How to instill purpose after an acquisition or new CEO

This week, a merger closed that has divided the entertainment industry, and many of the people who work in it are anxious. On closing day, NPR reported that workers at both companies were "a bit unsure about their future" as the day began. "Everybody just wants to know what's coming," one executive told Variety two weeks earlier.

The industry's unions split over it. The writers' union said the merger "will cause damage to writers and the industry at large" and stayed opposed. The directors' union welcomed the "clarity and stability" it saw in the settlement with state attorneys general, Variety reported. I'll leave the deal's merits to others. I'm interested in the people inside it.

After the deal closed, the new company's leaders sent employees a memo. It names "a clear purpose: to entertain, inspire and inform the world through extraordinary storytelling." On what comes next for staff, it gives two sentences: "Integrating two companies will bring change, including difficult decisions that affect our workforce. We are committed to handling this process thoughtfully and respectfully." The timing, how the decisions will be made and who will make them aren't in it yet. Those are the answers people are waiting for.

That moment isn't unique to entertainment. Any company that has just been acquired, or has just welcomed a new CEO, reaches it: a purpose is named, and people wait to see what it means for them.

That uncertainty is hard on people. It also costs the business. After a deal, people's sense of purpose tends to slip, at the moment the plan asks the most of them. It slips most among managers and frontline employees. And it can be shored up.

Why purpose slips

Executives know why the deal was done. Managers and frontline employees have less to go on, and that is where purpose drops.

A study of more than 800 acquisitions published in Strategy Science, drawing on data from about 1.7 million employees, found that employees' sense of purpose drops, on average, after a deal. In a summary of their work on Columbia Law School's CLS Blue Sky Blog, the same researchers report that the drop happens mainly among managers, salaried professionals and hourly employees, while the sense of purpose was actually higher among executives and senior managers after acquisitions. They explain that managers and frontline employees don't have the same access to information as executives, so management's visible actions shape their beliefs.

If you're the CEO after a deal, you're in the group where purpose was higher, which can make the drop hard to see.

It matters for results. Purpose is linked to better performance only with clear direction, and managers and professional staff drive that link. A broader 2019 study in Organization Science, not limited to deals, looked at nearly half a million employees at more than 400 companies. Purpose on its own was not linked to better performance. Companies whose people had a strong sense of purpose and saw a clear direction from management later posted stronger accounting and stock market results, and that result was driven by managers and professional staff, not by senior executives or hourly or commissioned workers.

The slip is common, not certain. In the deal researchers' summary, about one in three deals was linked to a stronger sense of purpose, not a weaker one.

Here are six things I'd tell a CEO who has just closed a deal or just taken the job.

1. Give people a purpose they can repeat in their own words (it's not just "to make money")

As I wrote in June, people do not commit to "we are going to create value." They commit to a company that stands for something they can say out loud and feel part of winning. The test is whether a frontline employee could tell a friend why the company exists, in their own words, without saying "to make money."

A picture travels better than a list. A study in the Academy of Management Journal, of about 150 hospitals plus an experiment with groups of full-time employees, found that a vivid picture of the organization's ultimate goal, paired with only a few values, improved performance more than other combinations. Leaders, it found, tend to do the reverse: they describe a vision without a picture and lean too hard on values language.

A short line is easier to repeat. About a year after a global software maker's new CEO wrote to staff about the company's mission in 2014, the mission had been rewritten as one line: "to empower every person and every organization on the planet to achieve more." Engadget called it "much clearer and easier to understand" than the version before.

2. Tie the purpose to where the company is going, in plain, specific words

Explain the deal, or the new strategy, in plain and specific words. People need to know what is changing, what is not, and why the business is moving now.

In the 2019 study, purpose went with better results only when people could also see a clear direction. In the deal research, deals whose rationales were disclosed "using precise and non-generic language" tended to go with a stronger sense of purpose afterward, according to the researchers' summary.

