Organizations have grown far more sophisticated and skilled in their ability to execute the integration process. The one area where companies still struggle, though, is in merging disparate cultures. This is the black box of integration, the most complex problem that executives encounter in M&A.
PRITCHETT, LP surveyed 130 executives and their responses offer important clues for cracking the code on culture in M&A. Here’s what the data indicates:
- Most culture assessment efforts are too ad hoc, unstructured, sketchy, and haphazard. In fact, they may very well cause more problems than they solve. There is a clear lack of efficacy in the data-gathering process and how that information is utilized.
- Outside consultants have utterly failed at establishing credibility in this arena. Executives have apparently concluded that the purveyors of traditional culture assessment/culture ...
M&A Culture Presentations
Hard Facts About Culture
- Strategy is a product of your view of the future.
- Culture is essentially the product of your history
- That will always present a challenge in ensuring that the corporate culture is aligned with and supports your plans for tomorrow.
- VERY FEW culture characteristics wield a make-or-break influence over operating results and an organization’s future …
Several Ways to Address Cultural Issues
Four Possible Scenarios for Culture Integration
Advantages to Each Approach
Why Are Post-Merger Cultural Issues Difficult to Manage
Consequences of Culture Conflict
Culture Differences Can Cause Integration Failure
3 Important Drivers of Cultural Issues
Components of Culture Change Programs
Cultural Due Diligence
41-slide PowerPoint presentation on how to perform culture M&A due diligence.
How to Perform Culture M&A Due Diligence: The 5 Stages
1) Understanding the Deal Logic
2) Getting Organized
3) Data Gathering Tools and Techniques
4) Analyzing the Data
5) Operationalizing the Data
15 culture assessment questions to identify strengths, weaknesses, and wild cards.
- How do people feel about being merged/acquired?
- What would be your (or others’) major concerns about being acquired or merged?
- What are the defining characteristics of your company? (What’s distinctive? What differentiates you from other organizations in general? From the competition?)
- Describe the company’s core values. (What does it believe in?)
- What do outsiders not know/realize about this company?
- What are its idiosyncrasies?
- What are the unwritten rules around here?
- What aspects of the culture are most important to people here? (What do they hold sacred?)
- Where in the organization do the dominant subcultures exist?
- What are the company’s negative or undesirable cultural attributes? (What aspects of the culture need to change? ...
Listed below are a number of cultural dimensions and indices that are organized across a continuum.
Step 1: Review each cultural characteristic and place an A in the column that most closely represents your perception of the Acquirer’s culture.
Step 2: Place B in the column that most closely represents the Acquired Company’s current culture.
Step 3: Calculate the absolute difference between each rating to determine the largest culture gaps ...
1. How do people feel about being merged/acquired?
The corporate perspective is different from the field’s perspective. Here at headquarters the questions are, “Is there room at the inn?” and “Will I go to Atlanta?” In the field, people are wondering if they will have to work for less money. Some are angry that it came to this. Did the CEO and the SVP just sell us out? People’s emotions run the gamut from “How could you do this?” to “What took you so long?”
It’s no shock that we merged, but people are set back on their heels that it is this acquirer...
Organizational Culture Checklist covers questions for:
Customers / Community
1. Spending Habits: Frugal or Free Spending
Comments regarding this issue: __________________________________________
2. Decision-Making Process: Deliberate or Expeditious
Comments regarding this issue: __________________________________________
3. Power and Authority ...
- What aspects of the way your organization operates contribute most to its success/effectiveness?
- What characteristics of the way your company operates most hamper or interfere with its ability to compete?
- List the company’s operating strengths. (What does it do best?)
- What would you identify as the company’s operating weaknesses? (Where is the company most vulnerable or least effective?) ...
The 3 page document discusses how the Integration Team should conduct the Operating Style Analysis in order to understand the similarities and differences between the two companies.
The 2-page Operating Style Analysis Word template follows the instructions.
1. Our outfit has a relentless drive to improve.
2. The attitude here is optimistic.
3. This work group exhibits a low tolerance for uncertainty and ambiguity.
4. We’re bureaucratic and rule-oriented.
5. Our work pace is fast ...
"Not necessarily HR people. Sometimes, project managers and directors can perform the assessment. Whoever does it, they should be well-respected ... Sometimes, only an outside external consultant has the necessary credibility to communicate the findings to top executives ..."
- "What are the unwritten rules? A lot of things get accomplished in organizations through unwritten rules, side channels and work arounds.
- What gives a person power here? It gets to the core of what is valued and what makes people successful. Sometimes it is not good behavior.
- What do people hold sacred about the culture ..."
How different a person would you be? If the change happened overnight, would you even recognize yourself the next morning? What would it feel like? How would you behave?
That’s what happens when, for example, a 4,000-person company acquires and integrates a 1,000-person firm. The acquirer’s cultural DNA will be reconstituted as it absorbs the new employees. Immediately when the deal closes, one out of every five people in the workforce will be from a firm with a different genetic code.
Can anyone doubt that the immigrants will leave their cultural mark on the land of the parent company?
