Causes of Integration Failure
The occurrence of non-cultural fit is one of the major causes of failures in the merger and acquisition process. Regardless of which culture will eventually be dominant, all workgroups will be subjected to the same tests, such as cooperation with former customers or suppliers, job loss, or feelings of dissatisfaction with their workplace. For example, the merger and acquisition of the German company Daimler-Benz and the American company Chrysler failed due to differences in cultural conformity. Daimler-Chrysler had excellent intentions, which included “technology sharing, market growth, shared resources, but a proper evaluation of cultural fit never successfully materialized, resulting in a predictable failure” (Appelbaum, 2009, p. 37). When merging two companies, there should be new leadership styles, direction, and communication to the organization. Another serious cultural fit issue that may hinder the merger process is the management stylistics that differs depending on the managers’ characters. Different companies have different ways of addressing, managing, planning, organizing, rewarding, and sanctioning ideas and work, hindering the merger process.
The following variable to consider when looking at the possibilities of integration is artistic potential. The artistic potential is an area within which companies operate, encompassing the characteristics that determine how various organizations and cultures are formed and accepted. The company’s creative potential is an excellent indicator that helps identify the desire to change and affects several traits. The first one refers to the innovative capability, which stands for readiness to adopt new values and ideas. Second is the trust potential: Where there is no trust among the stakeholders of the two companies intending to merge, then the whole process is deemed to fail. The third is the mutual dependence potential: divided mindsets and a parallel working environment are not healthy for the integration process (Appelbaum, 2009). Lastly is the integrative potential: unless both management merging together accepts the new changes, the merger process cannot succeed.
Communication, Direction, and Leadership
Communication, direction, and leadership coexist together because they play an important role in the merger process. Each of them is crucial in the stages of a 40 Journal of Executive Education acquisition. What is more, they cannot function without each other. Management and direction are essential to an organization; thus, the acquisition process requires an updated strong leadership style and a new focus (Appelbaum, 2009). It also takes time and effort to create open ways of communication and effective information exchange. Acquisitions strategically need an alteration in culture and leading style. Therefore, where there is no clear sense of direction, communications and leaders are not willing to embrace and adapt to new changes, then the merger process cannot succeed.
Ways to Reduce/Overcome their Negative Effect
Each organizational culture varies from the other in numerous aspects, including style, functions, structure, and others. Therefore, assessment of cultural compatibility is essential, as this will elevate the possibility of merger success (Appelbaum, 2009). The closer the cultural correspondence between the two organizations, the fewer obstacles may arise in the acquisition and merger process. Appelbaum (2009) states that “regardless of the culture that eventually prevails, all employees will face the same experiences, such as working with former competitors, customers or suppliers, losing their jobs or being unhappy” (p. 37). It is important to note that there is a fine line between the implementation of synergetic initiatives and integration, which depends on the proximity of the cultural correspondence of the two firms. However, this should happen without necessarily impacting the performance of both the merging firms and the employees negatively.
The merging companies should be too careful to embrace the following cultural potential changes as a way to reduce adverse effects. First, both companies must be open to new values and ideas or be innovative potential. Second, both parties involved must be trustworthy by disclosing every possible detail about their companies before the merger process (Appelbaum, 2009). Third, there must be a mutual dependence between the involved parties, where the mindset of the two companies works together for the greater good. Lastly is the willingness to accept the differences, understand, sort, and work through the issues for the better good.
Communication, Direction, and Leadership
Leadership remains the most salient issue when it comes to a merger closure. If the top management involved is formed faster, the consolidation process will be straightforward and smooth. Empirical evidence shows that a leadership vacuum is a primary thing M&As face (Appelbaum, 2009). The managers turned out to be accessible to new employees and actively participated in the whole process. A participatory leadership style is vital for the citizenship and commitment of employees.
Senior management should help employees deal with the loss they are facing to reduce the likelihood of failures in mergers and acquisitions and cultural conflicts, as well as increase the overall adaptation of employees. According to Appelbaum (2009), “successful mergers communicate as early as possible and as often as possible to employees, customers, partners, and the media” (2009 p. 40). Therefore, there should be a clear direction and communication with all stakeholders from both involved companies early to avoid any confusion or resistance.
Appelbaum, S. H., Roberts, J., & Shapiro, B. T. (2009). Cultural strategies in M&As: Investigating ten case studies. Journal of Executive Education, 8(1), 3.