Ah, culture! It takes the blame for many an M&A stumble. For deal makers, culture differences may seem like an inconvenient distraction in the heat of negotiation, so their potential impact is often minimized in due diligence, the potential issues wished away or simply ignored. For integration managers, however, culture is the elephant in the room. These people know that understanding the impact of culture is critical to their success, but they often don’t have the skills to address it or the language to talk about it.
Visible and Invisible Culture
Culture is a way of describing what’s unique about one group (insiders) compared to other groups (outsiders.) Insiders might say, “we don’t make a big investment until we all agree” or “we interview people an average of 16 times before we give them an offer.” In most companies, these behaviors become second nature after a while, and become the observable elements of culture.
To outsiders, these visible examples of culture beg some questions. The first of these is: “Why do we they these things?” Underlying the observable dimensions of culture are assumptions that people have about their industry, how their company provides differentiated value to customers, and what’s required to succeed strategically, operationally and financially. The other question is: “Which of these cultural elements actually have a positive impact on performance?” In other words, for example, how does a particular recruiting process translate into results for the enterprise?
In most organizations, the assumptions, beliefs and values underlying their cultural behaviors, and the links to performance, are not discussed. Why is it so hard for us to talk about corporate culture, especially when culture seems so integrated with competitive success? The most basic reason, we believe, is that we don’t have a commonly understood framework or language that would make it easier to talk about culture the way we do about, say, accounting statements or six sigma programs. Researchers and consultants offer a myriad of frameworks, definitions, analytical tools and intervention methodologies, leaving skeptical leaders to sort it all out on an ad hoc basis. As a result, we rarely hear executives draw explicit linkages between dimensions of their culture and performance of their business, and it is not easy to appreciate the power of culture to support or derail achievement of objectives.
Another reason that many people are loath to discuss culture is that talking about values, assumptions and beliefs makes many of us uneasy. Many people rarely communicate about these things in non-business conversation, so they don’t have the skills to do so in a business context. Some wonder whether communicating on this level is even appropriate in a business context. It sounds to them vaguely psychological, something that may cause them to reveal more than they wish about themselves. That pretty much shuts down discussion in most circles.
Thoughts for M&A Leaders
So, what can Business Development Managers and Integration Managers do about this during their next acquisition? We don’t expect people to embrace culture discussions easily, but they can start by developing a basic understanding of their own organizational culture – working with HR – to establish a common framework for discussion and give leaders the language to explore culture in the workplace. Focusing the conversations on how the culture produces tangible results gives everybody the incentive, and the permission, to continue. When the M&A team is clear about how their own organizational culture drives performance, they will be better prepared to understand, honor and leverage the culture in companies that they acquire.