Managing Culture Clash in Mergers and Acquisitions

Mitchell Lee Marks
Professor at San Francisco State University and
president of the consulting firm

Culture clash in a merger or acquisition is a lot like breathing. You don’t think about breathing, you just do it. You may be aware of your breathing now, because I’ve raised it to your attention. If someone threatened your ability to breathe, then you would certainly pay attention to breathing. The same holds true for culture in a merger. People don’t regularly notice their corporate culture, but when thrust into a merger, employees become aware of how their ways of doing things differ from those of the other side. When they feel threatened – often because they see themselves on the weaker side – employees not only see differences but also feel a sense of vulnerability over losing their accustomed way of doing business.

In typical combinations, culture building is an afterthought. Early in the process, executives downplay the importance of culture with off-handed comments like, “We are the same kind of people” or “The more I look, the more I see how similar we are.” With 20/20 hindsight, these same executives bemoan their inattention to differences in culture and values that set so many combinations on the wrong course. Studies conducted in a variety of countries find that senior executives rate “underestimating the importance and difficulty of combining cultures” as a major oversight in integration efforts.

Easing culture clash rests on acknowledging its presence, educating employees as to its dynamics, and preparing people to appreciate how initial impressions influence enduring cultural perceptions between the partners. Several companies include modules for easing a culture clash in training programs they offer to managers and employees. These sessions help people to recognize differences between the companies and expect a clash of cultures. Select firms go further and engage in deeper cross-cultural learning.

A recent study examined three levels of cultural learning during an acquisition – none, shallow, and deep – and found an interesting relationship between them and the subsequent integration of plants in an acquired firm. In the case of no learning, not surprisingly, no relationship to eventual integration success or failure was found. By contrast, deep culture learning interventions, involving cross-company dialogue, culture clarification workshops, and the like, had a strong, positive effect on integration success. Measured results included greater cross-cultural understanding, smoother resolution of cultural differences, more communication and cooperation between combining parties, and greater commitment to the new organization. What fascinates in this study is that shallow learning – for example, show-and-tell presentations, informal Q&A, and such – did little to eliminate inaccurate cultural stereotypes or to reconcile differences between the partners. On the contrary, these had the undesirable effects of strengthening perceptions of cultural differences and reinforcing stereotypes that contributed to conflict between the organizations. Based on this research, it seems that it is better to do nothing about culture clarification than something superficial and perfunctory. The best approach is to devote time and resources to deep culture learning, especially during the combination phase.

When properly managed, cultural clash can result in a postmerger organization that can better achieve strategic and financial objectives than either partner could do on its own. Partners learn from one another and engage in constructive debate regarding what cultural characteristics best align with the combination’s objectives, and best support the attainment of a postmerger organization that is much more than the sum of its parts.