There are many reasons why physician practices merge or acquire other practices: increased market share, gaining new capabilities, diversifying a service offering, and more. It’s also no secret that mergers and acquisitions sometimes don’t go as planned.
The importance of culture in practice mergers
In my experience, culture is the most common reason why mergers and acquisitions fail. In my experience, the largest contributor to merger and acquisition failure has to do not with the business but with the people. More specifically, how we handle (or fail to address) the cultural differences between organizations, which are exacerbated by a lack of effective communication. Put another way, did leadership account for the culture or anticipate a potential culture clash?
When a physician practice is acquired or when practices merge, the decision is typically based on a physician fit or market fit, but employee differences are often ignored.
It’s a mistake to assume that employee issues are easy to overcome and physician owners that fail to recognize them, may end up regretting it.
During the process, it’s easy to treat a prospective transaction as purely a mechanical process. However, the people aspect of any deal is always critical. Culture fits can provide the assurance that combining two-physician practices makes sense.
To ensure your merger or acquisition has the greatest chance of success, it’s critical to make your employees’ experience painless (or at least less painful). Consider what’s at risk during such a transition, how you communicate with employees, and how to support them.
It’s especially important to focus on people and culture during an acquisition or merger. Be sure to communicate with employees, collect feedback to take targeted action for retention, and provide ongoing support.
Related Content by this Author:
The Post-Merger Integration Process – 4 Steps to Success
The Most Common Reasons for Failed Group Practice Mergers
Seven Strategies to Consider Before a Practice Merger
Anticipate potential roadblocks
There are a few things at risk during a merger or acquisition:
- losing talented employees
- disrupting the culture of your practice
- missing opportunities to communicate with newly-acquired employees
To avoid having employees jump ship, speak with them, ideally before the deal closes. This will give you a better understanding of which parts of the practice are at the highest risk of turnover. The goal here is to reassure employees of job security and to thus reduce the risk of a mass exodus.
The culture will change after a practice merger
It’s inevitable that your physician practice culture will change after a merger or acquisition. There are three common ways to thoughtfully develop and shape a culture post-merger:
- Choose one business’ culture to be carried on
- Create a new culture that combines the best from both physician practices, or
- Create a completely new culture
Each path has its pros and cons. Whichever you choose, it’s important to communicate your decision, and your rationale, with employees.
During times of transition, communication often becomes increasingly siloed to top-level decision-makers, leaving the majority of employees in the dark. This disconnect causes rumors to spread and breeds distrust of leadership.
Rumors fill vacuums
Communicating with employees, empowering them, and creating a culture for them to thrive are all fundamental parts to integration.
Rumors fill mystery and vacuums, and employees are left asking questions. This lack of communication creates distrust and uncertainty in the workplace, leading to lower employee engagement levels.
Devise a communication plan before the deal is finalized and exercise it throughout the process. Being aware of the questions, concerns, and fears that employees might have. Proactively communicate answers as it will build transparency and trust, and help lead to a successful merger.
Prepare employees for the practice merger
Concerns about job security are top of mind for employees. They want to know how they will be affected:
- Will their role will still be relevant?
- Are their past successes going to be recognized?
- How will they be accepted as members of the new team?
Address their concerns and keep them updated on the process and timeline as much as possible. Also, communicate information on the following in a timely fashion:
- How and when benefits will transition
- What their election options are
- Details of the time-off policy
- How you conduct performance reviews
- When and how you review compensation
Addressing employees’ basic needs is crucial to establishing a foundation of trust and building confidence in leadership.
Proactively work to avoid employee turnover
Offering career path training pre- or post-merger is a great way to prepare and support employees. This way, even if there are layoffs or they opt to leave, they have an understanding of what their next step should be and where their strengths lie.
During this delicate process, it’s essential to keep employee turnover low because business continuity is key to realizing the benefits of the merger.
Furthermore, there can be large financial implications from the cost of hiring new employees. What’s more, employee turnover can result in loss of knowledge and patient relationships.
Once the acquisition is complete, it’s a good idea to conduct onboarding for acquired employees, the same as you would for a new hire. This is a great way to make them feel integrated and welcomed as well as establish expectations.
- Is there an actual orientation process?
- Do they need to participate in any training or watch any videos?
- Is there written material for them to read on their own?
- Is there welcome swag?
Treat them like members of the team, because they are.
Final thoughts on managing culture during a practice merger
It’s difficult to quantify the human side to mergers. Typically, physician owners overlook this aspect because of the notion of being able to rehire employees and managers.
Passing judgment without taking the time to understand why a particular practice or culture exists can lead to major misunderstandings and resentment.
Remember, you don’t need to wait until things feel settled to collect feedback post-merger or acquisition. Soliciting employee feedback during times of transition will give you the data you need to take action and ensure employees’ voices are heard both now and in the future.
Focus on what really matters and never forget that blending cultures takes time. Remain patient with cultural differences and participate constructively, without judgment, to explore which critical parts of the practice culture need to be aligned.
By adhering to these pointers, you raise the likelihood of immediate and long-term success for your merger or acquisition. You will also likely significantly reduce the inevitable anxiety that comes with such a significant effort. That’s a win/win for all involved!
Nick Hernandez, MBA, FACHE
Nick Hernandez, MBA, FACHE is the CEO and founder of ABISA, a consultancy specializing in strategic healthcare initiatives.
Since founding ABISA in 2007, his emphasis has been on developing and maintaining a strong relationship with physicians and identifying areas for business opportunity and support. The company’s client list includes physician groups, hospital systems, healthcare IT organizations, venture capitalists, private equity firms, and hedge fund managers.
Nick is a graduate of the United States Naval Academy and a former Captain in the U.S. Marine Corps. He holds MBA degrees in both Operations Management and Information Technology & E-Business Management from Wake Forest University. He is Board Certified in Healthcare Management and has been named a Fellow of the American College of Healthcare Executives.
He is a frequent guest lecturer and is often quoted in the national media. He has consulted with clients in multiple countries and has over 20 years of leadership and operations experience. Nick is a Subject Matter Expert in business strategy, practice management, telemedicine, health IT, and oncology.