Successfully selling your startup to a larger player or succeeding in helping your big tech or big pharma company buy a hot new startup on the cutting edge is a barometer of success in the global Silicon Valley in 2021. But integrating a tiny startup into a much larger company can be challenging, typically because the larger company operates with more process and structure, and the startup operates based on deeply held values. A hallmark of successful combinations is forming a common view on culture and shared values. When cultural differences exist, they can become severe enough to derail integration. While disputes over perks might frustrate employees, cultural differences can be much more serious, such as how leaders make decisions or how managers relate to their subordinates.
The first step to reconciling cultural differences is identifying them. A cultural integration team, composed of key people from both cultures, can work on the differences and decide what to keep and what to change. Identify, if you can, the implicit assumptions of each entity. Determine which align with the combined company’s goals and vision. Keep what will help. Change what will not.
Communicate early, often, and clearly along the way. Ask for input and pay sincere attention to it. People will support what they help to create. Strive for one company, one culture, with leaders modeling the desired behaviors and transparency.
Be aware that merged or about-to-be merged companies are ripe for poaching. Incentivize new behaviors and strive to retain talent. Pay for performance. Reward historical contributions with cash and future contributions with equity. Compensation is a powerful tool in both the pre-close execution phase and post-close integration. Retention awards and transition incentives are typically used to supplement other incentive or severance programs that might already be in place. Retention awards are usually vested at specific milestones, while transition incentives are often vested based on achieving specific objectives. Together they are a powerful combination.
In designing culture and values, rewarding past performance and incentivizing accountability for future performance metrics will govern behaviors going forward. Designing success is partly a form of art and partly science and execution.