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Virgilijus Dadonas
Post-merger cultural integration
Knowing How Culture Plays
M&A
Top contributing factors to deal failure (in order of importance):
• Integration took longer than expected
• Cultural integration issues
• Inconsistent communication of synergy objectives
• Insufficient attention to people (workforce) issues
• Poor (misinformed) strategy
• Risks not identified during due diligence
• Insufficient execution competence (capabilities)
• Hidden leadership conflicts
• Too high price paid for target
• Failure to implement an appropriate organizational structure
In addition to being cited directly as a leading cause of deal failure, cultural
integration is also linked as an underlying, indirect driver to a number of other
immediate causes of deal failure, including delayed integration or
implementation
2
Statistics indicate that up to one third of mergers fail within 5 years, and as
many as 80% never live up to their full expectations
3
The Cultural Paradox
Impact of culture on deal
success:
• Organization distraction and
loss of productivity
• Loss of key talents
• Failure to achieve critical
milestones or synergies
• Decreased employees
engagement
• Delayed integration
Companies know it’s important but don’t know what to do
While successful cultural integration is clearly a critical element in deal success
(the wild card in making a merger work), many companies do not know how to
successfully navigate it during a transaction – they did not have a specific
approach to assessing and integrating culture in a deal
Reasons for unsuccessful cultural
integration:
• Lack of leadership support
• Cultural risks not identified during
due diligence
• Lack of consensus among leadership
on desire culture
• Lack of competencies/skills
• Inconsistent communication
• Insufficient resources
4
Content
Culture
National Culture
Models of National Culture
Communication
Organizational Culture
Cultural Iceberg
Models of Organizational Culture
Subcultures and Identity
Post-Merger Cultural Integration
Cultural Due Diligence
Stress Management
Impact of Merger on Culture
Challenges of Cultural Integration
“Culture is deep. If you treat it as a superficial phenomenon, if you assume
that you can manipulate it and change it at will, you are sure to fail.” // Edgar
Schein
Culture
6
People who share in a culture find their culture challenging to recognize. The most
insightful cultural observers often are outsiders, because cultural givens are not implicit to
them.
Culture is implicit
Culturally influenced beliefs and actions feel right to people, even while their implicit
underpinnings make it difficult for those people to understand why they act the way they
do or why other ways of acting might also be appropriate.
Culture influences how people behave and how people understand
their own actions
Its elements are long-standing, not a matter of fads. The resilience of culture is supported
by culture being implicit. It is difficult for people to recognize their own culture and how it
exerts an influence on them. The staying power of culture is that it feels right to people;
new cultural values that are imposed on people seldom replace their underlying values
and beliefs in the long-run.
Culture is resilient
Culture consists of the long-standing, largely implicit shared values,
beliefs and assumptions that influence behavior, attitudes and meaning
in a society or company
7
Personality of an individual is his unique personal set of mental programs
which he does not share with any other human being. It is based upon traits
which are partly inherited with the individual's unique set of genes and partly
learned. Learned means: modified by the influence of culture as well as unique
personal experiences.
Human nature is what all human beings have in common: the human ability
to feel fear, anger, love, joy, sadness, the need to associate with others, to play
and exercise oneself, the facility to observe the environment and to talk about
it with other humans. However, what one does with these feelings, how one
expresses fear, joy, observations, etc., is modified by culture.
Specific to individuals
Specific to group
or category
Universal
Inherited and learned
Learned
Inherited
8
Culture as collective
programming
• Values - broad preferences for one
state of affairs over others to which
strong emotions are attached and by
which one group distinguishes itself
from other groups. Values refer to such
preferences as freedom over equality or
equality over freedom.
• Rituals - collective activities, technically
superfluous in reaching desired ends,
but which, within a culture, are
considered as socially essential. Ways of
greeting and paying respect to others,
social and religious ceremonies are
examples.
• Heroes - persons, alive or dead, real or
imaginary, who possess characteristics
which are highly prized in a culture, and
who thus serve as models for behavior.
• Symbols - words, gestures, pictures or
objects that carry a particular meaning
which is only recognized by those who
share the words in a language or jargon
belong to this category, as do dress,
hairstyles, flags, and status symbols.
Values
Heroes
Rituals
Symbols
practices
Organizational
culture
National
culture
“What many members of a group have in
common and by which they distinguish
themselves from other groups is called
culture” / Prof. Geert Hofstede
9
Culture can be defined as the inherited values, concepts, and ways of
living which are shared by people of the same social group. To make
the definition clearer, culture is divided into two kinds:
• Generic culture, which is a shared culture of all humans living on this
planet
• Local culture, which refers to symbols and schemas shared by a particular
social group
Six levels of human culture
Individual
Organizational
Occupational
National
Civilization
Universal UNIVERSAL LEVEL
INDIVIDUAL LEVEL
COLLECTIVE LEVEL
Supra-Culture
Macro-Culture
Meso-Culture
Micro-Culture
10
National level culture
National cultures differ at the level of unconscious values which are acquired during
childhood and these national cultures are stable; the afterward changes that occur are
practices whereby the underlying values are left untouched.
• Regional and/or ethnic and/or religious and/or linguistic affiliation levels, as most
nations are composed of culturally different regions and/or ethnic and/or religious
and/or language groups.
• Dominant culture – is the most powerful group in society. It receives the most support
from major institutions and constitutes the major belief system. Social institutions in
the society sustain the dominant culture and give it a degree of legitimacy that is not
shared by other cultures.
• Subcultures – the cultures of groups whose values and norms of behavior differ from
the dominant culture. Members of subcultures interact frequently and share a
common world view. Subcultures share some elements of the dominant culture and
coexist within it.
• Countercultures – subcultures created as a reaction against the values of the
dominant culture. Members of the counterculture reject the dominant cultural values
and develop cultural practices that defy the norms and values of the dominant group.
Nonconformity to the dominant culture is often the mark of a counterculture.
• Ethnocentrism – judging a culture by standards of one’s own culture.
11
Organizational level culture
Organizational cultures differ at the level of practices, which can be described as
external, and they are to some extent manageable. These organizational cultures differ
from one company to the other within the same country. Organizational culture can best
be thought of as the pattern of actions, words, beliefs and behaviors that members of a
business organization share.
Professional and occupational level cultures
This kind of cultures come between the national and organizational; getting into an
profession or industry requires teaching to gain social values coupled with the practices
of the organization. These cultures have symbols, heroes and rituals in common with
organizational cultures, but they also often imply holding certain values and convictions.
• Although professional/occupational levels are individuals who are collectively
considered to be a part of the in-group, they are still embedded in the organizational
cultures and, therefore, are defined as the in-group collectivism which refers to how
individuals relate to as an autonomous unit and how they attend to responsibilities
concerning their in-group. It reflects a strong sense of group, family group or
community identity.
• Social class culture – associated with educational opportunities and with a person's
profession or occupation.
12
Gender level culture
Gender differences are recognized within the same culture, there is what can be called men’s
culture vs women’s culture. Men and women have the ability to perform the same tasks at the
workplace, but they have differences when it comes to responding to the symbols used in
society. The differences between men and women highly depend on the national culture.
There are ten factors to consider when collaborating with men versus women:
• Power – social status and prestige, control or dominance over people and resources.
• Achievement – personal success through demonstrating competence acc. to social
standards.
• Hedonism – please and sensuous gratification for oneself.
• Stimulation – excitement, novelty and challenge in life.
• Self-direction – independence thought and action-choosing, creation and exploration.
• Universalism – understanding, appreciation, tolerance and protection for the welfare of all
people and for nature.
• Benevolence – preservation and enhancement of the welfare of people with whom one is in
frequent personal contact.
• Tradition – respect, commitment and acceptance of the custom and ideas that traditional
culture provide the self.
• Conformity – restraint of action, inclination and impulse likely to upset or harm others and
violate social expectations or norms.
• Security – safety, harmony and stability of society, of relationship and of self.
13
Generation level culture
Separates grandparents from parents from children.
Although they would fall under the cultural behaviors of their national origins because
they share common cultural, historical and social influences, the learning styles of the
generational culture are different. Therefore, when considering teaming, an organization
must take into consideration the different non-verbal communications that will be
exhibited by the different generations such as functions, proxemics, kinesics and silence.
How do you define generations? → Depends of who you ask.
1871-1889
New Worlders
1890-1908
Hard Timers
1909-1928
GI Generation
/ Good
Warriors
1929-1945
Lucky Few /
Veterans /
Traditionalists
/ Silent
1946-1964
Baby Boomers
1965-1982
Generation X /
The Slackers
1983-2001
Generation Y /
Millennials /
New Boomers
2002-
Homelander /
New Silent /
Generation Z /
Generation
Alpha
14
Social culture
While the community concept is a key distinction for social culture,
there are other critical layers to take into account when trying to
understand its impact on the global workforce
• Culture is multifaceted. Customs and ideas are the most readily visible
manifestations, but underlying these are ideas, often religious or philosophical
ones, broadly shared within a group that can have a profound effect on people’s
self-understanding, their identity, or how they act.
• Culture change tends to be slow but evolving. Cultural values show substantial
resilience over time. It would be hard, however, to imagine a major national one,
for example, that has not seen substantial evolution over the last century.
• Culture is borderless. An analysis of intra-national compared with international
differences found greater variety within than between countries. One important
reason for this variety is the notion of agency – that people can and do make
independent choices. Another is that culture is not invariably exclusive. Instead,
people are simultaneously part of overlapping, sometimes even apparently
contradictory, cultures through circumstance and choice.
15
Corporate culture
Corporate culture comprises the values, beliefs and practices of the
company, and is created either by design or is naturally based on the
personalities of executives
• Employees learn the corporate culture through training and by observation.
Organizational values also typically reflect unspoken, but understood, social norms
shaped by diverse influences such as internal reward structures, how senior officials
act in practice, and the national culture surrounding a given operation.
• Organizations that ignore the issues of culture and cultural integration will likely
face difficulties attracting, retaining and motivating the best employees, or outright
failure. Lack of initiatives to properly integrate corporate culture is a contributor to
the fact that 70% of M&As fail and more than 50% destroy value.
• Integrating employees from multiple societal environments into the organizational
values requires not only learning the critical differences but also finding a balance
between some parts of the corporate culture that should not change, while other
parts may need to be reconsidered and adapted to the cultures of the local
workforce.
National Culture
17
• National culture refers to the unique norms, values, and beliefs to
which a group of people generally link. Cultures differ, for example, in
the ways they solve problems, view time, deal with the external world,
and perceive themselves and others. National culture may be very strong
and yet difficult to define. It is estimated that less than 15% of a national
culture is readily observable.
• National culture is the collective programming of the human mind. As
opposed to organizational cultures, national cultures operate at a much
deeper level, as these beliefs, norms and values are learned earlier on.
• Talking about national cultures does not mean that national cultures are
uniform. In many countries, it is possible to talk about the existence of
cultures based on region or geography.
We may not realize how culture is shaping our behavior until
we leave our own country and go someplace else
18
In M&A deals differences in national cultures result in
stress and negative attitudes toward the merger and
cooperation. National cultural differences harm cross-
border M&A performance if the acquirer tries too tightly
integrate the acquired company. Forcing employees that
are strongly embedded in their own culture to integrate
with another national culture leads to
misunderstandings and misattributions of motives and
goals, which hinders smooth interactions between
employees from different national cultures.
