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Excerpt from Study 

CURRENT PRACTICES in Culture Assessment

Once the idea took hold that culture is important, a handy logic led to the notion that therefore culture should be studied—that it should be measured somehow—to determine the compatibility of merging organizations.

So culture assessment became vogue . . . but precisely what should be measured has remained vague. Furthermore, management often hasn’t known how to constructively use culture assessment data after gathering it.

This study sought answers regarding (1) how widely used and (2) how robust today’s culture assessment techniques are in the M&A arena.

CONCLUSIONS and Implications

The research offers important clues for cracking the code on culture in M&A. Here’s what the data indicate:

  • There’s a lot more talk than action on the culture front. Executives pay lip service to the importance of culture in mergers, but they routinely fail to back it up with dollars. Culture is the pauper when integration budgets are allocated.
  • Companies that do spend some time and money on cultural matters often proceed without a clear endgame in mind. For example, culture data is gathered with no viable methodology for how it will be used. No surprise—their initiatives fizzle out.
  • Most culture assessment efforts are conducted too late to be of much value. They’re also 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.
  • Companies rely on experts in the deal-making process, but then turn culture integration over to people who lack expertise in managing the intense political dynamics and psychological complexities involved.
  • Outside consultants have utterly failed at establishing credibility in this arena. Executives have apparently concluded that the purveyors of traditional culture assessment/culture integration services don’t add value.

These findings suggest that the culture challenges inherent in M&A need to be approached from a more promising angle.

  1. Culture should be a more strategic consideration in the merger process. It deserves far more weight in the initial targeting of potential acquisitions or merger partners.
  2. Due diligence should scrutinize cultural aspects of the deal with the same discipline given to financial and legal issues. This simply cannot be done via a traditional culture gap analysis or compatibility survey.
  3. Culture integration should be driven from the CEO/President level. This initiative cannot be delegated effectively. The architecture of culture strategy, plus the critical first steps of execution, belong to the leader.
  4. Organizations should be more astute in crafting their merger communications relating to cultural issues. Both the substance and timing of these messages are crucial. Management needs to be fine-tuned in managing people’s expectations, all the while shaping workforce behavior in the desired cultural direction.

Let’s note that the executives in this study, taken as a group, give themselves average marks for how they’re managing culture in M&A. But that’s not good enough. If culture heavily influences merger success and failure, there’s simply too much at stake to accept mediocrity. After all, we’re playing with shareholder value here.

A grade of “C” means leaving far too much money on the table.

“Culture is one of the most precious things a company has, so you must work harder on it than anything else.”

—Herb Kelleher, Founder & Chairman Emeritus, Southwest Airlines

 

 
 

 

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