The People Side of M&A, Part 2: What Culture Signals to Look for in Diligence

In Part 1, we made the case that culture is not a soft risk, it’s a strategic one. When it’s ignored during diligence, the risks to value creation are real: leadership turnover, slow integrations, disengaged teams, and missed synergies.

The natural next question is: how do you actually evaluate culture in a deal process?

At Rhizome HR, we work with investors and growth-stage leadership teams to bring structure to this part of diligence. While culture is nuanced, it’s not invisible. If you know where to look, the signals are there, and they can be just as telling as any line on a financial model.

Start with Three Core Dimensions

We focus our cultural assessment around three main dimensions:

1. Leadership Behavior

Who holds influence and how do they use it?

Look beyond titles. Influence isn’t always about hierarchy; it’s about behavior, tone, and how people show up. In diligence, we look for:

• How decisions are made in practice (not just in theory)

• The degree of top-down vs. collaborative leadership

• Whether dissent is welcomed or shut down

• How leaders talk about their teams and vice versa

You can often gather this through management interviews, 360 feedback (if available), internal documentation, and even town hall recordings.

2. Decision-Making Style

Speed and structure vary wildly across companies.

Some teams are consensus-driven. Others prioritize autonomy and speed. Neither is inherently better, but mismatches here often lead to post-close friction. Look for:

• How fast decisions get made, and who needs to weigh in

• Whether process or relationships drive approval paths

• How often decisions are revisited or overridden

• The presence (or absence) of documented decision-making frameworks

A decision style misalignment between buyer and target is one of the top sources of early-stage integration breakdown.

3. Employee Engagement and Sentiment

How do employees experience the culture day to day?

Engagement surveys are useful, but not always available. In their absence, look for proxies:

• Voluntary attrition, especially among high performers

• Internal communication style — transparent or guarded?

• How people talk about their work and leadership on public platforms (Glassdoor, Blind, etc.)

• Signals from recruiting — is the company struggling to attract or retain talent?

These insights help you understand morale, psychological safety, and adaptability — all of which affect post-close integration success.

Use Both Hard and Soft Data

You don’t need a full ethnographic study. But you do need more than founder interviews.

Incorporate both qualitative and quantitative signals to triangulate your understanding. Examples include:

• Org charts and span of control

  Tightly held power structures often point to founder-centric cultures or lack of delegation.

• Performance management frameworks

  Does the company actually reward the behaviors it claims to value?

• Values decks and onboarding materials

  What’s emphasized from day one and is it reinforced?

• Town hall recordings or internal newsletters

  These show tone, transparency, and focus areas.

Know What You're Solving For

You’re not looking for perfect alignment. You’re looking for predictable friction, the kind you can either prepare for or decide isn’t worth managing.

Ask yourself:

• Will this team need to operate differently post-close?

• Are they equipped and willing to adapt?

• Are our leadership philosophies compatible enough to function?

If the answer to any of these is no, culture should factor into your valuation, integration plan, or decision to walk away.

Final Thoughts

Cultural diligence is about more than surface impressions. It’s about pressure-testing your deal thesis against human reality.

No matter how compelling the strategic fit or financial upside, a deal can’t succeed without people who are aligned, motivated, and empowered to execute the plan.

In our next post, we’ll tackle the big question: What happens if the cultures don’t align should you still do the deal?