How One Roofing Distributor Makes Culture Its Competitive Advantage Despite Industry Challenges
Expanding a business through mergers and acquisitions is a tried and true growth strategy for many companies. In fact, the Institute for Mergers, Acquisitions, & Alliances reports that in 2015, there were over 44,000 M&A transactions that totaled more than $4.5 billion, and almost 14,000 of those transactions took place in the United States.
But while every business is aware of the large risks that come with such a transaction (like getting the most accurate valuation and retaining as many customers as possible), few give sufficient attention to what happens afterward: how do you successfully merge a new company culture into your established one? The impact of a merger and acquisition on company culture is a serious question.
Companies that fail to successfully integrate the new company into the existing culture can expect to see high turnover and low retention rates, missed targets, and poor performance, which will in turn affect the quality of the product or service they provide their customers. When the transition is handled well, however, mergers and acquisitions fuel some of the most successful businesses in the world, like P&G and Gillette.
Today, we’ll look at the example of SRS, a vibrant residential and commercial roofing products distributor, and how working with CultureIQ allowed them to use their unique strengths to overcome the culture challenges of M&A, as well as the challenges faced in a traditionally high-turnover industry.
Using Culture to Counter Typical Mergers and Acquisitions Challenges
“We are very familiar with the world of mergers and acquisitions at SRS Distribution,” says Heather Groff, HR Project manager for SRS. “We were founded in 2008, initially formed to acquire the 8 branches of Suncoast Roofers Supply out of bankruptcy. Since then, we’ve grown to include 170 acquired and newly opened locations in 41 states, and we are now the 3rd largest roofing distribution company in the country.”
With each acquisition, SRS strives to reinforce a clear set of values:
- Keep employees and customers safe
- Preserve the heritage and legacy of the acquired companies
- Maintain strong personal relationships with customers, employees, and supplier partners
- Support an entrepreneurial environment where local managers run their own business catered to their markets and their unique customer needs
- Be great stewards of our investor’s capital
- Do things with character and integrity as a responsible industry participant
- Create a culture that makes having fun a priority
But despite a clear vision for the company’s culture, it faces the same challenges any mergers and acquisitions business does:
- Preserving the heritage and legacy of acquired companies while also initiating them into the SRS culture
- Maintaining and monitoring high levels of safety for a large number of branches (which means increased communication with customers and employees in warehouses that can be entire states apart)
- Identifying key areas of focus for future initiatives, an otherwise dizzying task for VPs overseeing 170+ individual branches
Fortunately, SRS knew that company culture was a powerful tool, and that it could be used to overcome these challenges and safely and strategically integrate newly acquired companies. Using CultureIQ, SRS was able to embrace the challenges that come with mergers and acquisitions and position their company culture as a competitive advantage with the following steps: (1) confirming its hunch that autonomy was strong and working for it; (2) considering ways it can boost autonomy to overcome other challenges; and (3) uncovering other areas of strengths and focus that would allow its branches to thrive.
Finding Strength in Autonomy
In the world of mergers and acquisitions, the right level of autonomy is one thing that companies have to figure out. Companies must strike a balance between empowering and trusting employees to work independently and clearly encouraging new branches to adopt the essential values of the buyer’s company culture.
In SRS’s case, it’s simply not an option for a senior leader to micromanage how 170 branch managers get things done. However, it’s just as important to have confidence in how things get done and to know that despite a large amount of freedom, each independently-operated branch conducts business according to SRS’s standards.
From the start, SRS knew its strength was its autonomy and delegation; the leadership team was deeply experienced in screening potential acquisitions for a good fit and quick to empower former owners to run branches in their own style. However, SRS didn’t have hard data to support its hunches or make educated decisions about where to focus its energy.
“Once we partnered with CultureIQ, and they confirmed the issues we suspected we had, we were able to generate a strategy to get them corrected. We learned just how much employees understand our mission statement and goals, and how much they appreciate the autonomy the executive team gives them. Now we can speak their language when we make changes and reinforce that sense of autonomy.”
