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Managing Corporate Culture Differences During Mergers and Acquisitions: Issues and Solutions



The report starts with an introduction on the topic chosen by the writer and laid out several definitions based on the topic. Definition by word is vital so that the readers will have certain idea of what the writer is discussing. The third chapter is talking about the literatures which support the topic i.e. there are issues in mergers and acquisitions concentrating on corporate culture differences aspects. While fourth chapter discusses about the literature which is not support the topic. In fifth chapter, the writer relates on what are the issues arise and what are the solutions. The chapter has examined the issues arise regarding corporate culture differences when M&A and the way to manage it from different perspective. The writing identifies the culture differences between the merging firms as a key element affecting the success of M&A. From the writing, we can see that M&A often failed to achieve the expected outcomes of the merger because of lack of cultural fit or incompatible cultures. The managers pay less attention on the target selection criteria and do not analyze thoroughly the cultural fit of the merging entities especially during the pre-merger stages. Several ideas have been written based on the writers findings and readings.

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Managing Corporate Culture Differences During Mergers and Acquisitions: Issues and Solutions


1. 2. 3. 4. 5.

Abstract Introduction Literature supporting issue Literature not supporting issue Discussion 5.1. 5.2. Issues Suggested Solutions 5.2.1 Training in cross cultural awareness

1 3 11 13 15 15 18 18 19 20 20 24 26 27

5.2.2. Focus on communication 5.2.3. Acculturation process 5.2.4. Choosing a correct method 5.2.5. Four approaches in cultural integration strategy 6. 7. Conclusion References

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A few decades ago, corporate culture might have referred to a companys dress code or its working hours. Today, however, most business leaders recognize that organizational culture is both more sophisticated and more powerful than anything contained in an employee manual. One key element in developing and defining corporate culture is the narrative: a story told by a leader which becomes not only part of a companys folklore but eventually the unconscious fabric of employees behavior patterns (Marshall and Adamic, 2010).

Corporate culture has become an important topic in business primarily during the last two decades. While corporate culture is an intangible concept, it clearly plays a meaningful role in companies, affecting employees and organizational operations throughout a firm. While culture is not only determinant of business success or failure, a positive culture can be a significant competitive advantage over organizations with which a firm competes.

The rise of corporate culture began when people with variety backgrounds and cultural heritages, varieties personalities and varieties experiences brought together in a work environment. These factors will manifest themselves in an infinite variety of ways. Over time a dominant set of norm will emerge, guiding the way in which work is accomplished within organization.

The continuing global upsurge in merger, acquisition, joint venture and other forms of collaborative activity reflects the changing social, economic, technological and market environments in which organizations now have to operate and respond. The 1980s saw the

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biggest and most sustained wave of merger activity, estimated to have affected 25% of the US workforce (Cartwritght and Cooper, 1995).

Acquisitions, mergers and change have been an ongoing part of the operational strategy of many organizations for years, and have proven to be a significant and popular means for achieving corporate diversity, growth and rationalization (Kavanagh and Ashkanasy, 2006). Hence, mergers are commonly characterized as the consolidation of two firms into single firm. Acquisitions, by contrast, are commonly characterized as the purchase of one organization from another where the buyer or acquirer maintains control (Schraeder and Self, 2003).

The prospect of increasing profitability and market share by merger and acquisition continues to exercise a more seductive and immediate appeal to business leaders than a reliance on growth alone. Merger and acquisition have a unique potential to transform firms and to contribute to corporate renewal such as renew its market position at a speed not achievable by internal growth.

Hence, in managing corporate cultures differences during mergers and acquisitions, several issues arise such as cultures incompatible resulting to employees stress, lack of communication on the part of the managers, lack of preparation for both companies and inefficient integration method used by both firms during mergers and acquisitions resulting 69% company mergers failed (Wheelen and Hunger, p. 362). Therefore, several solutions and actions have been suggested for the companies to put it into implementation and enjoy benefit of the investment.

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Corporate culture

The history of traditional management and organization theory has been a history of how to control workers and to harmonize their interests with those of management. The history of managerial practices ranging from Taylorism and its various outgrowth has been how to control the non-rational aspects of the organizational behavior through coercive practices such as increased managerial supervision. It was not until the early 1980s that organization and management researchers discovered corporate culture as another instrument for the control of non-rational aspects of employee behaviors (Ogbor, 2001).

