Published on Wednesday, Apr 11, 2007
MERGERS and acquisitions - that's the name of the game! In today's highly-charged global scenario, a wave of mergers is about the only remaining tactic for continued growth.
The consolidation integrates two organisations to cut costs, reduce competition and consequentially increase market share. As such, the leaders meticulously design the strategic intent, resources, systems and structures to propel a successful union.
However, despite the scrupulous efforts, the hard work, money and time go down the drain as most corporate marriages fail! In fact, recent surveys reveal that hardly 15 per cent of the mergers are successful; about half result in culture clashes. Well, there is something to be said about the best laid plans... ... ... ... ..
Trouble brewing in paradise
During a merger, although executives diligently assimilate the various synergistic features right from assets and equipment to technology and strategies, they tend to discount the complexity of variant cultures. Most conglomerates barge into the acquired company and obliterate the long-standing traditions, practices and policies to meld it into a faceless subsidiary. Even in case of an equal alliance, the combined entity loses the erstwhile individualistic charm and appeal as they overlook the people factor.
Corroborating this is a recent "Making Mergers Work" study by the Society for Human Resource Management, wherein HR professionals listed "incompatible cultures" as the biggest obstacle to success in mergers and acquisitions. They emphasise that, `The companies may look at all the financial matters, but it's really the cultural and people issues that can mean the demise of a successful merger'. Therefore, despite staggering market opportunities and synergies, the amalgamations often lose ground.
Putting people at the heart of a merger
Well, simply wanting something will not make it happen; one has to find a way to make it happen! And, the recipe for getting a successful merger off the ground is shifting the spotlight from deal-making to merging-of-cultures. In fact, historians attribute the success of the Roman Empire in part to the successful merging of conquered cultures into itself. Therefore, the punch line is, pay more attention to people; not profits!
Following are some brief pointers on how to integrate cultural variations:
Middle ground - Every organisation has its own unique way of doing things. Everything from management, employment, compensation to investment varies. When two firms seek to merge, customary differences like structured - entrepreneurial, proactive - reactive, centralised - decentralised, formal - informal or extravagant - economical, will generate rocky terrain.
Management should step back to holistically examine the efficacy of both the cultures and incorporate the best in keeping with the shared goals and interests. As Nancy Rothbard, Management Professor at Wharton University cites, `Developing a culture that is adaptable - both to market conditions and to the firm's leadership - will help a company survive and grow.' This calls for setting a vision, selecting the right leaders to execute the integration and aligning them with the mission.
Assistance from outside consultants will also help ease the transition.
Handle with kid gloves - Culture change management is a tough volley and can be successful only when employees ascribe to it. However, predisposed workers lose motivation and experience job insecurity in the face of a merger. So, leaders should use persuasion, not coercion, to mobilise the apprehensive workforce.
Be upfront and share information about intentions, targets, benchmarks and the course of action. Establish a rapport by explaining the reason for imminent changes and letting them voice their views, concerns, queries and doubts.
Create buy-in by involving employees in selecting and merging the desirable procedures.
Patiently weaning away their resistance with frequent interaction and regular dialogue will go a long way in rebuilding trust and morale levels.
Even highlighting the new market opportunities, professional satisfaction and financial rewards will help them adjust to the new reality!
Play by different rules - However, when divergent cultures become a contentious zone and amalgamating them appears iconoclastic, leaders should let the individual companies retain their distinctive identity and learn to live with the differences.
They can accommodate variances by organising "firms within the firm" rather than pushing for "one firm". For instance, instead of wiping away Ben & Jerry's (U.S. ice-cream manufacturer) unique essence and strength, Unilever took the unconventional route and reaped windfall gains from preserving and complementing the former's divergent character.
Paradigm shift - Enlightened leaders deem cultural compatibility an important cornerstone in any alliance. They clarify, quantify and understand the different organisational cultures as well as the capacity for change.
If philosophies, priorities, practices and standards are diametrically opposite with harmonising coalescence unfeasible/impossible, they renounce the acquisition, well aware that obliviously surging ahead will court failure.
Finally, nothing sums it up better than what Chris Burand, President of consulting firm Burand & Associates said, `The merger of companies is very much like the joining together of different families to celebrate the holidays.
