According to one of the world’s largest accounting advisories, KPMG, people and organizational issues is the biggest reason why mergers or acquisitions fail
. And in a recent Bain survey
, the top reason cited for failure during this phase was integrating different company cultures. So how can your company avoid the clash?
The time to worry about different company cultures clashing in your merger isn’t after the merger is official — it’s as soon as the merger is even considered. Everything may line up perfectly but it can all be undone in the post-merger integration phase when the two cultures clash.
An example of a catastrophic post-merger culture clash is the troublesome merger Compaq experienced when they merged with Digital Equipment Corp. According to Stanford professor Glenn Carroll
, Compaq lost its position as the top computer maker in the United States due almost exclusively to the problems that occurred when the companies’ very different sales styles and corporate cultures failed to merge effectively.
That’s why it is so important for companies to not overlook potential culture issues when performing due diligence pre-merger. Of course, there are always going to be some issues when two corporate cultures merge, but both sides should be aware of how big the problem will be before moving forward. That way a plan can be put in place from the beginning.
Create a Concrete Plan
All too often company cultures are treated as a vague concept that can’t be managed effectively. But that’s incorrect. Executives from both companies should work together to create real tangible goals and make sure progress towards those goals can be measured. For example, instead of simply encouraging teamwork between the newly emerged workplaces, there should be a set number of collaborations required.
In addition to actual goals, it’s important to develop a plan for the corporate culture of the newly merged company as a whole. There will be strengths and weakness in the culture of each company, but this is a chance to take the best of each. That isn’t always as easy as it may seem, as two companies can have strengths that aren’t compatible. When that occurs, management must decide which strength they want to encourage and which they want to let go of.
Let It Go
Speaking of letting go, it’s important for both sides of the merger to understand that they are going to have to make sacrifices, and not just intangible parts of their culture.
It’s a tough but crucial part of mergers: not everyone is going to survive. Not only will there often be redundancy, but some employees who were thriving in the original corporate culture won’t be able to transition to the new culture. That’s why it’s important to communicate clearly and honestly about any layoffs, and to allow employees who want to leave to do so as quickly as possible.
To retain key employees, the company should focus on the socialization of the remaining employees. This can occur by encouraging employees to help each other adapt to the new culture, as well as management offering bonuses and other incentives to those who stay through the tricky merger process.
As we move into a truly global economy, it’s going to become increasingly important to focus on the importance of corporate culture when considering mergers. Don’t let your company be included in a list of mergers
killed by corporate culture clash.
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