AVOIDING CULTURE CLASH - WordPress.com › ... · mighty culture clash. The Culture Clash In their study of cross-border mergers and acquisitions, researchers Lee, Kim, and Park remind

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A Leader’s Guide to Creating Shared Culture

AVOIDING CULTURE CLASH

Senior Consultant A Deliberate Practice Consulting

Jennifer Holloran

www.adeliberatepractice.com

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Executive Summary Based on the expertise of scholarly researchers and experienced organizational development

professionals, this report provides leaders with a better picture of the cultural integration challenges of

a merger and acquisition process and offers potential solutions. Many mergers and acquisitions fail

because leaders do not address the merging together of two independent organizational cultures.

However, with the right planning and methods, leaders can prepare themselves and the participating

organizations more effectively to ensure that a shared culture emerges, helping protect and solidify the

positive benefits of the merger or acquisition.

In this report, leaders will gain greater knowledge about the importance of organizational

culture and the benefits any organization can receive from a strong culture. Next, they will learn about

the challenges that occur in a merger or acquisition scenario when two organizational cultures clash.

Finally, leaders will receive recommendations on how to avoid culture clash and achieve culture

integration. Specifically, leaders will receive help in considering their role in the change process,

examining the organizational culture of the impacted organizations, and creating a change management

plan.


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Table of Contents Executive Summary ____________________________________________________________ 2

Table of Contents ______________________________________________________________ 3

Introduction _________________________________________________________________ 4

Why Does Culture Matter? ______________________________________________________ 4

The Culture Clash _____________________________________________________________ 6

The Leader as Architect _________________________________________________________ 8

Conclusion __________________________________________________________________ 12

About the Author _____________________________________________________________ 13

References __________________________________________________________________ 13


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Introduction According to the Institute for Mergers, Acquisitions, and Alliances, 50,600 worldwide merger

and acquisition transactions took place in 2017i. With three record years now on the books, Benjamin

Gomes-Casseres of the Harvard Business Review suggests that this trend should continue into the

years aheadii. With so many mergers and acquisitions occurring each year, leaders should anticipate

that they may face the responsibility to manage similar change in their organization or may already

face the prospect today.

However, before a leader jumps headfirst into a merger or acquisition, he or she must consider

a few challenging realities. Mergers may seem to offer positive financial

benefits, but as many as 77% of them never achieve those anticipated

benefitsiii. Instead, many organizations that have undergone a merger

experience a range of adverse impacts, from productivity and profitability

loss, to lowered staff morale and attrition. So, why do so many mergers

and acquisitions fail to deliver on their initial promise? Many researchers

believe that unaddressed cultural integration issues serve as the primary reason for that failure. A

leader who wants to achieve the goals that made a merger or acquisition seem attractive in the first

place must intentionally set out to create a shared culture that will thrive post-merger and prevent the

culture clash that otherwise may result.

Why Does Culture Matter? All organizations have a culture. Edgar H. Schein defines culture as “a pattern or system of

beliefs, values, and behavioral norms that come to be taken for granted as basic assumptions and

eventually drop out of awareness.”iv The leaders and employees of an organization form their corporate

identity together through the shared understandings and commitments embedded in the culture. As

As many as 77% of mergers never achieve their

anticipated financial benefits.


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individuals in the organization respond to one another and then work in alignment with their shared

values, they increase trust as they fulfill one another’s expectations. In an article in the Journal of

Applied Social Psychology, researchers noted how predictability in behavior increases trust, and how

organizational trust results in many positive behavioral outcomesv.

An organization that has developed a healthy sense of trust and shared beliefs as part of its

culture experiences many benefits. Eric Van den Steen, in his article for

Management Science, describes some of the positive aspects of shared

culture: better delegation, higher employee motivation and satisfaction,

more rapid internal coordination, and less time spent by leaders and

employees on activities needed to convince, influence, or protect

themselves from one anothervi. In his study of firm performance in

relationship to corporate culture, Jesper B. Sørensen found that corporate culture also has an impact on

organizational performance and that a strong culture can help an organization achieve consistently high

performance, an outcome that any leader can appreciatevii.

While researchers have widely documented the benefits of a shared culture, the quantity of

literature for leaders on how to accomplish this goal within their organization indicates that leaders

cannot assume cultural alignment even in a standing organization. However, when the culture

experiences additional challenges, such as during a time of merger or acquisition, the complexity

increases further. Whether apparent or not, two organizations entering a merger will have meaningful

differences in their cultures that need consideration.

At the Cape of Good Hope in South Africa, visitors can stand on high ground and see the place

where the Atlantic and Indian Oceans meet. The meeting point stands out as a visible line because the

two oceans do not gently merge, but instead collide violently with a continuous and powerful crash.

