When Two Companies Merge but Their Employees Don't

Introduction

Imagine two companies come together and suddenly everyone is told, “We are now one company.” Sounds simple, right? But employees do not automatically become one team just because the legal documents are signed. One company may be very formal, while the other is more flexible. One may take decisions slowly, while the other likes to experiment. One may have many layers of approval, while the other lets employees make quick decisions.

So, like, a merger or acquisition is not just about combining money, technology and customers. It is also about combining people. And people bring their habits, values, ways of communicating and ideas about what good work looks like. This is why culture integration becomes such a big HR issue during mergers and acquisitions.

The problem is that management may think, “We bought the company, so now everyone should follow our way of working.” Employees may think, “But our way of working is exactly what made our company successful.” And that is where things can become difficult.

Problem

When two companies merge, employees can start feeling like there are two groups inside one organisation. There can be an “us” and “them” feeling. Employees from the acquired company may worry that their culture will disappear. Employees from the larger company may wonder why the new people are doing things differently.

There can also be confusion about leadership, reporting lines, technology, pay systems, job roles and decision-making. But the cultural problem can be harder to see because it does not always appear in an HR report immediately.

For example, imagine one company encourages employees to take risks and test new ideas. The other company focuses heavily on planning, approval and reducing mistakes. Both approaches can make sense. But when the two groups start working together, they may see each other as difficult. The first group may think the second group is too slow. The second group may think the first group is careless.

So, the problem is not necessarily that one culture is good and the other is bad. The problem is that employees may not understand how the two cultures are supposed to work together.

Analysis of the Problem

The first concept is organisational culture. Culture is basically how things are normally done inside a company. It includes values, behaviour, communication styles, leadership habits and informal rules. Employees learn these things over time, so culture does not change just because a new company logo appears.

The second concept is acculturation. This looks at what happens when two different organisational cultures come together. One company may try to make the other adopt its culture. The two cultures may remain separate. Or they may combine parts of both cultures to create something new.

This gives HR an important question: Do we really need everyone to work in exactly the same way? The answer may be no. Some things need to be standardised, like legal policies, financial controls and basic employee processes. But other things, like communication style or team rituals, may not need to become identical.

The third concept is cultural due diligence. Before or during an acquisition, HR should understand what makes each organisation different. This means looking beyond salaries and organisational charts. HR should understand leadership style, decision-making, employee expectations, rewards, communication and workplace values.

The fourth concept is change readiness. Not every employee will react to a merger in the same way. Some may be excited about new opportunities. Others may worry about losing their jobs, their manager or their old way of working. So, HR needs to understand how prepared employees are for the change instead of assuming everyone will accept it.

The fifth concept is stakeholder mapping. A merger affects many groups, including employees, managers, senior leaders and customers. Each group can have different concerns. So, HR needs to identify who is affected, what they are worried about and what information they need.

Another important idea is the psychological contract. This means the unwritten expectations employees have about their relationship with their employer. An employee may believe, for example, that their company values flexibility, creativity or independence. If the merger suddenly removes those things, the employee may feel that an important promise has been broken, even if that promise was never written in their employment contract.

Real-Life Case: Microsoft and LinkedIn

A very interesting real-life example is Microsoft's acquisition of LinkedIn. Microsoft announced the acquisition in June 2016, and the transaction was completed in December 2016. Microsoft paid approximately $27 billion for LinkedIn. ([Microsoft Investor Relations](https://www.microsoft.com/investor/reports/ar17/))

Now, here is where the HR part gets interesting. LinkedIn and Microsoft were both technology companies, but they did not operate in exactly the same way. LinkedIn had its own culture and way of working, while Microsoft had its own large corporate structure and operating systems.

Microsoft did not simply say, “LinkedIn is now Microsoft, so everyone has to become a Microsoft employee.” Satya Nadella's communication around the acquisition said that LinkedIn would retain its distinct brand, independence and culture. Jeff Weiner would continue as LinkedIn's CEO and report to Nadella. Microsoft also said that, in the near term, reporting relationships at Microsoft would not change. ([GeekWire](https://www.geekwire.com/2016/full-text-microsoft-ceo-satya-nadellas-memo-on-linkedin-deal/))

So, basically, Microsoft chose a selective approach. The companies could work together where there was a clear business reason, while LinkedIn could continue to keep important parts of its identity.

This was not just a theoretical idea. A Microsoft leader who later worked on several acquisition integrations described the LinkedIn integration as bringing together a combined workforce of around 130,000 people. She also explained that the two organisations operated differently and that both sides had things they could learn from each other. LinkedIn brought a more analytics-based and experimental approach to some areas, while Microsoft brought experience with large-scale enterprise platforms and channel partnerships. ([LinkedIn](https://www.linkedin.com/pulse/what-i-learned-from-mergers-acquisition-assignments-microsoft-zmuda))

So, the idea was not simply “Microsoft teaches LinkedIn how to work.” It was also “Microsoft can learn something from LinkedIn.” That is a very important mindset during cultural integration.