Cultural Best Practices
Nothing in the realm of M&A gets botched up so consistently as the blending of two companies’ corporate cultures. This foul-up is rooted in naiveté and fueled by the popular idea that culture requires broad-gauged attention once a deal closes. The naiveté is revealed in executives’ misconceptions regarding the malleability of culture. (Actually, it’s hard as hell to change.)
And the popular idea is wrong because instead of focusing on quickly “fixing” culture differences in the broad sense, which isn’t feasible, top management should focus the organization on delivering operating results in spite of those differences. That is feasible ...
The “best of both worlds” strategy for integrating cultures brings traumatic destabilization to both organizations. Managers in both companies end up struggling to manage an unfamiliar situation. They can’t necessarily draw on their previous successful experience as they wrestle with subtle and not-so-subtle ramifications of cultural shifts. Besides, after all is said and done, one of the two cultures virtually always comes out on top anyhow.
We recommend a much more pragmatic, business- oriented approach ...
There's an insidious threat facing organizations that is growing rapidly via M&A: A loss of alignment between corporate strategy and the existing culture.
If these two fall out of sync, you’ve got a real dilemma on your hands. But the disconnect often goes unnoticed by top management and the board of directors, even as it quietly undermines operating effectiveness. So what causes strategy and culture to fall out of alignment?
Think of it this way. Strategy is forward-oriented. It’s today’s game plan for tomorrow. Culture, on the other hand, is essentially the product of your history. One is shaped by the future, the other is forged by the past. (That’s a dramatic difference and it has huge implications.) …
Mergers very often are such a destabilizing event, and have such a powerful impact, that they “break the organizational box,” so to speak. Frequently there is a window of opportunity that develops during which management can do some very profound things in terms of reshaping the corporate culture.
But if that opportunity is not seized, the window soon slams shut, or gradually slides shut, as the case may be. If time goes by and nothing much changes, people tend to settle back into their same old behaviors and reembrace the same old beliefs and values.
This says two things. First of all, management has an outstanding opportunity to do some things to a corporate system and its beliefs, priorities, and so forth, on the heels of a merger. There is a superb opening (plus a real responsibility) to come forth and lead the organization into the changes that are needed …
The integration of a small, well-run company often requires a light touch strategy. In those situations, follow these 10 rules to achieve the best results:
1. Turn off "integration autopilot"
Over time, serial acquirers develop detailed procedures and checklists for running efficient integrations. That can work very nicely, just as long as the same tactics are not blindly applied to all deals, no matter their size.
2. Don't "wing it"
A light touch integration strategy does not mean no touch. Processes always should be implemented even on little deals, to define goals and time frames, track progress, and hold people accountable …
As far as corporate culture is concerned, “change” is the dirtiest word in the dictionary.
It’s culture’s nature to believe deeply in itself, and it shows absolutely no sense of humor when people attempt to redesign it.
In Culture Matters: How Values Shape Human Progress, Harrison and Huntington discuss how difficult it is to find something that “can substitute for disaster in stimulating cultural change.”
You’re dealing with a self-righteous, heavy-handed adversary. Don’t expect it to fight fair.
Culture’s overriding priority is to protect itself. This is more than a habit—it’s buried deep within culture’s DNA.
Let’s look at how this plays out when management decides to reshape the existing cultural …
You need a tremendous amount of high-quality communication to sustain a culture change. Managers typically underestimate the effort that is required. They rely on the normal communication practices and patterns, failing to consider that those methods were never designed for times like this. Standard communication procedures simply won’t cut it.
Consider the situation at hand. First, people need to hear the logic, the rationale, behind the decision to change the culture. Give them an airtight case, based on hard facts about the marketplace and the firm’s competitive position. Next, they want to know what’s coming, and how they’ll be affected personally. You must give them a clear understanding of what’s expected regarding new ways of work. You need to sell people on the purpose, preach hope, and explain the part they’re expected to play in the change strategy. The vision must be articulated, and then promoted with the zeal of a crusading evangelist.
And it doesn’t stop there. You can’t afford to let up. Don’t relax ...
Shaping Corporate Culture tells you what to expect, why things happen, and how to meet the challenges of culture change.
This handbook delivers a crucial all-employee message on the “how-to’s” of culture integration and change while distributing accountability for the change effort throughout the organization.
Used in conjunction with the complete 95-5 Methodology or as a stand-alone tool, this handbook will help your entire workforce focus on the 5% of culture issues that are mission-critical.
Ground rules include:
- Accept personal accountability for culture change
- Protect the organization’s operating results
- Push for speed in the change process
- Don’t be surprised when culture counterattacks
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:
1. 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.
2. 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 …
High-Velocity Culture Change delivers 22 specific guidelines on how to manage your part of the organization for high-velocity culture change. You’ll also learn how to avoid the management traps that cause most efforts to fail.
This handbook will prepare you for the rigors of the agonizing process that is called culture change. It will also prove how and why the pain is well worth the cost. Learn to:
- Achieve dramatic culture shifts in record time
- Put the day-to-day responsibility for culture change where it belongs
- Generate broad support for the culture change effort