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research report

THE PREEMINENT ORGANIZATION FOR DIVERSITY THOUGHT LEADERS

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Published By: Diversity Best Practices 2 Park Avenue, 10th Floor New York, NY 10016 DiversityBestPractices.com Copyright © 2014 by Diversity Best Practices. All rights reserved.

Leveraging Diversity and Inclusion in Mergers and Acquisitions

February 2014

1 | P a g e Copyright © 2014 by Diversity Best Practices. All rights reserved.!

Leveraging)Diversity)and)Inclusion)in)Mergers)and)Acquisitions)

))INTRODUCTION

The integration of corporate culture is essential to a successful merger or acquisition;

however, more than half of companies (58 percent) say they don’t have a specific

approach to assess and integrate culture.1 Those companies without a specific approach

for culture report a higher-than-normal loss of critical employees during the transaction.2

In failed mergers, it’s often not just two corporate cultures that are at odds. Many

mergers are global in nature, bringing in differences in national and ethnic culture. The

Daimler/Chrysler and Alcatel/Lucent mergers are just two examples that were mired in a

conflict of country cultures. Inherent differences had an impact on how decisions were

made, how work was organized and how problems were solved. These differences were

never resolved and, as a result, performance suffered, key talent resigned, and

productivity diminished. 3

Ensuring that diversity and inclusion are kept in mind during a merger or acquisition can

help address cross-cultural integration issues. Senior diversity practitioners are charged

with being culturally competent and understanding the internal company culture as well

as the culture of the geographic region(s) in which the company operates. As such,

these diversity and inclusion team members can alert senior leadership to potential

conflicts during and after the merger or acquisition.

“A diversity professional who is a corporate officer of a company can be privy at the

appropriate time to the goals and objectives of a merger or acquisition, along with the

senior executive of HR,” writes Philip Berry, president of Philip Berry Associates LLC, a

New York City-based business consultancy. “His or her early involvement can help plan

for the undertaking, along with the inclusion of finance and legal leaders. At any point

along the way, it is fruitful to involve the diversity officer so he or she can address the

delicate issues of cross-cultural integration.”4


Winston Strategic Partners, LLC, a Norwalk, Conn.–based communications consulting

firm, recommends considering the following to integrate diversity during a merger or

acquisition:

• Identify the similarities between the merged organizations

• Be explicit when identifying the differences between the merged organizations in

terms of the company’s business objectives

• Determine which will better serve these objectives

• Be authentic and forth-right in communicating internally the rationale to

promote/eliminate certain business practices

• Encourage feedback as changes are implemented

• Leverage members of the organizations who can be the “eyes” and “ears” to

represent all segments of the talent pool so every “voice” is heard

• Be flexible enough to course correct, if necessary5

THE ROLE OF EMPLOYEE RESOURCE GROUPS IN MERGERS & ACQUISITIONS

In addition to the diversity and inclusion officer, a company’s employee resource groups

(ERGs) can play an important role in the success of a merger. These groups can help

leaders of the post-merger company understand the culture of the legacy organizations

and their employees. ERGs can also serve as a resource to educate employees of the

post-merger organization about the new corporate culture. When employees have an

understanding of the landscape going forward, workforce attrition in the newly formed

company can be greatly reduced.

The following are examples of how companies have leveraged employee resource

groups during and following mergers and acquisitions.

Johnson & Johnson

Company growth through acquisitions is a business imperative for Johnson & Johnson.

The New Jersey-based pharmaceutical company relies on its employee resource groups

to assist with the cultural assimilation associated with integrating a foreign company into

a U.S. organization. The ERGs have helped the acquired companies to begin to

contribute to revenue and growth almost immediately.


“In order to reap the greatest rewards, J&J needs to figure out the best way to map itself

into [the acquired] organization and work around its system without destroying the magic

of the acquired company,” says Arisa Barista Cunningham, vice president, global

diversity, for J&J’s Medical Devices and Diagnostics Group.

During the acquisition of an Israeli company, Johnson & Johnson’s Association of Middle

Eastern and North African Heritage were consulted to obtain insights into doing business

in Israel. Other employee resource groups, such as the Asian Society for Innovation and

Achievement and the South Asian Professional Network and Association, have helped

make connections with local governments and businesses and prepare executives for

international assignments.6 Having insight into local cultures can reduce the potential of

conflicts that can cause a merger’s failure.

BNY Mellon

Before the 2007 merger of The Bank of New York and Mellon Financial Corporation,

each company had its own diversity and inclusion program supported by employee

resource groups. Following the merger, these programs were brought together under the

same global and regional governance structures.