Corporate culture is influenced by factors such as industry in which the company operates, its geographic location, events that have occurred during its history, the personalities of its employees and their patterns of interaction. Corporate culture always tend to similar with organizational culture where both tends to be unique to a particular organization, composed of an objective and subjective dimension, and concerned with tradition and the nature of shared beliefs and expectations about organizational life (Schraeder and Self, 2003). For the purpose of the report, the term corporate culture and organizational culture will be used interchangeably.

Schein (2009) defined corporate culture as a pattern of basic assumptions invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore to be taught to the new members as the correct way tp perceive, think and feel in relation to those problems.

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Sadri and Lees (2001) stated that a positive corporate typically encompasses several key elements: (1) It is fostered not merely by a mission statement but by a clear corporate vision, which is a mental picture of the companys desired future. Corporate visions are most effective when clearly communicated by top management who exhibit strong values and have dynamics and charismatic personalities. (2) Corporate culture is supported by corporate values that are consistent with the purpose of the company and aligned with personal values of organizational members. Corporate vision and values permeate all levels of the organization and are consistently modeled by top management. (3) Employees are highly valued at all levels of the organization and there is extensive employee interaction both within and across functional departments. (4) The culture is adaptable, adjusting quickly in response to external conditions and is consistent, treating all employees equally and fairly. (5) Corporate culture is perpetuated in some ways through tangible symbols, slogans, stories or ceremonies that highlight corporate values.

Mwaura, Sutton and Roberts (1998) mentioned that corporate culture comprises the values, norms, feelings, hopes and aspirations of an organizations members. Its function is to transmit learning, handle strong emotions and to unite and provide meaning. Assumptions have been made that corporate culture: forms a basis for competitive advantage; determines the effectiveness of the company; is important in developing high performance among staff; and helps to increase staff loyalty to an organization.

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Corporate culture is just a habitual way of behaving and acting, often motivated from deeply ingrained presumptions about the right to act (1993). While Gorman (1993) mentioned that the functions of culture are: (1) (2) (3) (4) transmission of learning to unite the organization to give meaning to members of an organization to handle strong emotions.

Based on the above different definitions of the concept, the central notion here is that culture relates to core organizational values. In turn, values are things which are important to organizations and underpin decisions and behavior. All organizations have cultures or sets of values which influence the way people behave in a variety of areas, such as treatment of customers, standards of performance, innovation etc (Flamholtz, 2001).

Sonnenfeld (1988) categorized corporate culture into four types. First, the academy exposes employees to many different jobs so that they can move around within the organization. Second, the club is very concerned with how people will fit to the organization. The baseball team consists of talented people or stars that are rewarded heavily for their accomplishments but who will readily leave the organization when better opportunity comes along. The fortress is an organization that is concerned mainly with survival.

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Mergers and Acquisitions (M&A)

Economic implications of mergers and acquisitions have long been an interest to economists. A merger by definition combines two firms leaving one surviving firm. An acquisition describes the purchase of one firm by another. In the Oxford Dictionary of Business (1996) (Coultard, 2000) the term merger is defined as a combination of two or more businesses on an equal footing that results in the creation of a new reporting entity formed from the combining businesses. indentify both M&A. For the purpose of this report, I will employ the term merger to

The prime reasons for most M&A are to maintain or increase market share and to increase share holder value by cutting costs and initiating new, expanded and improved services. Mergers create a new organization out of two or more organizations for more or less equal stature, pooling all resources. Acquisitions add a small firm onto the existing structure of a larger organization. Deals tend to be based on market prices and can be risky, and usually aim to increase sales, cut costs or enter new markets.

Potential M&A partners are typically identified pursuant to some type of strategic fit. Strategic fit is broadly characterized as similarity between organizational strategies or complementary organizational strategies setting the stage for potential strategic synergy. Furthermore, individuals within a strong company culture know what is expected of them, how to act and react when confronted with an unfamiliar situation. They also have a frame of reference within which they can pattern their response. Conversely, those in a weak culture spend a great deal of time deciding what they should do and how they should do it. Whether

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these issues are entirely true is unclear. However, it is generally agreed that the culture of a company must be considered when formulating and implementing a company-wide strategy such M&A process etc (Irani, Sharp and Kagioglou, 1997).

