Two Chaps - Many Cultures
Global Business Excellence Through Cultural and Emotional Intelligence (ICE-Q)
Welcome to ๐๐ฌ๐ค ๐พ๐๐๐ฅ๐จ โ ๐๐๐ฃ๐ฎ ๐พ๐ช๐ก๐ฉ๐ช๐ง๐๐จ. We help you navigate the business of culture and the culture of business. Christian Hรถferle and Brett Parry ponder many topics related to culture through a combination of short bursts and deep dives.
We feature guests from the world of business and personal development, speaking about their experiences developing a combination of Cultural Intelligence (CQ) and Emotional Intelligence (EQ), as well as it's vital importance to successful global organizations.
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Two Chaps - Many Cultures
The Critical Role of Cultural Intelligence in Mergers and Acquisitions Success
Unlock the secrets to successful business integrations as we delve into the surprisingly perilous world of mergers and acquisitions. A staggering 70 to 90 percent of these ambitious ventures stumble, often tripping over cultural hurdles that many executives overlook. But fear not, we're here with expert guidance to help you navigate these murky waters. We dissect the often underestimated impact of organizational and national cultures on M&A outcomes, offering invaluable insights on the human element at play in these complex corporate marriages.
Join us as we share the tale of a successful European venture gobbled up by a North American giant, illustrating the game-changing role of early cultural consulting. This episode isn't just about the perils; it's a treasure trove of strategic wisdom, laden with stories of leadership finesse and communication mastery that can turn potentially rocky acquisitions into smooth-sailing partnerships. It's a masterclass in the art of cultural integration, complete with the dos and don'ts that can make or break your next big business move. So tune in, learn from the best, and discover how to ensure your company's growth is not just a statistic, but a success story.
๐๐ฌ๐ค ๐พ๐๐๐ฅ๐จ โ ๐๐๐ฃ๐ฎ ๐พ๐ช๐ก๐ฉ๐ช๐ง๐๐จ is the worldโs #1 show on the business of culture and the culture of business. Christian Hรถferle and Brett Parry ponder culture in short bursts and deep dives, featuring your questions and comments related to culture, business, and personal growth.
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The music on this episode is provided courtesy of Sepalot.
โDuum Diipโ - Artist: Sepalot - Label: Eskapaden - Copyright control
Mergers and acquisitions have the capability for immense value, but research demonstrates that 70 to even 90 percent of MNAs fail or underperform. Navigating culture alignment is a top people challenge when executing. Mnas and leaders can no longer afford to underestimate the impact of organizational culture and national culture on these transactions and how they affect performance. So here you're going to learn what to do and what not to do.
Speaker 2:Welcome to Two Chaps Many.
Speaker 1:Cultures.
Speaker 2:In an increasingly globally connected world, it is vital to possess the essential skills of cultural intelligence. Listen along as we present the topics, tips and strategies you can use to develop the power of cultural understanding in your personal and professional life. Here are your hosts Christian Vifala and Brett Parry.
Speaker 3:Yes, welcome back to Two Chaps, many Cultures. Interesting stat, isn't it? Failure, constant failure. Of course, we don't want to always talk about failure. We want to talk about what we can do to alleviate that failure. And when it comes to mergers and acquisitions, which are really great ideas, this is the way that companies grow, it's the way that they develop new markets, it's the way that they bring on new people, new inspirations, new ways of growing. So tell us what is a merger and acquisition anyway? Let's just start with that point. I don't know.
Speaker 1:I think acquisition is fairly easy. I think acquisitions we acquire something we don't have it ourselves as a company. There is a product, a service, a technology, a set of talent. We don't have that and we'll take us forever to grow that and develop that ourselves. Here is a company on the market that does just that. Let's see if they are a target that we can acquire and include into our organization. Acquisition, fine.
Speaker 1:Merger that is, I think, where things can get a bit dicey, because merging you know this from driving your car on the interstate or on a freeway, when lanes go from 3 to 2 to 1, there is a sign that you need to let people merge or that you have to combine these lanes. So you have to align companies, you have to get your ducks in a row, I'm guessing as a company that is being acquired or that is merging with another. I think the terminology is a bit of a euphemism. It is to mask the fact that very often in these transactions it's one entity purchasing another. So that would be the acquisition part. I think the merger part was added for oh, we're equal partners in this. We are a quote, unquote merger of equals and we come together as equal peers, and we are combining our efforts. Now I don't know how many times that actually happens in reality, that they are treating each other as equals, but I'm ready to be surprised.
Speaker 3:I think in both situations there's a certain amount of nervousness from either side, especially from the people in the organization that are not involved in the actual idea of the merger acquisition in the first place.
