Executive Briefings

Four Practices to Ensure Post-Merger Culture Clashes Don't Torpedo Corporate Match-ups

By now, it's conventional wisdom: culture can ultimately break even the most seemingly harmonious corporate match. The list of mergers that have faltered or failed because of culture clash is long. Yet despite the many high-profile cautionary tales, very few companies involved in a post-merger integration deal with the culture question as fully and aggressively as they do with, say, capturing value from cost synergies.

Four Practices to Ensure Post-Merger Culture Clashes Don't Torpedo Corporate Match-ups

To be clear, by culture we are referring to an organization's values and characteristic set of behaviors, which collectively define how things get done in support of the organization’s purpose and strategy. Culture is what people say and do around others - and, tellingly, what they say and do when no one else is around.

There are several reasons why so many companies fail to address something so fundamental to a merger’s success. For one thing, culture can seem vague. Most people don’t know how to deal with it in an analytical, systematic and practical way. In addition, in the midst of a merger, most executives are already stretched beyond capacity. Some deal with culture, but in a superficial way; others wait until the dust settles, not realizing that postponing action will jeopardize success. But even those who take the time to identify cultural differences are rarely able to apply their understanding in a way that leads to actions that truly change behaviors.

In our work with hundreds of post-merger integration deals, we have gained some important (and surprising) insights that have significant implications for PMI success. Cultural differences, we’ve discovered, are often not where you expect them to be. And ignoring them can put not only the integration in jeopardy but the performance of the organization after the integration is complete.

Tackling culture during a PMI is challenging, but we have identified four proven practices that, if taken seriously, will lead to much more successful outcomes during and long after the integration. First, companies must identify cultural differences. Doing so is a critical first step in a PMI, and ideally one that should happen well before the integration begins - even during due diligence, if possible. Second, and equally important, companies need to commit to addressing these differences at the outset, given their profound impact on everything from talent retention to sustaining value. Third, it's essential to take a systematic approach to addressing cultural differences. Finally, companies must migrate to the target culture while preserving and harnessing desirable differences and making sure to measure success.

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To be clear, by culture we are referring to an organization's values and characteristic set of behaviors, which collectively define how things get done in support of the organization’s purpose and strategy. Culture is what people say and do around others - and, tellingly, what they say and do when no one else is around.

There are several reasons why so many companies fail to address something so fundamental to a merger’s success. For one thing, culture can seem vague. Most people don’t know how to deal with it in an analytical, systematic and practical way. In addition, in the midst of a merger, most executives are already stretched beyond capacity. Some deal with culture, but in a superficial way; others wait until the dust settles, not realizing that postponing action will jeopardize success. But even those who take the time to identify cultural differences are rarely able to apply their understanding in a way that leads to actions that truly change behaviors.

In our work with hundreds of post-merger integration deals, we have gained some important (and surprising) insights that have significant implications for PMI success. Cultural differences, we’ve discovered, are often not where you expect them to be. And ignoring them can put not only the integration in jeopardy but the performance of the organization after the integration is complete.

Tackling culture during a PMI is challenging, but we have identified four proven practices that, if taken seriously, will lead to much more successful outcomes during and long after the integration. First, companies must identify cultural differences. Doing so is a critical first step in a PMI, and ideally one that should happen well before the integration begins - even during due diligence, if possible. Second, and equally important, companies need to commit to addressing these differences at the outset, given their profound impact on everything from talent retention to sustaining value. Third, it's essential to take a systematic approach to addressing cultural differences. Finally, companies must migrate to the target culture while preserving and harnessing desirable differences and making sure to measure success.

Read Full Article

Four Practices to Ensure Post-Merger Culture Clashes Don't Torpedo Corporate Match-ups