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Quite some time ago, a newsletter to the members of Britain's Chairman's Club (an organisation whose members included at least 30 chairmen from Britain's top 50 companies) set out what they saw as the cultural bear traps to merging. Citing the many public examples of ailing mergers including, at the time, Daimler/Chrysler, Vicks/Vidal Sassoon and GE's takeover of Kidder Peabody, the newsletter listed the following nine points of cultural difference that can and have cost billions of dollars to shareholders of merging corporate giants.
- Incompatible time frames
- Different value systems
- Different attitudes flowing from being either a high gross margin or a low gross margin company
- Different mentalities about capital requirements
- Different error tolerance
- Conflicting attitudes to work or ideas
- Different organisational approaches
- Different perceptions to whether the deal is a merger or an acquisition
- Different ideas of customer service.
This is a comprehensive and worthwhile list - the impact of which is so great that the newsletter suggests that the costs of mergers far exceed their potential benefit. This point is not new. A later Boston Consulting Group study found that 50%-70% of takeover bids were likely to destroy shareholder value for the acquiring company. With global mergers and acquisitions volumes exceeding the $2,000bn mark in 2007 – there is a lot of money at stake here.
Coming from a 2nd wave, warrior perspective (that is from the mindset of the dying industrial era - based on Newtonian philosophy and scientific management) the Chairman's Club newsletter suggested that mergers are unlikely to work because merging different cultures is difficult. From a 3rd wave, heroic (post industrial, virtual age) perspective this recommendation is both horribly wrong and vastly misleading.
That global giants are hard to merge using old style methods is obvious. That there is another better way that actually works is just as obvious if only leaders have the courage, humility and vision to go looking for it.
Now that is the big snag. Chairmen of large successful companies have been deeply imbued in the old style, 2nd wave, warrior methodologies. This is how they were trained. They succeeded using warrior methods and thinking with 2nd wave mindsets. Their whole experience and knowledge base is in yesterday's ways of doing things. Their old-fashioned approaches have put them at the top of the social and economic heap. 2nd wave ideals are deeply ingrained in the dominant social milieux. We live in a highly disposable society. When our whitegoods don't work we throw them out and buy the most recent model. When our marriages don't work we trade in our current spouse on a newer (usually younger) model. When our staff are a bit tired and washed out we replace them. When we have trouble with merging cultures we dispose of people, assets and eventually the whole show.
Managing global diversity is a huge challenge for all corporations, large and small, and will continue to be so. Whether the diversity is different cultures, different genders, race or religious biases, is of little matter. It all comes back to the same simple principles for success. These include:
- Having enough sense of self to allow others to express their difference without us becoming frightened and defensive
- Respecting ourselves and others for what we bring; staying open to learning from the differences
- Acknowledging that at a very core level we are all human – and as such have a huge amount in common
- Learning to communicate and relate at a level that is way beyond our current skill level (and most likely outside of our current possibility set)
This formula works for blended families, for community justice and for merging global giants. It is, however, a very big ask for aging warriors who would often prefer to destroy shareholder value than learn and grow themselves.
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