You may recognize I Love You, You’re Perfect, Now Change as the title of a popular musical, but it’s also a common refrain when companies acquire or merge. The shift from “I can’t live without them” to “I’m not sure I can live with them” happens with both couples and corporations.
So what can you do to prevent culture clash when buying a company? Here's our Seven-Step Program:
- Cultural Due Diligence: Conduct cultural due diligence on the target company. Look beyond the numbers. Failure to do serious cultural due diligence can prove just as expensive and painful as poor financial, legal, or operational due diligence.
- Founder Impact: Assess the impact the founder or original entrepreneurial leadership team had on the business. What kind of dream did they have? What kind of operation did they run? And if the original founders will be exiting, what kind of influence and people will they leave behind?
- Value Drivers: Get crystal clear on the value drivers for the deal. Don’t get caught up in integration for the sake of integration. Plan to integrate only where it is necessary to create value together.
- The Mission Critical 5%: Don’t give all cultural attributes equal weight. Some are critical while others can wait. The trick lies in identifying the mission critical 5%. The rest is cultural noise and should be ignored, at least initially.
- Culture by Design: Most companies’ cultures develop by default. This may be your one opportunity to “design” the culture needed to support your combined strategy. People are expecting change, so make changes that impact your culture.
- Resistance and Relapses: Trying to change a company’s culture is a lot like trying to change a part of an individual’s personality. Some changes can be made, but not without a lot of work. Expect resistance and relapses. They’re part of the process.
- Manage Expectations: This is where most companies drop the ball. Even if they spend a lot of time and money analyzing the culture gap, they have a poor sense of what to do next. Their top-down efforts fizzle out because they don’t know how to operationalize their cultural ambitions. Very few actually do what’s needed to educate their workforce on what’s expected of them now. For example, what specific things do you want people to keep doing, stop doing, or start doing? It’s not enough to articulate a list of lofty values or create an inspiring mission statement. People need to know the “new rules.” They want to know what the priorities are now, how the two businesses will work together to create value, plus how their roles and responsibilities need to change.
Culture clash gets a lot of press because it sells newspapers. But when we’re called in to reconcile differences, we often find that the root causes are deeper. Many culture clashes stem from the following list of inadequately addressed problems:
Lines of authority remain foggy and vague. With so much fuzziness regarding who’s in charge, it’s left up to people to fight it out.
The combined business has a new strategy, but people are spending all their time and energy defending the past instead of designing the future.
A new organizational structure has been announced, but people don’t yet understand how to get work done. Communication channels have been disrupted. Social networks are in disarray. People simply don’t know how to accomplish what they could easily do before the deal was announced.
When these are the issues, we have to work at a more systemic level. Otherwise, cultural symptoms continue to mask strategic concerns.
When cultural issues truly are the root cause, most organizations don’t have people in-house that are equipped to reconcile them. Few people have been formally trained to do this. And even with training, most internal staff members are not equipped to recognize the important idiosyncrasies that need to be addressed.
Culture problems resemble health problems in that prevention is far less expensive and much more effective than cures. PRITCHETT’s best work comes when we’re involved before problems occur. By helping companies conduct cultural due diligence, plan a mission critical approach to cultural integration, and design a methodology for educating and engaging their workforces, we can prevent many culture clashes from ever occurring.