The biggest obstacle to a successful integration after an acquisition is conflicting corporate cultures. The disturbing statistics of merger failures document the problem: Between one-half and three-fourths of the deals that are done never measure up to original expectations.
The companies find they can’t live together. Sometimes they stay together, only to fight and feel miserable because their organizational values and lifestyles are incompatible.
Sometimes they stay together, only to fight and feel miserable because their organizational values and lifestyles are incompatible.
Corporate Culture: The Organization's Personality
Just what is “corporate culture”? Why is it so important? How does it exert such a profound influence over an organization and the way employees think, feel, and act?
If you want the cleanest, most straightforward definition of corporate culture, think of it as corporate personality.
Usually, when we think of personality, we think of the individual person. That’s a good place to start. Think for a minute or two. And identify three things that, in your opinion, represent very fundamental, core aspects of your personality. You might conclude, “I’m a true extrovert,” or “I’m a wallflower.” Perhaps you see yourself as highly aggressive, or as having a very understated personality. Maybe integrity is a hallmark of your makeup as a human being, or possibly you take pride in your genuine empathy for others.
Just off the top of your head, what comes to mind as two or three traits, characteristics, or attributes that you think are keys to your personality makeup?
Then, ask yourself how easy it would be for you to take one, two, or all of those traits and turn them 90 or 180 degrees. Could you remake yourself in terms of those characteristics? How easy would it be to overhaul your personality so that core dimensions such as these no longer describe or fit you?
There is a basic assumption about people that can be made here: People don’t change.
The conventional wisdom is that the individual personality has crystallized to an amazing degree by the time a child is school age. Agreed, a child continues to develop and fine-tune the personality through adolescence and even into adult years. But it’s the sameness of the personality, the constancy, that is so striking as the years go by.
People can usually look at their own children, or maybe certain aspects of their own personality, and say, “This child of mine seems to have come into the world made this way or that way,” or “I’ve been that way as long as I can remember.”
It is very hard to change people. When someone says, “I don’t like this thing about me, I don’t like my personality, and I think I’m going to change it,” that person has a heavy-duty job to perform. Even if the individual says, “Well, that’s probably true. I’ll get some special help from a psychologist, or I’ll get some coach, psychiatrist, teacher, or whoever, to work with me in changing this central part of my personality makeup,” it still will be a very, very sluggish struggle with limited returns.
Personality is extremely resistant to change, and that’s why the best predictor of future behavior is past behavior. Granted, it’s not a perfect predictor, but it’s probably the best single predictor managers will find.
That’s why it is unwise to hire people—or marry people, for that matter—with the idea that they can be “rehabilitated” after the fact. This sounds like a rather fatalistic and narrow belief. But there is a second basic assumption about people: People can change.
So when do people change?
It isn’t likely to happen to any significant degree when people just decide for themselves that they are going to change. It doesn’t occur very much even when they seek assistance from a helper or a professional person.
Personalities change, in significant ways, when the world hits them. When they are impacted by something from the external world, something that absolutely knocks them off the tracks they run on, they can change. Things like the following:
- A brush with death
- The loss of a child or some other loved one
- A profound religious experience
- Coming into sudden wealth (or the reverse)
- A rapid rise to fame
Events such as these can produce a distinct personality shift, because they make people reframe the way they look at the world, the things they value, what their priorities are, and so on.
The Difficult Task of Culture Change
But enough about the individual person—back to the subject of the organization, the corporation, and the corporate personality.
Organizations are like people in many ways. They are made up of people, and lots of times they are talked about with the same terminology. Again, there are two very solid assumptions that can be made:
- Companies don’t change very much, in and of themselves, in the routine, day-to-day corporate world of going about doing business. Maybe the company grows a little bit, makes a respectable profit, and experiences evolutionary change. But companies are unbelievably consistent and stable in terms of their personality dimensions.
- Companies can change. They do change. But usually when this change occurs, it is not because somebody at the top—maybe the executive committee, perhaps the company president—sat down and said, “Look, we don’t like this aspect of our personality or corporate culture. And we don’t like that aspect either. Let’s just reshape it."
Once again, they’re taking on a big job. It will be a tremendous struggle.
But if companies can change, and we know they do, when does it happen?
Companies, like people, may show a significant change in corporate personality when the world hits them from the outside. That kind of external impact can come from a merger or from being acquired. Other blows sufficient to reshape corporate culture might be a flood of foreign imports, a devastating legal battle, dramatic technological changes, key governmental actions, and maybe even a sweeping reorganization of a firm.
Major changes in the real world in which the corporation has to live, work, and make a profit can produce meaningful changes in personality.
Once again, though, there has to be something strong enough or meaningful enough to cause an organization to question its priorities or reexamine its values. Plus, there must be a new set of “reinforcers” strong enough to support significant shifts in the way the organization collectively thinks and behaves.
Many companies go through major reorganizations and never experience any culture change whatsoever. And, of course, there are firms that do get hit by powerful forces such that they should change and adapt, but they never do. Sometimes these companies die. Sometimes they end up part of the merger/acquisition casualty statistics, precisely because in the collision of cultures they lose their psychological identity and never recover.
Much is being written about corporate culture these days. One result of this is that some of the popular thinking in corporate circles seems to be, “Well, if we don’t like our culture, we’ll just go forth and change it.”
There are a lot of senior executives who are kidding themselves.
Over two decades ago, Fortune magazine carried a feature story on the subject, with the author concluding:
Corporate culture is real and powerful. It’s also hard to change, and you won’t
find much support for doing so inside or outside your company. If you run up
against the culture when trying to redirect strategy, attempt to dodge; if you must
meddle with the culture directly, tread carefully and with modest expectations.
Deal and Kennedy, in their book that first popularized the idea of corporate culture, made much the same sort of observation. They commented that changing corporate culture “costs a fortune and takes forever.”
Now, it’s very important to distinguish between change, in general, and meaningful changes in the corporate personality. A fact of organizational life is that companies are constantly changing certain habits and practices.
Individuals, too, develop new skills, learn new routines, develop new perspectives. But alterations in surface behavior, even new ways of looking at certain things, are not necessarily any good proof whatsoever that personality (or corporate culture) has been changed.
An organization’s personality forms over many years, from many shaping influences. And we can’t change our personality either as individuals or as organizations—just because we want to do it or see a need to do it.
The existing personality became what it is due to strong reasons, powerful forces. And there will be many strong reinforcers for keeping it as it is. One of the best indicators of whether or not culture is undergoing change will be the level of “resistance” that is seen and felt. Efforts to change personality generally produce a significant amount of resistance or psychological soreness. If managers set out to make meaningful changes and do not encounter resistance, they are not changing culture.
A key function of corporate culture is to bring stability to the organization, just as a key function of personality is to bring stability to the individual. As a result, it is safe to say—in fact, it is very important to say—that culture or personality manages us much more than the reverse.
The question companies must ask themselves, then, is whether there is a real willingness to provoke the resistance and the conflict that culture change will bring.
Will top management see the culture change effort through to completion?
Culture is the critical barrier to change. And the stronger the culture in the first place, the harder it is to change it. Just as the more ingrained a personality trait is, the harder it is to reshape.
In the merger integration process, culture typically stands squarely in the way of some of the transition and change. Of course, the function of culture is to protect an organization from willy-nilly responses to fads or short-term fluctuations.
But cultural influences just happen to be the sort of things that can really cause problems when a firm is being acquired and merged...