HR Theories, Frameworks and Concepts Reflected in the Problem

The first concept we can see is acculturation. When two cultures meet, organisations have different choices. They can push one culture onto the other, keep the cultures separate, or create a way for both to contribute. The Microsoft and LinkedIn approach is a useful example of selective integration because LinkedIn was initially allowed to maintain important parts of its own identity.

The second concept is cultural due diligence. Before deciding how to integrate employees, HR needs to understand what actually makes each company different. If HR ignores these differences, it may accidentally remove something that employees see as an important part of their workplace.

The third concept is psychological contract. Employees can have expectations that are not written in their contracts. If those expectations suddenly disappear after an acquisition, employees may feel that the organisation they joined is no longer the same.

The fourth concept is change readiness. A merger can create uncertainty. Employees may ask whether their role will change, whether their manager will change and whether their company's identity will disappear. So, HR needs to understand employee readiness and support people through the transition.

The fifth concept is stakeholder mapping. Employees, managers, leaders and customers can all be affected differently by an acquisition. So, one communication message may not work for everyone.

The sixth concept is selective integration. This means asking, “What actually needs to be combined?” instead of assuming that everything must be combined. For example, financial reporting may need one common system, while team traditions may not.

Solution Using HR Theories, Frameworks and Concepts

The first step should be cultural due diligence. HR should understand both companies before deciding what the new organisation should look like. This means talking to employees, managers and leaders and looking at how decisions are actually made.

The second step is to identify what is non-negotiable and what can remain different. Legal rules, safety standards, payroll processes and basic compliance may need to be aligned. But things like team rituals, communication styles and ways of brainstorming may not need to become exactly the same.

The third step is to use stakeholder mapping. HR can identify different employee groups and understand their main concerns. Senior leaders may want clarity about strategy. Employees may want job security. Managers may want clarity about reporting lines. So, communication should answer the questions that matter to each group.

The fourth step is to create a two-way communication system. Employees should not only receive information. They should also be able to ask questions and explain what is working or not working. This helps HR identify cultural problems before they become major employee-relations problems.

The fifth step is to create cross-company teams. Employees from both organisations can work together on real projects. This is useful because people learn about another culture much faster by actually working with someone than by attending one presentation about “our new culture.”

The sixth step is to protect useful parts of the acquired company's identity. This connects to selective integration. If a particular practice is helping employees innovate, communicate or serve customers well, HR should ask whether there is actually a reason to remove it.

Finally, HR should keep checking whether integration is working. Employee surveys, retention data, internal mobility, engagement results and feedback from managers can help HR see whether employees are actually adapting or simply being told to adapt.

Actual Solution Implemented in the Microsoft-LinkedIn Case

Microsoft's initial approach was deliberately not to completely absorb LinkedIn. LinkedIn kept its distinct brand, culture and independence, while Jeff Weiner continued as CEO and reported to Satya Nadella. Microsoft also stated that LinkedIn would be allowed to decide what made sense to integrate. ([GeekWire](https://www.geekwire.com/2016/full-text-microsoft-ceo-satya-nadellas-memo-on-linkedin-deal/))

At the same time, the companies did not simply operate as two completely unrelated businesses. Microsoft teams worked with LinkedIn to find areas where the two organisations could create value together. The integration included opportunities to connect LinkedIn's professional network with Microsoft's products and services. Microsoft's annual report said the acquisition was expected to accelerate growth across LinkedIn, Office 365 and Dynamics 365.

The people side also involved employees from both organisations learning from each other. A Microsoft leader involved in acquisition integration described how the different cultures brought different strengths. LinkedIn's teams had a strong analytics-based approach to testing ideas, while Microsoft brought experience in scaling enterprise technology and working through channel partners. The integration therefore created opportunities for both sides to learn rather than treating one culture as automatically superior.

Microsoft has also described its broader approach to culture change as involving employee input rather than having senior leaders simply decide what the culture should be. Its culture work under Satya Nadella included leadership commitment, employee surveys and involving employees in shaping the desired culture. ([Microsoft](https://www.linkedin.com/business/talent/blog/talent-engagement/steps-microsoft-took-to-renovate-culture))

What HR Can Learn From This

The biggest lesson is that a merger does not automatically create one culture. It creates a situation where two groups of people now have to figure out how to work together.

So, HR should not ask, “Which company's culture should win?” The better question is, “Which parts of each culture help the new organisation succeed?” Some things may need to become common. Some things may be better kept separate. And some completely new practices may need to be created.

Like, employees are not software that you can simply copy into a new system. They have habits, expectations, relationships and identities connected to where they worked before. If HR ignores that, the merger may look successful on paper while employees still feel like two separate groups.

That is why strategic HR has a big role in M&A. Finance can calculate the value of the deal, and technology teams can connect the systems, but HR has to help connect the people. And sometimes, connecting people does not mean making everyone the same. It means giving two different groups a reason to become one team.