Integrating Different Food Safety Cultures During Mergers & Acquisitions
By Sam Lewis
You’re a food manufacturer, your company is growing, and the decision has been made to acquire a new company for your established brand portfolio. But, joining different food safety protocols with another company is going to trigger a change of culture. How can you implement food safety programs and develop a unified culture of food safety with that newly acquired company?
We all know creating a culture of food safety is no easy task. From developing your company’s guiding safety principles, implementing them, training employees on them, to having every employee — from the C-suite down to the production line — make food safety top of mind can seem like an overwhelming, if not impossible, task.
Adding to the difficulty of that task are mergers and acquisitions of new food manufacturing and processing companies. How can two different cultures, in two different geographic locations, under one company, be harmonized? What happens to the best practices each company has grown accustom to? How can you be sure that your company’s growth doesn’t weaken its strong and established food safety standards? At the 12th Annual North American Summit On Food Safety, Paula Klassen, senior director of food safety and quality assurance at TreeHouse Foods, addressed these, and many other issues, on merging food safety cultures and shared some of her experiences on the matter.
First, according to Klassen, before you can establish a new culture of food safety, you must perform some due diligence; you have to be sure the company being acquired meets certain criteria. “Before an acquisition takes place, when a company forms a team to look at a potential acquisition, a food safety member on that team is critical,” says Klassen. “The food safety member of the acquisition team should find out as much as possible about the company and provide feedback to your business to help make the ‘go’ or ‘no-go’ decision.” During your due diligence, several facility tours will take place, often “incognito” or in an after-hours pretense. These tours serve as a “mini-audit” to get a sense of what the acquiring company will be taking on should it complete its desired transaction.
Klassen stresses examining the facility’s infrastructure; is it a strong or weak company? Will a large capital investment be needed to sustain the business? Is it a newer or older facility? What are its production limits? Is the facility in a remote or urban area?
Further due diligence in the potential acquisition should include a search for the company and reviewing its GFSI status. “A lot of a company’s history is publicly available and can be found through searches on the SQFI website. You can quickly see what its SQF status is — you can’t see full audit reports — but you can get a sense of the certification scheme and the company’s rating under it.” Similarly, Klassen says it’s essential to examine a company’s recall history — available on the FDA’s and CFIA’s websites — and ask, “Did they have recalls and how were they handled?”
Another detail of investigating a potential acquisition is checking out the company’s commitment to regulatory compliance and its relationships with regulators. “This can be challenging,” says Klassen. “You need to find out if the company has an understanding of claims and accuracy on labels. You also need to determine if the company’s relationship with regulators was adversarial or collaborative.” This holds especially true in the U.S. because of an increased number of class-action lawsuits due to unsubstantiated food label claims.
Investigating a potential acquisition also includes looking at the company’s food safety programs and QA procedures. “HACCP process flows, hazard assessments, environmental monitoring programs, sanitation protocols, allergen controls, etc. all of these must be looked at thoroughly,” says Klassen. From there, you can get a sense of the food safety culture at the facility. According to Klassen, several important questions must be asked here, including, “Is there an impression that they are very early in their continuum of developing a culture of quality and food safety? Are they at error-detection stage or error-prevention stage? Is there evidence of root-cause analysis and continuous improvement?” A quick sense of the status of the food safety culture can be gained by looking at which metrics the company tracks. “Does the company measure complaints and/or major quality incidents? Better yet, if it does measure them, does it have goals for improvement and a disciplined approach to getting there?” says Klassen.
A review of the staff and its training should occur. Klassen says organizational charts and resumes of personnel can be a great way to gauge commitment to food safety and quality from employees and management. Once this due diligence has been completed, you should evaluate the answers to these questions and proceed, or not proceed, with the acquisition accordingly. “In many cases, the due diligence process doesn’t lead to a deal. Sometimes, it’s because taking on the company wouldn’t be a good idea in terms of food safety. Other times, it just doesn’t make financial sense to acquire the company. Even if a deal is not struck, we always try to step back and review what we learned and discover how we can continually improve our acquisition checklist and playbook,” says Klassen.
A Deal Has Been Struck!
Your due diligence has started, your company likes what it sees in its partner, a merger has happened, and your company has grown. Congratulations! Now, the real challenges begin.
