With Alaska’s recent acquisition of Virgin America, one immediately thinks of the two company’s distinctive cultures and wonders what the transition will be like.
“Culture has been a real challenge in many mergers, so we’re working to do things differently,” said Ben Minicucci, Alaska President and COO who will also become CEO of Virgin America today. “We are being very thoughtful about culture and are working to create an environment that reflects who we are and where we’ve been, that also enables us to work together, be bold, and succeed in a rapidly evolving industry.” – From AlaskaAir’s Blog
While sometimes these unions have fantastic results, both in terms of revenue growth and happy employees, there are a slew of other mergers and acquisitions that have not worked out so well. For every Disney & Pixar match-made-in-heaven, there are many more flops like Daimler-Benz & Chrysler, KMart & Sears, or AOL & Time Warner — all of which showcase how finicky the process can be despite the paper-based benefits the individual companies bring to the table.
One of the biggest reasons for failure in a merger or acquisition is culture clash. Numbers and metrics are an easier part of the equation to work out prior to bringing two organizations together, but these numbers only create good outcomes in a vacuum. If the cultural norms of one company differ radically from the other, then there has to be steps taken to either bring the two parties together (essential in a merger), or maintain the acquired company’s culture with a mutual agreement to keep hands off. Roche’s purchase of Genentech is a perfect example wherein Genentech, the smaller company with a more distinctive and progressive culture, was allowed to self-manage and keep it’s identity. This, however, is certainly not the norm in these instances and so it behooves all parties to invest further in smoothing the cultural transition. Those organizations that eschew this softer discipline of culture integration do so at their peril — successful M & A’s are about more than just the quants.
Conduct a Culture Survey
The first step to merging cultures is to determine precisely what is being merged. While at first blush, you might take a company like Apple and say they’re design and customer-experience oriented, or a company like Snapple and say they’re feisty and quirky, there are a dozen other descriptors that lie beneath the surface. Only by conducting a survey can you determine the other cultural elements — for example, a company’s employees might describe their company as traditional, security-oriented, highly trustworthy, cutting-edge, modern, progressive, or in-your-face. One company might encourage individuality and self-expression while another promotes unity and conforming to a particular credo. In addition to a survey, a creating a culture forum with representatives from a cross-section of both businesses can also be quite helpful during this process. We offer a program called Active Forum in which we’ve conducted a number of similar discussions with great success in that it can sometimes elicit even more incite than a survey through focused dialogue.
Appoint a Culture Manager or Team
While this may have been something traditional companies balked at a decade ago, or something out of a Silicon Valley satire, it’s a very real benefit to have someone in managing company culture. With 83% of mergers failing, culture is something that should be taken very seriously — especially since cultural fit is much more difficult to work out prior to a merger than evaluating the numbers. A culture manager should be someone who works to manage the transition and take the pulse of the company, attending to issues and concerns that pop up along the way. Likewise, it’s important for this person to keep employees informed during the process of integration. Often employee morale is linked to how much they know about what is happening.
Develop a Common Language
Businesses often operate using their own proprietary dialects, full of company jargon and acronyms that make deciphering inter-organizational communication overly difficult. It can be incredibly helpful to decide upon a common language that both organizations can agree on and use moving forward. This will do wonders for clarifying messaging within the organizations, especially in this critical phase of cultural integration.
Focus on Relationship Building
Inter-organizational relationship building is key to the success of mergers and acquisitions, especially with regard to corporate cultures. This process takes time, but it can be accelerated through team building exercises and collaborative activities. Likewise, professional development programs emphasizing communication and group problem solving can be invaluable.
Though a risky endeavor, mergers and acquisitions can prove quite successful if they are well thought out – beyond just the numbers. By paying close attention to the equally important but less tangible component of culture both organizations can ensure a much smoother transition.
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