However, in many cases the opposite is happening. For example, in the period of leading up to the DaimlerChrysler merger, both firms were performing quite well. People in both organizations expected that their merger of equal would allow each unit to benefit from the others strength and capabilities. Stockholders in both companies overwhelmingly approved the merger and the stock prices and analyst predictions reflected this optimism. Yet, performance after the merger was entirely different, particularly at the Chrysler division. In the month following the merger, the stock price fell by roughly one half since the immediate post-merger high. The Chrysler divison began losing money shortly afterwards and was expected to continue to do so for several years. In addition, there were significant layoffs at Chrysler following the merger which is not anticipated prior to merger.

Kumar (2009) stated that M&A have become major means of industry consolidation. A merger can be defined as amalgamation, if all assets and liabilities of one company are transferred to the transferee company, in consideration of payment in the form of equity shares of the transferee company or debentures or cash or a mix of the above modes of payment. An acquisition, on the other hand, is aimed at gaining a controlling stake in the share capital of the target company.

Mergers are also often classified based on the type of the merging firms activities as vertical, horizontal and conglomerate. A merger is classified as vertical if integrating firms

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belong to the neighboring stages of production such as wine maker purchasing a bottle or cork factory. A horizontal merger describes the case where firms who are involved in the same business line get together and form a separate firm. The third category of mergers are called conglomerate and they occur between firms with unrelated lines of business (Aydogan, 2002).

When two organizations merged or acquired, their cultures are incompatible to the extent that many employees no longer fit into the environment and it dominant culture or find the culture ambiguous, fragmented or conflictual, the resultant effects are likely to have a substantial and large-scale impact. The effects of combining different cultural types, as it influences managerial style, employees perceptions and behaviours both prior to and during the integration period, and the extent to which a single coherent culture emerges, is likely to have important consequences for both individual and organizational merger outcomes (Cartwritght and Cooper, 1995).

One of the failure for the largest merger in Nordic History is between Telia (Sweden) and Telenor (Norway) where cultural issues had been perceived as being similar, yet greater analysis reveals significant differences just below the surface. On the surface both firms were a match made in heaven as both government owned and had historically been monopolies in their own country. Both firms underestimated their national cultures similarity and in the end narrow nationalism became a problem (2006).

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Traditionally, exploiting economies of scale or taking advantage of market imperfections has been dominant way of gaining competitive advantage by firms. But as economies are becoming more and more integrated due to forces of globalization, there is an increasing realization that these ways of competition offer limited profitability for firms. As a result, M&A have become increasingly popular as companies look for higher returns and dominant market position in the global market. M&A provide a means to acquire expertise, technology, products, complement ongoing internal product development, reduce exposure to risk and achieve economies of scope and scale (Lodorfos and Boateng, 2006).

Cartwright and Cooper (1993) suggested that financial benefits anticipated from M&A are often unrealized because of incompatible cultures. Although it is widely acknowledged that cultural compatibility or fit alone is no guarantee to M&As success, but it is also true to say that culture heterogeneity creates tensions and affects financial and managerial performance.

Harper and Cormeraie (1995) found out that a large area of training required to assist companies with their cross-national merger activities and to reduce the risks failure by preparing managers for working with cultural differences and by developing their intercultural competence skills.

Lodorfos and Boateng (2006) further agreed that culture plays a key role in the integration process and the overall success of M&A where cultural differences are to be

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regarded as detrimental or a major impediment to the success of M&A in that they lead to misunderstanding, fuel emotional reactions and exacerbate conflicts and clashes.

Bligh (2006) stated that successful post-merger leader needs to be able explicitly recognize, understand and utilize cultural differences at every step of a merger in order to elicit employee buy-in. Managers and employees that recognized existing cultural variation were more easily ably to draw on shared cultural values in the midst of changing cultural as well. Effective cultural leaders may more effectively recognize and understand the inevitability of cultural variation, drawing different perspectives and ways of doing things in order to come up with new cultural meanings that provide adequate room for variation in their interpretation. In other words effective cultural leaders recognize how existing cultural differences can be reconciled under a broader umbrella of cultural unity.

