The importance of culture: why mergers don't always last

Cultural due diligence

"If language is so important in a single company, it’s not hard to imagine how critical it can be when two cultures come together and where it is likely to cause of conflict, mistaken blame and a break on the speed at which things happen."

Having described culture as intangible does not mean surrendering the notion that it can be examined and diagnosed. An analysis of the language that is used within a business (called discourse anlaysis) including emails, notices, instructions, contracts, internal communications, and verbal communications both formal and informal, is a powerful tool that can be used to diagnose a company culture.

An illustration of the power of discourse analysis to drive transformation of company culture can be found in the British Prostrate Cancer Charity who undertook just such a project. Discourse analysis revealed that the things that had helped it succeed in the past had outlived their usefulness. But they were now baked into the culture, perpetuated through habits of language and, because invisible, very hard for them to change.

Commenting on the insights from the analysis, Seamus O’Farrell the new chief executive who had ambitious targets for growth and a much higher public profile for the charity said: “It was incredibly energising for the organisation. It was lovely to see people go ‘oh, yeah!’ in a totally non- defensive way: ‘Oh, we are like that, aren’t we?’”

The result was frank internal conversations which were not always comfortable, but important things are now being said, challenged and openly debated. As a result of changing the language patterns and thus changing the culture, the charity has had recent successes in winning significant corporate partnerships. So if language is so important in a single company, it’s not hard to imagine how critical it can be when two cultures come together and where it is likely to cause of conflict, mistaken blame and a break on the speed at which things happen.

As an example, a series of experiments conducted by Weber and Camerer at Carnegie Mellon University had people work in small teams to sort and identify photographs which they had to describe to others in their team. They then had to carry out various tasks which involved use of the images. They quickly assigned shorthand names for images – the one ‘with the girl and mother sitting’, ‘the powerpoint image’, ‘the portrait picture’. They then merged the teams and applied various tasks using the images. The execution of tasks was significantly slowed in the newly merged teams and confusion, irritation and misunderstandings were common. Scale that up to two merged companies and you can almost hear the talent running out of the door.

The acquirer and the acquired

"Culture can’t be a mash up. It’s not like throwing two cultures into a blender and seeing what comes out."

Though the chief executive of each company may have a bigger vision and see the benefits to both organisations in the merger, there is nevertheless always a sense of a winner or dominant company. That would no doubt have been true of the two New Zealand mergers had they gone ahead.

The recent acquisition of LinkedIn by Microsoft is another one to watch, especially in light of Microsoft’s poor record. Neither Microsoft’s acquisition of digital advertising firm aQuantive nor the mobile unit of Nokia were a great success. But Satya Nadella, Microsoft’s chief executive, seems determined to get this one right and has asked LinkedIn CEO Jeff Weiner to take the lead on an integration team responsible for merging their two companies: a responsibility that normally falls to an executive at the acquiring company.

But how will Weiner go about it? Culture can’t be a mash up. It’s not like throwing two cultures into a blender and seeing what comes out. A structured framework is needed, and employees have to have a voice. Otherwise it hinders morale and talent leaves. You need a new culture, not a mash up, and it can’t just be plucked out of the air.

An internal culture has to be built on core truths about the business. The building blocks for the culture are both business based and people/ belief based – the rational and the emotional mix gives the internal culture meaning and depth, and allows for a sense of ownership and belonging. 

But culture can’t be imposed from above. This can’t be Weiner and Nadella’s vision alone. The power of ‘how we do things here’ is an intangible that is owned by the entire business. As Mike Spose, CMO of Epic Media Group who managed a successful merger with a smaller advertising network, says: “Empower people to have a voice in defining the new culture.”

Culture doesn’t just determine how well the company will function internally (talent retention, efficient working practices, innovation and creativity), it also creates an employee experience which has a direct impact on customer experience. Clients and customers suffer during mergers unless the issue of culture is managed early, managed well, and given as much time and energy as operational issues.

Due diligence of cultural issues prior to a merger prepares the company for the intangibles of the merger. It sets a comms strategy in place, it starts joint projects where common language and ways of working can be developed, and it sets up a new culture with common agreement. The operational stuff will follow, if the merger survives that long.