As of late, there seems to be daily announcements of Mergers and Acquisitions (M&As) between high-profile, global firms. M&As have the potential to be highly profitable strategies, as the collective knowledge, skills and cultures of the organisations could lead to significantly greater output. However, the coming together of two groups of people presents leaders with a challenge of eliminating the sense of “us” and “them”, which so often arises when two organisational cultures come together.
Change leaders are not ignorant to the magnitude of this challenge. Just this week, AkzoNobel (owners of the Dulux paint brand) have reportedly rejected a second takeover bid from US rival PPG, with one of their key reasons being that there is “a significant culture gap” between the two companies. Sometimes, though, the M&A should not be avoided and leaders need to be equipped to manage the cultural fallout that may ensue.
Burying our heads in the sand can feel tempting when it comes to culture since it is such a complex, intangible and evolving phenomenon. How can we account for and manage all the behaviours, rituals, attitudes, stories, language, jokes, conversations, rewards, processes, rules, symbols, climates, and physical environment within an organisation? Let alone all of those within two separate organisations! However, given that the failure to integrate the two cultures is one of the most widely cited reasons for the failure of M&As,1 something must surely be done to attempt this monumental task.
So, how might organisations want to go about tackling this issue?
Business leaders often have a really clear understanding of the culture they want, but without an accurate understanding of the culture they have, reaching this ideal will be near impossible. The first step then is to truly understand the culture of the two organisations. This will enable leaders to better predict and manage the potential clash that might follow their upcoming merger.
When reflecting on organisational culture, it’s important to think beyond the surface-level elements which are commonly articulated and more easily identified. Without wading past the shallows of their culture, leaders will not reach the stronger cultural influences within their organisation. Leaders should be looking to uncover the day-to-day, experienced culture and the deep-rooted beliefs that are taken for granted and harder to articulate. These can become like anchors, preventing the shifts needed for cultural integration during an M&A.
So, Akzo Nobel are right to be cautious about merging with PPG, when they perceive that there is “a significant culture gap” between them, but I wonder at what level of culture this gap exists. Maybe it is within the shallow elements of culture, such as the look and feel of the office and how people dress for work. Perhaps it’s equally important, however, that the deeper, unwritten rules and values of the two organisations will not clash.
There are ways of helping leaders to get a handle on both the formal and deep-rooted aspects of their organisation’s culture and to capture its essence at a particular point in time. In particular, they might want to ask the following questions prior to an M&A:
- What are the similarities and differences between our culture and the organisation we’re merging with?
- Could the differences reflect an opportunity to build greater diversity, or is it likely to result in a clash?
- Which elements of the two cultures should we preserve and which should we attempt to move away from, if we are to create an organisation that fosters high levels of wellbeing and performance?
By asking themselves these questions and looking deeply into their organisation’s culture, leaders can identify specific changes that are most likely to lead to a successful integration and a resulting high performing organisation.
1Bligh, M. C. (2006). Post-merger culture clash: Can cultural leadership lessen casualties? London: Sage Publications