Gilmore, Shea and Useem (1997) emphasized that side effects are always present in culture change such as behavioral inversion; disappointment and blame; polarized images; and ambivalent authority. Behavioral inversion was characterized by a resurgence of hierarchy presented under the guise of an empowerment slogan. Disappointment and blame was often evident by individuals who sought to blame someone for challenges or pitfalls associated with the requisite changes. Polarized images were evident in tendencies to downplay the value of old practices in negative evaluative terms while characterizing proposed practices in positive evaluative terms. The final one, ambivalent authority was characterized by conflicting demands such as directing employees to be empowered.

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While Gorman (1993) mentioned that as regards changing culture generally, there is little doubt that culture does change; consequently, it is a question of conditions under which it changes and of being in a position to influence this change.



It is commonly reported that in both academic and practitioner journals that organizational culture is vital to the success or failure of M&A. A wide variety of issues such as company identity, communication difficulties, human resource problems, ego clashes and intergroup conflicts are often grouped under the umbrella term of cultural differences. As a result, culture is often made the scapegoat for the failure of M&A that, if not for culture, might otherwise have been profitable or even synergistic (Bligh, 2006).

Lynch and Lind (2002) stated that over 20 years, M&A activity has been one of the chief methods for organizational growth. There have been widespread warnings of the erosion of shareholder value and the serious socio-economic costs associated with many mergers. Despite the fact that merger success rate are deplorably low, corporations have turned increasingly to M&A to fuel their future success.

Nyugen and Kleiner (2003) mentioned that a study of mergers and acquisitions by KPMG International found that 75% tp 83% of them fail. Failure means lowered productivity, labor unrest, higher absenteeism and loss of shareholder value. In some cases, it means well-

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publicized dissolution of the combination. The fact is that it is much easier to make a deal than to make a deal work.

Lajoux and Weston (1998) reported that the longer-term effects of mergers shows impairment of value (measured by share price and other indicators) for a variety of identifiable reasons, including inexperience, lack of strategic purpose, use of overvalued stock as payment mode and poor post-merger integration. The research also shows that companies avoiding these traps perform better than their peers, both acquiring and non-acquiring.

Salama, Holland and Vinten (2003) stated that value creation is important objective in successful acquisitions. Yet studies and researches continue to highlight the low success rate associated with acquisitions. No matter how attractive is the business opportunity associated with an acquisition process, value is not created until capabilities are transferred, and people from both organizations collaborate in order to create the expected benefits and the unpredicted opportunities.

Cartwritght and Cooper (1995) discussed that merger success in the context related to M&A is dependent on synergy at both strategic and operational level. Cultural fit is as necessary a condition as strategic fit. In that case, one has to consider the wider response of the acquired firm or other merger partner. Cultural change is a long and difficult process, the timescale for which realistically is probably three to five years, possibly longer. Even in the best of circumstances, mergers can so change then ature, orientation and character of one or both of the merger partners; this means five to seven years are typically needed for employees to feel truly assimilated into merged entity (Nguyen and Kleiner, 2003).

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There is increasing evidence that cultural incompatibility is the single largest cause of lack of projected performance, departure of key executives and time consuming conflicts in the consolidation of business. Culture plays a major part in the way employees react to the new structure of the work environment, ranging from quick adapting and commitment to the new expectation, to resistance, withdrawal and other forms of unproductive behaviors. The term culture clash has been coined to describe the conflict of two companies philosophies, styles, values and missions. This may, in fact, be the most dangerous factor when two companies decide to combine.

Nguyen and Kleiner (2003) gave example of Fluor Corporation and St Joe Minerals Corporation. St Joe was decentralized, lean, frugal, informal and run with light hand. Fluor was highly centralized with large corporate staff, many reporting levels and many controls on decision making. In contrast to St Joes frugality, Fluor had planes and helicopters for use by its large central staff. This cultural conflict was so great that none of senior St Joe managers who went to Fluor stayed on, and of 22 senior officers in St Joe at the time of acquisition, only a few remained two years later.