Magnifying Strengths to Troubleshoot Industry Challenges
SRS faced similar challenges as other manufacturing and logistics companies, such as the threat of high turnover and a team of workers who engage in manual labor. Once SRS identified its strengths, it quickly looked to make the most of them by using its autonomy and strong sense of values to increase employee retention, engagement, and safety.
“We have a very entrepreneurial culture,” says Groff. “The branch decides who and when to hire. This gives each branch ownership over the hiring process and reduces the turnover other companies see from conflicting hiring policies at corporate and in the field.”
SRS also knew it could use its strong sense of values to encourage a high level of safety for both customers and employees.
“When you’re a manual worker, you want to work for a company that cares about protecting you and your family,” says Groff. “So based on the results of our CultureIQ survey, we knew that we could really incentivize safety by encouraging individual employees and branches to focus on safety. Now, when branches report a safe quarter, we reward them with bonuses, and this helps a great deal with turnover because employees see us taking such a vested interest in their safety.”
SRS’s success with safety initiatives shows just how vital it is for manufacturing and logistics companies to capitalize on their unique strengths to drive change. Focusing on strengths can help to reinforce a company’s mission and value alignment for new acquisitions, which in turn increases the likelihood that acquired managers, teams, and processes will thrive.
Manufacturing and logistics companies, as well as M&A companies, must often work through geographical restrictions, such as a distributed workforce and employees who may or may not work on computers regularly. To ensure company surveys incorporated the views of all workers, CultureIQ helped SRS combine their survey distribution through email and shared terminals. This enabled employees without regular computer access to participate in the surveys, resulting in a substantially more representative and accurate view of SRS’s culture.
Discovering New Opportunities of Focus
When you supervise the strategy for 170+ independent branches, it can be difficult to identify opportunities for change and improvement, let alone the most pressing and highest ROI opportunities. Working with CultureIQ allowed SRS to dig deep and identify both big and small initiatives that would have a powerful impact on the company’s bottom line.
For example, as a small initiative, SRS wanted to identify what kind of training and incentives would encourage sales team members to perform better. Using CultureIQ’s company culture software, it was able to segment and survey its sales team by high, middle, and low performers. The results of the survey allowed the management team to get a clear idea of the mindset of team members performing at the lowest level and come up with effective strategies that could help them reach their sales goals. Brainstorming incentives and training that would speak to these team members allowed SRS to influence their productivity while continuing to allow them to be autonomous; a win-win scenario for sales teams across the country.
In support of larger initiatives, SRS also worked with CultureIQ to analyze the performance and productivity of entire regions. Partnering with CultureIQ software and strategy gave VPs the information they needed to more deeply understand their branches’ existing cultures and dive into the unique challenges of their geographic locations.
“Each VP received a PowerPoint that detailed the most pressing cultural needs of their individual area,” says Groff. “It gave them clear insight into where they need to focus and backed it up with real data — data we can measure again to gauge improvement over time.”
Beyond individual teams and regional performance, SRS also used the CultureIQ data to assess overall cultural adoption for acquisitions over time.
“We were able to learn how long it will take for SRS acquisitions to get used to the new company based on the size of the company,” says Groff. “For example, we onboarded an enormous acquisition from a year and a half ago that is just now getting on board with everything. Smaller acquisitions, on the other hand, have fully embedded in half the time. The data gave us a better idea of how to get large companies into the culture more quickly.”
So, what’s next for SRS? Specific, strategic change that enhances how it does business. As we always say at CultureIQ, culture is an ongoing process, and therefore, so is culture management.
“One of our core values is to ‘Make Money and Have Fun,’ and our executive team takes that to heart,” says Groff. “We will be able to use the CultureIQ analysis to generate new ideas for areas where we can improve such as employee wellness, but also coming up with ways to make work more fun for employees, like giving everyone a paid day off on their birthday.”
If you enjoy learning about culture management at other companies, check out how Elite SEM uses culture software to maintain their award-winning culture.