The integration strategy applied by the acquiring firm
will dictate the amount of interactions between the
involved firms and consequently the level of cultural
clash occurring. In order to manage cultural differences
successfully, managers should pay as much attention to
cultural fit during both the pre-merger phase and during
the post-merger integration process as they do to
finance and strategic factors.
Cultural differences in M&As are especially important
for the top management level, as they are able to
influence and motivate employees, create trust. Through
the whole integration process managers have the
challenging task to create an atmosphere that supports
employees to handle national culture differences,
because national culture differences cause more stress,
negative attitudes toward merger and cooperation, than
organizational culture differences do.
The impact of cultural
differences on the
performance of M&A will
vary by:
• the integration strategy
• the degree of integration
• the extent to which the
merging firms want to
preserve their existing
national/country cultures
• the progress of cultural
integration
• managerial actions
throughout the whole
M&A process
It is not possible to expect
only one true cultural impact
on the performance of M&A.
“How different one culture is from another has little
meaning until those cultures are brought into contact with
one another.” // Oded Shenkar
Models of National Culture
20
• At present, there are several models of national cultures that continue to
be widely referred to.
• Each model highlights different aspects of societal beliefs, norms and
values and, as such, convergence across the models has been seen as
being very limited.
• Some models have gone a step further and offered measures or numerical
indicators for various countries that have been used widely in cross-
cultural assessment.
• These models offer useful templates for comparing management
processes, HRM policies and business strategies across national borders.
• However, the diversity of cultural models represents the culture theory
jungle – a situation in which explorer must choose between competing, if
sometimes overlapping, models.
Next we summarize the most popular national culture models
briefly
21
• One of the earliest models of culture that has served as a principal
foundation for several later models.
• This theory of culture based on value orientations, arguing that there are a
limited number of problems that are common to all human groups and for
which there are a limited number of solutions.
• Values in any given society are distributed in a way that creates a dominant
value system.
• Cultural dimensions:
1. Relationship with nature - beliefs about the need or responsibility to control
nature.
2. Relationship with people - beliefs about social structure.
3. Nature of human activities - beliefs about appropriate goals.
4. Relationship with time - extent to which time influences decisions.
5. Human nature - beliefs about different people nature.
Kluckhohn & Stodtbeck
Five value orientations model
Kluckhohn (1951), Kluckhohn & Stodtbeck (1961)
22
Five value orientations model
Scale
Relationship with Nature
Mastery over Harmony with Subjugation
Relationship with People
Individualistic Collateral/Consensus Lineal/Hierarchical
Nature of Human Activity
Doing Becoming Being
Relationship with Time
Past Present Future
Human nature
Good Neutral Evil
23
• This model focuses primarily on how cultures vary in interpersonal
communication, but also analysis personal space and time factors.
• Hall has always stressed the close relationship between culture and
communication. On this ground he defined culture as a “system” to provide,
send, store information. Hall argued that “communication is culture, and
culture is communication”.
• Cultural dimensions (factors):
1. Context - extent to which the context of a message is as important as the
message itself.
2. Space - extent to which people are comfortable sharing physical space with
others.
3. Time - extent to which people proceed towards one or multiple tasks at a time,
speed of actions and lead time.
4. Information flow - speed of message.
Hall
Four dimensions of context model
Hall (1959, …, 1990)
24
Four dimensions of context model
Scale
Context
High context Low context
Time as Structure
Monochronic Polychronic
Time as Communication
Event or
Object
Context
Schedule an
Appointment

Lead Time
Speed
Space
Intimate Personal Social Public
Low High
Territoriality Territoriality
Information flow
Fast Slow
Messages Messages
Action
Decoding time Decoding time
25
• The model focuses on variations in both values and personal relationships
across cultures.
• The first cultural five dimensions focus on relationships among people, while
the last two focus on time management and society's relationship with nature.
• Cultural dimensions:
1. Rules vs Relationships - relative importance of applying standardized rules and
policies across societal members; role of exceptions in rule enforcement.
2. The Individual vs the Group - extent to which people derive their identity from
within themselves or their group.
3. The range of Involvement - extent to which people's various roles are separated or
integrated.
4. The range of Emotions - extent to which people are free to express their feelings
in public.
5. How Status is viewed - manner in which respect and social status are treated to
people.
6. How people manage Time - relative focus on the past/present/future and
structuring time in daily activities.
7. Relationship with Environment - extent to which people believe they control the
environment or it controls them.
Trompenaars
Seven dimensions of culture
Trompenaars (1993), Trompenaars & Hampden-Turner (1998)
26
Seven dimensions of culture
Scale
Rules versus Relationships
Universalism Particularism
the Individual versus the Group
Individualism Communitarianism
the range of Involvement
Diffuse Specific
the range of Emotions
Neutral Affective/Emotional
how Status is viewed
Achievement Ascription
Time perspective
Past Present Future
Time structure
Sequential Synchronous
Relationship with Environment
Inner-directed Outer-directed
27
• It is theory of seven cultural value orientations that form three cultural value
dimensions.
• Identified ten universal human values that reflect needs, social motives and
social institutional demands: power, achievement, hedonism, stimulation, self-
direction, universalism, benevolence, tradition, conformity and security.
• To validate the theory, Schwartz presented analyses of data from 73 countries,
using two different instruments.
• Using the seven validated cultural orientations, he generated a worldwide map
of national cultures that identifies distinctive cultural regions.
• Cultural dimensions:
1. Conservatism vs Autonomy - extent to which individuals are integrated in groups.
2. Hierarchy vs Egalitarianism - extent to which equality is valued and expected.
3. Mastery vs Harmony - extent to which people seek to change the natural and
social world to advance personal or group interests.
Schwartz
Cultural value orientations model
Schwartz (1992, …, 2006)
28
Cultural value orientations model
Scale
EGALITARIANISM
Social justice
Equality
EMBEDDEDNESS
Social order
Obedience
Respect for tradition
HIERARCHY
Authority
Humble
MASTER
Ambition
Daring
Cultural Dimensions
Value Systems
SELF-TRANSCENDENCE
SELF-ENHANCEMENT
OPENESSTOCHANGE
CONSERVATION
29
• Based on research of the influence of cultural differences on leadership.
• The GLOBE project investigates how cultural values are related to
organizational practices, conceptions of leadership, the economic
competitiveness of societies, and the human condition of its members.
• Cultural dimensions:
1. Power distance - extent to which people expect power to be distributed equally.
2. Uncertainty avoidance - extent to which people rely on social norms, rules and
procedures to alleviate unpredictability of future events.
3. Humane orientation - degree to which people encourage and reward fairness,
altruism and generosity.
4. Institutional collectivism - degree to which society encourages and rewards
collective distribution of resources and collective action.
5. In-group collectivism - degree to which individuals express pride, loyalty and
cohesiveness in their organizations or families.
GLOBE
Global Leadership and Organizational Behavior
Effectiveness
House et al. (2004, 2007)
30
Cultural dimensions:
6. Assertiveness - degree to which individuals are assertive, confrontational and
aggressive in their relationship with others.
7. Gender egalitarianism - degree to which a collective minimizes gender inequality.
8. Future orientation - extent to which people engage in future-oriented behaviors
such as planning, investing and delaying gratification.
9. Performance orientation - degree to which high performance and excellence is
encouraged and rewarded.
GLOBE
Global Leadership and Organizational Behavior
Effectiveness
House et al. (2004, 2007)
(cont.)
31
Global Leadership and Organizational Behavior
Effectiveness
Scale
Future Orientation
Power Distance
Institutional Collectivism
Humane OrientationPerformance Orientation
Family Collectivism
Gender Egalitarianism
Assertiveness
Uncertainty Avoidance
7
6
5
4
3
2
1
0
32
• The most widely used model of cultural differences.
• Hofstede’s model based on the assumption that different cultures can be
distinguished based on differences in what they value → value dimensions.
• Cultural dimensions:
1. Power Distance - related to the different solutions to the basic problem of human
inequality.
2. Uncertainty Avoidance - related to the level of stress in a society in the face of an
unknown future.
3. Individualism vs Collectivism - related to the integration of individuals into
primary groups.
4. Masculinity vs Femininity - related to the division of emotional roles between
women and men.
5. Long Term vs Short Term Orientation - related to the choice of focus for people's
efforts: the future or the present and past.
6. Indulgence vs Restraint - related to the gratification versus control of basic
human desires related to enjoying life.
Hofstede
Six value dimensions model
Hofstede (1980), Hofstede & Bond (1991), Hofstede & Minkov (2010)
33
Six value dimensions model
Scale
Individualism versus Collectivism (IDV)
Individualism: Preference for a loosely-knit social
framework in which individuals are expected to take
care of only themselves and their immediate families
Collectivism: Preference for a tightly-knit framework in
society in which individuals can expect their relatives or
members of a particular in-group to look after them in
exchange for unquestioning loyalty
Uncertainty Avoidance Index (UAI)
High: Maintain rigid codes of belief and behaviour and
are intolerant of unorthodox behavior and ideas
Low: Maintain a more relaxed attitude in which practice
counts more than principles
Power Distance Index (PDI)
High: Accept a hierarchical order in which everybody
has a place and which needs no further justification
Low: Strive to equalize the distribution of power and
demand justification for inequalities of power
- a higher degree of the Index indicates that hierarchy is clearly
established and executed in society, without doubt or reason
- a lower degree in this index shows more acceptance of
differing thoughts/ideas
- refers to an individual’s independence from organizations
or collectivity
34
Six value dimensions model
Scale
Indulgence versus Restraint (IND)
Indulgence: Allow relatively free gratification of basic
and natural human drives related to enjoying life and
having fun
Restraint: Suppress gratification of needs and regulates
it by means of strict social norms
Long-Term versus Short-Term Orientation (LTO)
Long-Term: Pragmatic approach, encourage thrift and
efforts in modern education as a way to prepare for the
future
Short-Term: Preference to maintain time-honored
traditions and norms while viewing societal change with
suspicion
Masculinity versus Femininity (MAS)
Masculinity: Preference in society for achievement,
heroism, assertiveness and material rewards for success
Femininity: Preference for cooperation, modesty,
caring for the weak and quality of life
- measures the extent to which members of a society tend to
endorse goals characterized by social gender roles/values
- associates the connection of the past with the
current and future actions/challenges
- measures happiness, whether or not simple joys are fulfilled
See Indexes: http://www.geerthofstede.eu/dimension-data-matrix
(cont.)
35
• This is the latest cultural model to gain world-wide recognition.
• It is expanded concept of the Hall’s monochronic (attending to one thing at a
time) and polychronic (attending to multiple things at the same time) cultures.
• Lewis’s model provides an easy-to-read overview of cultural differences and
acts as a guide to interpreting and adapting to different cultural behaviors.
• Cultural dimensions:
1. Linear-active - refers to societies where people are task-oriented, highly organized,
prefer doing one thing at a time, tend to be logical, efficient and precise → focus
on jobs.
2. Reactive - refers to societies where people prefer to listen most od the time, in
order to establish both their own and the other’s position → focus on listening to
react.
3. Multi-active - refers to societies where people seek harmony, like to do many
things at a time, speak and listen at the same time→ focus on building
relationships.
