If you are considering a merger with another agency or being purchased, there is plenty of due diligence that you’ll need to perform.

Due diligence will span the gamut of issues, such as how contracts are structured, the soundness of the plan – and the numbers, of course.

If your agency is being purchased or merged into another agency, one of the main reasons the other company is entering into the agreement is the success you’ve had over the years. And the main driver of that success has been the people you employ, everyone from customer service representatives to producers.

Your specific company culture is a large part of your success and when a new party enters the picture it can be disruptive.

Your agency’s culture encompasses many things, including:

  • How management and supervisors treat their subordinates.
  • The agency’s values and community involvement.
  • Norms and how you communicate with one another.
  • Group versus individual accountability.
  • Whether you allow staff decision-making autonomy or if you have a hierarchical model for making decisions.

Some agencies have a rigid culture that has won them success selling insurance, while others have a more jovial atmosphere that celebrates achievement of their staff regularly. Agency goals can also differ, with some more interested in controlling costs while others are focused more on growing.

This is why it’s so important that corporate culture is top of mind when considering a merger or acquisition, and it should be part of your overall due diligence. In fact, large differences in corporate culture can sink a deal quickly and irreparably.

And if a deal goes through between agencies with clashing cultures, it could quickly hamper operations and you risk losing key talent if they are no longer happy in the new environment.

A study by Aon found that 80% of principals of agencies that were involved in mergers and acquisitions that had culture clashes said that an unsuccessful culture integration caused distraction and loss of productivity. Another 78% said that the loss of key talent was the worst result of the bad merger.

Getting it right
Corporate culture due diligence should be performed by both parties in the transaction, and can help identify both the opportunities and risks to their organizations should you merge operations.

A good approach is to have the combined leadership from both organizations meet and discuss how they picture the expanded operation’s vision and values going forward. Senior management should be involved in and lead these discussions, but it’s important that other key personnel be present too, including from your human resources department.

This combined team from both organizations should look at the following areas that constitute an agency’s culture:

Agency values – Each side should put on paper their agency’s core values and the principles that guide how they operate.

Communication – Communication styles can vary greatly between organizations. How do you communicate important developments to your team? How do managers and supervisors communicate with their subordinates? Does management have an open-door policy for staff who have questions or concerns?

Agency hierarchy – Look at your management hierarchy, how personnel report to superiors and decision-making autonomy among staff, if any.

Employee satisfaction – If your employees have high job satisfaction and engagement, and the other party’s staff doesn’t, that may be a warning sign. Both sides should evaluate these metrics.

Workplace norms – Look at the work environment (is it relaxed or rigid?), how employees interact with one another and management, as well as the agencies’ customs, such as annual or regular employee-building culture-reinforcing events.

Client, vendor and community interactions – One good way to gauge company culture is to look at how your agency interacts with its customers and interested third parties like vendors, other business partners and the community at large. Is your agency engaged in community activities, for example? Would these interactions change if your agency were to merge with or be acquired by the other entity?

Much of this work can be done by sharing information between the two parties, including:

  • Surveys of employees about their engagement at work,
  • Client satisfaction surveys,
  • Job descriptions,
  • How each firm measures productivity, and
  • What each firm does in terms of events and other team-building efforts.

The takeaway
Culture cannot easily be defined in a written statement. It’s not something tangible and you have to look at how your agency operates day to day and your cultural norms. This is a shared experience and it’s important to ensure that whichever firm you are merging with or being acquired by is a good fit.

The last thing you want is a complete upending of your office culture, risking defections of key talent that may have been instrumental in your agency’s success.

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