What you stress matters, too. A study in the Journal of Marketing Research followed salespeople after their company merged with one that had a weaker image. Those whose managers stressed the company's strategic intent lost less of their identification with the company. Those whose managers stressed its culture lost more.

Getting the order wrong costs people clarity. When the same software maker announced about 12,500 job cuts in 2014 in the phone business it had bought, the email to employees opened with "Hello there," and ran 10 paragraphs before giving the number of job cuts. Until then, it hinted at them with phrases such as "right-size" and "a smaller team." Ragan, a trade publisher for communicators, said it barely made clear that people were being let go.

3. Say what stays the same, and promise only what you can keep

People hold on when they can see it is still the company they joined. Name what isn't changing as plainly as what is, and promise only what you can keep.

In a field study and an experiment published in the Academy of Management Journal, leaders who assured people "that the essence of the organizational identity will remain unchanged" met less resistance to change.

The memo does this well for the brands: it promises that the studios it brings together "will continue to operate under their own names" and keep their logos. The memo doesn't yet say what that continuity means for the people who work there.

Here is what a broken promise can cost. When a U.S. food maker bought a British chocolate maker in 2010, it promised to keep a factory open, then reversed course after the takeover. A British parliamentary committee said the company "acted both irresponsibly and unwisely in making its original statement" and that it had soured its relationship with the chocolate maker's employees, CNBC reported.

4. Brief your managers first, so they can pass on the why in their own words

Give your managers the why before the all-hands, so they can pass it on in their own words.

The research doesn't test the order, but two findings support it. The deal researchers' summary notes that managers and frontline employees have less access to information than executives, so they read what management does. And in the 2019 study, the payoff from purpose and clarity was driven by managers and professional staff. One statement in our One Voice Diagnostic, the 16-statement assessment on our website, asks for exactly this: "Our frontline managers can explain why we're prioritizing what we're prioritizing this quarter, not just what."

5. Be clear and fair about the hard decisions

If hard decisions are coming, be blunt about the real situation. Cuts are sometimes necessary and always hard on the people affected, so if they are part of the plan, explain why the business needs them, and be just as clear about what they mean for those people and the support they'll get. Say when people will hear more, how the decisions will be made and on what basis, before people fill the gap themselves.

A study in Human Relations followed employees through a merger and an acquisition, for up to two years after the deal. As people came to see the process as fairer and less threatening, they identified more strongly with the company.

Compare two ways layoffs have been announced. After a social media platform was acquired in 2022, layoff notices came "from a generic address" and did not give the total number of layoffs, and offices were temporarily closed, The New York Times reported in a story carried by Boston.com. A home-rental platform's letter to staff during the pandemic in 2020, which was not about a deal, went the other way. It said decisions were "based on critical skills, and how well those skills matched our future business needs" and outlined the severance pay and final working day. The first left people guessing. The second told them how, why and when.

6. Prove it with decisions, not words

People believe a purpose when the decisions match it. As I wrote in June, rebuilding belief is not a campaign. It is a series of proof points. And as I wrote in July: If the people you promote and the people you let go tell a different story than your words in emails or speeches, they'll believe what you did, never what you said.

The research agrees: published values do little on their own, and what employees see in their leaders matters more. Researchers writing in MIT Sloan Management Review collected official values statements from more than 500 large organizations and compared more than 400 of them with over a million online employee reviews. They found no link between the values a company emphasizes in its published statements and how well employees say it lives up to them. A study published by the National Bureau of Economic Research looked at performance and found that proclaimed values "appear irrelevant." Firms performed better where employees saw executives as trustworthy and ethical.

Proof is clearest when it costs something. In 2014, a U.S. drugstore chain decided to stop selling tobacco, saying "the sale of tobacco products is inconsistent with our purpose" and that it expected to lose about $2 billion a year in revenue, according to its announcement as published by Pharmacy Times.

Can your people tell you why this company exists?

That question opens our One Voice Diagnostic: can your people tell you why the company exists, the purpose that gets them up in the morning, and not just "to make money"?

If you're not sure how they'd answer, take the One Voice Diagnostic and see where your message is landing.