Few M&A initiatives deliver the anticipated value. Often, the reason is that they fail to carefully synthesize the purpose and values of each entity into something new and inspiring for the merged entity. This failure leads to inevitable conflicts of culture and values between the organizations that came together. Purpose is the tool by which to avoid these clashes and optimize value in acquisitions. Consider Amazon’s acquisition of Whole Foods.
Amazon and Whole Foods both are companies driven by purpose, but their purposes were different. Amazon’s purpose was “to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.” Amazon empowers people to find what they want, purchase it, and have it delivered without having to interact with anyone else.
Whole Foods’s purpose was the opposite. It required its employees, inspired by its cause, to engage knowledgeably and caringly with its customers. At its soul, Whole Foods is about "a place to shop." One of Whole Foods’s core values is “to create ongoing win-win partnerships with our suppliers.” Amazon also has an inspiring set of values, but they are very different from Whole Foods’s and don’t include anything about suppliers.
Clearly, whatever Amazon’s strategic intention was in acquiring Whole Foods, it could not have intended for business to continue as usual at Whole Foods. Two choices faced Whole Foods:
1. They could try to adapt by aligning to Amazon’s purpose, but this was not possible because they are primarily a physical retailer focused on customer engagement, not an online store.
2. Whole Foods could create a new purpose that recognizes all of its own legacy capabilities plus the new capability-set introduced by Amazon. A new purpose for Whole Foods could continue the company’s commitments to delivering wholesomeness and to being a place that merges values with value. However, it would now focus on empowering customers to serve themselves efficiently to increase the value proposition for their customers.
One way to empower customers is the new retail trend called “order-to-shelf.” Order-to-shelf requires the store to display its inventory on its shelves, rather than hold a larger inventory in a back room and constantly restock it. This trend requires employees to be more focused on the inventory than on the customer, and is based on the belief that properly merchandised and efficiently managed inventory will yield higher value for the customer.
So, if this all makes good sense, why are Whole Foods employees “crying over stressful new workplace rules?” The answer could lie simply in the fact that Whole Foods leaders have not developed the capacity to design a new purpose for the company that not only supports Amazon but also expresses its own soul, nor have they been trained to use the purpose as a framework to explain how recent changes link to Whole Foods’s values. If properly conceived and communicated, the new purpose for Whole Foods could have been used to inspire employees rather than to drive them with numbers and spreadsheets.
Whether you are merging two teams, absorbing a team into your own, or merging two multinational corporations, the following six steps will help guarantee your success.
1. Audit pre-merger purposes
Probe the purposes of each entity irrespective of whether they ever articulated a purpose.
2. Determine pre-merger value-sets
Determine what values were necessary in each entity to create a culture capable of delivering on its purpose.
3. Explore culture merging
Are the purposes and values of each entity sufficiently aligned to one another for one to adopt the other’s with only minor modifications? If so, agree on the adoption and modifications.
4. Create new purpose and values
If there is not alignment between the pre-merger purposes and values, bring the leadership teams together to create a new purpose and supporting values for the new entity. This purpose should articulate the added value in the merger which could not have been realized if the entities had remained separate.
5. Develop leaders
Develop leaders’ capacities to inspire the merged team using its purpose and values. Teach them how to use these elements to inform all major strategic and talent decisions.
6. Align strategy
Align all processes, structure, and management practices to the new purpose and values to create an authentic organization of visible integrity. Remove unnecessary bureaucracy and micro-management to create a purpose-driven method of leadership and management.
Investment of time, effort, and thought upfront will yield multiples of value down the line.