When Mars marries Venus in a corporate environment, the result is sometimes a star. More often than not, however, it’s Jupiter ? huge and clunky, its size inhibiting initiative. According to consultants Emerge International, 75 per cent of all mergers, acquisitions, and general corporate change initiatives fail within the first three years. Says Emerge, a specialist in cultural due diligence: “One of the major culprits contributing to this failure rate is the lack of attention to organisational culture ? the Human System.”

The problem is not that people are unaware of cultural issues. It’s just that financial matters take centrestage as most CEOs lack the softer touch. According to human capital and financial management consultants Watson Wyatt: “Around the world, retention of key talent, communication, and integration of cultures were most often rated as critical activities in the integration plan for mergers and acquisitions. Yet, only eight per cent of respondents stated that human-resources management issues were a top priority during integration.”

Says Shashi Rao, a Mumbai-based HR consultant, “In India, where people didn’t bother about talent for a long time, there is a clear winners-and-losers approach. Very often, a new CEO is imposed on the company being taken over. It is assumed that the company being taken over is on a weaker wicket. So the people working there must be ‘inferior’ too.” A strange situation can arise, however, if the company being taken over is the more dynamic and successful. Consider the case of IDBI Bank being merged with parent and financial institution (FI) Industrial Development Bank of India (IDBI). The former was dynamic. It had quality people with impeccable MBA credentials. IDBI, on the other hand, was mired in sloth. It had been declared a dinosaur and could only stay out of the red because of a huge bailout package by the government. Yet, when the merger happened, the culture of the parent was imposed on the bank. More importantly, over a period of time, the payscales of the FI ? which are considerably lower ? will also be imported to the bank.

This is not a stray case. Global Trust Bank ? another dynamic new generation bank which, unfortunately, fell foul of the law ? was taken over by the 62-year-old Oriental Bank of Commerce.

There have also been cases where companies that are ethically challenged have taken over others that are far better corporate citizens. Silverline Technologies, now in the doghouse for all sorts of sins, took over Seranova. There are many others ? including one of the largest corporations in the country ? still sailing close to the wind.

What does an employee do in such a situation? Option No 1 is to leave. Decide immediately, says Rao. That way you will escape the stigma of failure. Option No 2 is to stay the course. Most of your competent colleagues will leave. You will find your path upwards easier. Option No 3 is to toady up to the new owners. “Some can do it, some can’t,” says Rao. “I will not make value judgments.”

But scan the cultures first. In a study titled Mars-Venus Marriages: Culture and Cross-Border M&A, Georgia Tech finance professors Rajesh Chakrabarti and Narayanan Jayaraman say that the more different the cultures, the greater the chances of a successful merger. Vive la difference.

LESSONS FROM EXPERIENCE

Don’t put culture on the backburner. The details of sealing the deal can obscure what seem like “softer” issues, but festering cultural differences can spell failure. Address them early in the process.

Evaluate cultural cues as rigorously as financial data. Assess areas such as decision-making style, execution discipline, and leadership approaches.

Define your “end-state culture”. Determine what kind of culture you want the merged organisation to have. Try to draw on the strengths of both companies.

Emphasise traits that the two organisations have in common.

Avoid the “winners and losers” mentality. Acquirers should refrain from forcing their approach on the other side.

Source: Coping With M&A Culture Clash by Peter Haapaniemi, Business Empowered