Mission; Organisational Culture; Culture in Joint Ventures, Mergers & Acquisitions
Right CultureTM
Organizational Culture Consulting
Cultural Integration in JV/M&A
Why the need for cultural integration?
Organizations undertaking JVs, mergers and acquisitions often set ambitious goals post integration, and the financial value of the transaction reflects this cumulative benefit. Yet we know that in most cases, the projected benefits don't get realized fully, and one of the main reasons is lack of proper cultural integration. In some cases, the two entities that come together fail to integrate or refuse to give up on their individual cultural identity in favor of what the combined entity would need. In many cases, they go through an unnecessary trial and error process, sometimes lasting years, which consumes time, energy, and money, and sadly cost missed opportunities.
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Systematic cultural integration therefore is the right way whenever an organization wants to form a JV or is undertaking a merger/acquisition.
Cultural integration: Broad steps
Step 1: Start early
If possible, start thinking about the cultural integration ahead of even the final deal. Start a dialog on how would the new entity function and what are its alignment challenges.
But if you have already gone ahead, put culture integration at the top of your agenda besides other tangible priorities. Impress upon senior leaders from both sides that working towards a common vision is the key to success.
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Step 2: Assess the two cultures
Invest in a formal culture assessment study for both the entities to clearly understand the strengths and weaknesses of each partner as well as the key areas of differences. For example, you may discover that while one company has a robust system to develop human capability throughout the organization, the other relies on a few star performers, or that one is slow and methodical whereas the other values quick decisions and is not averse to risk taking.
All this while, keep focusing on two core ideas: First, what is that if the combined entity does extremely well (e.g., new product development and speed to market) then coming together is likely to lead to “success?” Second, what are the other values or principles (e.g., collaboration, accountability, or trust & transparency) that should be adopted to conduct business? Next, expand these ideas into “key themes” (e.g., “accountability” could lead to structure, roles & responsibilities, and decision rights as key themes) to guide integration.
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Step 3: Develop an action plan
Constitute a team—call it cultural integration team—comprising members from both sides, and give them a clear brief on the areas or themes to look at. Distribute content by creating joint task forces, each one handling one major theme. Give them the freedom to explore the solutions and present to the CEO and the key leaders.
For example, exploration is needed on questions like “what does excellence means to us” or “what kind of structure in sales is best for us?” This analysis will lead to productive discussion on issues of both strategy and culture, and each theme will lead to several action points. ​
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Step 4: Monitor progress
Monitor progress against each key action item. It is important to develop a set of measures and fix accountability to assess progress. For example, if sales force integration is one of your priorities, one measure could be an assessment of the new deals won across product lines. Milestones could be training people in handling a wider product range, creating an organization structure that reflects integrated sales approach, and aligning performance and reward systems to reinforce new desired behavior.
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Cultural integration in large organizations is a multi-year process, typically 3–5 years (smaller organizations: 1–3 years), and there are no shortcuts. You need to be patient and ready for course corrections. Be ready to navigate hidden surprises and new challenges as you move forward. But the key issue is: get started. Don't ignore it.
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