When Cultures Collide

It has become received wisdom that integrating cultural factors is crucial for success in mergers, whether small or large. Research by McKinsey shows that 95% of leaders surveyed identified cultural fit as critical to the success of integration. 

A post-mortem of many major merger fails shows that cultural factors are often to blame. Daimler-Chrysler, Sprint/Nextel, Omnicom & Publicis and AOL TimeWarner are all examples of this. On paper, the transactions should have worked, the numbers looked good. But in practice, the inability or unwillingness to bring together different values, behaviours, practices, expectations, standards and ‘ways of doing business’ destroyed rather than created value. 

You don’t need to have been part of a mega-merger to have experienced this. Smaller businesses that buy or merge with others will experience similar challenges. Even bringing in a new team to an existing department requires a good cultural fit in order to be successful. 

How many times have you seen the phrase ‘culturally aligned’ in the press releases announcing merger activity? This prompts me to ask, ‘How do you know?’. What work has been done to identify cultural similarities and differences? How can you be certain without having spent quality time working together? Is cultural alignment even possible, or is this a myth?

Culture work performed poorly 

We have observed (and experienced!) some poorly led culture-alignment work. This includes:

1. Patronising your people with ‘inspirational’ quotes or values-words that have more value as wallpaper than impacting people’s attitudes, actions and behaviours. Ask yourself honestly - do these words really reflect the reality in the business?
2. Using ‘cultural alignment’ as a thin veil to excuse a highly controlling style will see leaders imposing detailed behaviours on everyone, regardless of their role in the business. Too many ‘thou shalts’ will suffocate creativity and rarely with any merit in substance.
3. Basing views about people and their approaches on anecdote rather than fact and then extrapolating and exaggerating those views to entire teams and departments. Do leaders use phrases like ‘they always’, ‘they never’ and ‘they are all like that’?
4. Significant effort going into crafting words and phrases to display to external stakeholders - customers, shareholders etc - rather than a focus on what’s real in the business. Getting words onto the website doesn’t make them real. Identifying the real phrases that are used in the business can be illuminating. For example, if we hear leaders say ‘there are no prizes for coming second’ a lot, we know that genuine teamwork will be a challenge.

What is a healthy approach to cultural alignment?

Great leadership recognises that it is a power struggle that is at the root of the culture question and seeks to share power in the coming together.

Using a house move as an analogy, successful cultural alignment is more likely to succeed if both parties adopt the attitude that they are moving into a new home together, rather than one inviting the other to move into their house. 

The opportunity to shape something new is invigorating and will challenge conventional thinking.

Action - make an honest appraisal about what’s working well and what’s no longer serving the business. Leaders can bring the best ideas and practices from both organisations to the new ‘home’.

Compromise is critical

Successful mergers also recognise that each party will bring some things that are not wholly enjoyed by the other. 

Action - Focusing energy on what will make a true difference to the business and not getting distracted by minor things requires a clear and intelligently informed understanding about the critical points of attrition. As long as these are secondary and not fundamental to the business, some compromise is acceptable. For example, if it’s a different approach to overtime that’s a significant factor, focus on that and not on the choice of coffee supplier.

Look to the future

Successful leaders will point towards the future when working on culture, rather than dwell too long in the past. They see opportunity to expand their vision for how the business serves its customers and people. This is not to say that all history should be abandoned, in fact far from it. The skill is in balancing:

1. A healthy respect for what’s contributed to the ethos and direction of both parties with...
2. A determination to identify unnecessary anchors, those things that are perceived as ‘sacred' but in fact are no longer essential to the future success of the combined business. Great leadership will harness the former to move the business beyond its anchors.

 Action - consider your culture aspirations, asking if ‘this is how we want to be’. Avoid excessive negotiation over the way things have been done in the past.

Living a company culture

Crucially, culture is organic and not fixed. Clear values are powerful when there is freedom to express and apply situationally; trust employees to adopt the desired attitudes rather than prescribing a long list of specific actions.

Action - leaders should provide examples that illustrate possible actions but that are not prescribed. Promoting stories of how people in the business are applying values and cultural expectations is an excellent way to build clear expectations, especially in the early months of a merger.

See it to be it

Expectations for attitude and behaviour, whether expressed in values, procedures or other codes, need to be seen to be believed.

Without belief, it is impossible for values and cultural expectations to be anything other than words on walls.

Action - leaders must be seen to live their values in practice, in small everyday matters just as much as major strategic scenarios. If the organisation chooses ‘friendly’ as a value, the leaders need to show that they are, well, friendly!

Slow down and be patient

Cultural alignment cannot be rushed. One of our clients put it like this: ‘You don’t really know until you’ve shared a toothbrush with them.’ Another described how it’s taken 18 months to bring their two businesses together as people have needed time to understand and trust each other. Trust is rarely built quickly, especially in a merger situation. Investing time deliberately to build relational capital - goodwill if you prefer - is essential.

Action - normalise culture thinking by including it as often as possible, e.g. in every team meeting, one-to-ones etc. CEOs and leadership teams should schedule focused time to understand culture and progress towards their desired culture, especially in the early stages of a merger. This needs to include a ‘listen to learn’ attitude, hearing from employees and customers with an open mind and not dismissing their observations and concerns. Leaders must invest time with their colleagues to build relationships, which is crucial for healthy feedback. External perspectives, especially around the attitudes and behaviours observed in the leadership team, will be instructive.

Draw on data-driven insights

In our work, drawing on insight from psychometrics, we help accelerate the ability of leadership teams to understand their values, mindsets, approaches, likely points of conflict and common ground when they join together or are considering joining. Understanding these factors at the outset can make a significant difference in the speed of success, providing objective and ‘real’ insight into the critical factors.

Is cultural alignment a myth? If viewed as either a PR exercise or desire for uniformity, then yes. Investing properly in fostering a healthy culture, however, can add significant value, not only reducing the time and costs of bringing two businesses together, but also in identifying new opportunities and creative thinking.