Colliding cultures

The Lenovo Way by Gina Quiao and Yolanda Conyers, and the Culture Map by Erin Meyer and Geert Hofstede’s work on Cultural Dimensions discussed  differences of culture, focussing on large, multi-national organisations where this could cause significant friction.

Conversely, if the friction factors could be eliminated, diversity of culture tends to promote innovation and enhanced performance. Both the Lenovo Way and the Culture Map highlight that simple awareness of cultural difference could reduce negative impacts.

For example, the American Conyers, seconded to a high-profile role in China did not know that her “request” for a meeting with a senior colleague translated into a “demand” for a meeting in Chinese, thus ruffling feathers. By the same token, Quiao gained a reputation among American colleagues for being taciturn and closed in meetings simply because it was polite in her Chinese culture to wait for others to speak first.

Professional firms in the UK are still merging as the industry continues to consolidate, whether with domestic or international counterparts. Cultural differences are therefore worthy of attention.

Research undertaken initially in the mid 80s indicates that most mergers fail to deliver value. A more recent study by McKinsey indicates that 85% of such transactions either fail to deliver value or are value-detracting. The reason? Essentially the issue stems from a failure to take account of people and / or of culture as part of post-merger integration.

What to do? Various business school professors tell us that a strong culture trumps strategy. I would phrase it differently and say that a strong culture is a necessary element of an effective strategy.

Whether or not you are contemplating a merger, it makes sense to consider the culture that currently exists within your firm and whether it supports your strategic aims. All organisations develop their own culture organically even if one is not developed deliberately. It becomes self-reinforcing as “just the way we do things here”. However, it may not always be positive and in some cases reinforces inertia, resistance to change and mediocrity.

If the existing culture is not aligned with the firm’s strategic aims, it pays to consider what needs to change in order to gain alignment. Benefits include reduced internal friction and (usually) improved client satisfaction and retention. In most cases, it makes sense to bring in some external expertise to help with the assessment and in planning any necessary changes. That expertise will probably include gaining input from clients as well as from staff at all levels and Partners, plus some market data and financial comparisons with competitor firms.

It may be helpful to seek support in the implementation of change once the plan is agreed. Indeed it is usually in the implementation phase that real difficulty occurs.

Where two organisations are coming together, a review of culture of both firms is essential. If it appears that the (inevitable) gap between the two is too great, it may be better to look for different partners than to force the fit. That is especially true if the merger is cross-border when national cultures as well as firms’ cultures can give rise to difference.

Having confirmed that there is sufficient cultural “fit” to proceed, success lies in agreeing not which of the two cultures is to predominate but how to build a culture for the merged organisation that is neither “we” nor “they” but “Us”. It is far easier for people to unite around a new set of cultural norms than to adapt to a culture that belonged elsewhere.

Leaders within the merged firm must act as exemplars of the new culture; genuinely walking the talk. During the implementation phase, which will typically last for a year or more, issues of organisational design, business processes and systems will need to be addressed.  In particular, it will be essential to review the basis of individual evaluations and reward mechanisms. (“What gets measured gets done. What gets rewarded gets done better…”).

By Stephen Newton