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Acquiring organization profile

Beware of culture in mergers and acquisitions

  • 15 November 2018
  • Posted by Marcella Bremer

Why and when does culture matter most? One of the answers to this question is: in case of mergers and acquisitions. Here's the case of one of my clients. Because they wish to remain anonymous we'll call them ET.

They rapidly acquired other companies during expansion and they understood that checking the culture around mergers and acquisitions would be crucial for success. George Gentry is head of organizational effectiveness and culture at ET's headquarters. He explains how the Competing Values Framework and the OCAI survey helped ET manage the culture part of their acquisitions.

Culture is the culprit

"We're looking to cover a whole range of products and services in our market, hence the acquisitions. Everyone knows that the culture always "did it". It's the culprit if things don't work out even if it's really a leadership issue, or some other problem. Culture is often used as a container concept while we wanted to better understand it. What is culture? How could we work with it?"

ET started looking for a useful tool and chose the Organizational Culture Assessment Instrument, developed by Cameron and Quinn (OCAI) because it's fairly easy to score, and easy to understand the four culture types.

Due diligence

"We've used the OCAI culture survey in two phases. First as part of our due diligence while assessing the risks, the structure, culture, and processes of a prospective acquisition. We did a qualitative check: analyzing the prospect's language, their leadership, rituals and symbols to get an idea of their current culture in the Competing Values Framework. We mapped them on the Framework based on our observations."

Interesting enough, the language that companies use gives away their culture, and whether it's positive or not. You'd have the best view if you have access to internal documents, but even publications will give it away.

  • What do they focus on - what is being valued? Is it collaboration or competition? Is it innovation and learning, or efficiency? What is the purpose of the company (and is it meaningful?). Do you notice genuinely positive language (not meaning PR phrases) or do they use many negations? Is the language impersonal, or do they use We, He, She. It will give you an idea!

How could we work together?

George continues: "Next, after we bought a company, we used the OCAI as a quantitative tool to assess the culture. We then organized sessions with the leadership teams of the receiving and the acquired organization. This helped them get a better understanding of the culture, possible differences and similarities, and how they could work together now that they were aware of their current culture types."

Unfortunately, M&A time is hectic. "We'd loved to have organized visioning workshops on a shared preferred culture as well but, more often than not, there isn't time. HR matters like benefits, terms of employment, responsibilities, and so on, seem more urgent to arrange. Culture is often the topic that gets postponed."

Startups versus mature units

So far, Gentry has seen an interesting pattern in their respective cultures. "We often acquire startups that score very high on flexibility, innovation, collaboration. ET is a mature organization and we focus on output and efficiency. ET staff regularly feels a "gap" between current and preferred culture indicating a wish for change."

Even though the OCAI sometimes yields surprising results. "Leaders sometimes expect a huge difference between the two organizations, while the profiles show that they share a lot on the inside. That's a great starting point for successful collaboration." The OCAI helps to verbalize what is unconscious (the culture) and to work with the facts (instead of prejudice, and biased expectations).

From culture to behaviors

The ET top executive team has defined core behaviors that they'd like to see as crucial in the culture. Even though these behaviors were developed in a top-down way (aligned with their culture!), ET has a team of change champions to keep them alive. They organize culture dialogues with teams to see how they could embody these behaviors.

For a healthy culture, it's important to agree on the details and dilemmas of behaviors. For instance, how do you "do" a customer orientation? Does this mean that the customer gets endless maintenance of older products even if it's no longer efficient? Or do you sell "no" to the client? How do people innovate and keep learning (an important part of a positive culture)? Can staff always bring up new ideas or do production targets get in the way? Just some examples.

How an organization handles their dilemmas defines the culture - and how positive that is. That's why principles, values and core behaviors are "easier said than done." Whether an acquisition is a success or not, whether the culture is healthy or not, depends on the answers to this kind of dilemmas. And it's not just the answers; what matters most is what people actually DO when faced with a dilemma.

Are people open to the acquisition and collaborating with new partners? Do they use greetings in emails or not? Is there small talk or do you cut to the chase immediately? How could you smooth the process? Developing a more positive culture can start right from the beginning, as a fresh start for everyone.

  • What are your most common dilemmas? What would your people do...? How would you define the culture?

This is a real client case. George is a pseudonym. His name is known by OCAI online. His organization wishes to remain anonymous. Thank you for sharing, George.

Do you want to learn more about developing a positive culture? Join this Positive Culture Academy. Go to the enroll page and start! Help your team or organization develop its positive potential. © Marcella Bremer, 2018. All rights reserved.