Lewis
Behaviour/communication dimensions model
Lewis (1996)
36
Behaviour/Communication dimensions model
Scale
ReactiveLinear-Active
Multi-Active
Interconnection satisfactory respect oriented
accommodating compromisers
target oriented
decisive planners
people oriented
communicative interrelators
mediators
37
• Theory of Actions (Parsons & Shils (1951))
1. Affectivity (need gratification) versus affective neutrality (restraint of impulses).
2. Self-orientation versus collectivity-orientation.
3. Universalism (applying general standards) versus particularism (taking particular
relationships into account).
4. Ascription (judging others by who they are) versus achievement (judging others by what
they do).
5. Specificity (limiting relations to others to specific spheres) versus diffuseness (no prior
limitations to nature of relations).
• Group-Grid Theory (Douglas (1970, 1973))
1. Group – indicating how clearly defined an individual's social position is as inside or outside a
bounded social group.
2. Grid – indicating how clearly defined an individual's social role is within networks of social
privileges, claims, and obligations.
• Cultural Theory of Risk (Douglas & Wildavsky (1982)) based on Group-Grid Theory
1. Hierarchical organizing (e.g. the government).
2. Egalitarian organizing (e.g. Greenpeace).
3. Individualistic organizing (e.g. the markets).
4. Fatalistic organizing (nothing will make any difference).
5. Autonomous organizing (deliberate avoidance of the coercive involvement in the other four).
Other national culture models
Conceptual dimensions
38
• Standard Analytic Issues (Inkeles & Levinson (1954, 1969))
1. Relation to authority – personal behaviour adaptation and personal identity representation
in interaction with authority.
2. Concept of himself/herself (incl. masculinity/femininity) – what the person thinks he is, like to
be, would expect to become.
3. Primary dilemmas and conflicts – ways of dealing with interaction authority versus self.
• Cultural Distance approaches:
• KS-Index (Kogut & Singh (1988)) based on four Hofstede dimensions (Power distance,
Individualism/Collectivism, Masculinity/Femininity, Uncertainty avoidance).
• 10 common assumptions on culture distance (Shenkar (2001), Tung & Verbeke (2010)) divided
from international business and management research.
• Euclidian Distance Index (Barkema and Vermeulen (1997), Drogendijk & Slangen (2006))
based on Schwartz’s dimensions of national culture.
• Psychic distance (Dow & Karunaratna (2006)) based on objective data/measures: relative
distance of languages, differences in educational level, industrial development, political
systems, religion, time zones, and whether the countries in question have previous colonial
ties.
Other national culture models
Conceptual dimensions
(cont.)
39
• As is evident from review above, there are many different ways to represent
cultural differences.
• However, all of the models have important factors to contribute to our understanding
of culture as it relates to management practices, therefore, the most productive
approach is to integrate and adapt the various models based on their utility for better
understanding business and management in cross-cultural settings.
• These five relatively distinct common themes that collectively represent the principal
differences between cultures are:
1. Distribution of power and authority in society = Hierarchy and Power type
cultures.
2. Centrality of individuals or groups as the basis of social relationships = Structure
type cultures.
3. People's relationship with their environment = Environment type cultures.
4. Use of time = Time type cultures.
5. Mechanisms of personal and social control = Relationships/Feeling/Emotions type
cultures.
Convergence of national culture models
40
National culture models
Converged dimensions
Relationships
Power
Structure
Time
Environment
Hierarchical vs
Egalitarian
Uncertainty
Avoidance
Indulgence vs
Restraint
Neutral vs Affective
Specific vs Diffuse
Masculinity vs
Femininity
Long-Term vs Short-
Term Orientation
Monochronic vs
Polychronic
Sequential vs
Synchronous
Individualism vs
Collectivism
Individualism vs
Communitarianism
Universalism vs
Particularism
Internal-Direction vs
Outer-direction
High-Context vs
Low-Context
Achievement vs
Ascription
41
National culture dimensions
RelationsSmallPowerDistance
Individualism
Collectivism
LargePowerDistance
SmallPowerDistance
Masculinity
Femininity
LargePowerDistance
SmallPowerDistance
Strong Uncertainty Avoidance
Weak Uncertainty Avoidance
LargePowerDistance
StrongUncertaintyAvoidance
Individualism
Collectivism
WeakUncertaintyAvoidance
Femininity
Individualism
Collectivism
Masculinity
Communication is made possible through symbols,
which can be either sounds or gestures.
Communication
43
• Language can be defined as a shared communication system allowing
exchange of information between two individuals.
• From this definition, it can be concluded that language is directly bonded to
culture, as it reflects people’s mutual norms, values and beliefs and how they
interact within a community and their surroundings → language is central to
national identity.
• Within a cross-cultural environment, language can be addressed as a barrier
for communication for two main issues:
– translation problems - it can be very problematic when a word or statement is
not fully understood by a person, as it will result in misunderstandings
– ’linguistic imperialism’ - a person or group of persons want imperatively the
collaboration process to be in their own language
Language
44
Non-verbal communication can be defined as human actions and attributes that have
socially shared meaning that are intentionally sent or interpreted as intentional, are
consciously sent or consciously received and have the potential for feedback from the
receiver.
• Functions. Replacing spoken messages with gestures. This can be a way to communicate with
someone who does not speak your language or serve a utilitarian purpose. Signs and symbols can
be used to direct attention to things that they designate. Symbols are however not necessarily
universal, what is acceptable in one culture could well be offensive in another.
• Proxemics. This refers to the amount of personal space we allow between us and others.
• Kinesics. This describes gestures, body movements, facial expressions and eye contacts. All these
behaviors are ways that people communicate differently in different cultures. These so-called kinesics
again are not universal and can be easily misunderstood.
• Silence. This is a form of communication. In some cultures, it means fearful of communicating, in
some, a lack of attention, or agreement.
• Haptics. Form of interaction involving touch. Use of touch to communicate varies from culture to
culture.
• Clothing and physical appearance. The cloth really act as communicator when it comes to culture.
This has a lot of meaning in different culture and can be used to convey cultural heritage.
Non-verbal communication
Organizational Culture
When we say “culture” in the context of cross-border M&A, it specifically
means the organizational culture differences of the merging companies.
But it is not enough to know what differences are – the most important
part is understanding why these differences exist.
46
• The configurations and managing of organizations are affected by the
national cultures; nevertheless, organizational cultures have their own
characteristics and dimensions.
• Corporate culture refers to the common set of values, traditions, and
beliefs that influences organizational behavior; it is a long-term driver of
results.
• We define organizational culture as the way in which members of an
organization relate:
• to each other
• to their work
• to the outside world
Two elements determine the strength of corporate culture
The number of
employees who accept,
reject or share in the
basic beliefs, values and
assumptions
The number of
shared beliefs, values
and assumptions
47
Organizational
culture
Creating
organizational culture
An organization’s culture, particularly
during its early years, is inevitably tied to
the personalities, background, and values
of its stakeholders, as well as their vision
for the future of the organization. The way
they want to do business determines the
organization’s rules, the structure set up,
and the people they hire to work with
them.
The industry characteristics and demands
act as a force to create a certain
orientation culture.
Maintaining
organizational culture
Organization’s culture is shaped as it faces
external and internal challenges and learns
how to deal with them. When the
organization’s way of doing business provides
a successful adaptation to environmental
challenges and ensures success, those values
are retained. These values and ways of doing
business are taught to new members as ‘the
way to do business’.
Stakeholders’
preferences
Industry
demands
Advance values,
goals,
assumptions
Members of
organization
External
stakeholders
Environment /
Market
Leadership
Policies &
Procedures
48
• Organizational culture starts with a vision/mission statement that provides
the members with a purpose
• Vision articulates the organization´s purpose
• Values offer a set of guidelines on behaviors and mindsets needed to achieve
that vision
• Whatever the organization´s values are they must be reinforced in review
criteria and promotion policies, and baked into operating principles of daily
life of the company
• So, norms are defined as an established behavior pattern as part of a culture
• And practices make an organization differ to another
• Through it, culture gives organization a sense of identity and determines,
through the organization's legends, rituals, beliefs, meanings, values, norms
and language, the way in which ‘things are done’.
• However, a successful organizational culture demands people stick with the
culture they like, and involves the right culture carriers who reinforce the
culture that organization already has.
49
Cultural Iceberg
culture has visible and invisible
aspects
however, culture is not static
Three levels of culture identifies how visible
the culture is to an observer:
• Artifacts – visible organizational structure and
processes, building layouts, behavior, physical
settings that reflects who we are/want to be
• Espoused Values – what we say we stand for,
i.e. vision and mission statements, strategies,
goals, philosophies
• Enacted Values – what our behavior says we
stand for, i.e. policies, procedures that
demonstrate what really matters
• Underlying Assumptions – shared, usually
taken for granted values and beliefs about the
world, what success is, what matters, who
matters, and why
Artifacts
Underlying
assumptions
Espoused
values
Impact
Formative factors:
• our Core Values – way of seeing the world
and deciding what matters to us
• our Interpretations – what that means in
our personal and professional lives, and
• our observable Behaviors – how we
ultimately act
Schein (1992)
50
• Culture is the most difficult organizational attribute to change, outlasting
organizational products, services, founders and leadership and all other
physical attributes of the organization.
• The two main reasons why cultures develop in organizations is due to external
adaptation and internal integration
• External adaptation reflects an evolutionary approach to organizational culture
and suggests that cultures develop and persist because they help organizations to
survive and flourish; if the culture is valuable, then it holds the potential for
generating sustained competitive advantages
• Internal integration is an important function since social structures are required
for organization to exist; organizational practices are learned through socialization
at the workplace, and work environment reinforces culture on a daily basis by
encouraging employees to exercise cultural values
• Organizational culture is shaped by multiple factors: external environment,
industry, size and nature of organization’s workforce, technologies in use, the
organization’s history and ownership.
according to Schein…
51
The culture is dynamic – it
adapts and changes in
response to various
influences and conditions,
and is shaped by and
overlaps with other
cultures
External survival factors
• Vision/mission, strategy, goals
• Means: structure, systems, processes
• Measurements: evaluation and
correction
Internal integration factors
• Common language and concepts
• Group boundaries and identity
• Nature of authority and relationships
• Allocation of rewords and status
Deep underlying assumptions
• Relationships with nature
• The nature of reality and truth
• The nature of human nature
• The nature of human relationships
• The nature of time and space
• The unknowable and uncontrollable
Orientation
• Process vs Result
• Open vs Closed System
• Tight vs Loose Control
• Profession vs Parochial Units
• Job vs Employee
• Pragmatic vs Normative
Culture re-structuring
Diagnose current
culture
Develop plan to engage
people in desired
change of behavior
52
Benefits
• Initially, strong culture was conceived as a consistent set of beliefs, values,
assumptions and practices embraced by members of the organization
• Strong culture has core values which are intensely held and widely shared; it increases
behavioral consistency, enhances control and coordination, improves goals alignment
between company and employees
• Homogeneity among the value structures of organizational actors can be a source of
job satisfaction, commitment, job proficiency and long tenure
Disadvantages
• One limitation of strong culture is the difficulty to change it, therefore, it may hinder
efforts at change
• The internalized controls associated with a strong culture result in individuals placing
unconstrained demands with themselves and acting as a barrier to adaptation and
change
• A strong culture contribute to a displacement of goals or sub-goals formation. This
means that behavioral ways of doing things become important and overshadow the
original purpose of organization
A strong culture may act as an asset or
a liability for the organization
Strongculture
“Organizational culture is the way we do things in order
to succeed.” // William Schneider
Models of Organizational Culture
54
Cultural web
model
• The Paradigm - what the organization is
about, what it does, its mission, its values
• Stories - build up about people and events,
and convey a message about what is valued
within the organization
• Symbols - include organizational logos and
designs, but also extend to symbols of power
such as parking spaces and executive
washrooms
• Power structures - who makes the
decisions, how widely spread is power, and
on what is power based?
