In many M&A deals, the similarity in values is an early sign to would-be acquirers of cultural compatibility. Culture differences are often cited as the third rail of M&A integration success, so having some comfort on that front is reassuring, to be sure.
Just last week, United Technologies’ Chairman and Chief Executive Officer Greg Hayes was quoted as saying, “UTC and Rockwell Collins share cultures of mutual trust and respect, accountability and teamwork that will allow us to work together to achieve our common goals.” While it remains to be seen if this is true, there are many situations where common values did not spare acquirers from significant cultural challenges. We have certainly worked with numerous organizations where a similarity in values was associated with conflicting models of leadership and, as a consequence, meaningful differences in company culture.
What does this tell us about values and culture? There are at least three possibilities. A common situation is that apparently similar value statements are associated with very different expected behaviors in the two companies. For instance, the common value of “treating people with respect” may lead people in one company to defer to the opinions of a recognized expert, while in another company the same value supports lively and open debate about decisions before consensus is reached. This is the challenge of alternative meanings.
A second possibility is that the values are aspirational. In this case, the leaders believe the values are important, and may even determine success, but the organization is not yet living up to them. This is a challenge of leadership execution.
Another possibility is that the value statements do not align with the vision of enterprise, but rather they are branding statements, intended to attract without driving any particular behavior. This is the challenge of “feel good” values.
So, caveat emptor is an appropriate caution. Are your values similar to those of your acquisition target? And are any of the challenges above at play to make the cultural picture more complicated?
Our solution is to take advantage of due diligence to dig into the values statements and understand better how the company translates them into action. Ask these questions of the CEO and several other leaders as part of due diligence. The picture you develop of the target organization will be a better reflection of the true culture of the place than the value statements alone might provide. Here are some suggestions for questions to make sure you have a good understanding of how the values operate in the potential acquisition.
- Tell me about the value statements on your website. How were they developed? Who was involved? How long have they been around?
- How do the values relate to your vision, your aspiration for where you want the company to be in 5 or 10 years?
- When you say, “insert value statement here,” what specific behaviors are you expecting to see? (Do this for each value statement)
- Give me a few examples of how the values have guided action or decisions at the executive level? (…at middle manager levels?)
- Tell me about some occasions when people did not live up to a value. Describe the situation, the value at play, and how the organization responded.
- What role do values have in hiring decisions? How does this work in practice? Can you give an example where values played a role in hiring someone that might not otherwise have been hired? (… or played a role in deciding not to hire someone.)
- Are the values weighted significantly in employee recognition and in determining rewards? Describe how this works in practice.
Most companies won’t call off a deal due to differences in values or culture, and you probably won’t either. These differences need not scuttle a deal, nor do they portend a poor integration. Instead, the contrasts you see when probing at this level should open up early avenues for discussing culture, culture differences, and how to address them, before you close the deal.