Question: Our firm is about to acquire a young, innovative company where the culture is less formal, and also less efficient. While we are well established and respected in our market, we're not as quick as they are to grasp new technologies. How can we preserve the best qualities of both our companies as we merge?    – James L., VP

Bob's Answer: Every organization has a culture made up of deeply rooted beliefs, values, and norms shared by the members. These beliefs and values are not always directly visible, but they drive the company's decisions and actions. So when organizations with incompatible cultures come together, the conflicts created can be immobilizing. A study of mergers a few years ago found that of 150 deals worth more than $500 million, only 17 percent created substantial returns, 33 percent created marginal returns and 50 percent actually eroded shareholder returns.

Why such bad odds? Experts concluded that the lack of success was due in large part to details such as personnel and corporate culture that were overlooked in the transition.

An appreciative inquiry is the best approach to find the positives in the two existing cultures and bring those forward into the new culture that supports your corporate strategy. This process in itself will help each organization get to know and value the other. But before you can decide who you want to be as a single entity, you need to find out who both companies really are, and a good way to do that is to perform a cultural assessment. Cultural audit tools range from focus groups and one-on-one interviews to standardized assessments given to a large sample of employees. They are successfully used to determine cultural compatibility before the acquisition, but are also useful at this stage. A good assessment should address all the significant aspects of "how we do things around here." By soliciting responses from different divisions and levels in each company, a true picture comparing both cultures can be visualized on a graph.  From this data you can assess where the cultures are similar, where conflicts may emerge, and where each company's strengths lie.

Lyn's Answer: There was a time when companies relied on top leaders to set the tone and culture of the organization. But you are right to address this question, because the rise of information technology has changed leadership's role, for many reasons. Today information is rapidly available company-wide and while leaders are still critical, there are many layers of influence in the workplace. The boss may not even understand the specialized jobs some team members perform; and matrixed structures diffuse responsibility to multiple leaders. All this results in cultures that are influenced by multiple levels, ages and demographics. Molding a productive culture from so many different influencers can be a bit like sculpting with Jello! The first step is to convince top management that culture is key to a successful merger.

Fortunately, you have plenty of backup from the business press:  articles in the Wall Street Journal, Fortune and BusinessWeek have all asserted that lack of attention to cultural fit is the most common reason mergers don't work. Blending cultures is not easy, but according to Wanda Silva, a mergers and acquisitions expert, cultural integration is the single most important factor determining whether profits can be sustained and grown in companies that merge and acquire.

Bob: The assessment results are used to integrate the executive team, and together they should look at the results in both companies, create a vision of the desired culture, and determine action steps to reach it. A common occurrence when companies merge is for the more dominant company to quash the culture of the other. However, leaders at the highest level know what a huge mistake this is and work diligently to keep what is best from both companies – by intentionally making decisions that insure the continuance of the best attributes of both cultures.

Lyn: Many companies use transition teams of employees from both companies to facilitate integration during a merger – one company called theirs a Culture Club. The team works on bridging the gaps identified in the cultural assessment and are an excellent way to tap into ideas employees have about what works and doesn't work day to day. A member of one team remarked to me: It's amazing how big the little things are. Quitting time at one company was 5 pm and the other at 5:30 and it turned out to be a big deal to settle ... It's not the lions and tigers that will get you, it's the gnats. An employee transition team helps handle the pesky things that bug people and also builds loyalty and acceptance of cultural changes that may be required down the road.


Turknett Leadership Group is a corporate psychology and management consulting firm that has guided executives from entrepreneurial firms and Fortune 500 companies to successful answers for over two decades. If you have a question about the best way to lead your organization or develop your own skills as a leader, send a confidential e-mail to: Answers@turknett.com. Click here to find sources for this article and additional information on this topic.