Post on 24-Jun-2020
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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.