Why does culture matter so much?
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If the culture feels right people can deliver their best.
When people are e.g. not used to fast decision making or are not empowered to work independently it will be quite a challenge for them. They will feel uncomfortable, unsure about the consequences, etc. Like this the engagement level will go do and so will the motivation and performance.Cultural mismatch can be a difficult thing to overcome, but as with all challenges, it is not impossible. The largest negative impact to cultural integration failure would likely be loss of employees, loss of customers, and eventually loss of the synergies and goals of the deal in the first place. Effective change management can overcome cultural challenges, if they are well planned for in a realistic manner. Not everyone will get on board if culture changes are significant, but with the right plan and attitude, shift is possible. I witnessed this in an integration of a large national for profit acquiring a regional non-for-profit, and saw first hand what worked and what did not. It definitely takes careful planning, patience, and strong, caring leadership to guide both organizations through this. Respect, caring, and honesty go a long way.
The biggest negative impact of culture mismatch between target and acquirer would be employee disengagement and de-motivation. If employees feel there is a mismatch between their personal values and the new entity’s culture, their loyalty and drive to contribute to the organization’s success will be greatly diminished. Good staff morale is critical to the attainment of organizational goals and therefore the ultimate outcome of the M/A.
I can tell you that having been on the side as being acquired and having to lead the organization in my country to integrate with our new parent company, has been extremely difficult. While strategic portfolio and size synergies were obvious, it was incredible the number of challenges we face due to the very different “how get things done” cultures. It took years to eventually subside and a lot of talent churn as well.
People want to feel safe. They are more creative, productive, etc., when they feel safe and are more likely to feel safe in an environment that is, at the very least, consistent. Add the stress of an acquisition (or a pandemic) and an unsafe culture will crumble, leading to talent churn, loss of productivity, and maybe even sabotage (intentional or unintentional). As part of cultural due diligence, it may be important to ask employees on both sides of the deal how safe they feel. An acquirer may have to evaluate their own culture from the standpoint of “is our culture strong enough” to take this on. Likewise, if the employees in a target do not feel safe before they are acquired, or merged, it is highly unlikely they are going to feel safe during integration or after.
Culture is what makes or breaks the company. Cultural fit will bring out the best in employees and to contribute more to the company even post merger.
Culture mismatch will definitely create issues and problems. If the culture mismatch involve keys personnel and crucial operations, we definitely need to think twice before the merger and acquisition. However, if it involve non key personnel and non crucial operations, dont think it should be a crucial factor to determine the merger and acquisition. Issues arising from the difference in culture on non key personnel and non crucial operation can be mitigated via SOP and intense training. Only those survive from the SOP and after training shall remain to be retained.
Even though companies recognise culture as a key factor in the M&A’s ultimate success, most of them fail to conduct cultural due diligence before they finalise the deal. One of the main causes, for deals not delivering value to their full potential post-merger, is failure to realise significant synergies.
Successful transactions require a holistic view of culture at an early stage, and a strong focus on people-related issues.
Research has found that 83% of M&A fail to create their intended value, with clashes between organisational cultures being one of the most frequently cited reasons for failure.
One of the main barriers to success for organisations is the collision of cultures and not knowing what to do about it.
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