The factors that contribute to the success or failure of a deal are too long to list. The blame often falls to cultural clashes. This is what happens when two businesses have different styles, values, habits, and philosophies. One survey ranked culture clash as the top reason for deal failure.
Addressing cultural differences early can prevent deal failure, and maximize the value of each deal. Here’s how to do it.
Identify Differences Early
Don’t make the mistake of only looking at the financial side. You need to analyze whether the corporate cultures align, too. Get a good idea of corporate culture before the acquisition. Even after the letter of intent is signed, it’s wise to assess compatibility. Analyze soft factors such as company hierarchy and physical environment, work hours and habits, employee age, communication styles, dress code, and customer culture.
Consider a series of interviews. Management interviews can help you uncover management styles, and employee surveys can help you better understand staff priorities, attitudes, and habits.
Talk to Customers
You need to understand the customers’ point of view before closing the deal. For example, there might be leadership issues with the company, and only interviews with customers will reveal this. Consider a customer interview project to gain access to customer viewpoints.
Rally Around the Company’s Mission
The senior management of both organizations must work jointly to clarify the company’s mission and shared values. The acquiring business needs a clear set of values and behaviors, as well as a strategy for orienting employees. If the company is unclear, this can disrupt operations. It can be helpful to plan off-site sessions with leaders form both entities who are guided by a consultant. The goal should be to mold both cultures into a more desirable state.
Help Staff See Value
The companies must help employees understand why the merger occurred, and why it’s a good thing. A cultural ambassador to bring both sides into alignment can help employees avoid feeling brushed aside. Clear and compelling evidence can win over discontents from both sides, and strengthen the company’s culture. Now is the time to address organizational goals, including at the job and team level, and to implement an incentive program to support positive behaviors. Benefits, reward, compensation, and incentives can help nurture an engaged staff.
Stage a Cultural Intervention
Specific strategies to blend two cultures can set the stage for positive change. There are two general methods. The first is a top-down approach led by the CEO and management. This imposes a specific management style. Most leaders prefer this approach, since it’s easier for them. Employees adjust to management, not the other way around. The problem is that this approach neglects the informal components of an organization, including how people interact with one another. It can also trigger festering resentment.
A targeted approach is more inclusive. This strategy focuses on specific areas for change. This approach can engage and motivate the most talented members of the team, and is less likely to foster resentment. For example, when the goal is to gain more customers, the team will directly work on this goal. The downside is that this takes longer, and a cultural transformation will not happen overnight.
Culture is a fickle thing. No two cultures are alike, and no culture can change overnight. With a little preparation and sensitivity, however, cultural clashes do not have to derail a transaction. Align your mission. Communicate effectively. And intervene when necessary.