The meeting of those two oceans bears a striking resemblance to what a leader can expect if he or she

A strong corporate culture can help an

organization achieve high performance.


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brings two cultures together without consideration of the impact they will have on one another – a

mighty culture clash.

The Culture Clash In their study of cross-border mergers and acquisitions, researchers Lee, Kim, and Park remind

leaders that culture impacts what people need, how they make decisions, and what leadership styles

they consider validviii. So, when a leader asks two cultures to merge, the collision highlights those

differences. In particular, Lee, Kim, and Park point out that as cultures collide, “members of each

cultural group realize that what they have taken for granted as something ‘right’ may not be ‘right’ in

another cultural context.” This discovery can stir up a variety of negative emotions. Lee, Kim, and

Park found that while some may internalize their feelings and experience anxiety and stress, others

may allow those feelings to impact their interpersonal relationships, displayed through irritation and

anger.

Similarly, Michelle Bligh, in her study on the use of cultural leadership to lessen culture

clashes post-merger, describes the impact of the merger and acquisition process on employees and

their leaders as notably traumaticix. She recounts that organizations in a post-merger environment

struggle with issues of “lowered trust, commitment, satisfaction, and productivity, and increased

absenteeism, turnover, and attitudinal problems.” Van den Steen agrees, finding negative impacts in

organizations dealing with culture clash: difficulty in delegating to others, lower employee motivation

and satisfaction, slower internal coordination, and more time spent by leaders and employees on

activities needed to convince, influence, or protect themselves from one another, the clear opposite

from organizations living with shared beliefs.

A leader primarily concerned with the bottom line may view these issues as temporary bumps

in the change management process. However, in their article on change management strategy during a

merger, Marie Kavanagh and Neal Ashkanasy emphasize that the impact on individuals during this


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period of organizational de- and reconstruction may make the difference between success or failure of

the mergerx. Further, any significant organizational misalignment will ultimately impact organizational

performance and effectiveness. In their book, Diagnosing and

Changing Organizational Culture, Kim Cameron and Robert Quinn

made the connection between internal fragmentation and lowered

organizational effectiveness, due to the time and energy needed to

address conflicts and inconsistencies surfaced by cultural

incongruencexi. Inevitably, Cameron and Quinn argue, the lack of a

shared culture will eventually permeate other core functions, such as by creating disagreements in

organizational strategy and goals.

While culture clash may appear intimidating, the creation of a shared culture after a merger or

acquisition also comes with many additional benefits. Lee, Kim, and Park highlight that the merge of

different cultures can create an atmosphere of increased organizational learning, expanding the

organization’s access to knowledge and helping motivate fresh thinking among the workforce.

Sørensen’s research also indicates that the strength of the culture can aid the organization in using the

competencies available better and decrease disagreement about goals and strategies. Therefore, an

organization that manages to create a shared belief system in a merged culture environment should

have a meaningful competitive advantage.

With all of the evidence that shows the benefits of shared culture and the significant

consequences of culture clashes or cultural misalignment, all leaders should take an interest in the

health of their organizational culture. Leaders who embark on a merger or acquisition process should

take sufficient notice of the potential issues and plan their strategy accordingly. With so much at stake,

this may seem like a daunting task. However, with the right planning and support, leaders can make the

difference in creating a shared culture between two merging organizations.

The lack of a shared culture will

eventually permeate other core functions.


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The Leader as Architect Imagine if an architect decided to build a sprawling multi-use complex, with multiple building

types and functions designed to meet the needs of a broad community with a diversity of needs. Now,

imagine that the architect started to build, but without committing to a plan and preferring to figure it

out on a day-to-day basis based on what feels right. It should come as no surprise to that architect when

the building project comes to a halt because of a lack of the necessary foundations or poor

prioritization of the project elements. Worse, the architect may find the entire project in jeopardy if too

many issues emerge.

In merger or acquisition scenarios, leaders have a choice about their approach to cultural

integration. Schein points out that a leader can choose to do nothing and allow the merged organization

to solve the clash on its own. However, he also suggested the likelihood that one culture will instead

dominate the other, forcing those on the outside to either conform to the culture or depart. Alternately,

a leader can find a way to help the organizations merge into a shared culture. Leaders who follow the

three steps provided in this report can create a shared culture, reap the benefits of cultural alignment,

and increase the likelihood of a successful merger or acquisition.

1. BE CLEAR ABOUT THE LEADER’S ROLE

Organizational leaders often spend much of their time balancing significant workloads, so it

might seem tempting to delegate the cultural development and alignment

process during a merger or acquisition. Bligh encourages leaders that

while realistically they cannot manage the cultural change process alone,

they also have an irreplaceable role in cultural change. The managers and

employees of the newly merged organization will watch the leader as the

role model for the new culture. According to Schein, regardless of what

others in the organization say or what systems adjust in the new structure, the leader sets the tone in

Leaders have an irreplaceable role in

cultural change.