• Organizational structures - reporting lines,
hierarchies, and the way that work flows
through the business
• Control systems - the processes in place to
monitor what is going on, staff reviewing
systems
• Rituals & Routines – communication flows,
procedures, management meetings, reports
and so on
Johnson (1988), Johnson & Scholes (1992 )
Stories Symbols
Rituals &
Routines
Control
systems
Organizational
structures
Power
structures
The Paradigm
55
Organizational
Culture Profile
(OCP) model
• Innovative culture is flexible, adaptable, and
experiment with new ideas; these organizations
are characterized by a flat hierarchy and titles
and other status distinctions tend to be
downplayed
• Aggressive culture values competitiveness and
outperforming competitors; by emphasizing this,
it often falls short in corporate social
responsibility
• Outcome-oriented culture emphasizes
achievement, results and action as important
values
• Stable culture is predictable, rule-oriented and
bureaucratic, aiming to coordinate and align
individual effort for greatest levels of efficiency
• People-oriented culture values fairness,
supportiveness, and respect for individual rights
– ‘people are their greatest asset’
• Team-oriented culture is collaborative,
emphasize cooperation among employees,
capable of helping each other when needed
• Detail-oriented culture emphasizes precision
and pays attention to details
• Service culture trains employees to serve the
customers well and resolve customer problems in
ways they see fit
• Safety culture exists in jobs that are safety
sensitive
O’Reilly, Chatman & Caldwell (1991)
Innovative
AggressiveDetail
oriented
Team
oriented
Outcome
oriented
People
oriented
Stable
OCP
Service
Safety
56
Outside focused
model
• Work-hard, play-hard culture has rapid
feedback/reward and low risk resulting in
stress coming from quantity of work rather
than uncertainty; high-speed action leading to
high-speed recreation
• Tough-guy / macho / stars culture has
rapid feedback/reward and high risk, resulting
in stress coming from high risk and potential
loss/gain of reward; focus on the present
rather than the longer-term future
• Process culture has slow feedback/reward
and low risk, resulting in low stress, plodding
work, comfort and security; stress comes from
internal politics and stupidity of the system,
development of bureaucracies and other ways
of maintaining the status quo; focus on
security of the past and of the future
• Bet-Your-Company culture has slow
feedback/reward and high risk, resulting in
stress coming from high risk and delay before
knowing if actions have paid off; the long view
is taken, but then much work is put into
making sure things happen as planned
LowDegreeRisk
Slow Feedback Speed
Fast Feedback Speed
HighDegreeRisk
Work hard/
Play hard
Tough-Guy /
Macho /
Stars
Process
Bet-Your-
Company
Deal & Kennedy (1982, 2000)
57
Organizational
ideologies
model
• Role-oriented culture aspires to be as
rational and orderly as possible, competition
and conflicts are regulated or replaced by
agreements, rules, and procedures; while there
is a strong emphasis on hierarchy and status,
it is moderated by the commitment to
legitimacy and legality
• Task-oriented culture values highest the
achievement of a superordinate goal, and the
organization’s structure, functions and
activities are all evaluated in terms of their
contribution to this superordinate goal;
nothing is permitted to get in the way of
accomplishing the task
• Person-oriented culture seeks primarily to
serve the needs of its members, the
organization itself is just a device for it;
authority in the power-oriented sense is
discouraged, and may be assigned only on the
basis of task competence; individuals are
expected to influence each other through
example, helpfulness and caring
• Power-oriented culture attempts to
dominate its environment and conquer all
opposition, maintains absolute control over
subordinates
Harrison (1972, 1987)
HighConcentration
Low Formalization
High Formalization
LowConcentration
Role
orientation
Task/
Achievement
orientation
Power
orientation
Person/
Support
orientation
58
Four power
structures model
Based on Harrison’s culture model.
• Role culture is highly autocratic and
hierarchical bureaucratic; there is a clear
defined structure, power derives from a
person’s position, and little scope exists for
expert power
• Task / Achievement culture emphasizes
accomplishment of the task; no single power
source, matrix organization, teams are formed
to solve particular problems and may develop
own objectives
• Person / People culture has minimal
structure and serve to nurture personal
growth and development; organization full of
people with similar competence, and power
lies in each group of individuals
• Power culture concentrates power among a
small group or a central figure and its control
is radiating from its center like a web; this
culture needs only a few rules and
little bureaucracy, but swift in decisions can
occur
Handy (1976, 1985, 1993)
HighConcentration
Low Formalization
High Formalization
LowConcentration
Role Task /
Achievement
Power Person /
People
Handy matched its cultural models to Robert Anthony’s hierarchy of management activity:
• Strategic management – is concerned with direction-setting, policy making and crisis handling, therefore it suits
power culture
• Tactical management – is concerned with establishing means to corporate ends, therefore suits a task culture
• Operational management – is concerned with routine activities, therefore it suits role culture
59
Universal
corporate
culture model
• Cultivation culture heralds a system of
beliefs or expectations that the organization
and its people will accomplish what it deems
valuable; it trusts unquestioningly in success,
in its people and in the organization.
• Collaboration culture springs from the
family; its way to success is to put a collection
of people together, to build these people into
a team, to engender their positive affective
relationship with one another and to charge
them with fully utilizing one another as
resources.
• Control cultures prize objectivity, empiricism
and the systematic examination of externally
generated facts are highly valued; emotions,
subjectivity, and ‘soft’ concepts take
everyone’s eye off the ball and potentially get
the organization in trouble; important values
in control cultures are order and predictability,
as well as maintaining stability.
• Competence culture is based in the
achievement motive, defined as need to
compete against a standard of excellence; in a
competence culture, being superior or the
best is paramount, and the culture gains its
uniqueness by combining possibility with
rationalism.
Personal
Possibility
Actuality
Impersonal
Collaboration Control
Cultivation Competence
Schneider (1999)
60
Competing values
framework (CVF)
model
• Hierarchy culture emerges in the relatively
stable environment; clear lines of decision-
making authority, standardized policies and
procedures, control and accountability
mechanisms were valued as the keys to success
• Market culture emerges when the external
environment is hostile rather than benign, the
organization is in the business of increasing
competition, success is defined in terms of
result, profit, market share and penetration
• Clan culture is a team-oriented approach
with basic assumptions that the environment
can best be managed through teamwork and
employee development, customers are best
thought of as partners, the organization is in
the business of developing a humane work
environment, and the major task of
management is to empower employees and
facilitate their participation, commitment and
loyalty
• Adhocracy culture fosters adaptability,
flexibility and creativity if uncertainty,
ambiguity and information overload are
typical; the glue that holds that organization
together is commitment to dynamism,
experimentation and innovation
InternalFocusandIntegration
Stability and Control
Flexibility and Discretion
ExternalFocusandDifferentiation
Clan
(Collaborate)
do things together
Adhocracy
(Create)
do things first
Hierarchy
(Control)
do things right
Market
(Compete)
do things first
Quinn and Rohrbaugh (1983), Cameron and Quinn
(2011)
61
The 4 diversity
cultures model
• Guided Missile culture organizations are
managed mostly by objectives, employ matrix
management structure, and give the individual
a great sense of ownership and potential
satisfaction of a ‘win’
• Eiffel Tower culture is likened to typical
hardened bureaucracy where the
infrastructure’s power is directly related to the
importance and/of the position, task and
accomplishment outweigh the concerns for
relationship, and adherence to the rules and
recognition of hierarchy are extremely
important
• Family culture is built on reputation and
employs a respect not only for family, but for
anyone that has a deep roots in their
successes; managers tend to make decisions
not only on their bosses recommendations,
but also on others who have influenced their
careers and whom they honor
• Incubator culture deals with self expression;
it is the most egalitarian style of management
and is often a very loose structure with
ideation being a key performance indicator
Personal/InformalStyle
Hierarchical / Centralized
Egalitarian / Decentralized
Task/FormalStyle
Incubator
(fulfilment-
oriented)
Guided Missile
(project-
oriented)
Family
(power-
oriented)
Eiffel Tower
(role-oriented)
Trompenaars & Hampden-Turner (1998, 2004),
Trompenaars & Woolliams (2008)
62
This model includes twelve norms that are
divided in three different types of cultures and
defines culture as the behavior that members
think is required in order to meet expectations
within the organization.
• Constructive culture encourages members
of the organization to cooperate and meet
the higher needs of the higher order
• Passive / defensive culture fosters
members of the organization to believe that
they need interaction in certain ways just to
secure their own position
• Aggressive / defensive culture pushes
members of the organization to protect their
status and security in forceful ways
Organizational
Culture Inventory
model
Cooke (1987)
63
• Achievement – people are focused on attaining high-quality results (standard of excellence) and try to think
ahead, explore alternatives before acting to minimizing risks of failure
• Self-actualizing – people in organization try to fulfill their capabilities and talent in order to reach personal
growth, strive to acquire knowledge and experience
• Humanistic-encouraging – people help others within the organization to grow and develop; focus lies on
coaching and caring for whole team in order to move forward
• Affiliative – people strive for cooperation and maintaining good working atmosphere, share their thoughts
and feelings, are friendly and cooperative, and make others feel a part of things
• Approval – employees have a hard time taking own decisions and seek their leaders approval before applying
their ideas
• Conventional – employees focus on rules and procedures of the organization and are supposed to act
according to set standards
• Dependent – performance of employees depends on decision of superiors; they do not question orders from
the boss but instead follow blindly
• Avoidance – employees do not think about their own personal goals and only acts according to policies of the
organization
• Oppositional – people are critical and question others work; sometimes this might lead to a better product
but sometimes the user comes off as arrogant
• Power – users like to control others and focus on their own respect and influence
• Competitive – people focus on their own status, compare themselves with others and try to outperform them
• Perfectionistic – users make an effort in acquiring perfect results with focus on details using high standards as
improving their own self-worth
Organizational Culture Inventory model
(cont.)
Constructive
cultures
Passive
cultures
Aggressive
cultures
64
Denison’s cultures
assessment
model
The Denison model serves as the foundation for
the cultural development activities, and is based
on four cultural traits (every divided to 3 sub-
measures) of effective organization integrated
into a common framework what allows to
measure these traits simultaneously.
• Mission – Direction, Purpose & Blueprint:
defining a meaningful long-term direction for
the organization “Do we know where we are
going?”
• Adaptability – Pattern, Trends & Market:
translating the demand of the business
environment into action “Are we listening to
the marketplace?”
• Consistency – Systems, Structures &
Processes: defining the values, systems and
processes that are the basis of a strong
culture “Does our system create leverage?”
• Involvement – Commitment, Ownership &
Responsibility: building human capital,
ownership and responsibility “Are our people
aligned and engaged?”
