Many think of culture as a singular phenomenon that varies only across geographical barriers. However, we acknowledge that culture exists on six distinct levels, and that taking these levels into account can help individuals adjust to different cultural surroundings as they encounter them at work, at home and abroad. The six levels of culture are: national/societal, identity group, organizational, functional, team, and individual. Here we will be discussing the organizational level of culture.
When looking at a given organization, the observer can consider not only its official policies and procedures, but also the kind of culture that exists within the company. An organization’s culture is what is expected, reinforced and rewarded within it. This culture is part organic and part intentionally created by the organization’s leaders – some behaviors and practices arise from the employees’ individual work-style preferences coming together, and some grow from the leadership’s system of rewards and establishment and enforcement of rules. Similarly, companies’ cultures can change as their employee pools change or mature, and as leaders enact or rescind new policies.
Recognizing the existence of the organizational level of culture enables those who work within an organization to engage in a proactive and strategic reading of their culture. This can help them spot areas of strength and those that need change, and find growth opportunities. But one of the most important instances in which a company must examine and adapt its organizational culture is during mergers and acquisitions. And while many leaders in organizations undergoing mergers and acquisitions make an attempt to align the two companies’ cultures, such endeavors often end up faltering because of lack of direction or follow-through, with disastrous effects.
Culture contributes significantly to the failure or underperformance of most mergers and acquisitions. According to McKinsey, only 23 percent of acquisitions recover the cost of capital over a ten-year period. Mercer, in a study of 150 deals, found a 53 percent failure rate, and in a study of 115 mergers, Kearney determined that 58 percent did not add value. Many sources cite cultural differences between organizations as a key stumbling block, yet few organizations use this insight to successfully integrate.
In the course of a number of client experiences, we have noticed that senior leaders tend to proclaim cultural similarity at the beginning of mergers and acquisitions. In their pursuit to realize “synergies,” top executives deem cultural differences either non-existent or insignificant. However, it is usually further down in the organization, at the operational level of daily interactions and experiences, where cultural differences, similarities and synergies are negotiated. Because of the depth of culture within an organization, and its dynamism, truly facilitating cultural integration requires perspectives, tools and approaches that take these into account. This means equipping integration leaders and newly formed cross-organizational teams with shared language, awareness, knowledge and skills to sensitively navigate their acquisition experience, not only as individuals, but also as organizational members.
This is where the Cultural Orientations Approach is essential. It posits the understanding that organizational culture exists, and that it is profound, intentional and organic, all at the same time. The COA – along with its sister tool, the Cultural Navigator online learning platform – gives individuals within an organization the non-judgmental vocabulary and skill set to understand their own cultures and those of the people they work with, and to bridge any gaps there may be between them.
With these tools at their disposal, organizations – and the people within them – can establish a new, shared culture with higher levels of commitment, performance and results. This is essential with mergers and acquisitions, but also with individual organizations wishing to create a culture that spurs collaboration, innovation and excellence.Back to Navigating Culture Blog