legacies. Disney, with its family-friendly image and focus on meticulously crafted storytelling, stood in stark contrast to Fox’s edgier, more experimental content and risk-taking corporate culture. This clash created significant challenges during the integration process. 

Employees from the Fox side expressed concerns about their creative freedom being stifled under Disney’s more conservative umbrella. Meanwhile, Disney veterans felt unsettled by the disruption brought by Fox’s fast-paced, unconventional style. The success of the merger hinged on finding a balance between these opposing approaches, fostering innovation within a framework that maintains Disney’s core brand identity.  

Aligning Policies: Building a Foundation 

So, what can HR professionals do (proactively and retroactively) about all this potential for conflict? Streamlining policies lies at the heart of a smoother merger. These entities may have starkly different approaches to benefits administration, performance reviews, and even everyday HR procedures. The challenge is to consolidate these into a unified, transparent system that feels fair and efficient to employees on both sides of the merger.  

Strategies for success include early assessment to identify potential policy clashes even before the merger is finalized. Preemptive action saves time and headaches down the line. Communication and transparency are equally vital. It’s crucial for HR management to explain the reasoning behind changes, involve employees in the process where possible, and provide clear channels for employee feedback to mitigate confusion and anxiety. 

Compensation: Creating a Level Playing Field 

Let’s talk specifically about pay structures, which we know can be wildly uneven between merging companies—even for employees with similar job functions. Establishing a fair, equitable system is crucial in the post-merger landscape. This means conducting benchmark studies to ensure compensation aligns with industry standards and the combined company’s goals. Transparent communication around how pay decisions are made builds trust, even if not all employees get immediate raises. Partners like Commonwealth Payroll & HR can help with this process. Our compensation management tools provide data-driven insights into market rates, facilitating the creation of clear, justifiable pay structures that minimize potential conflict. 

Merging Cultures: The Delicate Balance 

What about corporate culture—notoriously tricky to define but with an undeniable impact? Successful integration requires acknowledging and addressing the unique ways each company operates. Merging these into a cohesive new culture takes time, but proactive steps make a significant difference.  

These steps include defining the non-negotiable core values of the new organization and communicating those clearly. Another powerful method is fostering cross-company collaboration with team projects and initiatives across the divides of the previous companies. This builds understanding and rapport. Finally, celebrating successes, like highlighting instances where cultural integration yields positive results, can help demonstrate the benefits of the merger for everyone involved. 

Leadership, Communication, and Empathy 

As companies embark on a merger, emphasizing the strength of the leadership team as well as employee support throughout the organization helps ensure a successful transition. Strong, empathetic leadership sets the tone for the entire integration process. Open, frequent communication across all levels minimizes fear and fosters a sense of shared purpose. It’s also important to recognize the emotional toll of mergers on employees. Offering resources and support can help everyone adjust more easily and promote a culture of well-being. 

How Can Commonwealth Payroll & HR Assist During Your Company Merger or Acquisition? 

Your organization isn’t doomed to culture conflicts and policy pitfalls. Commonwealth Payroll & HR’s platform offers robust HR management tools, simplifying the consolidation of employee data, streamlining the creation of new policies, and ensuring regulatory compliance—all essential during a time of flux. 

If you’re looking for some guidance to help during a transitional period, contact us to chat with our team and get the support you need.

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