Denison (1990, 1994, 1996),
Denison & Neale (1996)
External Focus
Internal Focus
Flexible
Stable
65
• MISSION – the degree to which the organization is crystal clear about its business direction
• Strategic Direction and Intent – the organization’s plan to ‘make a mark’ in its industry,
articulated strategic intention convey its purpose and make clear how everyone can
contribute
• Goals and Objectives – a clear set of goals and objectives linked to the mission, vision and
strategy what provides everyone a clear direction in their work
• Vision – shared view of a desired future status that embodies core values and captures the
hearts and minds of the organization, while providing guidance and direction
• ADAPTABILITY – the degree to which the organization understands the customers’ needs, can
change in response to changing demands, can learn new skills and technologies to support
business success
• Organizational Learning – the organization receives, translates and interprets signals from
the environment into opportunities for encouraging innovation, gaining knowledge and
developing capabilities
• Customer Focus – the organization is driven by a concern to satisfy the customer, i.e. it
understands and reacts to the customers, and anticipates their future needs
• Creating Change – the organization is able to create adaptive change, to read the business
environment, quickly react to current and anticipated future changes
Denison’s cultures assessment model
(cont.)
66
• CONSISTENCY – the degree to which the organization has shared values, systems and
processes, which support achievement of the business mission and goals
• Coordination and Integration – different functions and units of organization are able to
work together well to achieve common goals, i.e. the organizational boundaries do not
interfere with getting work done
• Agreement – the organization is able to reach agreement on critical issues, including the
underlying level of agreement and ability to reconcile differences when they occur
• Core Values – members of the organization share a set of values which create a strong
sense of identity and a clear set of expectations
• INVOLVEMENT – the degree to which individuals at all levels are truly engaged in and ‘own’ the
business direction, and positioned to help the business succeed
• Empowerment – individuals have the authority and ability to manage their own work, what
creates a sense of ownership and responsibility toward the organization
• Team Orientation – value is placed on working in teams towards common goals to which
all employees feel mutual accountability
• Capability Development – the organization continually invest in the development of
employee’s skills in order to stay competitive and meet on-going business needs
Denison’s cultures assessment model
(cont.)
67
Hofstede’s
8 dimensions
Multi-Focus
model
This model consists of six autonomous
dimensions or variables and two semi-
autonomous dimensions:
D1 – Means- vs Goals-oriented
D2 – Internally vs Externally driven
D3 – Easygoing vs Strict work discipline
D4 – Local vs Professional
D5 – Open vs Closed system
D6 – Employee- vs Work-oriented
Strategic windowDysfunctional window
0 50 100
Dimensions of organizational culture D1 , D2 , D3 , D4 , D5 , D6
Variable X Variable Y
0 50 100
Dimensions of organizational culture D7 , D8
Low High
Hofstede & Minkov (2010), Waisfisz (2015)
D7 – Degree of acceptance of leadership style
D8 – Degree of identification with your organization
68
D1 - Organization effectiveness – Means- vs Goal-oriented (process vs result)
• Means-oriented culture places importance on how work gets done; the focus is on the way people do
work and an emphasis on avoiding risk
• Goal-oriented culture identifies with what work gets done; there is a strong focus on achieving an end
result
D2 - Customer orientation – Internally vs Externally driven (pragmatic/flexible vs
normative/rigid)
• Employees within an internally-driven culture see themselves as experts; they feel they know what is
best for the client and customer and act accordingly
• Employees working in an externally-driven culture are very customer-oriented and will do whatever
the customers wants
D3 - Control - Easygoing vs Strict work discipline (loose vs tight control)
• In an easygoing culture, the approach to work is informal, loose, unpredictable, little control and
discipline what facilitate a high level of improvisation
• In a strict culture, there is a fair amount of planning, which leads to efficiency and productivity, people
are cost-conscious, punctual and serious
D4 - Focus – Local vs Professional
• Local organizational culture allows a great amount of predictability as employees identify with their
boss and/or their teammates, are short-term directed, internally focused and there is strong social
control to act, look, and talk in a certain way
• In an organization with a professional culture, employees identify with their profession and/or the
content of the work
Hofstede’s 8 dimensions Multi-Focus Model
(cont.)
69
D5 - Approachability – Open vs Closed system
• In an open system, newcomers are welcomed easily, people are inclusive and take the approach that
almost anyone will fit in the organization
• A closed system is more exclusive, where newcomers have to prove themselves
D6 - Management philosophy – Employee- vs Work-oriented
• In a culture with an employee-oriented management philosophy, leaders take responsibility for the
happiness, well-being, and satisfaction of their employees, even if this is at the expense of the work
• In a work-oriented (job-centered) culture, a focus on high task performance can come at the
expense of employees, there is heavy pressure to perform the task even if this is at the expense of
employees
D7 - Degree of acceptance of leadership style
• This dimension tells us to which degree the leadership style of respondents’ direct boss is being in
line with respondents’ preferences
D8 - Degree of identification with your organization
• This dimension shows to which degree respondents identify with the organization in its totality
Hofstede’s 8 dimensions Multi-Focus Model
(cont.)
Subcultures
71
In practice, an organizational culture is not completely homogeneous.
Normally there exits a dominant culture, generally accepted and followed by the
majority of people.
However, in addition to this dominant culture, organization might have some
subcultures that overlap and may even disagree with each other.
Subcultures reflect common problems, situations or experience that organization faces.
• Dominant culture – expresses the core
values shared by a majority of the
organization’s members = distinctive identity
of an organization
• Subculture – shares the dominant culture’s
core values as well as other values that
characterize their own departments,
geographical units, etc.
• Counterculture – its values are in opposition
to those of the dominant culture
• Co-cultures – groups of people living within
a dominant culture who are clearly different
from the dominant culture (basis: gender,
race, ethnicity, sexual orientation, religion,
social class, generation)
Subcultures
Dominant
culture
Core
values
72
• The most basic unit in the expression of cultural norms is the individual. A single
person mirrors the behavior of those around him, thus adapting to and
strengthening, the culture he finds himself in.
• Individual culture is the result of numerous aspects of a person’s life, and
reflects his own personal values, how he prefers to act, how he likes to treat others
and be treated by them.
• Individual culture can change over time as person needs to adapt his individual
behavior to suit the general orientations of those around him – he either
replicates and reinforces cultural norms, or alters and modifies them.
• Whether a person is able to adapt his individual cultural preferences depends on
whether or not those preferences are core or negotiable. Core cultural
preferences are those that a person holds very dear, whether for an ideological
reason or because he believes in their importance in his life or society.
• When a person experiences a cultural gap with another person or group around
a core cultural preference, it is normally too difficult for him to adapt or style
switch to match the preferences of those around him.
Individual / Personal culture
73
• Every profession develops its own code of conduct,
professional norms; this brings pride in their profession
and loyalty to the profession – members become more
loyal to their profession than to a particular
organization.
• Professional culture differentiates the characteristics
and value systems of particular professional groups.
Professional culture
• Through personnel selection, similar education and training, on-the-job experience,
peer pressure, etc., professionals tend to adopt the value system and develop behaviour
patterns consistent with their peers; they learn to ‘walk and talk’ alike.
• The positive aspects of the professional culture are shown in strong motivation to do
well and a in a high level of professionalism.
• A negative aspect is that professionals may adopt value systems that lead to
developing a sense of personal invulnerability.
• It should be noted, that professional affiliations can create different linguistic
repertoires or codes for intra- and/or inter-group communication.
Organizational
culture
Professional
culture
Industrial culture
Market
74
• Compared to professional culture, occupational culture is a broader construct as
result of similar occupational backgrounds and experiences of different groups of
organizational members.
• Occupational culture develops through social interaction, shared experience,
common training and affiliation, mutual support, associated values and norms,
and similar personal characteristics of members of a particular occupational
group.
• Occupational culture is a reduced, selective, and task-based version of culture
that includes history and traditions, etiquette and routines, rules, principles and
practices that serve to buffer practitioners from contacts with the public; a kind of
lens on the world, it highlights some aspects of the social and physical
environment and omits or minimizes others.
• Occupational culture develops distinct jargon and shapes perceptions of reality by
developing classification systems to describe experiences and concepts.
• Occupational culture may have greater influence over work styles and
perspectives than an organization’s policies and procedures, since it crosses
organizational boundaries and is often imported.
Occupational culture
75
Individual identity
Individual identity is the concept a person develops about himself that evolves over the
course of his life. This may include aspects of his life that he has no control over, as well
as choices he makes in life. The person demonstrates portions of his individual identity
outwardly through what he wears and how he interacts with other people. He may also
keep some elements of his identity to himself, even when these parts are very important.
Individual identity develops over time and can evolve, sometimes drastically, depending
on what directions we take in our life.
Professional identity
Professional identity is the image a person has based on the way he performs a job or
operates within a career field. Building a professional identity often involves a mix of
education, professional training and personality. People earn degrees and professional
certifications to demonstrate knowledge, credibility and expertise in a given profession.
Personality and professional etiquette create distinction among the people in a
profession who have similar backgrounds.
76
Organizational identity is defined as an
enduring, distinctive and central statement
perceived by an organization’s members to
answer questions such as
• “Who are we?”
• “What are we doing?”
• “What do we want to be in the future?”
The organizational culture is the context in which
organizational identity is developed.
Centrality means that the
statement should include features
that are important and essential to
the organization
Distinctiveness emphasizes that
the identity statement should be
able to distinguish the organization
from others and helps the
organization locate itself in a
specific classification. A distinctive
identity statement usually includes
organizational ideology,
management philosophy and
culture
Durability emphasizes the
enduring nature of organizational
identity. It implies that
organizational change is difficult to
start because the loss of
organizational identity will have
strong impact on the organization
Culture Identity Image
The members of organization express their understandings
of their organizational culture through organizational identity,
which in turn, affects the perception of others outside the
organization about the organization.
The outsiders’ perception, or organizational image, in turn,
affects the organizational identity, which again is reflected in
the central elements of the organizational culture.
77
Individual
culture
socialization
Individuals have first been socialized in their
national cultures already in their childhood and
possibly later as well, in professional cultures
before socializing in the organisational culture.
However, professional and/or occupational
cultures are still expected to persist in
organizations because of professional/
occupational affiliations.
National cultures have a strong impact on an
individual’s perception and understanding,
affecting him throughout his lifetime.
Socialization refers to the process by
which the culture values of organizational
members are brought into line with the
organizational culture
National culture
• nationality
• ethnicity
• region
• gender
• religion
• generation
• educational systems
• etc.
Professional culture
• academic
• business
• banking
• legal
• medical
• engineering
• etc.
Organizational culture
• incl. subcultures
Progressive socialization that occur during a person’s life
Post-Merger Cultural Integration
Two out of three mergers fail due to not taking care of cultural differences.
Do you want your acquisition to work? Take culture into consideration.
79
M&A insights on culture
• Financial acquirer is not always the cultural acquirer. The company providing acquisition currency (the
financial acquirer) should not necessarily impose their culture on the target. At times, an acquisition is
driven by importing the target’s culture, or “way of doing things,” such as in situations when the target
has innovative products/services or “know-how.” In these cases, the target becomes the cultural acquirer.
• Culture must support the business strategy. For instance, if a business strategy is built upon innovation,
the culture must be aligned across all enablers (i.e. processes, systems, structure) and oriented toward
instilling such an environment by encouraging and embracing creativity and invention.
• Not an overnight process. Once similarities and differences in culture are identified, aspects of these
cultures to be preserved and enhanced must be identified. Culture will need to be shaped gradually.
• Culture is an outcome, not an input. Organization culture is an outcome of good, or poor, integration.
Relentless focus on business performance backed by the right processes, systems and incentives will
create a sustainable culture. One does not have to change culture as a pre-condition to integration.
• Culture is not “good” or “bad” - it just is. An entrepreneurial culture is “loose” for some and
“undisciplined” for others. Focusing on leveraging cultural strengths to improve business performance
will ultimately create a stronger culture.
