Merger They Wrote: Avoiding a Corporate Culture Collision

Article excerpt

At no time is a business more at risk of causing a corporate culture collision than when it merges with another firm. The special challenges that are inherent in any business integration requires the merger partners to put on the brakes and carefully assess whether the respective corporate cultures of their firms will make for a smooth ride.

According to Mitchell Marks, a San Francisco-based organizational psychologist and merger expert and co-author of Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions, and Alliances (Jossey-Bass, 1998), creating one company out of two starts with an integration of the firms' corporate cultures.

Yet, Marks notes, "Cultural integration is ignored in the majority of business combinations. This is a major reason why 60 percent to 80 percent of all business combinations undergo a slow, painful demise."

It is in the pre-merger discovery process that two cultures can often collide. "All the cultural norms that employees had taken for granted--rituals for running meetings, tactics for resolving differences--are exposed and often discarded at the incoming company," Marks explained.

Too often during a merger situation corporate culture is discussed in terms of dress codes or office decor or benefits. Many companies wrongly assume that compensation programs or other benefits equate to corporate culture. They don't. Instead, merger partners need to zero in on the basic ways that decisions get made in their companies and how differing approaches can be combined in harmony.

At the core of corporate culture is the company's mission and the values that fuel that mission. These values reveal a lot about a company and, increasingly, are what employees are most interested in. What needs to be addressed is to what extent will the most talented people from each company buy into the new vision, and does the leadership of each firm recognize who those people are?

One of the biggest misconceptions about corporate culture is that good cultures just happen--that some companies luck our. This masks the hard work and serious planning that go into tailoring a culture to the business.

As Frederick F. Reichheld, director of Boston-based management consultancy Bain & Co., noted in CIO Enterprise Magazine "When smart organizations implement culture-enhancing programs, they do so with the goal of improving specific aspects of the working environment.

In The Character of a Corporation: How Your Company's Culture Can Make or Break Your Business, (Harper Business, 1998), Robert Goffee, co-author states that "There is no right culture. Culture is appropriate only in terms of what you are trying to do in the business."

In a merger situation, once leadership has a clear vision of what the new company's culture should be, they must be prepared to commit the resources required to nurture and sustain it. It's easy to say that your company values initiative, creativity and teamwork, but when those attributes are exhibited, how do you reward them?

Consider the case of Sam Walton, founder of Wal-Mart Stores Inc., and a recognized master of corporate culture. Years ago, impressed by the "whistle while you work" philosophy he encountered at a tennis ball factory in South Korea, Walton instituted the Wal-Mart Corporate Cheer, which now begins every morning meeting at Wal-Mart stores across the country. This none-too-subtle form of cultural reinforcement encourages enthusiasm for the company and reminds employees of the need to focus on customer satisfaction.

Transwestern: A Case Study

The importance of corporate culture did not go unnoticed by the leadership of Transwestern Commercial Services, AMO[R], and Carey Winston which merged in June of 1998. Each firm had worked hard to cultivate its own vision and corporate culture. Effectively integrating both approaches into one cohesive culture would prove to be one of the key ingredients of merger success. …