Multiple studies agree that value creation is more dependent on successful culture integration than on any other factor; they cite poor cultural compatibility as the root cause for the high rate of acquisition failure. Without a timely and extensive integration of cultures, creating value will not be possible.
The traditional due diligence process evaluates multiple quantifiable parameters to validate the intuitive sense that a specific deal will create value, but often, the least attention is paid to assessing cultural fit because it’s not readily quantifiable.
Business acquisitions are expected to create value. Yet, most fail to do so and often destroy it.
Yet culture is a primary driver of performance, more so than products or services. How committed and synchronized are the leaders of the business in cultivating culture? How consistently do the organization’s people behave in accordance with their purpose and values to produce expected outcomes? How thoroughly do they grasp their role in creating value for the business by producing it for customers? Consider these keys to assessing culture compatibility:
- How aligned are the company’s purpose and profit motives? How is purpose inspiring discretionary effort and driving change? How are collaboration, shared accountability and innovation cultivated? Why do its people choose to invest their talents and energy in the business?
- What strategic value is created for customers? How does the business leverage its value proposition to accelerate its customers’ progress and growth? How sustainable are the customer relationships?
- What specific aspects of the company’s culture contribute most to its success and sustainability? Why is this so? Will the acquiring organization be able to retain these productive cultural aspects as drivers of its post-acquisition sustainability? Would you choose to work for this company?
Considering these key issues requires that the acquiring company has a thorough understanding of its own culture.
How has your culture contributed to
your company’s value creation and sustainability?
How has it motivated your people to invest
discretionary effort that drives change and achieves goals?