12 August 2008
How to harmonize clashing cultures
Avoid "the mistrust that comes from ambiguity" during mergers or acquisitions.
The recent news about the proposed merger of InBev and Anheuser-Busch had the Hub wondering about the outcome, given a reported “clash of two very different company cultures.”
InBev is described as having a “to-the-bone cost cutting and no-frills corporate culture,” while Anheuser-Busch flies its senior personnel to business meetings around the world in executive jets.
Both companies have created a website with messages for stakeholders, including employees.
Optimistic studies suggest 50-50 merger success rates, while pessimists say 80% will not meet expectations.
80% failure for mergers
Most mergers and acquisitions (M&As) fail to achieve the pre-deal objectives, often due to persistent “Us and Them” problems and internal power struggles.
Optimistic studies suggest 50-50 merger success rates, while pessimists say 80% will not meet expectations and a third will be sold off again within five years.
While due diligence may have failed to unearth financial problems, the commonest cause of failure is down to people. Culture clashes are said to account for roughly two-thirds of the failures.
Leadership and communication
Most consulting firms say leaders need to communicate the intent behind the acquisition clearly, the changes and opportunities they expect, and listen carefully – preferably in person.
How many times have the experts said effective leadership, demonstrable commitment and honest communication are critical merger success factors?
A Towers Perrin report says successful M&A leaders:
- set the right priorities and create positive business momentum and discipline;
- imbue employees with commitment, engagement, confidence and comfort to work through difficult transitions;
- inspire a sense of purpose, coherence, community and trust that allows employees to remain focused and highly engaged; and
- are instrumental in creating a shared culture embodying the business strategy of the new combined organization.
Culture clashes are said to account for roughly two-thirds of the failures.
Cultural misfire will sink the deal
David Harding, leader of consultancy Bain & Company's Global M&A practice and co-author of Mastering the Merger, observes that acquirers buy a capability, but with it comes a culture.
Harding says, “If you buy a company with a strong sales organization, you're buying their culture.” In changing that culture, the merged company risks losing its best salespeople.
“If you misfire on culture, it'll sink the deal. You'll end up with a dysfunctional organization,” Harding says. He suggests executives announce their organization early, defining their business model and building an aligned infrastructure.
“It's the mistrust that comes from ambiguity that will not stand in most organizations. This causes most problems regarding culture,” he concludes.
Working at an informal level
The Hub believes internal communication professionals can help deal with culture clashes at an informal level – the level at which cultures are formed. This means educating leaders on how informal socialization works, as well as promoting stories and myths about key people and events.
When rumors are spreading around mergers or acquisitions, no news is bad news as far as employees are concerned. The time spent working the grapevine always escalates around the time of a merger – increased hugely when the cultures are acknowledged to be very different.
No news is bad news as far as employees are concerned.
On the formal communication front, inaccurate news is worse than no news at all and the need for “honesty” comes up most often in this respect.
Employees compare communication, reading between the lines. This means any messages must be truthful, consistent and coherent – leading back to the importance of effective leadership.
Can the cultures be reconciled?
Mark Goodrich of ER Consultants, poses a cultural question: “What is the emotional logic of the key players – can personal agendas be reconciled with the business agendas? Will the two cultures fit?”
Goodrich says his firm has seen several major merger attempts fail because the two top teams were unable to work together. “The emotional pain extends down the organization as key players fight for superiority. Feelings of winners and losers remain for many years beyond,” he says.
Gary Ashton, ER Consultants, observes that as companies develop a more global reach, integration will become an issue inside the boardroom. “Managing change but failing to lead – developing artefacts such as communication plans, employee surveys and newsletters is no substitute for providing leadership and direction for staff,” he says.
Have your say
Any merger is likely to encounter cultural differences. What would you do differently in the case of a merger between clashing cultures? How helpful are the informal aspects of communication in bridging a cultural divide – and how do you access these aspects of organizational life?
Discuss these issues with other readers below.
Other recommendations:
Merger communication in the spotlight
TOP TIPS: Six ways to communicate effectively during a merger
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