Klassen suggests collaborating with the new company immediately. “The acquiring company and the company being acquired need to collaborate. They need to be sensitive to each other’s needs, specifically regarding the future of everyone’s employment,” says Klassen.
Open sharing of documents from both sides of the acquisition should be an immediate expectation so a standard approach to food safety can be established. From there, a firm commitment to food safety can be made by all parties.
Cooking Up An Integration Strategy
After the understanding of the merger has been reached, the integration of food safety cultures can begin. A very structured strategy to integration is essential to avoid surprises in the future. “Obviously, food safety is paramount. The first thing that should be developed and implemented is a standard crisis communications plan,” says Klassen. There are many IT tools on the market that can help your company in the event of a crisis, but the technology can only help so much. Having solid crisis communications plans and food safety plans in place are what truly ensure food safety and quality. But, even something as two different email platforms between companies can become troublesome, so it is important that all systems are standardized. Then, these tools and systems must be learned by all staff members.
Furthering that notion, a uniform language for the newly-merged companies must be established. “If your company is anything like mine, acronyms are very, very commonplace and, within your company, everyone understands those acronyms,” says Klassen. “But, between companies, not everyone will understand every acronym. Because of this, it is important to establish and learn a common language early in integration.” This includes not only acronyms, but all variations of terms that could occur between companies.
Of course, these changes and new endeavors can’t happen overnight. Klassen suggests prioritizing your tasks into 30, 60, and 90 (or more) day plans — Klassen likens these tasks to races, some are sprints, needing to be accomplished quickly, others are marathons, taking weeks, even months, to complete — to keep all parties involved on task while still feeling a sense of accomplishment.
The Integration Balancing Act
Balancing the practices and process of two companies during their integration is imperative. “As a buyer, you can’t come in and say, ‘resistance is futile, you will be assimilated,’” says Klassen. “Conversely, complete autonomy and independence cannot happen either. It is imperative to find, like Goldilocks, ‘the just right,’ the middle ground.” When approaching this balancing act during integration, it is important to remember why you, the acquirer, were attracted to the acquired company in the first place — likely, the company was successful and had many positive attributes, including a great reputation of food safety and quality.
From a food safety culture standpoint, each step of the integration process requires clear, documented communication between parties. “It could be for complex processes, or it could be as simple as how we go about measuring complaints. Regardless, we must be sure that all individuals are trained, and as the changes are rolled out, they are clearly documented,” says Klassen.
Behavior-based food safety culture is a staple of TreeHouse Foods. “We try to lead by example — whether it’s hourly employees on the production floor or in the board room with senior leadership — we assimilate our cultures to know what it means to do the right thing, even if it is costly and unpopular… food safety is non-negotiable,” says Klassen. “Despite two different cultures merging, both parties are essentially doing the same work; trying to achieve the same goals, ensuring FDA or CFIA compliance, producing high-quality, safe products with great efficiency while remaining profitable.”
Transcendentalist author Ralph Waldo Emerson once said, “Nothing great was ever achieved without enthusiasm.” This notion is one that should be applied as a cultural tenet in the successful integration of food safety cultures. The acquiring company and the acquired company should enter the endeavor with a positive attitude, the desire to win, a mutual respect for one another — which includes openness and willingness to learn from each other.
Finally, everyone should assume a leadership role, no matter how small, in doing what it takes to make your peers successful and continually improve. “TreeHouse Foods’ SVP of food safety tells us at every meeting, ‘I am pleased, but not satisfied,’” says Klassen. “We need to continually progress along the food safety culture continuum. We need to humbly acknowledge we are never complete, and, even bigger than mergers and acquisitions, we need to commit to improving as an industry. We need to be stewards to each other because, as food safety incidents happen, it affects all of us.”
About Paula Klassen
Paula is the Senior Director of Food Safety and Q.A. of the Condiments division of Treehouse Foods and has been with E.D. Smith Foods since 1993. She is responsible for food safety and Operations Q.A. for 11 condiments manufacturing facilities throughout the U.S. and Canada. Within E.D. Smith and Treehouse, she has held various positions in Q.A., Food Safety, HACCP Program development, and Continuous Improvement.
Paula received her Bachelor of Science in Biological Science and Master of Science in Environmental Biology from the University of Guelph. She also holds a Bachelor of Education from Brock University. She was recently appointed Vice-Chair of the Executive Technical Board of the Association for Dressings and Sauces and has been a member of the ETB since 2011.