Each family has its own traditions, and those traditions must be merged carefully and thoughtfully to ensure future harmony". Then, two good companies will transform into one great company with a happily ever after culmination.
The consolidation integrates two organisations to cut costs, reduce competition and consequentially increase market share. As such, the leaders meticulously design the strategic intent, resources, systems and structures to propel a successful union.
However, despite the scrupulous efforts, the hard work, money and time go down the drain as most corporate marriages fail! In fact, recent surveys reveal that hardly 15 per cent of the mergers are successful; about half result in culture clashes. Well, there is something to be said about the best laid plans... ... ... ... ..
Trouble brewing in paradise
During a merger, although executives diligently assimilate the various synergistic features right from assets and equipment to technology and strategies, they tend to discount the complexity of variant cultures. Most conglomerates barge into the acquired company and obliterate the long-standing traditions, practices and policies to meld it into a faceless subsidiary. Even in case of an equal alliance, the combined entity loses the erstwhile individualistic charm and appeal as they overlook the people factor.
Corroborating this is a recent "Making Mergers Work" study by the Society for Human Resource Management, wherein HR professionals listed "incompatible cultures" as the biggest obstacle to success in mergers and acquisitions. They emphasise that, `The companies may look at all the financial matters, but it's really the cultural and people issues that can mean the demise of a successful merger'. Therefore, despite staggering market opportunities and synergies, the amalgamations often lose ground.
Putting people at the heart of a merger
Well, simply wanting something will not make it happen; one has to find a way to make it happen! And, the recipe for getting a successful merger off the ground is shifting the spotlight from deal-making to merging-of-cultures. In fact, historians attribute the success of the Roman Empire in part to the successful merging of conquered cultures into itself. Therefore, the punch line is, pay more attention to people; not profits!
Following are some brief pointers on how to integrate cultural variations:
Middle ground - Every organisation has its own unique way of doing things. Everything from management, employment, compensation to investment varies. When two firms seek to merge, customary differences like structured - entrepreneurial, proactive - reactive, centralised - decentralised, formal - informal or extravagant - economical, will generate rocky terrain.
Management should step back to holistically examine the efficacy of both the cultures and incorporate the best in keeping with the shared goals and interests. As Nancy Rothbard, Management Professor at Wharton University cites, `Developing a culture that is adaptable - both to market conditions and to the firm's leadership - will help a company survive and grow.' This calls for setting a vision, selecting the right leaders to execute the integration and aligning them with the mission.
Assistance from outside consultants will also help ease the transition.
Handle with kid gloves - Culture change management is a tough volley and can be successful only when employees ascribe to it. However, predisposed workers lose motivation and experience job insecurity in the face of a merger. So, leaders should use persuasion, not coercion, to mobilise the apprehensive workforce.
Be upfront and share information about intentions, targets, benchmarks and the course of action. Establish a rapport by explaining the reason for imminent changes and letting them voice their views, concerns, queries and doubts.
Create buy-in by involving employees in selecting and merging the desirable procedures.
Patiently weaning away their resistance with frequent interaction and regular dialogue will go a long way in rebuilding trust and morale levels.
Even highlighting the new market opportunities, professional satisfaction and financial rewards will help them adjust to the new reality!
Play by different rules - However, when divergent cultures become a contentious zone and amalgamating them appears iconoclastic, leaders should let the individual companies retain their distinctive identity and learn to live with the differences.
They can accommodate variances by organising "firms within the firm" rather than pushing for "one firm". For instance, instead of wiping away Ben & Jerry's (U.S. ice-cream manufacturer) unique essence and strength, Unilever took the unconventional route and reaped windfall gains from preserving and complementing the former's divergent character.
Paradigm shift - Enlightened leaders deem cultural compatibility an important cornerstone in any alliance. They clarify, quantify and understand the different organisational cultures as well as the capacity for change.
If philosophies, priorities, practices and standards are diametrically opposite with harmonising coalescence unfeasible/impossible, they renounce the acquisition, well aware that obliviously surging ahead will court failure.
Finally, nothing sums it up better than what Chris Burand, President of consulting firm Burand & Associates said, `The merger of companies is very much like the joining together of different families to celebrate the holidays.
Each family has its own traditions, and those traditions must be merged carefully and thoughtfully to ensure future harmony". Then, two good companies will transform into one great company with a happily ever after culmination.
PAYAL CHANANIA
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