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The trouble with culture

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“One reason culture is so often the fall guy for failure is the broad array of things executives mean when they cite culture as a challenge,” says McCauley.

There are a wide variety of organizational power issues. Some organizational power issues include: which senior executives get what roles or where the combined company headquarters will be located. For other organizations, such organizational power issues might incorporate symbolic issues, such as: dress codes, use of legacy brands and logos, or company-provided meals and other perks. And still others are thinking about national cultural issues, i.e., the differences in societal norms from country to country. 

Samy Walleyo, Principal, Transaction Advisory Services at EY Germany, adds: “In particular, in Europe, where you have many cross-border integrations, national culture and its intangibility is often used as an excuse for failure.” 

Employees often feel a lot of passion around such organizational power, symbolic and national cultural differences, so handling them badly can certainly cause problems. But McCauley believes getting them right is not especially difficult if they are addressed with honesty and compassion backed by good communications.

“In particular, in Europe, where you have many cross-border integrations, national culture and its intangibility is often used as an excuse for failure.”

Samy Walleyo
Principal, Transaction Advisory Services at EY Germany

Although getting these “side issues” right is important, it is not sufficient for successful deal integration. Instead, success often rests on addressing the most important and challenging issue – which is often masked by the word “culture.” This issue is the ability to drive meaningful change in specific business behaviors such as customer responsiveness or degree of cost consciousness. Identifying and changing these critical behaviors should be the focus of an integration plan.

“Solving most so-called cultural issues doesn’t solve the primary problem dealmakers have, which is getting people aligned around the right business behaviors through an effectively redesigned operating model,” says Iddo Hadar, Technology Transaction Integration Advisor, Transaction Advisory Services, Ernst & Young LLP.

“If you’re in a fast-moving industry like technology, it’s not okay to say ‘indirect communications and slow decision-making are national culture issues that should be left untouched.”

Iddo Hadar
Technology Transaction Integration Advisor, Transaction Advisory Services, Ernst & Young LLP

Using a behaviors-based integration framework can help deal leaders determine when it is — or is not — important to insist on change. Deals between Japanese and US companies are frequently cited as difficult culturally. Yet most of the cultural differences — dress code or title structure come to mind — don’t matter much to results. However, where we consistently see important differences at Japanese firms is in communications and the speed of decision-making.

“If you’re in a fast-moving industry like technology, it’s not okay to say ‘indirect communications and slow decision-making are national culture issues that should be left untouched.’ Leadership needs to understand when these are key business behaviors that impact competitiveness, and take steps to effect change, even if it forces people to be uncomfortable and act differently from what is usual in their national culture or previous company,” says Hadar.