While the pace of oil and gas mergers and acquisitions (M&A) deal-making declined throughout 2020 in both value and number of deals,1 experts are highlighting the potential growth in cross-border M&A, as well as increasing trends toward “responsible investments” with a greater focus on environmental, social and governance (ESG) screening as part of due diligence.2
This intensifies the importance of not being “blindsided” by safety culture in your next M&A. In two recent conversations with senior executives that had experienced fatalities in their newly acquired companies, they reinforced the importance of conducting a deeper due diligence process prior to acquiring a new company and in accelerating the pace of safety culture integration.
Aligning safety culture effectively on the front end will help avoid a myriad of challenges on the back end. It will also help prevent serious injuries and fatalities (SIFs) down the road. Although it’s not necessary to merge with a company that has the same safety culture, it IS critical to manage the cultural differences well and identify them early.
Step 1: Assess Safety Culture in M&A Target Companies
As part of the due diligence process, leaders should perform a robust, independent and thorough safety culture analysis to diagnose differences and similarities. When this cannot be completed as part of the due diligence process, it should be completed as soon as possible prior to integration. This is increasingly more critical when dealing with cross-border transactions and to meet more stringent ESG requirements. Potential approaches include:
- Interviews with managers and employees to provide insight into how workers of each organization view the prioritization of safety and leadership commitment to safety culture.
- Employee surveys should be employed to assess attitudes, behaviors and intentions when it comes to safety ownership, accountability and performance.
- Learning culture should be assessed to determine if organizational leaders treat close calls and incidents as opportunities to learn or occasions to punish.
- Safety risk analyses should be conducted with safety metrics, systems, policies and procedures.
Step 2: Rapidly Establish a Safety Culture Integration Plan
Once M&As are complete, leaders need a game plan to rapidly integrate safety cultures. While safety culture is a component of the overall integration, it needs defined expertise, focus and urgency to drive forward. In our experience, speed is of high importance to mitigate risk. The integration plan should explore the following questions:
- Where are current goals and vision already aligned?
- What aspects of both the target and parent company’s safety culture need to change and which should stay the same?
- What differences between the two safety cultures present challenges?
- What differences could be complimentary?
- What can be learned from the target company that needs to be integrated into the larger organization?
- What should the culture look like moving forward?
- When differences exist, proper planning and management of the integration process can alleviate negative ramifications and prevent culture clash. It is important to establish a documented process for working through differences between the two safety cultures prior to the integration.3 Charting a clear path removes ambiguity during the transition period and aligns leaders on a common goal moving forward.
Step 3: Safety Culture Integration
Leaders must be proactive in driving safety transformation initiatives during company integration. These efforts include communicating expectations, establishing trust, encouraging employee participation, providing adequate resources, and holding the organization accountable for performance during and after the change management process. The following are 10 “musts” to accelerate the pace of safety culture integration:
- Paint a picture of desired organizational values and culture.
- Set clear expectations around safety and safety culture.
- Boost trust throughout the organization.
- Promote participation.
- Provide mentoring, coaching, training and guidance to ease the transition.
- Drive out fear.
- Demonstrate you care.
- Show people the ropes.
- Check to see how people are doing.
- Learn from new employees.
Step 4: Sustainment
Safety champions should be identified to ensure integration efforts are sustained. Explore themes such as safety metrics, leading indicators, training, processes and systems to ensure new employees are effectively aligned with the values and goals of the organization. This includes coaching and mentoring employees as they adapt to their new environment. Pre and post-pulse assessments are also used to measure M&A success, and to strategically and behaviorally address remaining gaps.
Also, “safety” is a unifying force to get people on the same page so that everyone goes home safely to their families. Improving and aligning safety culture before, during and after the M&A process builds on successes already attained. It also helps prevent serious injuries and fatalities in the future.
The Bottom Line
Like in the movie, The Blind Side, introducing someone new may have surprising effects that benefit everyone. The upheaval that is sometimes created with M&As provides a rich environment for larger organizational improvement. This is especially true with safety culture. Bringing in a new partner triggers a focus on how things are currently being done. Holding up a mirror and honestly assessing strengths and weaknesses is an important first step to improvement. Also, new partner organizations may have creative ideas and best practices to further strengthen the organization.
M&As, while challenging, offer an outstanding opportunity for leaders to improve safety culture throughout the organization and prevent SIFs. Don’t
let the opportunity escape you!
- S&P Global Market Intelligence. Oil, gas deal tracker: COVID-19 fallout stifled Q3’20 M&A. October 14, 2020.
- Intralinks. What Will Oil & Gas M&A Dealmaking Look Like in 2021? November 5, 2020.
- Schweiger, D. M., & Lippert, R. L. (2005). Integration: The critical link in M&A value creation. In G. K. Stahl & M. E. Mendenhall (Eds.), Mergers and Acquisitions: Managing Culture and Human Resources (pp. 17–45). Stanford, CA: Stanford University Press.
Headline photo courtesy of Propulo Consulting