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A merger is the integration of two organizations into one. The reasons to do so are numerous: economies of scale, industry capacity reduction, growth, acquisition of know-how … But the data are impressively dramatic. Most mergers fail and destroy value. One of the main reasons is because there is not enough focus on cultural compatibility.

 

I propose these 10 “guidelines for culture management during mergers”.

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Integrate “culture” in the process of the due diligence. Do this early on.

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Assess both cultures to detect differences and more importantly the common ground.

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Take mutual appreciation as point of departure. Avoid the pitfall to focus on weaknesses. Search for compatibility, synergy, commonality.

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Try to appropriate cultural differences and commonalities from the very beginning, during the merger negotiations. Negotiators should be very aware of how the culture of the other company works.

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Appoint someone to deal with culture change. Make sure that this is someone with impact.
Don’t confuse this person with a change manager. Change is very often about culture. But someone who deals with culture engineering will continuously look for ways of reinforcing the culture, independently of any project.

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Define a third culture, next to the existing two cultures. Avoid that one group has to adapt to the culture of the other group. Both merging groups should evolve versus this new third culture. Make sure that this is clear for everyone.

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Make sure the new culture is tangible. Look for early beacons of culture change. Many small initiatives, will make the culture change. Ut is also important to detect inconsistencies between the current operation model and the target operational model.

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Make sure that important decisions are made in a culturally neutral way. The risk exists that one group will impose decisions over the other. This will create a quilt-culture instead of a homogeneous culture. For every strategic decision a cultural risk assessment must be made, and actions should be define to neutralize negative fall-out.

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Design processes and interfaces between the various parts of the organisation with the third culture in mind. Develop ways to detect cultural short-circuits.

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When designing a new culture, adopt an empathic way of working. Think about how the new culture will feel like. Emotion, Experience, Effort are three elements to integrate in the culture design. Take into consideration the doubts of people and address them early on. This is more important when the merger took place between former competitors.

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The success of a merger should not be a matter of coincidence. Even though the integration of two organizations does not follow predictable paths, organizations can do a lot to avoid the collision of two cultures.

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Otolith is a European advisory house, focussed on the improvement of strategy execution.

People are the center of any successful strategy. Every strategy should be people-centric.

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David Ducheyne

David Ducheyne

David Ducheyne is the founder of Otolith. As a former HR and business leader he focuses now on humanising strategy execution.

2 Comments

  • Jim Smith says:

    I’ve been through several of these and there is an approach that works quite well. Human nature plays a huge roll in the entire lifecycle of a merger. From the first handshake to the dust has settled. Top to bottom, individuals are concerned about who will survive and who will not. The next, once the winners are in their positions is. Unfortunately, they have to focus on the upcoming quarter’s numbers. Meanwhile, HR is still trying to figure out what the hell the culture is post-merger. We have been surprised to see what happens when you engage with a post-merger organization and have the CEO asking questions, the responses to which are received by a third party who places the answers in front of the executive team. When the responses are anonymous, and the question is simple and direct, and things start to change, daily in some cases, the culture takes notice. Since the sources cannot be identified by which premerger group they belong to, the executives are forced to deal with the suggestions, void of any concern for historical culture. The immediate changes in effect create the new culture, the traditional we/they cloud disappears, and a new culture emerges. Never underestimate the negative effects of self-interest, whether in the janitorial group or among the officers. One client CEO opened the floodgates by asking the post-merger organization to tell him the “truly stupid things the new company was doing.” Not much happened, initially. Then, in the third week, the CEO listened to the employees, (800 at that point) and took a shocking action. Seven days later the input sored to 4700 and saved $300 million, killed or altered hundreds of policies, sent a corporate bully home and saved 1800 jobs. The interesting part, no one had a clue which culture generated the high impact suggestions, and no one cared, well, except for the one who was sent home. A post-merger culture was born, the byproduct of action and results, notwithstanding no plan developed.

    • dducheyne says:

      Thanks Jim. I like the idea of asking question and then doing something with the answers. That last point often is missing.

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