Speaker 3:The employees may be nervous. They may be from a culture where certainty is really built in and they like the continuity of doing the same thing over and over again, the comfort of doing that. And of course, then the management says we're merging with another company and that company just happens to be in a different country and they are asked to interact with these people, and of course there's a lot of that has to be messaged properly. That's something for management to do, certainly, but what we're talking about today is think about those cultural aspects of when you are matching two entities from different, not only country cultures but also corporate cultures. This can include things like what are the leadership styles, what is expectation of their time that it takes to get things done, what are the ways that people communicate, what tools do they use, what technology do they use to communicate? And all of these things can be influenced by culture.
Speaker 1:And very often the decision to combine two organizations for a better business outcome are driven by the numbers, is by how much more revenue could we generate? How much could we reduce our headcount and expense on talent? How much could we reduce our shared services? How much new market share could we add? These are all numbers games and that's all economically sound. We're not shaking any of that. That's the reason why a merger even begins or is in consideration.
Speaker 1:Unfortunately, very often when two entities are thinking about this, the people part of the equation is very often an afterthought or not a full variable in the equation. And what Brett just said is bringing people together. It's not yes, we're bringing companies together, but these companies only exist because there are people working in them. And if you want to bring the people together, you need to look at how that works, because a culture isn't only defined by the name of the country on the passport or the flag pin on the map. It is the rules of engagement within an organization, which behaviors are rewarded, which behaviors are sanctioned. What makes you a hero in the company, what makes you somebody that needs to lean in, to learn a little bit more in order to perform to the expectations of the rest of the group. There are so many behaviors that are inherent to a company that when you bring two companies together, this should be top of your agenda, and there are plenty of stories of these M&A activities gone wrong. They have made it into the study books.
Speaker 1:People at university learn about these, quote unquote, failed mergers I wouldn't call them failed.
Speaker 1:They have given us a lot of feedback on how not to do it, and for some of these examples, the feedback was a very expensive one.
Speaker 1:I think one of the most proverbial ones by now is the one where Daimler and Chrysler were literally out loud, communicating it to their respective teams, talking about a merger of equas, and it sounded very German and it came with a fist pounding on the table as the CEO of the one side explained this merger of equas. Now, it was a very expensive merger that had to be dissolved and has left both sides with scars, so it didn't work out. And there are plenty of other examples and it's easy to point at them and say, yo, look at those morons, how could they not see the light? However, there are plenty of examples where mergers actually do work, and that's why companies are still acquiring each other and merging with each other, because there are ways to do it right, and both Brett and I had the fortune of being involved in such projects, where company cultures were brought together and the leaderships on both sides of these entities took preemptive measures to consider the people factoring these equations right, brett.
Speaker 3:Yeah, and understand that when a company has its operations and they've been successful over many years, why have they been successful? They've developed strategies, and strategies that have worked often get repeated because they're just comfortable, they're normal, they know what works. But of course it's attributed to Peter Drucker. Nobody really knows whether he said it, but culture eats strategy for breakfast.
Speaker 1:So, in terms of Peter Drucker said and I'm paraphrasing because I don't remember the literal quote he said you can't change culture. You can only work with a culture that you have. So you have to play the cards at your dealt. So you cannot change necessarily how people behave just because you dictate it to them. People will change, or groups of people will change, their behaviors if it suits their interests and if it's to benefit of the group. But dictating that top down is often a futile endeavor. So yes, I'm paraphrasing Mr Drucker, but in merging organizations you can wish upon a cultural marriage as much as you want. It needs to work for both sides and you need to incentivize it or you need to build enough bridges for these, for the people in these organizations to cross towards each other's sides.
Speaker 3:Yeah, absolutely so. That strategy that worked in the past you may have to adapt a little bit. It actually may mean developing a new strategy that is developed specifically for the goal of merging successfully or acquiring a company that you see as valuable. So culture is an important part of this and we see this many times, even between individuals that move countries, and when we work with you can see it just in the personal relationships, of course. And that's really where the core, where it starts, the what people believe in terms of what is been successful for them, in terms of leadership style, communication styles, the way that we just show up, the way hierarchy management is seen, the way the openness or the connectedness between management is influenced by leadership styles and what's expected. So you could imagine that one company coming from a very hierarchical culture where the boss does all the deciding, to another culture where it's a, it's just a free for all, everybody has an opinion that there's already potential there for tension.
