After the Merger: Blending Dissimilar Corporate Cultures

You’re the HR director at a national bank whose switchboard operators are good at selling products when clients call with account questions. Your firm’s acquired a regional bank whose operators get high marks for customer satisfaction. Turns out, the regional bank operators don’t like pushing products during customer-service calls; they think it’s rude.

 

What do you do?

 

After a merger or an acquisition, company leaders often speak in platitudes about melding dissimilar corporate cultures but fail to follow up with concrete ways to ensure the blending is successful, said Gerald Adolph, senior partner at New York-based Booz & Company, a global management consulting firm. That failure, he said, can threaten the outcome of multibillion-dollar transactions.

 

In fact, an HR director who is successfully addressing the differences between two workplace cultures should be “confronted with uncomfortable choices and trade-offs,” he said. “If not, there's a very good possibility that your culture effort hasn't gone deep enough.”  

 

Adolph described the challenges of working on the case of the national and regional banks that combined their very different call-in centers.

 

“First you have to recognize the [corporate] differences and get them out on the table,” he said. “I want Bank B to do more cross-selling, so is that a training challenge, an incentives challenge or an information challenge? What we ran into was a culture that had been built into Bank B that made [operators] feel it was somehow wrong to use that [call] as a selling opportunity. That’s a cultural challenge.”

 

What did Adolph do? First, he approached the issue as a customer might.

 

“I had an experience with my cable provider where I called for something and they kept trying to cross-sell to me,” Adolph recalled. “I told them, ‘Why don’t you solve my problem first, and then I’ll give you time to pitch what you want to pitch.’ So [at the bank], we made sure to construct calls in a way that first solved people’s problems, so we could maintain customer satisfaction, but then pivoted in a way” that helped the bank sell products.

 

“Turned out Bank B was better at selling than we thought, and same for Bank A on customer satisfaction,” Adolph said. “We just had to illustrate to these two teams that they weren’t that far apart.”

 

Companies often face culture clashes when a larger, hierarchal firm acquires a smaller, entrepreneurial one, said Alexandra R. Lajoux, author of The Art of M&A Integration (McGraw-Hill, 2006) and chief knowledge officer at the National Association of Corporate Directors, a nonprofit training organization for corporate board members.

 

“Smaller organizations are more likely to put value on initiative, creativity and spontaneity,” observed Lajoux.

 

She illustrated the differences with an example. Company Y, which values on-time delivery of its product and tight cost controls, buys Company Z, which accepts missed deadlines and cost overruns but prizes “crazy new ideas” that translate into products that sell well. If the two companies merge, she said, their mission statements should be revised to ensure the entities hire, retain and promote workers who embody both companies’ values.

 

“How do you describe both companies’ values so that Company Z’s lack of conformity to Company Y’s values won’t mean someone from Company Z can’t get a promotion?” she asked. “You might want to craft a new values statement that says: ‘The company believes in product quality and its promises; at the same time we value innovation in all our people.’ So when someone’s being looked at for hiring or promotion, innovation is now one factor to consider; otherwise, there might not be room or flexibility to value that kind of person.”

 

Steve Lance learned the importance of avoiding an us-versus-them mentality in the mid-1990s, when Apple Computer acquired NeXT, the small computer company where he worked with NeXT founder Steve Jobs.

 

When Jobs became Apple’s CEO, he put his NeXT management team at the company’s senior levels and replaced Apple board members with NeXT employees in hopes of inspiring a more entrepreneurial spirit. But a culture clash erupted.

 

“The two companies’ cultures were completely at odds,” he recalled. “Apple was very staid and losing market share every day. NeXT had lots of younger people who were nimble, fast and who thought very much outside the box. People who had been at Apple for 15 or 20 years didn’t understand why someone 10 years their junior, and who had run a much smaller company, was being put above them.”

 

Lance discovered it was important to respect differing opinions. “It’s not about who wins, or whose way is the right way and whose is the wrong way,” he said. “The attitude needs to be, ‘How do we take the best of what you have and the best of what we have and make something even better?’ ”

 

Lajoux advises HR managers to avoid jumping to the conclusion that workers who resist change are being stubborn or egotistical. “It could be they have something of value to protect, and the HR person has to examine what that might be,” she said. “What might get lost in a merger can sometimes be old procedures and values that really do matter. Let’s say the old way of doing things seems a little expensive. It could be it tends to be expensive because a whole lot of quality was built in—you don’t want to forget about that.”

 

While it’s important to recognize where power shifts are happening during a merger or acquisition—much as when Jobs put NeXT colleagues on Apple’s board—it’s just as critical to stay objective about which employees will fit best in what positions, she noted.

 

“You have to ask, ‘How can you rise above the power plays and make sure hiring and promotion decisions are fair, aboveboard and transparent?’”

 

Sometimes, Adolph said, a company may not want to integrate two corporate cultures but instead “figure how to make the two cultures click and enhance each other.”

 

He added: “If I’m a large pharmaceutical company and I buy a biotech, I shouldn’t immediately assume I want to integrate those two cultures. In doing so, I may give up the value of what I just bought. On one hand, I may need the biotech to give me a molecule, and then my pharmaceutical company gets the right approvals and launches a product. On the other hand, this little biotech may know something about research and development that the R&D folks at the pharmaceutical company need to understand. In the first case, I don’t really need to blend the two cultures. In the second, I do—because I need to infuse the whole organization with this biotech’s knowledge so value will be created.”