The basic idea behind a merger is to capitalize on the strengths each side brings to the table with the goal of becoming “bigger and better” together. So why is it that so many mergers don’t live up to expectations, or fail outright? Mergers are time-consuming ventures where the details of each company are examined and weighed, discussed and compared. Considering the resources invested in bringing a merger to fruition, you’d expect the chances of success to be high, but failure rates are reported to be somewhere between 50-70 percent. How come, and what can you do to improve the odds?
To some degree, it’s the “nature of the beast”, you can evaluate each company’s existing parts — numbers, resources, and talent down to the very last detail — but you won’t know how they actually fit together until you launch and it’s time to move forward as one unit. It’s when you are bringing the project from being a largely theoretical exercise to a practical reality that you’ll see if the pieces fit.
At this stage, success hinges on how the details are executed, and that, in turn, depends on how they are communicated. If those tasked with executing the plans — employees and managers at various levels — have differing understandings, then it’s easy to see how the reality may end up being that of confusion and conflict, rather than the well-oiled “bigger, better machine” you were aiming for when first joining forces.
There are well-known examples of high-profile companies where the merger did not go as expected. One such example comes from German automaker Daimler AG (then known as Daimler-Benz) and American car company Chrysler. This transatlantic deal was praised by many because it combined two companies that focused on different areas of the automotive market and operated in different geographical regions. Before long, however, the positives were overshadowed by internal cultural conflicts. Chrysler had a loose entrepreneurial culture and Daimler-Benz was structured and hierarchical. The managers for the two companies clashed and eventually, the merger was dissolved when Daimler sold its remaining stake in Chrysler.
In his Harvard Business Review article Merging Two Global Companies, Matthew Bird says: “Successfully managing with culture in mind is an art based on judgment — like a tightrope act, it hinges on balance.” The gist, of course, is that you need to self-correct before being too far off-balance, or you’ll fall.
It turns out that whether you are doing a transcontinental merger or are staying closer to home, many of the issues that arise are the same. Culture and communication are at the heart of the matter in most instances.
Globiana’s CEO, Elena Mosko, notes that the merger between Globiana and the German counterpart crossculture academy had its fair share of communication gaps. This may seem ironic as both companies are experts in cross-cultural communication, but perhaps that was part of the problem. Elena says: “One mistake we made was assumption. We assumed that because both companies were in the same field (albeit with different entry points), had an international employee base, did international business, and spoke English, that we somehow occupied the same space, that we automatically got each other. That wasn’t the case. Our everyday working cultures were very different. We had to actively work out the details.”
The problem with making assumptions is that they are based on a subjective view that translates into feelings and projections and that’s not what you want to guide you as you negotiate a merger. In Elena’s experience, these basic strategies/mindsets are helpful when negotiating and implementing a merger:
- Identify and acknowledge communication styles of the parties involved.
- Review and spell out communication expectations.
- Work proactively to not let an “us vs them”-mindset take hold.
- Revisit your “BIG WHY” when struggling to see the path forward.
- Look for and utilize “the golden nuggets”.
Here is a closer look:
This can include whether someone is straightforward or more of a hedger/obfuscator. Communication style can also include perception of time, and body language. All of these things are influenced by personal style and preference, as well as the culture a person is coming from. Identifying and acknowledging each other’s styles is vital to avoid misunderstandings, hurt feelings, and negotiation break-downs.
The expectations of communication include such things as urgency in replying to an email message, or adherence to agendas in meetings. What is the protocol for canceling meetings? If you are engaged in an international deal that spans time zones, what are the guidelines for handling time differences when conducting meetings? Not being on the same page can result in everything from mild irritation to resentment, and, ultimately lost business opportunities.
The “Us vs Them”-Mindset
It’s important to pay attention to the “us vs them”-mindset because without buy-in from both sides, on all levels of the organization, the risk of failure is big. You need to be able to communicate shared goals and articulate what the joint mission is. The best-case scenario if not succeeding is lost productivity and poor engagement. The worst-case scenario is losing valuable talent or even the deal itself. Adopting, sticking to, and communicating an “us”-mindset early on in the process is vital.
“The BIG WHY”
“The big why” is the reason you wanted to do this in the first place. It’s important to go back to this question when you are struggling to see the path forward or are having doubts about the project. There is a reason why “the big why” is a well-known and oft-used strategy in business coaching, and one you can return to over and over again. If you can’t answer the question of what’s at the core of your decision to do something, to follow a certain path, then you most likely won’t get there. As a business leader, you need to be able to communicate your “why”, and get buy-in from employees, in order to succeed.
The Golden Nugget
The golden nugget(s) is “the proof” that the merger was solid. It represents concrete examples of areas positively impacted by the merger, such as a new contract that would not have been possible without your business partner, or expertise previously not available. You might need to turn to the golden nugget more than expected, especially in the early days after a merge, as a reminder to yourself and others, that you are on the right path.
Combining two companies across cultures is an exercise in paying attention to the small details while at the same time keeping the bigger goal in sharp focus. The foundation for any successful merger is the ability to effectively communicate, to all levels, why, and how, you will be stronger together.
By: Felicia Shermis