The newly formed BNY Mellon supports its focus on diversity and inclusion through the

following:

• A Global Diversity and Inclusion Council, chaired by the chairman and CEO

• Regional Diversity and Inclusion Councils in EMEA and Asia Pacific

• Four employee resource groups focusing on women (Women’s Initiatives

Network), multicultural employees (IMPACT), employees with disabilities

(HEART), and lesbian, gay, bisexual and transgender employees (PRISM)

• A Business Resource Group for Returning Military

• An Office of Diversity and Inclusion steered by a new global head of diversity and

inclusion7

State Street Corporation

During mergers and acquisitions, State Street Corporation, a financial services holding

company uses its employee resource groups as a bridge into the company for

employees in the acquired organizations and relies on these groups to assist the human


resources team with new employee on-boarding. “The ERGs basically act as a

welcoming committee for new employees,” says Mike Scannell, State Street’s senior

vice president and head of global inclusion, about the role of the company’s ERGs

during mergers and acquisitions. The company uses questions on employee

engagement surveys to assess the effectiveness of its ERG efforts during these

transition periods.8

Exelon

Prior to the 2012 merger of Exelon and Constellation, each company had its own affinity

groups. Exelon referred to them as employee resource groups, while Constellation

called them business resource groups. Despite having different labels, both companies’

groups were focused on fostering a more inclusive environment, serving the community,

providing professional and personal development and taking part in recruiting events.

Exelon, the post-merger company, offers eight employee resource groups in cities

including Baltimore, Chicago, Houston and Philadelphia. These ERGs represent the

integration of the legacy companies’ employee groups and support Exelon’s diversity

and inclusion strategy of:

• Raising diversity awareness by strengthening employee connections

• Cultivating an inclusive work environment

• Representing the diversity of Exelon’s marketplace. 9

Merck

The 2009 merger of Merck and Schering-Plough made Merck the second largest

pharmaceutical company in the world. During this transition, the company leveraged its

nine employee resource groups—the Veterans’ Leaders Network, the Differently Abled,

the Women’s Network, the Interfaith Network and others groups focused on Blacks,

Hispanics, Indigenous people, Asians, and the LGBT community—to deliver diversity

awareness activities to employees of the newly merged firm..10

CONCLUSION

Research has shown that the inability to integrate cultures—both corporate and

country—is the cause of most failed mergers. Understanding the internal and geographic

cultures of pre-merger companies and then determining and communicating the


corporate culture of the post-merger entity can significantly improve the chances of

success. Culturally competent diversity and inclusion professionals can serve as an

asset in gaining a much-needed cultural understanding during this period of transition.

In addition, an employee resources group can be a valuable tool for companies to learn

about the people within their organizations (and the regions from which they hail) and to

educate employees about the culture of the post-merger company. As illustrated in this

report, companies are beginning to leverage employee resource groups in this manner.

Greater involvement of diversity professionals and employee resource groups during

and after the transaction can work to minimize the cultural disconnects that often lead to

failed mergers.

ENDNOTES

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1Bouwman, Christina H.S., “The Role of Corporate Culture in Mergers & Acquisitions,” Weatherhead School of Management, Case Western Reserve, accessed February 4, 2014, http://faculty.weatherhead.case.edu/bouwman/downloads/BouwmanCorpCultureM&A%20Dec2012.pdf 2Bouwman, Christina H.S., “The Role of Corporate Culture in Mergers & Acquisitions,” Weatherhead School of Management, Case Western Reserve, accessed February 4, 2014, http://faculty.weatherhead.case.edu/bouwman/downloads/BouwmanCorpCultureM&A%20Dec2012.pdf 3!Berry, Philip, “The Diversity Officer Role: Its Relevance During the Recession, Recovery and the Obama Era,” Diversity Best Practices, accessed February 4, 2014, http://www.diversitybestpractices.com/publications/diversity-officer-role-its-relevance-during-recession-recovery-and-obama-era!4 Berry, Philip, “The Diversity Officer Role: Its Relevance During the Recession, Recovery and the Obama Era,” Diversity Best Practices, accessed February 4, 2014, http://www.diversitybestpractices.com/publications/diversity-officer-role-its-relevance-during-recession-recovery-and-obama-era 5 Diversity Challenges of Mergers and Acquisitions, Winston Strategic Partners, LLC, accessed February 4, 2014, http://winstonstrategicpartners.com/blog/?p=90 6 “Employee Resource Groups That Drive Business,” Jennifer Brown Consulting, accessed February 4, 2014, http://www.cisco.com/web/about/ac49/ac55/docs/ERGreportEXTERNAL.pdf 7 Zocca, Alessandra, “Intellectual Generosity and Leadership Are Always Rewarded and Do Help Women Move Up Faster,” Professional Women International, accessed February 4, 2014, http://www.pwi.be/Default.aspx?pageId=984098&mode=PostView&bmi=1297325 8 Santana, Joe, “The 4C’s of ERGs,” Diversity Executive, accessed February 4, 2014, http://diversity-executive.com/articles/view/the-4-c-s-of-ergs/5 9“Diversity + Inclusion 2012 Report:” The Unique Contributions of Each Individual Shape the Organization,” Exelon, accessed February 4, 2014, http://www.exeloncorp.com/assets/newsroom/downloads/docs/Div_Inclusion_Report.pdf


!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!10 “Merck’s Merger with Schering-Plough Will Open Many Jobs,” Diversity/Careers in Engineering & Information Technology, accessed February 4, 2014, http://www.diversitycareers.com/articles/pro/10-octnov/dia_merck.html

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h report - Diversity Best Practices · 2016-07-19 · 1 | Page Copyright © 2014 by Diversity Best Practices.All rights reserved.! Leveraging)Diversity)and)Inclusion) in)Mergers)and)Acquisitions)))