Managing culture clash in mergers and acquisitions
News + Events : Managing culture clash in mergers and acquisitions
If 75% of all mergers and acquisitions fail to achieve their desired financial or strategic results, what makes the other 25% successful?
On November 4 and 5, Management Professor Mitchell Lee Marks, Ph.D, will lead a workshop for executives on successfully merging companies:
Making Mergers and Acquisitions Work: Managing the Human, Cultural and Organizational Issues
This intensive day-and-a-half seminar will be held at the SFSU Downtown Campus at 835 Market Street. Professor Mitchell Lee Marks, Ph.D., has advised in more than 100 mergers and acquisitions and is the author of six books on the subject. He is co-author (with Philip Mirvis) of the recently published Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions and Alliance (Jossey-Bass Publishers). He is a frequent speaker to business groups and has lectured at Harvard Business School and the Smithsonian Institution.
Culture clash in a merger or acquisition is a lot like breathing.
You donâ€™t think about breathing, you just do it. But if someone were to come up from behind, cup their hands around your mouth and nostrils, and threaten your ability to breathe, then you would certainly pay attention to breathing. The same holds true for culture in a combination. People donâ€™t regularly notice their corporate culture, but when thrust into a merger, employees become aware of how their ways of doing things differ from those of the other side. When they feel threatened by a combinationâ€”often because they see themselves on the weaker sideâ€” employees not only see differences but also feel a sense of vulnerability and fear over losing their accustomed way of doing business.
In typical combinations, culture building is an afterthought.
Early in the process, executives downplay the importance of culture with off -handed comments like â€œwe are the same kind of peopleâ€ or â€œthe more I look, the more I see how similar we are.â€ With 20/20 hindsight, these same executives bemoan their inattention to differences in culture and values that set so many combinations on the wrong course. Studies conducted in a variety of countries find that senior executives rate â€œunderestimating the importance and difficulty of combining culturesâ€ as a major oversight in integration efforts.
Easing culture clash rests on acknowledging its presence, educating employees as to its dynamics, and preparing people to appreciate how initial impressions influence enduring cultural perceptions between the partners.
Several companies include modules for easing a culture clash in training programs they offer to managers and employees. These sessions help people to recognize differences between companies and to expect a clash of cultures when they are combined. Select firms go further and engage in what is termed deep cross-cultural learning.
A recent study examined three levels of cultural learning during an acquisitionâ€”none, shallow, and deepâ€” and found an interesting relationship between them and the subsequent integration of plants in an acquired firm.
In the case of no learning, not surprisingly, no relationship to eventual integration success or failure was found. By contrast, deep culture learning interventions, involving cross-company dialogue, culture clarification workshops, and the like, had a strong positive effect on integration success. Measured results included greater cross-cultural understanding, smoother resolution of cultural differences, more communication and cooperation between combining parties, and greater commitment to the combined organization. What fascinates in this study is that shallow learningâ€”for example, show-and-tell presentations, official communiquÃ©s, informal Q&A, and suchâ€”did little to clarify and eliminate inaccurate cultural stereotypes or to reconcile differences between the partners.
On the contrary, these had the undesirable effects of strengthening perceptions of cultural differences and reinforcing stereotypes that contributed to conflict between the organizations.
Based on this research, it seems that it is better to do nothing about culture clarification than something superficial and perfunctory. The best approach, of course, is to devote time and resources to deep culture learning, especially during the combination phase.
When properly managed, cultural clash can result in a post-merger organization that can better achieve strategic and financial objectives than either partner could do on its own.
Partners learn from one another and engage in constructive debate regarding what cultural characteristics best align with the combinationâ€™s objectives and best support the attainment of a post-merger organization that is much more than the sum of its parts.