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how they react, respond, and reward, even if the leader’s actions do not align with how the intended

organizational culture. Therefore, the leader cannot opt out of their responsibility to actively engage in

cultural development.

In their research on cultural leadership, Harrison Trice and Janice Beyer describe the kind of

leader an organization needs during a time of cultural innovation, or “when new sets of shared

understanding emerge within a social group.” Although leaders enter into a merger and acquisition

process because they believe that it will create positive results, the actions of the merger inevitably

create a time of crisis. In his book, Leading Change, John Kotter describes a time of crisis as the

perfect time for organizational change because the crisis forces the organization out of a state of

complacencyxii. To lead through the crisis, Trice and Beyer state that successful leaders will set the

example for others as they lead from confidence in their beliefs, exude competence, show that the

changes work, and demonstrate trust in their followers through setting high expectationsxiii. Further,

they inform leaders that part of their role includes ending some elements of the past and establishing

new traditions. To do so, leaders must have a firm understanding of both cultures impacted by the

merger or acquisition.

2. EXAMINE BOTH CULTURES AND SEEK SHARED CULTURAL ELEMENTS

In any merger or acquisition, leaders ensure that appropriate due diligence has taken place on

many organizational fronts to prevent unexpected problems. However, even though culture clashes

have often received the blame for integration failures, cultural due diligence does not often take place.

Based on the statistics, leaders cannot afford to skip the cultural due diligence process. Carleton and

Lineberry describe this process as a combination of “self-assessment, assessment of the target

company, and alignment and integration planning.”

Returning to Schein’s definition of culture, often leaders and employees do not consciously

recognize the elements of their organizational culture because those elements have become so


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embedded in the way the organization works. If a leader has not tried to define his or her

organization’s culture before, then he or she may need to start from within first to understand his or her

own culture before attempting to learn a new one. Schein suggests that an organizational culture

includes three elements: artifacts, espoused beliefs and values, and underlying basic assumptions.

Artifacts include the more visible aspects of the culture, including office layout, norms for

interpersonal interaction, and repeated narratives and events. Espoused beliefs and values encompass

ideas and assumptions that have become expected ideology within the organization. Underlying basic

assumptions include the most difficult-to-unearth elements, or as researchers Achilles Armenakis and

Irene Lang called them, “the unspoken, unquestioned, and taken for granted.”xiv Examining one’s

organizational culture from within may prove quite tricky for the fully-acculturated leader, so outside

consulting support or assessments may help provide an objective viewpoint into cultural discovery and

insight.

Once the leader has an understanding of their current organizational culture, they can then

apply the same process to the other organizational culture. Bligh suggests that leaders can help create

buy-in from the newly merged workforce by showing that they have taken the time to understand each

organization’s history and cultural uniquenesses. Through analysis of both cultures, the leader may

find elements in each culture that he or she would like to retain and incorporate into a shared

environment. Trice and Breyer encourage leaders to consider that they will need to talk explicitly about

Artifacts

Espoused Beliefs and

Values

Underlying Basic

Assumptions


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cultural elements that have to change, making it clear that they cannot continue into the shared

environment.

Leaders should also watch for two common pitfalls as they examine the involved

organizational cultures. For example, Bligh points out that even with an examination of the culture,

some cultural elements may not surface until the group feels a threat against their shared identity, such

as might occur in a merger or acquisition. Additionally, research has shown that the group that feels

“acquired” may struggle most as they feel pushed to lose their shared identity and put on a new one. In

a situation where all groups suspect that they must give up certain established norms, both groups may

experience these emotions, which can increase conflict and resistance to change.

3. DEVELOP AND USE A CHANGE MANAGEMENT PLAN

While the leader’s actions and behaviors have a critical impact on success, an intentional

change management plan can also increase the likelihood of shared culture development. Regardless of

the level of disparity between the two merging cultures, leaders can take encouragement from Lee,

Kim, and Park, who share that the likelihood of success resides more on how well leaders manage the

post-merger and acquisition integration process rather than the similarity of the starting cultures.

Therefore, leaders need a well-developed change management plan.

Bligh, adapting Kotter’s eight-stage change management process for cultural change purposes,

counsels leaders to address issues of vision and communication, team-building, and systems and

structural change. After developing the vision for shared culture, leaders should clearly and regularly

communicate their reasoning behind the elements of that culture. Schein suggests that leaders talk

about the specific behavioral aspects of the culture, rather than using the broader term of “culture

change.” As part of that communication process, leaders need to provide opportunities for employees

to mourn the loss of cultural elements with which they identify personally, while also celebrating the

moments of success and progress so that the integrated workforce can find motivation in successfully


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shared beliefs and short-term wins. Additionally, leaders need to express their vision and strategy in a

way that helps their employees to have realistic expectations, positive and negative, about the change

and anticipated progress.