Nguyen and Kleiner (2003) further stated that while cultural conflict often plays a big role in producing merger failure, it is often neglected when benefits of a potential merger are examined. For instance, following the announcement of the AOL/Time Warner deal, a front-

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page Wall Street Journal article discussed possible determinants of success or failure for the merger such as synergies, costs, competitor reaction etc. The only clear discussion of possible cultural conflict is a single paragraph talking about how the different personalities of AOLs Steve Case and Time Warners Gerald Levin reflect cultural differences between the two firms.

When merger happened between two companies, it has been suggested that it takes two to three years for the traumas of a merger to subside and it is during this stormy period that many business mergers failed. According to Harper and Cormeraie (1995), the reasons are most mergers fail to account for the importance of the human resources issues which usually become critical determinants to success. Second, many mergers take place at high speed and focus on the financial benefits to the exclusion of other considerations. Finally, they fail adequately to take account of the innately conservative, change-resistant aspects of the company culture. Moreover there is a lack of specific awareness of the importance of cultural differences and their impact on each company. The M&A can be described as arranged by the top management without consulting the interested parties such as managers and employees. If consultation is ignored, long-term distress can be created at all levels and the companies pay the price.

Lodorfos and Boateng (2006) agreed that benefits of consolidation extend beyond pure financial motives such as creating new market opportunities, building core competencies, expanding economies of scale and sustaining long-term competitive advantage. Therefore M&A represent a strategic choice for a firm to grow. However, in order to success in M&A process, the role of culture or organizational culture has to be reckoned with. The lack of attention on cultural issues can lead to a detrimental result. In some mergers, inadequate discussions or

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information sharing with the unions or employees had an impact on the employees morale, stress levels and behavior. The divestment of Solutia Corporation from Monsanto Inc is due to the cultures within the corporation began to diverge, increasing the gap between the two cultures, something that impact seriously on employees motivation and the Solutias operating efficiency.

M&A usually trigger to a varying extent some kind of cultural dynamic affecting employees performance, attitude and behavior and therefore it is important for managers to recognize this and give cultural integration issues a serious attention at the early stages of merger process. What we can do is by having employees representation and participation during the pre-merger stage can lead to high levels of trust between key stakeholders, and consequently reduce dissatisfaction, resistance to change and the risks associated with culture clashes.

When merging with or acquiring another company, top management must give some consideration to a potential clash of corporate cultures. Wheelen (2012) mentioned that integrating culture was a top challenge. Cultural differences are even more problematic when a company acquires a firm from another country. For instance, DaimlerChryslers purchase of a controlling interest in Mitsubishi Motors in 2001 was insufficient to overcome Mitsubishis resistance to change. After investing $2 billion to cut Mitsubishis costs and improve its product development, DaimlerChrysler gave up. It is dangerous to assume that the firms can simply be integrated into the same reporting structure. The greater the gap between the cultures of the acquired firm and the acquiring firm, the faster executives in the acquired firm quit their job

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and valuable talent is lost. Conversely, when corporate cultures are similar, performance problems are minimized.

In order words, to minimize risks relating to culture incompatibilities, managers should carefully analyze and understand the target organizations drivers and motives to merge, policies, norms, priorities, values, language, communication channels and reporting lines in order to evaluate the compatibility of the two cultures. At the time, managers oblige to highlight the positive and negative attributes of each of the cultures and then decide the level of integration or independence necessary for a successful co-existence.


Suggested Solutions

5.2.1 Training in cross cultural awareness

Training in cross-cultural awareness and learning to work with cultural differences can help considerably in making the transition from arranged mergers to working partnership, but in many instances the training is not called for until the relationship between companies beginning to founder. Hence, training help managers in preparing them to work more effectively across cultures by increasing awareness of their personal learning and communication styles. At the same time, bring them to understand the significant aspects of their own culture, how it influences their attitudes and behaviors and how it is perceived by others (Harper and Cormeraie, 1995).

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Lodorfos and Boateng (2006) further stated that the managers of the merging of DowUnion Carbide have suggested that in order to avoid cultural clashes managers need to develop a flexible and well-defined merger and acquisition pre-plan and plan. Integration teams comprising all merging partners and experts in change management and organizational psychology or even hire external consultants to integrate the two companies processes and systems.

