Young vs Old: What we learnt about culture differences in a merger

Defining culture

Organisational culture is tricky to pin down. There are lots of definitions, but this one by Needle (2004) is a good summary:

How do you measure culture?

With any definition, there’s an exhaustive (and exhausting!) set of questions to measure it. For us, there are 4 key parts to it: governance, enablement, agility and visibility.

Within each of these areas we look specifically at:

• Inclusion
• Collaboration
• Innovation
• Transparency

The definitions can always be argued, but we know that when organisations perform well against these factors, it produces higher growth, profitability and customer satisfaction. That’s how we know that a strong culture, as defined in this way, is crucially important to organisational success.

Culture, and its unspoken complexities, becomes extremely evident during mergers and acquisitions. Harvard Business Review (HBR) recently wrote about the merger between Amazon and Whole Foods failing to run smoothly due to a clash between ‘tight’ and ‘loose’ cultures.

It concluded that significant mismatches in cultures contributed to a net income plummet of circa $600 million dollars. Though the stakes may be lower for smaller organisations, the message is clear – ignore the importance of cultural differences at your peril.

How we approach cultures in mergers

In our recent work with two merging organisations in the Intellectual Property space, we saw the problems in culture differences, which helped us work towards a successful merger. We asked both organisations to assess their organisations using our QlearFit model – a survey measuring 16 dimensions of an organisation. The biggest differences in scores were in culture. It seems that these are the elements which make two seemingly similar organisations very different in the day-to-day running of the businesses.

In particular, our work highlighted the difference between older and newer organisations, with one mid-size organisation established in the 60s, and the other in the early noughties with less than 500 employees. Perhaps unsurprisingly, the younger organisation scored an average of 12.5% higher in all 4 areas, with a particular advantage in inclusion – the extent to which employees feel included and respected for who they are at work.

As a result, it showed the new organisation how to understand the strengths and weaknesses of the two legacy organisations. It gave us an easy way to begin to explore how to build a new, unified positive culture and find a simple starting point in what might usually be a minefield of complex, drawn-out cultural discovery.

So how will this new organisation use the insights? How could they be used for other merging organisations?

1. Agree what the new organisation should be famous for. The important question to ask is, ‘What do we want to be famous for, internally and with our clients’? Deciding on one area of culture to pursue ensures that action is focussed.
2. Learn more and build a behavioural framework. Whether you choose to focus on inclusion, collaboration, innovation or transparency, understand which of the legacy organisations ‘does it better’ and find out more. You’ll want to go deeper than just descriptive words and specifically ask questions about how the area shows up in behaviours. This deep dive could be done via interviews or at scale, via surveys. If we were looking at transparency, we might send a survey to the legacy organisation who performed better in this area and ask questions such as ‘Recall a time when someone in your team, department or wider organisation was open about their success or failure. Tell us what happened and what impact it had’. This specificity allows you to identify the critical behaviours which make up transparency – this then allows you to develop a framework for how similar behaviours can be rewarded, and opposite behaviours to be penalised helping to reinforce the new culture. These critical behaviours can then be embedded in training, performance management, internal comms and other organisational processes.
3. Measure success. Measure the success of cultural improvements by asking the organisation 2 questions at regular intervals – we recommend once a quarter to get a consistent measure, but allows time for the cultural change to bed in. Make the first question a simple, multiple choice question that gives you a clear measure that you can track over time. Use a second question that people can answer in their own words – this gives context to the first question, and a better understanding of how to build a great culture.

Find out more about how we can help with Organisational Fitness in your business.