THE ROLE OF ORGANIZATIONAL CULTURE IN MERGING PROCESS

Organizational or corporate culture??

·         A pattern of basic assumptions that are considered valid and that are taught to new members as the way to perceive, think, and feel in the organization.

·         “Collective programming of the mind which distinguishes the members of one organization from another” (Hofstede, 1998).

Mergers and Acquisitions…

Help a firm renew its market position at a speed not achievable through internal development (Haspeslagh and Jemison, 1991)

EX:     IBERIA – BRITISH AIRWAYS

Statictic of Megers around the world…

Mergers and Acquisitions in Colombia

“Integration process is the real source of value creation in acquisitions” (Haspeslagh and Jemison, 1991)

Two organizational integration variables are particularly relevant in the acquisition process (Datta and Grant, 1990; Datta, 1991) :

-          The motive for the acquisition (strategic fit and decision making process)

-          the process of implementation (including the “acculturation” process)

 “Merging implies the reconstruction of a new social identity” (Alzira, Wayne, Gerald 2003)

  

The success of a particular integration strategy depends primarily on:

•        The manager’s ability to reconcile the need for strategic interdependence between the two firms.

•        The need for organizational autonomy (Elsa and Veiga 1994).

•        The existence of cultural fit.

Cultural Modifications…

Given the current business environment, managers may want to focus on three particular cultural modifications:

1.      Support for a global view of business.

2.      Reinforcement of ethical behavior.

3.      Empowerment of employees to excel in product and service quality.

QUESTION

According to the case studies (in class and in textbook), what are the practical steps to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process to occur between the two groups of people in their process of cultural and behavioral integration?

As it was seen in the different cases studied the role of the individual is critical as an agent of organizational learning in a merging or acquisition process. In this sense there is important to highlight some steps that applied these companies to get a success acquisition or merger process. The fist one is the creation of an integration team. A strong commitment from top executives to lead the new entities into the future is vital to minimize the uncertainties associate with employee´s roles and future direction. The second one could be make an appropriate culture assessment exercise to identify any significant differences or similarities between the company´s target people and the potential acquirer partner one. And finally it is important to establish a set of common goals and objectives that lead people to think in a common identity and decrease the cultural differences. In all this process is necessary to have in mind that mergers and acquisitions always implies the reconstruction of a new social identity.

REFERENCES

      Alzira S., Wayne H., and Gerald V. (2003) “Challenges and opportunities in mergers and acquisitions: three international case studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo”, Journal of European Industrial Training, Vol. 27 Iss:6, p. 313-321.

      Angwin, D. (2001) “Mergers and acquisitions across European borders: national perspectives onpre-acquisition due diligence and the use of professional advisers”, Journal of World business, Vol.36 No.1, p. 2-57.

      Datta, D.K. and Grant, J.H. (1990), “Relationships between type of acquisition, the autonomy given to the acquired firm, and acquisition process: an empirical analysis”, Journal of Management, Vol.16, p. 29-44.

      Elsaa, P.M. and Veiga, J.F. (1994), “Acculturation in acquired organizations: a force-field perspective”, Human Relations, Vol. 47 No. 4.

      Gitelson, G., Bing, J., Laroche, L (2001) Culture Shock, CMA Management.

      Haspeslagh, P.C. and Jemison, D.B. (1991) Managing Acquisitions, The Free Press, New York.