Why do so many merger & acquisition attempts fall short of expectations?
Senior executives with personal experience of mergers or acquisitions rate underestimating the difficulty of integrating the two cultures as a major cause of M&A disappointments.
A critical success ingredient for M&As: Proactive attention to cultural integration.
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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 are careful to integrate the formal, explicit rules and policies that previously governed each separate firm. But it's easy to overlook the two sets of informal practices and implicit norms and values that have silently guided the how of employees' daily work as they interacted with colleagues, customers, suppliers, and other stakeholders in their original firms. It is these intangible factors that "cultural integration" addresses.
Read The Eighth Key Practice of M&A Success, a published 3-page article by GROVEWELL's two partners.
Benefits Gained from Business Anthropology
Anthropology's unique contribution to human self-understanding has been in developing practical ways of comprehending the complex role of culture — i.e., of shared values and mindsets — in human behavior in groups. Business anthropology applies the culture concept to the understanding of organizations.
Business anthropologists pay attention to the informal as well as the formal, to the implicit as well as the explicit, and to the cognitive, the emotional, the value-laden, and the behavioral. They focus on exactly those factors to which senior executives were referring when they said that under-estimating the importance and difficulty of integrating cultures helped to cause M&As to fall short of expectations.
Addressing Cultural Integration Before a Combination Occurs
Before the decision to combine is finalized, GROVEWELL's team can complete a cultural risk analysis with respect to potential integration challenges. This process is also known as a "cultural audit" or as "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. With this, the decision-makers of each of the two firms gain an additional set of directly relevant facts.
Cultural risk analysis confers the possibility of saying "No" to a combination that promises an impossibly difficult (but clearly foreseen) cultural integration. It also confers the possibility of saying — in full knowledge of what must be done to deal with integration issues — "Yes!" to the combination.