"HOW TO EFECTIVELY MERGE COMPANY CULTURES" - David Maxfield - Vital Smarts

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An organization’s unique culture can be a powerful driver of success. At the same time, there are often elements of a culture that hold back the organization. This mix of challenges is especially apparent during mergers and acquisitions. The different cultures have different strengths and weaknesses, and you want to emerge with the best of both.
I’m going to use one of our clients, a healthcare organization, as an example. We’ve worked with this organization as they combined several formerly independent hospitals, each with its own culture.

Culture lies below the waterline. We use an iceberg metaphor to illustrate the relationship between the visible parts of an organization and its more hidden cultural elements.

Above the waterline is the tip of the iceberg you can see. In an organization, this includes explicit goals, strategies, structures, processes, and systems. This is the organization’s not-so-secret sauce. These are the parts that are talked about the most. They are planned, tracked, and evaluated. They are on every leaders’ radar screen.

Our healthcare client had a very explicit above-the-waterline goal and strategy. They wanted to become a “destination” health center—a place that would draw patients from several states. This explicit strategy guided their structure (they built a children’s hospital, cancer and heart centers, and a medical school, and purchased several regional community hospitals); it guided their processes (implementing integrated IT systems); it guided their reward systems (creating incentives that encouraged community hospitals to refer patients to their centers of excellence); and it influenced its people policies (switching from using community physicians to using employed physicians).

Below the waterline lies the bulk of the iceberg you can’t see. In an organization, this includes implicit norms, values, hidden assumptions, unwritten rules, and behaviors. This is the organization’s secret sauce, its culture. An organization’s culture often goes unseen, unrecognized, and undiscussed. It’s like the adage, “fish discover water last.”

An organization’s culture is often derived from local regional norms, professional practices, values the founders held, and the like. It’s a source of great strength and vitality, but can also include contradictory and unproductive elements.

Because culture lies below the waterline, it is often ignored or neglected by leaders—especially during times of change. And this is certainly the case during mergers and acquisitions.

Here is the problem: most leaders focus too exclusively on above-the-waterline strategies for change. Yet, the most typical dangers—the obstacles that sink change efforts—lie below the waterline. Change plans run into cultural norms, and as Peter Drucker is credited with saying: “Culture eats strategy for breakfast.”

Our healthcare client also had to deal with many cultural elements. For example, many of the community hospitals they purchased felt as if they’d been “taken over.” Many of these small hospitals had been founded by religious orders (from several different religions), and saw their secret sauce as being a sacred sauce—not something they wanted to lose.

Identify Your Secret Sauce. While culture includes norms, values, hidden assumptions, and unwritten rules, it is expressed through behaviors. Behaviors are the key. The rest—the norms, values, etc.—are the influences that create and maintain the behaviors. When dealing with culture, we begin with ... (Click here to read more)