Organizational Alignment in China during Mergers and Acquisitions

One of the most common reasons why Chinese companies require an organizational alignment is mergers and acquisitions (M&A), especially with foreign companies.

The M&A market in China is dominated by the more economically developed regions, such as Beijing, which had 119 M&A deals in 2021, and Shanghai, two of China’s largest cities. However, even though the domestic market is where companies in China conduct most of these transactions, we have seen that the value of inbound international M&A transactions has increased in recent years, supported by additional market opening initiatives launched in 2018. Although the COVID-19 pandemic (2020) led to a decline of the foreign-backed deal’s value, there is still plenty of activity in this market.

According to Statista, nearly 12,800 corporate acquisition agreements involving firms from Greater China were made public in 2021, which meant a 21% rise over the prior year. The value of M&A transactions involving Greater China companies totaled 637.4 billion US dollars (including only transactions with stated deal value numbers). Also, in the first three quarters of the same year, there were 1,460 completed M&A agreements involving participation from enterprises from Chinese mainland.

When involved in these types of processes there is a strong need to identify culture or talent-related obstacles which may affect the achievement of the forecasts and/or goals.

Organizational alignment guarantees employees from entry-level to upper management to share a common goal and vision for a company’s success by implementing specific tactics and ideas. Besides, it contributes an increased satisfaction and improved consumer experience. All these factors help to:

  • Lower staff turnover
  • Enhance brand reputation
  • Improve production
  • Benefit corporate culture
  • Improve client loyalty
  • Create a wholesome work atmosphere

The organizational alignment processes, due to M&A between foreign companies and companies in China, are strongly marked by the cultural differences which have an impact on communication and negotiation processes, as well as the way people conduct business activity.

Managing a team formed by Chinese and western employees successfully requires an ability to recognize these cultural differences. Not handling these properly might result in a toxic workplace with a lot of misunderstandings.

Some of the most common signs that a company needs an organizational alignment are:

  • Disengagement from employees
  • High Rotation
  • Interdepartmental tension
  • Stagnant or negative financial results
  • Constantly putting off fires
  • High stress, initial signs of burnout
  • Role ambiguity/conflict
  • Lack of innovation

Some of the differences between cultures in China that may lead to an alignment are:

  • Highly hierarchical work organization
  • Ineffective communication
  • Low proactiveness when giving opinions
  • High value to relationships and group dynamics at work

Organizational alignment is crucial because it promotes cooperation and a shared pursuit of business goals, which has long-term benefits for an organization’s productivity and profitability. It also increases employee satisfaction and improves customer experience.

In Zavala Civitas, as Executive Search and Organizational Consultant firm specialized in China, we are used to being part of organizational alignment processes and to bringing the needed change into organizations. In addition, we can be side by side with the key executives and help them adapt to the changing circumstances.

Feel free to contact us to know more about our services.

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