5.2.2. Focus on communication

Lodorfos and Boateng (2006) also found out that communication is critical in developing trust between companies involved and consequently lead to successful integration. Lack of effective communication heightens culture differences and creates tensions between the employees. In order to reduce communication problems, managers must not only give information but actively involve all the stakeholders and especially the employees in the merger process. At the same time, the implementation of job rotation system whereby key players exchange jobs and work together with their counterparts in the merging company to familiarize themselves with what goes on and the way of doing things in each company.

Sharing information and encourage communication has been discussed deeply by Schraeder and Self (2003) where providing realistic communication to the employees will give brief information about the merging process and at the same time to reduce stress and uncertainty among employees. A realistic merger preview should provide clear and concise information about the purpose of integration and specific details about the integration plan. It

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should also clearly delineate lines of authority and elaborate any leadership changes precipitated from M&A.

5.2.3. Acculturation process Another way to manage organizational change is through the process of acculturation i.e. the process of managing or integrating cultures for organizational members. This process can also be utilized to assist organizational members in melding cultures in merged or acquired firms (Schraeder and Self, 2003). Stahl and Voigt (2005) defined acculturation in anthropology as changes induced in two cultural systems as a result of the diffusion of cultural elements in both directions. So, in the context of M&A, acculturation as the outcome of a cooperative process whereby the beliefs, assumptions and values of two previously independent work forces form a jointly determined culture. Acculturation is achieved through development of a common organizational language, mutual consideration and values promoting shared interests. As such, acculturation can be considered a prerequisite for M&A success, especially when high levels of integration are required.

5.2.4. Choosing a correct method

There are four general methods of managing two different cultures where the choice of which method to use should be based on: (1) (2) how much members of the acquired firm value preserving their own culture; and how attractive they perceive the culture of the acquirer to be.

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Integration involves a relatively balanced give-and-take of cultural and managerial practices between the merger partners and no strong imposition of cultural change on either company. It merger the two cultures in such a way that the separate cultures of both firms are preserved in the resulting culture. This is what Renault (France) do when purchasing controlling stake in Nissan (Japan) where the new CEO develop a new corporate culture based on the best elements of Japanese culture.

Assimilation involves the domination of one organization over the other. The domination is not forced but it is welcomed by members of the acquired firm, who may feel for many reasons that their culture and managerial practices have not produced success. The acquired firm surrenders its culture and adopts new culture of the acquiring company. This is the case when CIMB acquired Southern Bank where we can see Southern Bank adopts its acquirer corporate culture.

Separation is characterized by a separation of the two companies cultures. They are structurally separated, without cultural exchange. For instance KFC and Pizza Hut where both are under JCorp and practicing different corporate cultures.

Deculturation involves the disintegration of one companys culture resulting from unwanted and extreme pressure from other to impose its culture and practices. This is the most common and most destructive method of dealing with two different cultures. It is often accompanied by much confusion, conflict, resentment and stress. This is a primary reason why so many executives tend to leave after their firm is acquired. Most researches on mergers mentioned that the failures up to 60%.

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Integration process in managing cultural differences have been proven a more realistic and successful strategy than finding the ideal cultural fit. Buono and Bowditch (1989) consider that successful integration can be achieved even between diversified organizational cultures. In bringing together firms with different cultures and skills, acquisitions create unique learning opportunities for the partner firms. Effective integration can be defined as the combination of firms into a single unity or group, generating efforts to fulfill the goals of the new organization.

The integration strategy can be implemented by forming integration team where a group of key executives who would be in charge of making the necessary decisions relating to the integration strategies. Salama, Holland and Vinten (2003) further stated that the integration strategies were perceived as contributing to the acquisition success between Deutsche Bank and Bankers Trust where the integration team had played the role efficiently.

Salama, Holland and Vinten (2003) also discussed the integration between Ford and Volvo where they have used separation method when managing differences cultures between two companies. Volvo is a decentralized firm and teamwork oriented where decision making process happens at the lower levels. Volvo Swedish culture is very strong where people can see it in Volvo factory in Japan and South America. Compared to Ford, the acquiring firm, it is perceived as a structured and hierarchical US operation. Decision making process is done only at the top levels only. In order to differentiate two product lines, Ford established new organizational structure i.e. Ford Cars to concentrates on Ford products and Premium Automotive Group to focus on premium products such as Volvo (2006).