• Sub-cultures matter. Culture can prevail differently in different parts of the organization. Sub-cultures
exist based on function, demographic and/or geographic differences, but may be most pronounced in
organizations with an aggressive acquisition history. To affect change, sub-cultures must be recognized
and addressed separately yet kept in alignment with the broader organization.
• Starts at the top. Culture is a reflection of the behaviors and attitudes exhibited by the organization’s
leaders, their adherence to the strategy and their decision making. From our experience, the higher up
you go in the organization, the clearer the distinction of cultural differences.
80
Culture has direct influence on the deal’s bottom
line.
While successful cultural integration is clearly a
critical element in deal success, many companies
do not know how to successfully navigate it
during a transaction. As result, the cultural
differences lead to decreased productivity,
declining market share and lower revenue –
negative effect on value of the deal.
• Leadership ownership
• Clarity of M&A logic and PMI as change
management case
• Coherent deal-making and organizational
cultures
• Early understanding of cultural similarities
and differences
• Adaptability and flexibility to change
culture for both sides of transaction
• Communication and active management
of changes to culture
• Clarity of behavioral directions
• Ineffective leadership
• Incoherent deal-making and PMI
processes
• Poorly planned or challenging integration
• Failure to recognize or reconcile
differences in organizational behavior
• Lack of awareness, tolerance or
understanding of social drivers of behavior
• Inability to drive change
• Lack of linkage between required behavior
change to business results
Time
Value
Current value
Pre-M&A expected value
Post-M&A real value
Valuecreation
Valuedestruction
M&A deal’s value leak
Culture related factors
Cultural due diligence is the process of analyzing a culture
with the purpose to identify and outline the cultural
strengths and weakness (and risks and opportunities) in
relation to the goals and objectives of that organization.
Cultural Due Diligence
82
• M&A cultural due diligence refers to the determination of cultural compatibility in
merger or acquisition. Cultural compatibility does not necessarily equal cultural
similarity, but rather refers to whether two cultures are ‘combinable’. Pre-acquisition
cultural due diligence may enable an acquirer to determine whether and how a
combination of different cultures in the post-acquisition stage has high chances of
success.
• Recommended that an acquirer analyze its own organizational and national cultures
prior to undertaking acquisitions to identify the cultural factors that are crucial for the
future integration of cultures involved. Only then due diligence will help organization
uncover the key issues that can impede negotiations and integrations.
• Cultural due diligence is different from HR due diligence:
• HR DD - focuses primarily on historical and projected headcount, personnel turnover
patterns, profiles of senior leadership as well as their compensation packages to
resolve the inequities in the compensation plans between the two organizations and
other similar issues
• Cultural DD - focuses on the assessment of values, visions, missions and beliefs,
leadership and management styles, perceptions about the organization, management
and the way things are done in the target entity, and their compatibility with those of
the acquiring organization
83
Cultural DD as diagnostic
process
• Identifies target entities using cultural fit as a criterion
during M&A strategy planning phase:
• By having ‘cultural fit’ (‘cultural compatibility’ ) as a
criterion for identifying a target entity, the acquiring
company sort out organizations that are culturally
dissimilar from the list of potential targets.
• By assessing the multiple layers of cultural ‘fit’ (e.g.
national, industry, organizational, individual) and
considering a range of response scenarios, new types of
strategic acquisitions are possible.
• Evaluates cultural compatibility between acquirer and
target organization:
• Organizational values, beliefs, vision or mission
• Corporate objectives
• Organizational policies, procedures and practices
• Understands the concerns and anxieties of the
employees in general and key talents in particular in the
target organization.
• Saves the merged organization from the potential
conflict arising out of ‘them vs us’ (=‘talk merger vs act
acquisition’ ) syndrome.
• Prepares the leaders to achieve M&A outcomes and for
a future merged entity.
Cultural assessment should:
• Provide organizational and
national cultures analysis
• Determine the degree of
cultural alignment between
organizations and come up
with a culture alignment
plan for the areas of
divergence
• Present a complete risk
assessment, signaling the
potential organizations /
people-related collisions
• Identify synergies that sign
success
Diagnose collision risks between:
• Two companies’ views at each
other today
• Two companies’ views of their
shared future
• Senior management perspective
• Functions / departments
• Companies and their customers
• Companies and their investors
• Companies and their industry
• Companies and their suppliers
84
External culture indicators – formal
aspects (‘the way we saw they get
things done’):
• Vision / mission statements
• Structure
• Rituals and ceremonies
• Behavior and patterns of behavior
• Policies and procedures
• Work environment and layout
• Infrastructure and technology in use
• Social medial, website content
• Relations with external stakeholders
Identify
meaningful cultural
differences
National cultural factors
Employees may identify both with their original
culture and new culture, and experience
conflicting values: view to time, task vs
relationships orientation, leading vs following,
open vs indirect feedback, free will vs fate, labor
relations and reward philosophy, labor code,
dress code, community involvement, country-
unique cultural norms, practices, and traditions.
Industry and professional
cultural factors
Depending on different level of economical
development, its globalization, education or
political factors industries or professionals may
have different cultural features: professionalism,
attitude to unions and associations, perception
of quality, social responsibility, self-identity,
loyalty.
85
Internal culture indicators – informal
aspects (‘the way they really get things
done’):
• Values, belies and assumptions
• Attitudes
• Heroes and stories
• Unconscious behaviors
• Leadership and management style
• Business drivers
• Employees’ practices and perceptions
• Organizational ability or resistance to
change
Identify
meaningful cultural
differences
Organization cultural factors
Self-image, corporate values, decision-making
process, attitude toward risk and reward,
communication process, commitment to
employees development and safety, emphasis on
people vs tasks, concerns about social
responsibility, code of conduct, leadership and
management style indicators, traditions.
Subcultures factors
Organizational structure, intercompany
hierarchies or functions may have different
subcultures: top-executives vs managers, blue
collar vs white collar job, degree of functional
importance, individual vs team oriented groups.
86
Cultural integration framework
Day 1
M&A
pre-deal
phase
M&A strategy
development
phase
Self-
identification
phase
• Acquirer’s culture self-assessment
(real culture vs desired culture)
• Cultural evaluation of potential target companies
(regarding possible conflicts in fundamental matters and degree of estimated integration
difficulties)
• ‘Blind’ cultural assessment of selected target companies before negotiation
(deal negotiation preparation)
• Detailed cultural due diligence as part of general DD process
• Cultural integration process
(cultural synergy)Socio-cultural
integration
phase
• Identification of cultural risks and potential conflicts
• Evaluation degree of cultural integration difficulty
• Cultural alignment / integration planning
(for both organizations or target company)
• Estimation of resources required for cultural alignment / integration
• Cultural due diligence is a tool that offers a systematic way to diagnose and
address intercultural issues in a merger or acquisition. The aim of it is to
synchronize some important elements within a culture. These elements are related
to people: how people feel and think, what actions do they completed, how
people do tasks, what rules get imposed, and what images and phrases have
significant sense.
• In cultural due diligence is necessary to examine our own cultural identities as well
as others’ cultural beliefs, traditions and values to gain a better insight of their
‘truths’. This process involves standing back of our emotional responses when we
recognize that other cultural points of view may differ entirely from our own.
• Cultural due diligence can determine the degree to which change can or cannot
occur smoothly within the companies involved in M&A due to the fact that some
cultural differences can be overcome, others cannot. This is the reason why cultural
due diligence is of central importance to the non-operational pre-merger activities.
“Culture is more often a course of conflict than a
synergy. Cultural differences are a nuisance at best and
often a disaster.” // Geert Hofstede
Stress Management
89
• Even the best-orchestrated mergers can be threatening, unsettling and
stressful for some employees.
• Some common merger stressors include: uncertainty, insecurity and fears
concerning job loss, job changes, job transfers, compensation changes, or
power, status, and prestige changes.
• They can lead, in turn, to organizational outcomes such as absenteeism, poor
performance and higher employee turnover.
• To reduce merger stress, merger stress management plan need to be
implemented, which could include the following strategies:
• Merger stress audit – assesses of employees perceptions of the merger.
• Realistic merger previews – informs employees about what to expect once the
acquisition takes place, in order to help them through the transition.
• Individual counselling – helps employees overcome merger stress and fear and
suggested coping strategies may help alleviate negative reactions.
• Merger stress management – enables employees to share their fears and
concerns, and would be guided through methods and processes to alleviate these
dysfunctional stress responses.
90
Cultural shock
Cultural shock grows out of the difficulties in
assimilating the new culture, causing difficulty in
knowing what is appropriate and what is not.
The cultural shocks appeared occurred during the
closeness operations between organizations are
reflected on three main levels:
• Conflicts at the level of structures and working
systems
• Conflicts related to the management style
• Conflicts related to exercising the power
Culture shock is often described as a
"personal disorientation" that
accompanies transition into a new
culture.
Satisfaction/Happiness
Time in new culture
Adaptation / Integration
Honeymoon Culture shock Adjustment Mastering
Experimentation
Unreality and
euphoria
Fantasia
Acceptance
of reality
Interest
Search
91
• Demands – issues like workload, work
pattern and the work environment
• Control – what influence the people
have about the way they do their work
• Support – including the
encouragement, sponsorship and
resources provided by the employer,
line management and colleagues
• Relationships – including promoting
positive working to avoid conflict and
dealing with unacceptable behavior
• Role – whether employees understand
their role within the organization and
whether the organization ensures that
the person does not have conflicting
roles
• Change – how organizational change
(large or small) is managed and
communicated in the organization
Workplace stressors
Stress
Support
Control
Demands
Role
Relation-
ships
Change
Identify
the stress
risk
factors
Monitor
and
review
Record
your
findings
Evaluate
the
risks
Decide
who might
be harmed
and howWork-related
stress
management
92
Merger-Emotions
syndrome
• Denial – the first employees’ react to the announced
merger; they say it must be ‘just a rumor’
• Fear – when the merger becomes a reality,
employees become fearful of the unknown
• Anger - once employees feel that they are unable to
prevent the merger from taking place, they begin to
express anger towards those who are responsible;
they feel like they have been ‘sold out’ after providing
the company with loyal service
• Sadness – employees begin to grieve the loss of
organizational identity and reminisce about ‘the good
old days’
• Acceptance – when mourning period has elapsed,
employees begin to recognize that to fight the
situation would be useless; they begin to become
hopeful about their new situation
• Relief – employees begin to realize that the situation
is not as unpromising as they had had predicted
• Interest – once people become secure with their new
positions or with the company, they begin to look for
positive factors, benefits and challenges they can
achieve through the new organization
• Liking – employees discover new opportunities that
they had not envisioned before and begin to like their
new situations
• Enjoyment – employees discover that the new
situation is working out well and feel more secure and
comfortable
Acceptance
News of the merger Commitment to the
situation
Enjoyment
Liking
Interest
Relief
Denial
Fear
Anger
Sadness
Hunsaker & Coombs (1988)
93
Self-esteem
Shock
Denial
Anger
Depression
Acceptance
Experimentation
Discovery
Integration
Acquisition
Old
status
quo
Chaos
Integration
in practice
Performance
Transforming
idea discovered
Acquisition
Time
Time
Kubler-Ross’s (1970)
Weinberg (1997)
Motivation
2.
Proactive
phase
Time
1.
Alarm
3.
