Culture Clash: 3 Reasons Why Your M&A is Failing

Culture Clash: 3 Reasons Why Your M&A is Failing

A few weeks ago, I met with a couple of executives who were in the process of merging their companies.  They talked about how they believe they had done everything right.  They assessed each other’s companies, not just from a numbers standpoint but they also examined one another’s culture to make sure they were a good fit.  And they were…at least on paper. 

“Our visions and values were completely aligned,” said one of the executives.  But for some reason, their merger just wasn’t going as smoothly as they had thought. 

Not surprisingly, many of the organizations we’ve worked with faced this same issue.  When mergers and acquisitions (M&As) happen, executives and leaders oftentimes get together to share the vision and values.  More often than not, this consists of things like respect, honesty, integrity and so on.  No one would look at those qualities and say, “Oh, no.  We don’t value respect and honesty at our company.”  The issue is that all of those values and visions are super high-level.  They are vague and generally easy to buy into.  However, in order to be successful, you need to dive deeper and look at the details.  

In my time with these two executives, I shared some common culture-clash issues that we’ve run into with illumyx, to see if it rang true for them. 

Culture Clash 1:  How Decisions Are Made

In business, there are a million decisions that need to be made on a daily basis.  This can range anywhere from what you want to pack for lunch, to whether or not you sign that proposal on your desk.  But more important than what you do, is the actual decision-making process. 

In illumyx, we have two ranges when it comes to decision-making:  Directive vs. Collaborative

Directive

Directive decision-making typically means supervisors and managers are the decision makers.  There is clear hierarchy and directions come from above.

Collaborative

Collaborative decision-making means that leaders drive decision making down to individuals and teams.  This pressure for individuals and teams to make decisions, helps to create greater discussion among employees and teams.

While things can be achieved with either approach, when merging or acquiring, this can cause an issue.  Generally, directive organizations may find the collaborative approach too slow, while collaborative organizations may view the directive approach as strict and rigid.  We can see this in the merger of Daimler and Chrysler in 1998

Culture Clash 2:  How You Solve Problem

Another leading cause to M&A failure revolves around conflict resolution.  How do you solve issues?  We categorize this into two generalities:  Responsive or Planning

Responsive

Typically, this method involves a high level of flexibility.  Employees are quick to dive into the problem and adapt to meet needs as they arise.

Planning

A planning approach to problem solving, involves a very methodical, thoughtful orientation.  When a problem arises, it is common for the employee to get a plan in place so the job is done right the first time.

During M&A, this can cause major problems.  The Responsive approach may fire off quick solutions and the need or desire to act on it, while the Planning-oriented company wants to examine all components of the situation to take the best course of action.  This can cause tension within the organization, resulting in an organizational rift and ultimately M&A failure.

Culture Clash 3:  How Work is Executed

Another culture clash moment we tend to see is when it comes to how work is done.  Are you more End Result or Process oriented?

End Result

End Result companies have a tendency to value outcomes over process.  This allows employees the freedom and autonomy to execute work how they see fit.

Process

Process-oriented companies have a strong emphasis on structure and consistencies.  They want reliable results and believe a strong process can get this.

When you have two companies coming together with different work approaches, tension and chaos can quickly arise. In the end, these two different approaches can grind workflow to a halt.

As I laid these components out to these leaders, I saw a lot of head nodding.  They could see differences in all three of those areas and I could tell they were starting to understand why their merger wasn’t going as smoothly as planned. 

In the end, if you’re going through an integration…slow down.  Take the time to ask the key, detailed questions about how decisions are made, how problems are solved and how work is executed.  Understanding the nuances will help you avoid many of the issues that so many companies face.

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