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The integration of culture should be an active and gradual process in which the two organizations learn to work and do things in the same way or understand why they should do things in different way. During this stage of the process more attention must be given to the levels of integration between two cultures and the creation of an atmosphere that can support cultural changes. In order to create that atmosphere, organizations should understand each others culture and people in both organizations should be willing to work together after the merger, something that could only be achieved with socio-cultural integration and communication between two organizations employees. In the post merger phase it is necessary for companies to maintain that atmosphere and also introduce processes and systems to measure and evaluate the effectiveness of the new organizational culture to organizations performance and to the employees moral and respond accordingly (Lodorfos and Boateng, 2006).

Furthermore, leaders have to be sensitive to the cultural issue in order to retain key people. According to Paulson (2001), cultural integration takes time and is best accomplished face to face. For this reason, integration teams are set up containing both Cisco and acquired personnel. The objective of this pairing is to mentor the acquired manager in the Cisco way, having experienced Cisco veteran working alongside, coaching as the process unfolds. This approach not only provides information input to the acquired employee but also, invisibly transfers information about Ciscos culture. Cisco goes overboard in making sure not only that acquired employees are welcomed properly but also, that they have someone they can go to during important early days of the integration. Moreover, orientation sessions are held on a regular basis so that employees can ask questions and get answers. Sometimes change

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management training sessions are offered to help acquired employees deal with the changes associated with assimilating into Cisco (Paulson, p. 185).

In implementing the integration strategy, certain specific guidelines exist to assist organizations in managing the process. Among others are the role of leadership as an important influence on merging organizational cultures and subcultures. Bligh (2006) stated that successful post-merger leader needs to be able explicitly recognize, understand and utilize cultural differences at every step of a merger in order to elicit employee buy-in. Managers and employees that recognized existing cultural variation were more easily ably to draw on shared cultural values in the midst of changing cultural as well. Effective cultural leaders may more effectively recognize and understand the inevitability of cultural variation, drawing different perspectives and ways of doing things in order to come up with new cultural meanings that provide adequate room for variation in their interpretation. In other words effective cultural leaders recognize how existing cultural differences can be reconciled under a broader umbrella of cultural unity.

5.2.5. Four approaches in cultural integration strategy

The writer is of the opinion that one of the best method is the integration method. In implementing this cultural integration strategy, certain approaches need to be followed in order to ensure the strategy successfully executed and employees motivation to be with the new company is high.

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Lodorfos and Boateng (2006) suggested four staged approach for managing corporate cultural differences (cultural integration strategy) during process M&A as the following: (1) Pre-merger and pre-planning where it involves information gathering and developing trust through one-tone interaction between members of both companies. This is to

identify cultural gap and having clarification through retreat/workshop and use the job rotation to identify structural/physical characteristics of each business, beliefs and values behind these practices and decision making processes and communication lines. (2) Planning stage is aimed to produce action plan to facilitate the cultural integration process which involves key tasks such as negotiating the composition of a sub-taskforce for integrating culture, decide on extent of cultural integration and methods and timing of change, assess the potential risks, identification of training needs, setting integration goals and budgeting for integration. (3) Implementation process is designed to integrate structure and control systems and it involves activities such as creating atmosphere for cultural integration, communication, training development, re-organization and integrate structures, functions/control systems. (4) Evaluation, review and reflection is to evaluate expected against actual outcomes, lessons learn and revise through consultations.

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In conclusion, the writer believes that there are issues regarding differences in corporate culture whenever M&A is exercised. However, these issues can be overcome by choosing the suitable solution suggested by the writer based on his reading on texts and journals. Among other solutions are focusing on communication, training for help, four methods of managing cultural differences which is integration, assimilation, separation, deculturation and four approaches when implementing cultural integration strategy. Besides that acculturation process is also suggested. Thus, the report has examined the issues arise regarding corporate culture differences when M&A and the way to manage it from different perspective.

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