Mixed
feelings
4.
Frustration
5.
Reactive
phase
Geyer & Kohlhofer (2008)
1. Uninformed
optimism
pessimismoptimism
Time
2. Informed
pessimism
3. Realism
4. Informed
optimism
5. Rewarding
completion
94
Effective
emotional change
management
Change curve is unavoidable and expected as
people learn and grow through the change event.
The depth and duration of disengagement can be
managed through effective management of key
human factors that helps people to move more
quickly from cultural endings to new levels of
engagement and productivity: speed of
integration, trust, communication and retaining
key people.
1. Forming - characterized with anxiety and
uncertainty as people just starting to come
together. Leader direct.
2. Storming - where conflict and competition
are at its greatest as people feel confident
and begin to address some of the more
important issues surrounding them. Leader
coaches.
3. Norming - a sense of community, cohesive
organization is established, tasks are set,
leadership is shared. Leader facilitates and
enables.
4. Performing – organization has a shared
culture. Leader delegates and oversees.
5. [Adjourning - involves completing the task
and breaking up the team.]
Productivity
Time
Change
in demand
Unwelcome
change
duration
depth
Ending Neutral zone New beginning
1. Forming
Tuckman (1965, 1977)
M&A, in the end, is not like war. In merger or
acquisition, both “they” and “we” want success, and
both may find it far more effectively by learning to
assimilate the culture of the enemy until there is no
enemy at all.
Impact of Merger on Culture
96
Typology of cultural
integration
Cultural integration in terms of
the degree of change required by
the acquiring company and the
acquired company:
• Preservation (stand-alone) -
requires little change by
either company / easiest way
• Absorption - requires
fundamental changes in the
acquired company and little
change in the acquiring
company / easier way
• Reverse merger - requires a
high degree of changes in the
acquiring company as it
adopts the way of the
acquired company / harder
way
• Transformation - requires
more fundamental changes
for both companies / hardest
way
• Best of both – requires
substantial changes in both
companies / hard way
ABSORPTION
Acquired company conforms to
acquirer
Cultural assimilation
• Imposes acquirer’s preferences
• Fast-paced timeline
TRANSFORMATION
Both companies find new ways to
operate
Cultural transformation
• Develops new culture and values
• Gradual shift to strategic control
PRESERVATION
Acquired company retains
independence
Cultural autonomy
• Protects advanced qualities
• Management at arm’s length
REVERSE MERGER
Exceptional case of acquired
company ruling
Cultural assimilation
• Adopts acquired company’s
values, practices and norms
BEST OF BOTH
Additive from both sides
Cultural integration
• Sum greater than parts
• Collaboration and
transferred capabilities
Acquiring company
Degree of change
Acquiredcompany
Degreeofchange
low high
lowhigh
Mirvis & Marks (1992)
97
The acquiring company accepts the acquired company’s cultural differences unequivocally. The
acquiring company allows the acquired one to operate as an autonomous business unit but usually
intervenes to maintain financial control by integrating reporting systems and procedures. The strategy
used by the acquirer in this type of acquisition is non-interference.
Open Marriage (autonomy or semi-autonomy)
The acquirer sees its role as being to dominate and redesign the acquired organization. These types of
acquisitions implement wide-scale and radical changes in the acquired company. Their success
depends on the acquiring company’s ability to displace and replace the acquired company’s culture. In
essence, this is a ‘win/lose’ situation.
Traditional / Redesign Marriage (absorb and assimilate)
It relies on an integration of operations in which the equality of both organizations is recognized. The
essence of the collaborative marriage is shared learning. In contrast to traditional marriages, which
centre around destroying and displacing one culture in favour of another, collaborative marriages seek
to positively build on and integrate the two to create a ‘best of both’ culture. In collaborative
marriages the two organizations are in a ‘win-win’ situation.
Modern / Collaborative Marriage (co-create a new identity)
Cultural compatibility
When an company acquires or merges with another, a new organization may take one of
three possible forms depending on the nature of the two cultures, the motive for and the
objective and power dynamics of the combination.
98
Difficulties of
implementing
mergers
• Conglomerate merger – the acquired
company is usually one of many under the
corporate umbrella; since the companies are
unrelated in product or service, internal
changes to the acquired company, which will
remain relatively autonomous, are likely to be
minimal, and there will be few cultural
consequences
• Vertical merger – most of the interaction
between the two companies is at the corporate
level; the level of complexity at the corporate
level increases, this leads to the demotion of
some executives to middle management, loss
of social standing, which often leads, in turn, to
a higher level of executive turnover
• Concentric merger – there is a tendency to
combine some operations and sharing of
expertise between the two companies, which
may be resisted by the employees of both
companies
• Horizontal merger – downsizing and
voluntary quits usually precede or immediately
follow the merger; the intense interactions
between the employees of both companies
may result in conflict and the compatibility of
styles and values between management and
staff becomes central in personnel decisions
Degreeofrelatedness
Difficulty of implementation
Conglomerate
lowhigh
low high
Vertical
Concentric
Horizontal
Culture, by itself, cannot be seen as reason of the failure
of post-merger integrations. What makes culture a
stumbling block in many M&A deals are the differences
that arise during the integration.
Challenges of Cultural Integration
100
• As a rule, the financial, legal, technical, and organizational aspects of the merger
draw more of the focus while the human and social aspects fall behind.
• Result: not enough is done before, during, and after the merger to help people
unite successfully
• Cultural integration is given lip service but gets shortchanged on
investment and attention
• Communication with employees about the merger and new culture
is sporadic, inadequate, limited to ‘a need to know’ basis
• Leadership doesn’t identify culture risks during due diligence. No leaders
agreement on the desired culture to work toward (cultural alignment)
• In most acquisitions, the organizational cultures of two companies are compatible.
This doesn’t mean that the cultures are exactly the same, but rather that they
don’t conflict in certain fundamental respects, such as management style and
corporate governance practices.
Why organizational cultures
don’t merger?
101
Cultural clash
• People don’t buy in to the newly
merged organization. They don’t get the
right information from leaders about
the purpose and plan for the deal, which
leads to distrust and fear about the
future, disengagement, and loss of their
loyalty.
• People don’t understand each other.
They don’t learn about the cultural
features of the merging organizations,
and can’t connect with new colleagues.
• People don’t collaborate, or even work
against each other. Different systems
and business styles keep employees
apart; ‘us vs them’ mindset produces
internal competition and conflict.
• People are distracted from the core
business. A poorly planned integration
takes too much time and attention;
productivity drops, eroding the
company’s revenue and customer base.
• People leave. They don’t feel like they
fit in anymore, or they’re unhappy with
the problems and delays of integration.
Social merger
• People have allegiance to the newly
merged organization. They are
comfortable and confident in the new
company and feel a sense of belonging
and united identity, are fully engaged
with each other and with their work.
• People have positive relationships with
each other. They talk to their new
colleagues and share their history and
ways of doing things.
• People cooperate to serve the business.
They share information and best
practices, answer questions, and act as
though they are all on the same side,
know when to adapt their processes so
that customers are served better.
• People stay. They are invested in the new
entity they’re building and feel respected
and valuable.
= Psychological synergy
102
• When dealing with people from another culture, one may know something about their
language, the space to use while dealing with people, awareness about your culture and
how to apply one’s cultural behavior with that of the other culture.
• Cultural intelligence is the capability to work effectively in culturally diverse
environments. It covers such areas as:
• Linguistic intelligence – helpful to learn about the customer's’ native language and
using international business English can increase effectiveness when communicating
with persons of other cultures
• Spatial intelligence – involves the space used during meetings, negotiations,
introductions, etc., and understand the effects of manipulating the spatial dimension
• Intrapersonal intelligence – reflects a person’s ability to understand his inner world
(from which many people are entirely disconnected), awareness of one’s own cultural
style in order to make adjustments to international counterparts
• Interpersonal intelligence – includes the ability to understand other people and
their motivations, has a keen ability to relate to others as individuals
• In order to work with a cultural integration, a person is supposed to recognize and adapt
with the differences in cultures – possesses cultural intelligence.
Cultural intelligence
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration
Post-Merger Cultural Integration

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Post-Merger Cultural Integration

  • 1. Virgilijus Dadonas Post-merger cultural integration Knowing How Culture Plays M&A
  • 2. Top contributing factors to deal failure (in order of importance): • Integration took longer than expected • Cultural integration issues • Inconsistent communication of synergy objectives • Insufficient attention to people (workforce) issues • Poor (misinformed) strategy • Risks not identified during due diligence • Insufficient execution competence (capabilities) • Hidden leadership conflicts • Too high price paid for target • Failure to implement an appropriate organizational structure In addition to being cited directly as a leading cause of deal failure, cultural integration is also linked as an underlying, indirect driver to a number of other immediate causes of deal failure, including delayed integration or implementation 2 Statistics indicate that up to one third of mergers fail within 5 years, and as many as 80% never live up to their full expectations
  • 3. 3 The Cultural Paradox Impact of culture on deal success: • Organization distraction and loss of productivity • Loss of key talents • Failure to achieve critical milestones or synergies • Decreased employees engagement • Delayed integration Companies know it’s important but don’t know what to do While successful cultural integration is clearly a critical element in deal success (the wild card in making a merger work), many companies do not know how to successfully navigate it during a transaction – they did not have a specific approach to assessing and integrating culture in a deal Reasons for unsuccessful cultural integration: • Lack of leadership support • Cultural risks not identified during due diligence • Lack of consensus among leadership on desire culture • Lack of competencies/skills • Inconsistent communication • Insufficient resources
  • 4. 4 Content Culture National Culture Models of National Culture Communication Organizational Culture Cultural Iceberg Models of Organizational Culture Subcultures and Identity Post-Merger Cultural Integration Cultural Due Diligence Stress Management Impact of Merger on Culture Challenges of Cultural Integration
  • 5. “Culture is deep. If you treat it as a superficial phenomenon, if you assume that you can manipulate it and change it at will, you are sure to fail.” // Edgar Schein Culture
  • 6. 6 People who share in a culture find their culture challenging to recognize. The most insightful cultural observers often are outsiders, because cultural givens are not implicit to them. Culture is implicit Culturally influenced beliefs and actions feel right to people, even while their implicit underpinnings make it difficult for those people to understand why they act the way they do or why other ways of acting might also be appropriate. Culture influences how people behave and how people understand their own actions Its elements are long-standing, not a matter of fads. The resilience of culture is supported by culture being implicit. It is difficult for people to recognize their own culture and how it exerts an influence on them. The staying power of culture is that it feels right to people; new cultural values that are imposed on people seldom replace their underlying values and beliefs in the long-run. Culture is resilient Culture consists of the long-standing, largely implicit shared values, beliefs and assumptions that influence behavior, attitudes and meaning in a society or company
  • 7. 7 Personality of an individual is his unique personal set of mental programs which he does not share with any other human being. It is based upon traits which are partly inherited with the individual's unique set of genes and partly learned. Learned means: modified by the influence of culture as well as unique personal experiences. Human nature is what all human beings have in common: the human ability to feel fear, anger, love, joy, sadness, the need to associate with others, to play and exercise oneself, the facility to observe the environment and to talk about it with other humans. However, what one does with these feelings, how one expresses fear, joy, observations, etc., is modified by culture. Specific to individuals Specific to group or category Universal Inherited and learned Learned Inherited
  • 8. 8 Culture as collective programming • Values - broad preferences for one state of affairs over others to which strong emotions are attached and by which one group distinguishes itself from other groups. Values refer to such preferences as freedom over equality or equality over freedom. • Rituals - collective activities, technically superfluous in reaching desired ends, but which, within a culture, are considered as socially essential. Ways of greeting and paying respect to others, social and religious ceremonies are examples. • Heroes - persons, alive or dead, real or imaginary, who possess characteristics which are highly prized in a culture, and who thus serve as models for behavior. • Symbols - words, gestures, pictures or objects that carry a particular meaning which is only recognized by those who share the words in a language or jargon belong to this category, as do dress, hairstyles, flags, and status symbols. Values Heroes Rituals Symbols practices Organizational culture National culture “What many members of a group have in common and by which they distinguish themselves from other groups is called culture” / Prof. Geert Hofstede
  • 9. 9 Culture can be defined as the inherited values, concepts, and ways of living which are shared by people of the same social group. To make the definition clearer, culture is divided into two kinds: • Generic culture, which is a shared culture of all humans living on this planet • Local culture, which refers to symbols and schemas shared by a particular social group Six levels of human culture Individual Organizational Occupational National Civilization Universal UNIVERSAL LEVEL INDIVIDUAL LEVEL COLLECTIVE LEVEL Supra-Culture Macro-Culture Meso-Culture Micro-Culture
  • 10. 10 National level culture National cultures differ at the level of unconscious values which are acquired during childhood and these national cultures are stable; the afterward changes that occur are practices whereby the underlying values are left untouched. • Regional and/or ethnic and/or religious and/or linguistic affiliation levels, as most nations are composed of culturally different regions and/or ethnic and/or religious and/or language groups. • Dominant culture – is the most powerful group in society. It receives the most support from major institutions and constitutes the major belief system. Social institutions in the society sustain the dominant culture and give it a degree of legitimacy that is not shared by other cultures. • Subcultures – the cultures of groups whose values and norms of behavior differ from the dominant culture. Members of subcultures interact frequently and share a common world view. Subcultures share some elements of the dominant culture and coexist within it. • Countercultures – subcultures created as a reaction against the values of the dominant culture. Members of the counterculture reject the dominant cultural values and develop cultural practices that defy the norms and values of the dominant group. Nonconformity to the dominant culture is often the mark of a counterculture. • Ethnocentrism – judging a culture by standards of one’s own culture.
