Culture can often be neglected simply because it is difficult to measure, especially when compared to hard facts such as number of employees or company revenue. After all, what constitutes a “good” culture? Definitions may vary from company to company and even among members of your own acquisition team.
Despite this challenge, company culture should not be ignored; it is an important characteristic of the acquisition target and a significant factor in the success of the transaction.
I have found the best way to measure culture is to use objective criteria and concrete metrics. This way, everyone on your acquisition team will be on the same page when evaluating a potential acquisition target. Below I’ve listed three example criteria to consider:
- Communication Style – Observe how employees and management typically communicate during the acquisition process. Is there truly an “open door” policy where all suggestions are welcome? Does it take a long time to come to a decision or does the company make decisions swiftly? Consider this communication style lines up with your own.
- Entrepreneurial vs. Mature Company – Is the original owner still at the company or does the seller have a professional management team? Also be sure to take a look at employee turnover, benefits and compensation. These items will give you a better understanding of the target’s culture.
- Conflict Resolution – Does the company have a formal process in place? If so, how does it compare to your own process?
There are, of course, other criteria you may wish to consider when evaluating the seller’s organization. And, there is no one right answer when it comes to measuring culture. Your criteria and metrics will be different depending on your strategic rationale for acquisition and you own company’s growth goals.
I’ll be discussing some more tips on measuring company culture my upcoming videocast on “Cultural Due Diligence” this Thursday, November 5. Don’t make the mistake of omitting culture from your M&A process.