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| Why are there so many
merger & acquisition failures?
Research indicates that senior executives who have personal experience with a merger or acquisition (and the benefit of hindsight) rate underestimating the importance and difficulty of integrating the two cultures as a major cause of M&A failures. For example, according to a 1999 study of mergers & acquisitions by KPMG... 83% of all mergers & acquisitions produce no benefit for the shareholders. Interviews with over 100 senior executives involved in some 700 deals over a two-year period reveal that the overwhelming cause for failure "is the people and the cultural differences."It is well known that many M&A efforts lack a critical success ingredient: sustained attention to the cultural integration of the two sets of employees and their daily work processes. What Is "Cultural Integration"? "How we get things done around here" is a short yet evocative definition of culture. It is applicable to corporate culture because it focuses on the how of accomplishing productive work day after day. When two firms combine, deal-makers and process managers always are careful to integrate the formal rules and policies for previously governed each separate firm. These elements of the two cultures were codified, and some were legally mandated; thus, they demand resolution. But it's easy to overlook the two sets of informal practices and the implicit norms and values that, as much as the codified rules, silently guided the how of employees' daily work as they interacted with colleagues, customers, suppliers, and other stakeholders in their original firms. It is precisely this that "cultural integration" addresses. The practice of business anthropology
is amply prepared to provide sustained attention to this critical success
ingredient.
Benefits Gained from Business Anthropology Anthropology's unique contribution has been in developing practical ways of studying culture and of comprehending its complex role in human social behavior in groups both small and large. Business anthropology applies the culture concept to the understanding of organizations. It addresses the process of culture change and culture adaptation within single organizations as well as those that are combining. Business anthropologists pay attention
to the informal as well as the formal, and to the cognitive, the emotional,
and the behavioral. Their ways of gathering information are focused
on the here and the now, and on the unique as well
as the patterned. They focus on exactly those factors to which
senior executives were referring when they said that underestimating the
importance and difficulty of integrating cultures helped to cause M&A
failures.
GROVEWELL's
business anthropology team recognizes that business must be about productivity
and profits. So they are careful to address actual business
challenges and then to devise practical, applicable solutions.
How Business Anthropologists Work The work of business anthropologists is emergent, which means that each phase of their process is devised on the basis of what was learned during the previous phase. The process begins with extensive interviewing of key employees representing a wide range of levels and functions in both of the combining units. In "emergent" fashion, these initial soundings provide GROVEWELL's team with informed judgments about how to proceed with the next phase of their information-gathering. . .and so on. The outcome of the GROVEWELL team's efforts is a set of detailed, extensive recommendations to your firm's decision-makers. At the latter's request, GROVEWELL's
team can also become involved in process facilitation of implementation
efforts.
Addressing Cultural Integration Before the Combination A process similar to the one described above is applied when GROVEWELL's team completes a cultural risk analysis with respect to potential integration challenges before the decision to combine is finalized. (This process is also known as a "cultural audit" or "cultural due diligence.") The principal outcome of a cultural risk analysis is a report in which GROVEWELL's team states its findings about possible integration challenges to the decision-makers of each of the firms that are considering a merger or acquisition. The latter then have an additional set of facts available to them as they decide whether or not to implement the combination. Cultural risk analysis confers the possibility of saying "no" to an impossibly difficult -- but clearly foreseen -- cultural integration. It also confers the possibility of saying "yes" to a combination in full knowledge of what needs to be done to deal effectively with people- and process-integration issues. -
GROVEWELL's partners are the co-authors of "The Eighth Key Practice for M&A Success," published in the e-magazine M&A Review [London] in July 2001. To read, click here. To obtain specific information,
or to inquire about engaging GROVEWELL's
services, contact info@grovewell.com.
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- Example: Business anthropologists recently studied the barriers to effective meetings involving employees of German and American firms that were linked in a joint venture. During meetings, the Germans and Americans were devoting far more time to heated discussions about appropriate meeting styles than to addressing the vital work of their firms' joint venture. You might expect that the barriers lay in their national cultural differences. But since the anthropologists were open to potential influences from all types and levels of culture, they located the barriers, instead, in cultural differences at the functional/departmental level. They were able, as well, to pin-point four ways in which the participants' assumptions about meetings were derailing their shared intention to have genuinely task-focused meetings. Most importantly: Armed with their indepth culture-based understanding of this situation, the anthropologists guided the participants to a hybrid "Third Way" of managing meetings that freed them to refocus on productive tasks. Outcomes: The above example underscores five characteristics of the work of business anthropologists. The practitioners. . .
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