Speaker 1:Yeah, and you might want to watch one of our previous episodes where Brett and I were exactly talking about the different leadership styles around the world. So this very much plays into these considerations. When two companies, or even more companies come together, I'm currently involved in what is not a technical M&A process. It's a three entities of the same conglomerate on three different continents are re organizing the company structure. So you have an Asian parent company and their subsidiaries in South America and one in North America. So we have three parties coming together and having to align these leadership processes and principles as well as the communication internally and to the customer.
Speaker 1:Very interesting conversations to be had. And you could argue that, yeah, we should. Then in our M&A process, we should bring in somebody like Brett or Christian to help us with that culture piece. Yes, you should. I'm both Brett and I will say, yes, do that. And shameless, because that's what I'm known for. I'm really shameless. You should be unfriended. Now I think you can do even better than that, because this topical application of oh, we're going to need some culture consulting because we're bringing these entities together. Yes, that's a good starting point.
Speaker 1:I think one of the best examples I've had in my practice that could serve as a best practice even was the acquisition of a production site in Europe, northern Europe, done by a North American conglomerate in the packaging paper industry I'm not going to mention any names. So there's a big one of the global players in paper and packaging and they're buying a $600-$700 million plant in the south of Sweden and this conglomerate that was the buying entity, was the buying partner had done this before. They have bought paper mills and other production sites around the globe and they remembered when it didn't work and they fell flat on their faces before and still had the bruises and still had the scars to show and to talk about these stories or these transactions that didn't yield the results that the company had wanted. So would you?
Speaker 3:say that it looked good on paper, but it didn't work out so well.
Speaker 1:Yeah, yes, I couldn't help it, it did, it did.
Speaker 1:And what they did instead this time around was that we want to accompany this the right way from the get-go, with every stakeholder involved, and that includes the human factor, the culture piece. So a consortium of consultants, including myself, was part of this process from the very beginning. When the purchasing party and the acquisition target were not even allowed to talk to each other for regulatory reasons, we were given access to both sides and we were able to consult these both parties to the extent of when would the corporate veil be coming down? When can they talk to each other? How do we moderate these conversations? How do we help facilitate these internal conversations? How do we help the respective players adjust their leadership styles, adjust their behaviors, adjust their expectations to the desired outcomes of the merger?
Speaker 1:It was a very rewarding project. It took a long time. Like M&As do, they are not a one-and-done process. When you see the news online or in media say, well companies, abc is purchasing company 123 for $7.5 billion big headline news that sounds like a flash in the pan. It's a once-and-done. It is an 18-months-and-more process, depending on the scope of the project, until the merging is beginning to be complete. It will sometimes take years for it to be complete.
Speaker 3:So the best thing is to plan it's really investing in the time, ahead of time, as you're leading up to a considered merger, even in the process of, perhaps, the negotiations. If you have somebody that's culturally in the room with you, that can give you some context about what you're seeing when you're actually in the negotiation stage. Even you're talking to counterparts from a different culture, a different language, a different framework, and some of these real things that you can notice will be in that stage Before you even decide that you're going to write a check or you're going to actually open up and, as Christian says, remove that veil. This can be done by the management to notice what's going on the other side and how can we actually match those cultures together to make for an effective merger when it all comes to fruition. Because that little bit of investment at the start can absolutely pay off dividends for a long-term successful acquisition that benefits not only the management and the shareholders but also the people that are in the organisations to assuage any of the doubt and the discomfort and the risk taking that comes along with it.
Speaker 3:So we're certainly advocates for it, because we do this work and there are many times that we get called in to do this, as Christian says, and we really always welcome any questions, any comments, any of your experiences that you've had in being involved in a merger, of no matter what size it is. It doesn't have to be multi-million dollar deals, it could be just small acquisitions, but if you've had those experiences, we'd love you to share them. Write it down in the comments. Reach out to us, down the comments. Yes, reach out to us. Tell us what your experience is and what would be one final takeaway that we could leave people with.
Speaker 1:Well, again, shameless plug or very biased point of view from our perspective. Too often in my experience, people like Brett and I consultants are brought in to help with a fraction of the actual transaction. I think if you want a merger to go right, you want somebody like Brett or myself or anyone else who's doing this work by your side. You want to carve out an executive domain for people that are your chief culture officers, who will help guide you, will be the sounding board for you as you are completing this process. It's not just a numbers game, it's a people's game, and the more that sinks in with everybody in your senior executive teams, the better it is.
Speaker 3:Absolutely. Thanks again for listening. Don't forget to subscribe, hit that button and that bell or whatever you want to do to remind you, to let you know when we put up new episodes. Of course it's every week and we're just bringing you content around the culture of business and the business of culture. This is two chaps, many cultures. Thanks again, good to see you again, pal, and we'll see you next week. All right, see you, bye.