Culture Clashes Kill Mergers

Culture is the set of norms, behaviors, values, beliefs, and interaction parameters shared among a group of people.

When evaluating a merger or other significant re-organization, most leaders tend to focus primarily on more tangible items like headcount, savings, systems, processes and tasks. Very little time is spent on identifying and proactively planning to overcome key barriers like people’s natural behavior, motivations and ability or willingness to change.

In a Bain survey of executives who have managed through mergers, [culture] was the No. 1 reason for a deal’s failure to achieve the promised value.

Because culture and behavior are considered “soft” skills, results- and task-oriented leaders discount or don’t know how to deal with this area of a merger. But there are very real bottom line impacts to ignoring these realities. One of the most famous examples is the failed merger of Mercedes Benz and Chrysler. In 2007, after 9 years, the companies admitted it wasn’t working and took an estimated $29 billion loss.

There are those who say the merger, which faced significant cultural differences, was doomed from the start.Chicago Tribune

You had two companies from different countries with different languages and different styles come together yet there were no synergies. said Dave Healy, analyst with Burnham Securities, referring to the then-Daimler-Benz chairman and why the merger failed.

How do you measure and use “culture” to make a merger successful?

Most people tend to look to the culture’s published values on a company’s website, or do some form of formal or informal employee survey. However, those are very subjective. They really reflect what they want to be. Or employees say what think they “should” say or maybe they have an axe to grind. They may be unsure how it is going to be used. These methods also do nothing to help you to know what to do with this information.

Culture is the glue that binds an organization together and it’s the hardest thing for competitors to copy. As a result, it can be a lasting source of competitive advantage.

Culture is more than just a unique identity, however. The best performing companies typically display a set of performance attributes that align with the company’s strategy and reinforce the right employee behaviors. Harvard Business Review

Using Behavioral Science to “Quantify” Behaviors and Your Company Culture:

What if you had a solution that, with 91% accuracy, could quantify the predominant natural behaviors of the team or company as a whole? If you are about to make significant changes to a team/organization and you find out that the main strengths of the team are Planned and Anchored, how you would go about planning and communicating change to this team would need to be completely different than if the team were Spontaneous and Creative.

Norms of behavior: ways of acting that persist because they are rewarded and the group teaches these behaviors to new people, sanctioning those who do not conform.

Pronouncements that we must change our culture either will be denied or cause levels of anxiety that trigger intense resistance to change. Therefore, you will fail if you take culture head on.

Professor Edgar Schein, Sloan Fellows Professor of Management Emeritus, MIT

Behavioral intelligence can also tell you how to motivate or reassure individuals and the team. Not everyone is motivated just by their paycheck. Understanding individual and team natural behaviors will dramatically increase your ability to successfully implement change.

It is easier to build up the strengths of a culture than to change dysfunctional elements

• Option 1: Actively work towards the desired attributes
• Option 2: Passively allow it to develop unmanaged, and live with all the attendant risks

Culture is the end result.

Professor John Kotter, Harvard Business School, Harvard University

Don’t go blindly into your next merger or reorganization. Unlock the power of behavioral intelligence to help you significantly increase your success and bottom line.

• About the Author

Kriss Poll