Cultural compatibility can make or break the ultimate success of a merger or acquisition. If you’re contemplating (or in the midst of) such a transaction, then you know how daunting a process it is. There’s so much on the line. The financial investment and commitments. Your company’s reputation. Management changes. Customer and supplier reactions. Employee implications. As you sift through the analyses and recommendations of the accountants, attorneys, and possibly independent business brokers, you also need to pay attention to the compatibility quotient. There’s financial due diligence, and then there’s “cultural due diligence”.
There are very real costs associated with mergers between businesses that are not a good cultural fit. The combined business can fail as a result of decision-making based on false assumptions, contradictory practices or policies, or the build up of internal defensive walls that block the cooperation and free flow of information vital to success. You need to stay on top of your game during the transitional period, which can extend over a couple of years for larger organizations. Know that your competition will use the situation as an opportunity to woo away existing clients and spook your prospects. It’s a strategy from an old playbook. Propose that another company’s reorganization will be a distraction and therefore that company won’t deliver attentive, quality service. Customer defection is a real possible consequence if you can’t demonstrate a truly unified front, cohesiveness in market behaviors and consistency in operations. With a low cultural quotient, you run the risk of spending too much time, energy and resources on fitting a square peg into a round hole and not enough time on retaining existing customers and getting new ones. Great differences in business culture will demoralize and sap motivation from your best employees, spread negativity and self-defeating beliefs throughout the organization, and ultimately leave the resulting business without sound financial footing and without a strong brand identity.
Even when companies have similar business cultures, there are still some differences that you will need to address. The keys here are mutual respect for each other’s culture and identification of common ground.
Companies that want to avoid such pitfalls need to enlist an independent party to conduct a cultural assessment, and then create and implement a plan for incorporating the assessment’s findings into a well-orchestrated integration plan (or a decision not to proceed).
A cultural assessment and integration plan should take into account, at a minimum, the following organizational culture variables:
Behaviors - the degree of informality/formality, decision-making maps, processes and hierarchies, and the definition (and requirements) of work (job descriptions, employee qualifications).
Communication - style (formal/informal), degree of openness, language, frequency and vehicles for information sharing.
Beliefs - common vision and goals, beliefs about what success is, and standards of ethical and acceptable behavior.
Business structure - the organization of work through teams and individual contributors, department/division responsibilities, accountabilities and interactions;
Business performance - performance criteria and measures, employee performance management programs, and compensation (including incentives and bonus plans).
If you’ve already inked the deal and find your business is exhibiting signs of ‘culture clash’, there are steps you can take to minimize these, keep the organization focused on the business plan, and lay the foundation for the 3 C’s to merger and acquisition success – communication, collaboration, and community.
Stephanie Leibowitz, MA, Anthropologist At Work
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Well done, Stephanie; a great topic for discussion and emblematic of corporate dysfunction!
ReplyDeleteSo often I see this cultural mis-fit at the level of employee hiring errors: 's/he just didn't fit in'.. It's obvious that at the level of corporate mergers it's a potential nightmare.
How can an astute company (with a willing and pro-active merger partner) reduce the risk of sinking their deal on issues they neglected to consider? Statistically accurate, verified assessments are excellent tools for this purpose. Companies who routinely hire individuals for replacement or new positions are wise to benchmark the behavioral style or attitudes and values of the individual best suited to fill the job. What does the job need, in the way of these 'soft' skills, to be done excellently? With a benchmark profile, promising candidates are then assessed to see how closely they match the ideal, assuming they also have the requisite education and experience.
Imagine if a company took its own profile, as a collective whole? It would have clarity around the type of behavior, values and attitudes that, on a general yet collective and cohesive basis, have contributed to its success (and we'll assume success is there or why would the merger partner be interested?). The principals at the top would then be able to compare their corporate profile with that of their proposed partner. Compatible? Great! Not so compatible? Well, what does each company have to change or compromise to make this marriage work? Is it worth the effort? Can they quantify the cost of the added time necessary to bring the partners to cultural parity?
Imagine how much friction could be reduced with this pro-active stance! Can anyone find a way to help companies see the light? Probably have to put it in dollars or lost share price to make them hear......