Cultural Integration

Research indicates that senior executives rate underestimating the importance and difficulty of integrating the two cultures as a major cause of M&A failures. According to a 1999 study of global mergers & acquisitions by KPMG, 83% of all cross-border deals produce no added value for the shareholders and over 50% actually destroyed value. Interviews with over 100 senior executives involved in some 700 deals between 1996 and 1998 reveal that the overwhelming cause for failure is a lack of focus on the 'soft keys' including people, culture and communication. While most firms tend to focus on 'hard keys' such as due diligence, integration project planning, financial and legal challenges, focusing on cultural integration was shown to have more significant impact on the likelihood of generating shareholder value from the deal.

According to A.T. Kearney a common problem is that the more powerful partner imposes their culture on the less powerful one without evaluating which culture would be more appropriate for the new organisation. Cultural assimilation may lead to a successful integration under some conditions but in other cases, this approach will destroy much of the value that was expected to be generated from the merger. Often the most appropriate approach is to develop a new common culture, whilst keeping the best elements of both organisations. This is cultural integration.

Mergers and acquisitions often follow a different path with a collision of cultures, resistance from employees, management crackdowns, conflict escalation, breakdowns in communication and relationships and even the failure of the business integration. Integration means significant change. Change creates fear and resistance. Successful cultural integration will engage both the hearts and minds of the people affected. Learning for cultural integration does not mean that people will not experience fear and that there will be no resistance to the business integration process. This is a natural part of the change process. The cultural integration process consists of four phases (discovery, design, delivery and review). Our integrated approach is aligned with and drives the business and strategic integration process.

"'The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture, it manages you, and you may not even be aware of it."
— Edgar Schein

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Discovery - The Cultural Audit

The discovery phase includes an initial cultural audit. If conditions allow, this audit can even be carried out in the pre-merger due diligence as part of a risk analysis. The audit involves comparing both partners' perceptions of key elements of their corporate cultures. The results of the audit can indicate potential conflicts which can then be more effectively addressed in the delivery phase and can help to target time and resources more effectively. Clarion Learning recommends the Adaptive Cultures Framework and the associated Insights Diagnostic developed by Alison Cameron and Andrew Brown.

Design

When implementing change, we work at the organisational, group and individual level with a focus on the individual evolution, social and structural levers for cultural that will enable the new business strategy. The 'whole system' approach to cultural integration informs us that no matter where we focus, there will always be an impact on the rest of the system. We need to ensure that the multiple levels of the learning intervention are aligned and constantly reinforce rather than undermine each other.

Delivery

The delivery phase generally consists of workshops with the key stakeholders from both organizations, which encourage the participants to examine the shared values and mindsets existing within their current business cultures, engage in dialog with their new colleagues, build relationships and trust, identify and deal with any emerging conflicts and start working towards common goals and a shared sense of identity. The extended leadership group then works together to co-create the aspirational culture for the newly formed organisation.

Learning > Change > Results

"'The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture, it manages you, and you may not even be aware of it." — Edgar Schein

Discovery - The Cultural Audit

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