In any merger or acquisition, the focus is often on the financial and legal parts of a transition. From a strategic perspective, this ensures a dealership is sound and operational and can include establishing leadership, organizational charts and other business systems necessary after a transition. What can be overlooked is organizational integration. This vital part of any transition can mean adjusting business procedures, leadership, compensation policies and other less tangible aspects of integration such as people, attitudes and culture.

“If you’re the dealer that is being purchased or you’re going to be a minority owner, you want to make sure you’ve got things in place that are protecting the employees and the folks you’re bringing into that transition,” says Michael Piercy, vice president of dealer development for the North American Equipment Dealers Assn. (NAEDA). “If you’re the person who’s expanding and you’re the majority, you want to make sure you’ve got the best pieces in place to keep as many people as possible.” 

People, Piercy says, are the most important part of a merger or acquisition. Human capital, dealer culture and workforce development are some of the most valuable assets a dealership should be — and often aren’t — investing in. Every dealer Piercy encounters needs more technicians, salespeople or administrators, and in dealer transitions, he sees additional but unnecessary employee loss because of a lack of solid culture integration between merging or acquired dealerships. 

“Why is culture integration the biggest issue? It’s because it deals primarily with human capital. It deals with the people, and there’s often no analysis done of the human capital. There is a lot of poor communication,” he says. 

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When employees assume what is happening in a transition without clear and effective communication from the leadership team, the assumptions they make can be detrimental to employee culture and foster resentment among employees experiencing the brunt of the transition. Culture, Piercy says, has the deepest impact on dealers when they’re not paying attention to it. 

As younger generations enter the workforce as farmers or equipment technicians, salespeople or administrators, the cultural divide widens and can form rifts if dealers aren’t careful. 

“We’re not used to that mindset, those values. We’re not used to those kinds of things that millennials are asking us to be mindful of. So it’s important as we’re moving into this sensitive area of transition with people who we’re trying to protect that we take the time to ensure we’re meeting our employees’ needs. We want to create an atmosphere that people are attracted to and want to be a part of,” Piercy says. 

One way to minimize a cultural divide is to clearly communicate the expectations of the merger or acquisition to employees outside of just the C-suite. This can mean setting goals that align with new expectations and then following through on those goals to track the trajectory of their performance. Piercy estimates that more often than not, there’s little direction given to employees. This prevents them from feeling comfortable understanding their role within the larger organization. 

To foster better communication between different levels of a dealership, uniform and comprehensive training can keep all employees on the same page. 

“You may be meshing a group that’s really well-trained with a group that’s not well-trained, and because you have other issues to manage, you let it ride for a while,” Piercy says. “From my experience, that doesn’t work out very well. At some point, people’s feelings get hurt. Or, because expectations and goals are different, people are working two different ways, and dealers end up with attrition they weren’t expecting.” 

Another reason cultural integration is one of the biggest issues in dealership transitions, Piercy says, is because it’s an investment of both time and resources dealers aren’t often willing to make. However, disregarding the cultural side of a transition can statistically cost dealers between 30-40% of their efficiency and profitability, according to Piercy. This, he says, is worth paying attention to. 

Clear Communication

Most dealerships, according to Piercy, cannot afford for 5, 3 or even 2 employees to walk out the door today. As generational values change, it should be a priority for dealers to invest in ways to measure business culture such as employee engagement surveys and then to adjust the business accordingly. 

“One of the things that amazed me when I came into this industry was how reactive it is,” Piercy says. “We don’t wait until we see smoke. Or until we see fire. Or until the building’s on fire. It’s usually when the building’s just a pile of ash that we’ll scratch our head and say, ‘We probably ought to get some water to put on this thing.’ Culture is not one of those things we can do that with. Not only are the people who are working for us changing, but so are the people we’re engaging with on a daily basis.” 

Piercy notices the older generations are often the first ones in the office and the last to leave. Millennials, however, aren’t usually doing the same. It’s not bad or wrong, he says, just different. Accounting for these trends and differences in culture between generations allows dealers to better understand, work with and support their employees while reducing turnover. 

In the same way that a dealership couldn’t run its business without a clear financial statement, dealers need a sense of the health of their human capital, says Piercy. Balancing a dealer’s focus between the technical aspects of the business and the people will yield the most benefit. When the focus relies too heavily on the technical, the impact on the individual who had to change 25 years of prior operating patterns after an acquisition is forgotten. 

Dealers can’t manage what they don’t measure, says Piercy, and quadrupling normal feedback solicitation is not overkill when the health of internal operations can hinge on a positive or negative employee culture. 

Transitions can also cause goals, missions and company values to change. This is an excellent opportunity to get employees involved in that process through extensive feedback and discussion, he says. Despite what would likely be a massive undertaking, especially at a larger dealership, it can help make people feel more valued, heard and seen, reducing employee loss after a merger or acquisition. 

One of the most eye opening experiences for Piercy was when he worked with a dealer trying to be more open with financial statements. When asking technicians what they thought the dealership made on an example tech rate of $120 per hour, the technicians said $100. In reality, the dealership’s typical markup was 34% or $0.34 per dollar of that $120. The average rate of return, according to the cost of doing business study, says Piercy, is considerably less than employees believe. 

“As you’re going through the transition process, everybody has things swirling in their head, and the reality is that we really can’t afford to lose a lot of people,” he says. “We could minimize some of the negative impact of a transition — the negative feng shui — if we were engaging with our employees more.” 

Key Cultural Considerations 

One of the reasons for establishing effective employee engagement surveys, especially during and after a transition, is they help evaluate both parties to better serve the unified whole going forward. According to Piercy, organizations that are assuming control of other organizations aren’t often able to step back and fairly evaluate whether it should be scrapping some of its policies and adopting ones from the dealer being acquired. Creating the most efficient and employee friendly dealership, however, requires being receptive to honest feedback. 

After some of these cultural questions are answered by employees, establishing expectations that are 100% supported by the leadership team is critical.

“It’s important for communication to come from the top down to mid-level management and for mid-level management to also be involved and communicate expectations as much as possible,” says Piercy. 

This standardizes dealership messaging so that no person in a leadership position is contradicting expectations that may already be in flux after a transition. It also creates a stable environment for employees who are most affected by cultural integration. 

“Outside of showing up and clocking in everyday, some employees have no idea what contribution they’re making to a dealer organization, let alone to the change,” he says. “So leadership can explain expectations for a new organizational structure, and each person will have a goal to help the organization achieve those expectations. What happens when you help somebody set a goal for something? It gives them something to work toward.” 

The way to ensure these goals and expectations are followed is to hold employees accountable through a system that encourages behavioral change. This change happens beyond HR, Piercy says. It can’t be defined in a policy manual. It has to become a standard operating expectation. 

According to Piercy, up until 2023, pay wasn’t in the top 10 reasons why employees stay or leave their organization. Instead, the top 3 are recognition, respect and reward. 

“How do you reward somebody who you don’t hold accountable, that you don’t have anything you can measure them with?” he says. “In order to establish an effective system that’s going to produce change, you have to incorporate accountability.” 

Once accountability is established, dealers can measure employees’ progress through constant reassessment. Employee engagement surveys shouldn’t stop after a merger or acquisition is over. Devoting time and attention to company culture in the same way dealerships devote resources to the technical aspect of the business will produce happier employees who are more loyal to their company. 

“Don’t leave the cultural part of integration out of your mission,” Piercy says. “It’s too vital to the success of your organization.”