Managing uncertainty when corporate cultures meet–three perspectives for leaders
By Mads Holme, Iago Storgaard and Astrid Ingemann Breitenstein
When led successfully, the merging of organisations presents an opportunity to build new corporate cultures that transcend the sum of their parts. While the power of corporate culture in mergers and acquisitions is increasingly recognised, it is often considered merely in terms of risk management, overlooking the potential for positive impact.
Managing the uncertainty of corporate cultures meeting, at its core, requires leading with a clear perspective, from the beginning: not only on future cost synergies or diversified capabilities, but also on their role within the changing dynamics of the market and society at large.
We have outlined three essential considerations for leaders to successfully navigate this intricate process of leading when corporate cultures meet.
1. Other each other with care
When groups encounter unfamiliar ones, they tend to construct each other as fundamentally different from themselves. Renowned philosopher Edward Said examined how colonial powers created a clear divide between "us" (the colonisers) and "them" (the colonised), to strengthen in-group identity while justifying inequality. Though different in nature, this process of ‘othering’ also emerges in business contexts today, where merging corporate cultures can face similar challenges of exaggerating differences.
Group identities will always exist within corporations, whether by business function, office floor or country. As leading business thinker, Erin Meyer has shown it is possible to successfully lead across these fragmentations, but this requires significant care. For one global technology company we worked with, the strategic decision to expand their offerings towards higher value, integrated computer services cast a spotlight onto the cultural rifts across tech, sales, and delivery divisions – all of which had been working as very separate functions in the past but needed to collaborate for future growth.
Applying a mixed methods approach to both the formal and informal cultures of these divisions revealed that the leadership was speaking the language of the sales culture alone, othering and alienating the rest: only celebrating sales achievements in company-wide meetings, or overlooking technical expertise in the universal sales-focussed performance criteria. Through a deep analysis of what it meant to thrive at work across the groups, ReD mapped what elements of the subcultures were valuable and productive sources of identity, and which would need to be transformed to alleviate the destructive sources of fragmentation.
In this case, it was a shift in business strategy that compelled leadership to take seriously and manage the tensions in their internal subcultures. By identifying areas of mutual understanding within the organisation, whilst still respecting the differences, churn rates were reduced, and the collaborative potential of teams was boosted.
2. Respect the past, build for the future
When confronted with change, organisations and their leaders often focus on the past. While celebrating a company's history can provide a valuable foundation, leaders should focus on what the culture needs to do for the company's future.
Take the case of a leading company in rare disease therapeutics, which on the tail of years of growth and expansion, found their culture had been diluted and lacked a shared vision. The leadership team wanted to develop a strong employee value proposition that could carry across the increasingly dispersed company and engage the best talent in a competitive labour market. With ReD, it carried out a deep dive into the employee experience at various levels of the company, as well as an analysis of the greater employment landscape to uncover what made up the unifying spirit of the organisation.
Early in the analysis, however, the team identified many decision makers being tempted to base the future employee value proposition (EVP) very heavily on a nostalgic past. However, when less married to the past, the EVP was able to much more effectively encompass external partners as well as welcome, rather than alienate, future employees. Articulating this rationale when bringing the EVP to life across the company – outlining the importance of not letting an emotional tie to a nostalgic past get in the way of doing things differently – allowed employees to be on board with the culture as it transformed.
During the initial analysis, it became apparent that many decision-makers were inclined to heavily base the future employee value proposition (EVP) on a nostalgic view of the past. However, when they shifted their focus away from this nostalgia, the EVP was able to more effectively include external partners and welcome new employees rather than alienate them. Clearly articulating this approach while implementing the EVP throughout the company—emphasising the need to avoid letting nostalgic emotions hinder progress —helped employees embrace the evolving culture.
3. Plan for some degree of tension - it’s only natural
Tensions are bound to arise in the meeting of corporate cultures. Such frictions, or as organisational theorist Bruce Tuckman terms them, "storming", are natural in the creation of new groups. To successfully transition from "storming" to "norming", where new ways of collaborating are established, leaders must not resist these tensions but rather anticipate and plan for them.
In a merger of two major companies, we advised leaders on how to anticipate, identify and address frictions right from the start. ReD’s outside-in approach – which de-codes the cultural traits often invisible to those within an organisation – revealed which cultural features would be productive to build upon and which were potential barriers to successful cultural integration.
Instead of fearing friction, the pinpointing of key cultural differences early on made it possible to have a conversation about what needed to change. The leadership was able to define the core areas of development for the new company culture from before day 0. Critically this approach eliminates the need for multiple rounds of change on contentious issues and prevents an ongoing cycle of "storming" that so often holds back sustainable organisational growth after periods of change.
By remaining vigilant against "othering," not oversimplifying unfamiliar, complex problems, and preparing for points of tension, leaders can effectively manage cultural change to foster cohesive and resilient futures. Managing when corporate cultures meet means more than just mitigating risk; it is an opportunity for leadership to leverage synergies and create collaboration that is greater than the sum of any individual element.