As the integrated workforce grows in understanding of the change and motivation to take part,

leaders should use team-building to take progress further. When leaders include individuals from both

working group in teams that provide input and help enact change, it

increases the buy-in from the rest of the workforce. Further, since leaders

cannot accomplish the change on their efforts alone, this team-building

process also helps engage others in the change process and creates more

organizational momentum.

Finally, leaders should reinforce change through the adjustment of

organizational structures and systems. Kotter describes this as both the elimination of systems and

structures that create barriers and the creation of new systems or alignment of former systems to

reinforce the change. Schein also recommends that leaders consider how to adjust their standards of

evaluation since behaviors that receive rewards will naturally become part of the culture, while

behaviors that receive punishment will not.

Conclusion In today’s business environment, mergers and acquisitions have become an increasing reality

for many organizations. Unfortunately, most of those mergers and acquisitions will fail to produce the

results anticipated by the leaders who propose them, due to a clash of cultures that inhibits the

integrated organization from effective performance and productivity. Leaders do not have to accept the

risk of failure caused by culture clash but have the unique ability to lead the work towards the creation

of a shared culture. Overseeing the process necessary to create a shared culture while also managing

the other facets of a merger or acquisition may seem like an overwhelming task. However, leaders do

Leaders cannot accomplish change on

their efforts alone.


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not have to take on this task alone. A consultant with expertise in organizational development can

provide an invaluable asset during a critical time of organizational change.

To learn more about how A Deliberate Practice Consulting can come alongside your merger or

acquisition process, please visit www.adeilberatepractice.com.

About the Author Jennifer Holloran serves as the Founder and Senior Consultant of A Deliberate Practice

Consulting, as well as the Chief Human Resources Officer for Wycliffe Bible Translators. With 16

years of experience in human resources and organizational development practices, as well as

experience working with and as executive leadership, Jennifer stands ready to serve your organization

with consulting support for all of your strategic people and organizational needs. For more

information, visit www.adeliberatepractice.com.

References i Number & value of M&A worldwide. Retrieved from https://imaa-institute.org/mergers-and-acquisitions-statistics/ ii Gomes-Casseres, B. (2018, January 2). What the big mergers of 2017 tell us about 2018. Retrieved from https://hbr.org/2017/12/what-the-big-mergers-of-2017-tell-us-about-2018 iii Carleton, J. R. & Lineberry, C. S. (2004). Achieving post-merger success: A stakeholder’s guide to cultural due diligence, assessment and integration. San Francisco, CA: Pfeiffer. iv Schein, E. H. (2017). Organizational culture and leadership (5th ed.). Hoboken, NJ: John Wiley & Sons, Inc. v Loh, J. (M. I.), Smith, J. R., & Restubog, S. L. D. (2010). The role of culture, workgroup membership, and organizational status on cooperation and trust: An experimental investigation. Journal of Applied Social Psychology, 40(12), 2947-2968. vi Van den Steen, E. (2010). Culture clash: The costs and benefits of homogeneity. Management Science, 56(10), 1718-1738. vii Sørensen, J. B. (2002). The strength of corporate culture and the reliability of firm performance. Administrative Science Quarterly, 47(1), 70-91. viii Lee, S., Kim, J., & Park, B. I. (2015). Culture clashes in cross-border mergers and acquisitions: A case study of Sweden's Volvo and South Korea's Samsung. International Business Review, 24(4), 580-593. ix Bligh, M. C. (2006). Surviving post-merger ‘Culture clash’: Can cultural leadership lessen the casualties? Leadership, 2(4), 395-426.


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x Kavanagh, M. H., & Ashkanasy, N. M. (2006). The impact of leadership and change management strategy on organizational culture and individual acceptance of change during a merger. British Journal of Management, 17(Supplement 1), S81-S103. xi Cameron, K. S., & Quinn, R. E. (2011). Diagnosing and changing organizational culture: Based on the competing values framework (3rd ed.). San Francisco, CA: Jossey-Bass. xii Kotter, J. P. (2012). Leading change. Boston, MA: Harvard Business Review Press. xiii Trice, H. M., & Beyer, J. M. (1991). Cultural leadership in organizations. Organization Science, 2(2), 149-169. xiv Armenakis, A., & Lang, I. (2014). Forensic diagnosis and transformation of an organizational culture. Journal of Change Management, 14(2), 149-170.

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AVOIDING CULTURE CLASH - WordPress.com › ... · mighty culture clash. The Culture Clash In their study of cross-border mergers and acquisitions, researchers Lee, Kim, and Park remind