Summary: Globally, mergers, acquisitions and alliances have increased at a rate of 25 percent a year and are frequently the growth strategy of choice for many corporations. The well-publicized failure rate of these moves is frequently caused by trying to squeeze one culture into another. Paradoxically, making individual business units feel valued for who they are encourages a more collaborative effort in achieving the organization’s overall vision.
Forming alliances is frequently the growth strategy of choice in corporations, large and small. The result? Mergers, acquisitions and alliances around the globe have increased by 25 percent a year.
Conversely, the failure rate among these alliances continues to hover between 60 and 70 percent.
Why the high rate of failures? Bottom line, it’s culture clash – trying to squeeze one culture into another — such as when Kinko’s merged with FedEx — and, in other cases, totally obliterating one culture in favor of another.
Rarely, if ever, does pre-integration due diligence consider the dynamics of the organizations’ cultures, their degree of compatibility or the potential cultural conflicts that are almost certain to arise.
In many alliances, leaders tend to focus on creating a `we are all in this together` environment. Then, they expect management and employees of the acquired organization to put the `greater good` ahead of their own ways of being and behaving. Most acquired organizations expect to make changes in processes and infrastructure. However, they are not excited about giving up their identities and resist being shoe-horned into a new and often totally different culture.
An uncommon strategy. Research at the University of Colorado (O’Connor, 2006) suggests that each business unit must feel secure, distinct and non-threatened if it is to align and contribute to the over-arching corporate vision. Our real world consulting supports this. Thus, rather than changing their culture and identities, we suggest, first, honoring and strengthening them.
When organizations feel valued for who they are, they are much more likely to collaborate in achieving the overall organizational vision.
So, what principles help build strong commitment to the overall organization goals?
A good example comes from a company attempting to integrate several subsidiaries into `one-company`. Its goal is to leverage technology, increase cross-selling and create more brand visibility in its market.
To achieve this goal, executive leadership is modeling the following principles:
- Have frequent contact among the acquired organizations. The CEO made visits to each site and hosted round table discussions and `all-hands` meetings to explain the business case and answer questions — and he did this frequently. The employees were impressed that the CEO devoted a significant amount of his time visiting with them. This single gesture made the employees feel they were valued members of the team.
- Find ways to make each business unit a star within the whole organization. Among other activities, this CEO initiated a monthly newsletter, highlighting people and achievements at each site. This demonstrated respect for their value, their separateness and their expertise while implying common ground for the vision of the parent company. The newsletter also enabled each employee to maintain his or her identity while gaining a sense of pride in contributing to organizational goals.
- Leverage differences among the business units. The focus here was to take advantage of each partner’s expertise, markets, customers and suppliers. In doing so, differences were embraced at every level. Soon, units were employing the `best of the best` in each site’s functional area.
- Establish performance management systems relevant for the particular organization and yet related to the corporate vision. Performance data were used to recognize and strengthen each unit by identifying barriers to performance. Support was then provided to overcome each unit’s challenges and to help it produce results. The themes of “honor our differences”, “build our strengths” and “produce results” were embraced by all.
Paradoxically, integration is likely to be more successful when each organization is strong in its separate and distinct identity. Yet, at the same time, it must be motivated to make distinct and dramatic contributions to the overarching vision and goals of the parent. By creating an environment for this kind of collaboration, leaders encourage employees to maintain an external focus, a strong motivation and a commitment to contribute to customer satisfaction.