Cultural Synergy – Merger and Acquisitions on scale.

The process of combining two individuals, their actions, backgrounds, experiences and fundamental beliefs in the pursuit of creating a synergistic harmony can have it’s challenges. On the other hand, taking two global firms with complex business infrastructures, separate cross-functioning cultures and diverse perspectives is a separate conversation. In this piece we will uncover and examine several elements of creating a cultural synergy amongst international organizations that elect to merge as one entity.

So what is synergy and why is it important? “Synergy is a cooperative or combined action, and occurs when diverse or disparate individuals or groups collaborate for a common cause. The objective is to increase effectiveness by sharing perceptions and experiences, insights, and knowledge.” (Moran, Abramson, & Moran, 2014, p.266). In a global marketplace there many different industries that are ran by people from different ethnic, social, religious and unique cultural backgrounds. One organization may consist of 100,000 + employees that have their own respective cultural biases but also have professional cultural biases. Creating synergy amongst two groups of people consisting of 200,000+ people is a tall order for any executive leadership team to handle. In most cases, expert management consulting firms that specialize in merger/acquisitions are contracted to do the heavy lifting. These firms are experts in developing and executing a framework to analyze, initiate, integrate and manage the transaction.

Companies like Deloitte, Accenture, Boston Consulting Group, Vanguard, Mckinsey and Bain & Company are leaders in the global management consulting space. One of their core competencies is the development of cultural synergy in the process of a merger and/or acquisition. “A merger is a legal consolidation of two entities into one entity, whereas an acquisition occurs when one entity takes ownership of another entity’s stock, equity interests or assets.” (Investopedia, 2019). In this process there is an implementation and transition element of uniting two cultures together. One of the largest merger and acquisitions in history was between two global-telecommunications giants. Britain’s Vodafone and German based telecom company, Mannesmann.

The $180 billion acquisition of Mannesmann had an immediate impact that gave Vodafone control of the board of directors. This hostile takeover led to the replacement and implementation of a new managing and governing body. “The combined company’s 19-member board will have five Mannesmann representatives, including Mr. Esser, Vodafone said Friday in a statement. The other 14 will be executive and nonexecutive board members of Vodafone. A German supervisory board is similar to a U.S. board of directors.” (Gautam., Anita, WSJ.com, 2000). These changes caused a significant culture shock to Mannesmann due to the “hostile like takeover” according to German Chancellor Gerhard Schroeder. “Hostile takeovers damage corporate culture.” (Bartlett, BBC News, 2000). There are dimensions or panels of institutions within or near the same cultures. And there are institutions that cross these lines, but have information process-related goals as their mission. These intersecting lines of cultural mission are trajectories for synergy. (Smiraglia, 2014). One of the more serious challenges that Vodafone and Mannesmann had during the integration process pertained to culture dynamics, specifically synergy. “The German culture of corporate governance which is based on strong employee involvement and co-determination.” (Schulten, 1999). Vodafone recognized this and stated that they would accept the German system of industrial relations and corporate governance. Upstanding how cultural adjustment works and how that process flows, we can see the ebs and flows of the graph below:

Furthermore, there are many ways to foster or hinder professional synergy within an organization. Leadership traits such as integrity, humility, confidence and being a well articulated visionary are traits employees most commonly seek in order rally behind the mission and vision of a company. The integration process of two separate cultures can take several years to fully integrate and sometimes they never fully do. Some of the known strategies that I have found impactful are ones that put human capital as top priority. Timing and sequencing is critical due to the culture change and synergy creation being a process. Identifying cooperation for mutual advantage is one of the first elements of developing high-synergistic cultures. It is innate for an employee or an organization to want to know what’s in it for them. Once the awareness is set and the leadership team takes a compassionate, empathic and methodical approach, the process then becomes conducive of a more synergistic organization.

 

One way to hinder synergy is to take an “aggressive an antagonistic behavior towards an employee, leading to psychological violence toward one another.” (Moron, Abramson, Moron, 2017). Ethnocentric biases that create out-groups and do not promote a cohesive and diverse culture will inevitable reap conflict. Moreover, creating a professional cultural synergy on-scale is a multi-dimensional process that requires strategy, resources, competent and proven models. Executive leadership personnel with high levels of emotional and intellectual intelligence is critical to the success of the overall cultural synergy

 

Author: Steven Strauser

Pennsylvania State University – Organizational Leadership

Work cited

Bartlett, P. (2000). Mannesmann faces culture shock. BBC News Corp. Retrieved on February 15th 2019 from http://news.bbc.co.uk/2/hi/business/602406.stm

Cultural Synergy. (2011). In J. Law, Business: the ultimate resource (3rd ed.). London, UK: A&C Black. Retrieved from http://ss360.libraries.psu.edu.ezaccess.libraries.psu.edu/cgi-bin/ssredirpg?D=7F9&U=http%3A%2F%2Falias.libraries.psu.edu%2Feresources%2Fproxy%2Flogin%3Furl%3Dhttps%3A%2F%2Fsearch.credoreference.com%2Fcontent%2Fentry%2Fultimatebusiness%2Fcultural_synergy%2F0%3FinstitutionId%3D725

Kate Berardo, “Framework [Graph]: The 5Rs of Culture Change,” in Building Cultural Competence: Innovative Activities and Models. Retrieved on February 13th 2019 from https://lafayette-sa.terradotta.com/index.cfmFuseAction=Abroad.ViewLink&Parent_ID=0CC59248-5056-BA1F-73D0217BB65D2885&Link_ID=0CC853AE-5056-BA1F-73CEBD4D4A7F7813

Libo-on, L. (2013, Jan 16). The cultural synergy. McClatchy – Tribune Business News Retrieved from http://ezaccess.libraries.psu.edu/login?url=https://search-proquest-com.ezaccess.libraries.psu.edu/docview/1269692519?accountid=13158

Moran, R. T., Abramson, N. R., & Moran, S. V. (2014). Managing cultural differences: Leadership skills and strategies for working in a global world. New York: Elsevier.

Nail, G., Raghaven, A. (2000). Vodafone, Mannesmann set to takeover at $180 billion after long struggle. Retrieved on February 15th 2019 from https://www.wsj.com/articles/SB949581016407171705

Pennsylvania State University. (2017). Cultural Synergy. Retrieved on February 15th 2019. From https://courses.worldcampus.psu.edu/lms/evo_lti/tool2.php?url=content/06_lesson/02_page.html

Shine, B., Park, J., & Wyer, R. (2007). Brand Synergy Effects in Multiple Brand Extensions. Journal of Marketing Research, 44(4), 663-670. Retrieved from http://www.jstor.org.ezaccess.libraries.psu.edu/stable/30162510Copy

Smiraglia R. (2014). Cultural Synergy and the Role of Information Institutions. In: Cultural Synergy in Information Institutions. Springer, New York, NY. Retrieved on February 14th 2019 from https://doi.org/10.1007/978-1-4939-1249-0_1

Wikipedia. (2019). Mergers and acquisitions. Retrieved on  February 15th 2019 from https://en.m.wikipedia.org/wiki/Mergers_and_acquisitions