In order to increase market share, product offering and enter new markets, organizations often see mergers and acquisitions as the preferred opportunity for growth. Companies like Renault-Nissan and GlaxoSmithKline show these ambitions can form solid alliances and bring true customer value. Unfortunately, the reality in many cases is often less romantic. In fact, failure rates for mergers and acquisitions are generally accepted to be 50% to 70%.
What many organizations fail to oversee in their due diligence process are the sociocultural and cross-cultural differences that may form challenges in a successful merger or acquisition. This article focuses on several misconceptions and explores ways to overcome them.
“This is how we’ve been doing it for years”
It’s common that an organization acquires or merges with another organization because of its expertise in certain core competencies deemed valuable; Research & Development, technical experts or top sales people. Once an organization fails to offer these people an environment they feel comfortable in, they will eventually in due course leave and all you’ll be left with is the furniture and the fittings. Does this sentence sound familiar? “But this is how we have been doing it for years”. Please don’t fall for this obvious pitfall.
To avoid a sociocultural clash from happening, it’s important that due diligence is not only based on hard numbers but also these intangibles represented by corporate culture and structure. During the integration process, an organization needs to keep an eye on the expectations of all people that are essential to the (new) company. Let these people keep their own culture so they can be kept productive, rather than forcing any existing culture upon them. Have lower expectations; don’t expect you’ll be able to achieve any radical changes. When business cultures clash, time is truly wasted.
“Human Resources is responsible for culture”
Another pitfall organizations have been falling for is that any cultural implication of the merger or acquisition is delegated to Human Resources, so that senior management can focus on the hard parts such as strategy, finance and technology. That sends a very wrong signal to the organization; it implies that culture has no influence on the future success (or failure!) of the merger or acquisition. As a result, employees may feel misunderstood and unimportant, causing an even higher threshold before cultural fusion of different groups actually takes place.
Of course HR possesses the expertise in this area, but could never weigh in as heavy as the management board. Understanding of culture or the multiple cultures involved in the process should be a core competence of any senior leader. It’s their duty in the first place to approach the people and keep them informed about all of the changes. They should of course cooperate with HR for guidance and advice on these matters. HR can also play an important part as a sound board to employees to give them the feeling they can add value to the process.
“Great, we want the same thing!”
In the case of an international merger or acquisition it goes beyond the integration of corporate cultures. With different national cultures you also have to deal with differences in behaviour and implicit assumptions. What seemed to be a topic that both had agreed upon can turn out to be totally different in reality. It can happen that the parties are convinced that they are on the same side, while the opposite is true.
For example what is understood as an “open culture” by one culture doesn’t have to mean the same for the other. Where one party may think about an environment where you can communicate openly and share honest feedback, the other may expect people to be open to adopt change and innovative initiatives. Furthermore, for the latter party, the open communication style might be very undesirable in fact.
It’s important that these implicit assumptions are addressed beforehand. Winners in this area know that this demands a high level of intercultural sensitivity from key people involved.
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