So you made an exit…Now what?
By Arona Maskil, an Inter-cultural expert specializing in Relocation and Cultural Intelligence (CQ) training for individuals and organizations.
Many young professionals working in startup dream of their company making an exit. But alongside the great promise of a future for the company, the exit could also lead to organizational changes the employees would have to face. These are the challenges startup companies must prepare for.
In the first half of 2017, the Israeli hi-tech industry reported on 57 exits totalling $1.95 billion, according to the IVC-Meitar Exits Report. Each stunning, brilliant, dazzling and well-publicized exit fills us with national pride and inspires the inevitable speculations about economic and technological implications and revenues to the state.In all the frenzy and euphoria that has become a familiar hallmark of “The Exit,” seldom do we consider the sudden impact on the employees of the massive restructuring that is the nature of this beast. The exit happened; now what? The company and the people who run it will face both personal and organizational changes that will often challenge their abilities to adapt.
Prior to the exit, employees were motivated by a common goal to reach the finish line, but once that goal is reached, motivation and a sense of victory quickly reveals ambivalence and confusion as employees find themselves questioning the nature of the new organization and perhaps their future within it. Once relevant employees may now fear layoffs, as an average of 30 percent of employees will be considered redundant after a merger or acquisition in the same industry, according to a Harvard Business Review study.
Along with the promises of generating new capital into the company, a greater access to resources, knowledge and talents, an exit also brings with it an organizational change and the employees must learn to adapt quickly.
Understanding the acquiring company’s culture
In this global world, it is easy to assume cross cultural interactions will be clear and seemless, particularly with American colleagues. The reality is often far from that. Cultural differences run a wide spectrum and understanding their nuances plays a significant role in helping management and employees navigate a smooth transition.
A recent Harvard Business Review study found that between 70 percent and 90 percent of mergers fail due to lack of human investment evidenced by a drop in morale and lack of synergies attributed to cultural misalignment.
Cultural differences occur when the companies’ fundamental ways of working are so different and so easily misinterpreted that people feel frustrated and anxious. Demoralization and defections ensues, productivity suffers and no one seems to know how to fix it. Understanding some key elements is a good place to start:
Communication – Communication is essential to any cooperation, and understanding another culture’s communication style can often make or break a business relationship. Learning the communication culture of the acquiring company even before the acquisition will most surely prove a wise investment. In Israel, for example, communication is direct—a yes is a YES, compared to Far-East cultures where the communication is more implied and indirect.
Decision making – Employees in an Israeli organization may have enjoyed being part of the work process, development and decision making, but if the buyers are Americans, the sphere of influence and decision-making may likely be reduced. Are brainstorming meetings actually generating decisions or just providing support to management who pull the strings? Pace and structure are also issues. Expect a slower, more calculated pace from the Japanese and even from the Americans.
New organizational policies and management methods – Elements such as a work environment, recruitment process, salary conditions, promotions, etc. that may have been handled informally will surely become more formal and structured after an exit, and management needs to address this. It is also important to understand the management style within the acquiring organization—Israeli start-ups, for example, practice a circular style that doesn’t differentiate between management and the team. The Russian practice, in contrast, recognizes a clear power distance between management and employees.
Working relations between managers and employees – Some cultures, such as the Danish, promote an environment of equality, encouraging employees to communicate directly within all levels of the organization. Others, such as the Far Eastern, are more hierarchical, and require employees to communicate only with their direct managers.
An acquisition forces the employees to learn to work productively with people who may have different perspectives and processes, come from different corporate and national cultures and even speak different languages. Moreover, they may also be apprehensive about working with Israelis. That said, this situation creates an opportunity to sharpen and enhance collaboration skills and become familiar with the other culture.
I recommend learning from the experience of Jan Koum, the founder of WhatsApp, following the company’s acquisition by Facebook. Jan Koum did a great job helping his team navigate the Facebook acquisition while ensuring WhatsApp maintained its culture and independence. Koum was able to get buy-in from his team by presenting it as a partnership and arranging a time for Mark Zukerberg to meet with the team in person thus ensuring a sense of security within the WhatsApp team.
Here’s to the next exit!