  • 11. 11 Organizational level culture Organizational cultures differ at the level of practices, which can be described as external, and they are to some extent manageable. These organizational cultures differ from one company to the other within the same country. Organizational culture can best be thought of as the pattern of actions, words, beliefs and behaviors that members of a business organization share. Professional and occupational level cultures This kind of cultures come between the national and organizational; getting into an profession or industry requires teaching to gain social values coupled with the practices of the organization. These cultures have symbols, heroes and rituals in common with organizational cultures, but they also often imply holding certain values and convictions. • Although professional/occupational levels are individuals who are collectively considered to be a part of the in-group, they are still embedded in the organizational cultures and, therefore, are defined as the in-group collectivism which refers to how individuals relate to as an autonomous unit and how they attend to responsibilities concerning their in-group. It reflects a strong sense of group, family group or community identity. • Social class culture – associated with educational opportunities and with a person's profession or occupation.
  • 12. 12 Gender level culture Gender differences are recognized within the same culture, there is what can be called men’s culture vs women’s culture. Men and women have the ability to perform the same tasks at the workplace, but they have differences when it comes to responding to the symbols used in society. The differences between men and women highly depend on the national culture. There are ten factors to consider when collaborating with men versus women: • Power – social status and prestige, control or dominance over people and resources. • Achievement – personal success through demonstrating competence acc. to social standards. • Hedonism – please and sensuous gratification for oneself. • Stimulation – excitement, novelty and challenge in life. • Self-direction – independence thought and action-choosing, creation and exploration. • Universalism – understanding, appreciation, tolerance and protection for the welfare of all people and for nature. • Benevolence – preservation and enhancement of the welfare of people with whom one is in frequent personal contact. • Tradition – respect, commitment and acceptance of the custom and ideas that traditional culture provide the self. • Conformity – restraint of action, inclination and impulse likely to upset or harm others and violate social expectations or norms. • Security – safety, harmony and stability of society, of relationship and of self.
  • 13. 13 Generation level culture Separates grandparents from parents from children. Although they would fall under the cultural behaviors of their national origins because they share common cultural, historical and social influences, the learning styles of the generational culture are different. Therefore, when considering teaming, an organization must take into consideration the different non-verbal communications that will be exhibited by the different generations such as functions, proxemics, kinesics and silence. How do you define generations? → Depends of who you ask. 1871-1889 New Worlders 1890-1908 Hard Timers 1909-1928 GI Generation / Good Warriors 1929-1945 Lucky Few / Veterans / Traditionalists / Silent 1946-1964 Baby Boomers 1965-1982 Generation X / The Slackers 1983-2001 Generation Y / Millennials / New Boomers 2002- Homelander / New Silent / Generation Z / Generation Alpha
  • 14. 14 Social culture While the community concept is a key distinction for social culture, there are other critical layers to take into account when trying to understand its impact on the global workforce • Culture is multifaceted. Customs and ideas are the most readily visible manifestations, but underlying these are ideas, often religious or philosophical ones, broadly shared within a group that can have a profound effect on people’s self-understanding, their identity, or how they act. • Culture change tends to be slow but evolving. Cultural values show substantial resilience over time. It would be hard, however, to imagine a major national one, for example, that has not seen substantial evolution over the last century. • Culture is borderless. An analysis of intra-national compared with international differences found greater variety within than between countries. One important reason for this variety is the notion of agency – that people can and do make independent choices. Another is that culture is not invariably exclusive. Instead, people are simultaneously part of overlapping, sometimes even apparently contradictory, cultures through circumstance and choice.
  • 15. 15 Corporate culture Corporate culture comprises the values, beliefs and practices of the company, and is created either by design or is naturally based on the personalities of executives • Employees learn the corporate culture through training and by observation. Organizational values also typically reflect unspoken, but understood, social norms shaped by diverse influences such as internal reward structures, how senior officials act in practice, and the national culture surrounding a given operation. • Organizations that ignore the issues of culture and cultural integration will likely face difficulties attracting, retaining and motivating the best employees, or outright failure. Lack of initiatives to properly integrate corporate culture is a contributor to the fact that 70% of M&As fail and more than 50% destroy value. • Integrating employees from multiple societal environments into the organizational values requires not only learning the critical differences but also finding a balance between some parts of the corporate culture that should not change, while other parts may need to be reconsidered and adapted to the cultures of the local workforce.
  • 17. 17 • National culture refers to the unique norms, values, and beliefs to which a group of people generally link. Cultures differ, for example, in the ways they solve problems, view time, deal with the external world, and perceive themselves and others. National culture may be very strong and yet difficult to define. It is estimated that less than 15% of a national culture is readily observable. • National culture is the collective programming of the human mind. As opposed to organizational cultures, national cultures operate at a much deeper level, as these beliefs, norms and values are learned earlier on. • Talking about national cultures does not mean that national cultures are uniform. In many countries, it is possible to talk about the existence of cultures based on region or geography. We may not realize how culture is shaping our behavior until we leave our own country and go someplace else
  • 18. 18 In M&A deals differences in national cultures result in stress and negative attitudes toward the merger and cooperation. National cultural differences harm cross- border M&A performance if the acquirer tries too tightly integrate the acquired company. Forcing employees that are strongly embedded in their own culture to integrate with another national culture leads to misunderstandings and misattributions of motives and goals, which hinders smooth interactions between employees from different national cultures. The integration strategy applied by the acquiring firm will dictate the amount of interactions between the involved firms and consequently the level of cultural clash occurring. In order to manage cultural differences successfully, managers should pay as much attention to cultural fit during both the pre-merger phase and during the post-merger integration process as they do to finance and strategic factors. Cultural differences in M&As are especially important for the top management level, as they are able to influence and motivate employees, create trust. Through the whole integration process managers have the challenging task to create an atmosphere that supports employees to handle national culture differences, because national culture differences cause more stress, negative attitudes toward merger and cooperation, than organizational culture differences do. The impact of cultural differences on the performance of M&A will vary by: • the integration strategy • the degree of integration • the extent to which the merging firms want to preserve their existing national/country cultures • the progress of cultural integration • managerial actions throughout the whole M&A process It is not possible to expect only one true cultural impact on the performance of M&A.
  • 19. “How different one culture is from another has little meaning until those cultures are brought into contact with one another.” // Oded Shenkar Models of National Culture
  • 20. 20 • At present, there are several models of national cultures that continue to be widely referred to. • Each model highlights different aspects of societal beliefs, norms and values and, as such, convergence across the models has been seen as being very limited. • Some models have gone a step further and offered measures or numerical indicators for various countries that have been used widely in cross- cultural assessment. • These models offer useful templates for comparing management processes, HRM policies and business strategies across national borders. • However, the diversity of cultural models represents the culture theory jungle – a situation in which explorer must choose between competing, if sometimes overlapping, models. Next we summarize the most popular national culture models briefly
  • 21. 21 • One of the earliest models of culture that has served as a principal foundation for several later models. • This theory of culture based on value orientations, arguing that there are a limited number of problems that are common to all human groups and for which there are a limited number of solutions. • Values in any given society are distributed in a way that creates a dominant value system. • Cultural dimensions: 1. Relationship with nature - beliefs about the need or responsibility to control nature. 2. Relationship with people - beliefs about social structure. 3. Nature of human activities - beliefs about appropriate goals. 4. Relationship with time - extent to which time influences decisions. 5. Human nature - beliefs about different people nature. Kluckhohn & Stodtbeck Five value orientations model Kluckhohn (1951), Kluckhohn & Stodtbeck (1961)
  • 22. 22 Five value orientations model Scale Relationship with Nature Mastery over Harmony with Subjugation Relationship with People Individualistic Collateral/Consensus Lineal/Hierarchical Nature of Human Activity Doing Becoming Being Relationship with Time Past Present Future Human nature Good Neutral Evil
  • 23. 23 • This model focuses primarily on how cultures vary in interpersonal communication, but also analysis personal space and time factors. • Hall has always stressed the close relationship between culture and communication. On this ground he defined culture as a “system” to provide, send, store information. Hall argued that “communication is culture, and culture is communication”. • Cultural dimensions (factors): 1. Context - extent to which the context of a message is as important as the message itself. 2. Space - extent to which people are comfortable sharing physical space with others. 3. Time - extent to which people proceed towards one or multiple tasks at a time, speed of actions and lead time. 4. Information flow - speed of message. Hall Four dimensions of context model Hall (1959, …, 1990)
  • 24. 24 Four dimensions of context model Scale Context High context Low context Time as Structure Monochronic Polychronic Time as Communication Event or Object Context Schedule an Appointment  Lead Time Speed Space Intimate Personal Social Public Low High Territoriality Territoriality Information flow Fast Slow Messages Messages Action Decoding time Decoding time
  • 25. 25 • The model focuses on variations in both values and personal relationships across cultures. • The first cultural five dimensions focus on relationships among people, while the last two focus on time management and society's relationship with nature. • Cultural dimensions: 1. Rules vs Relationships - relative importance of applying standardized rules and policies across societal members; role of exceptions in rule enforcement. 2. The Individual vs the Group - extent to which people derive their identity from within themselves or their group. 3. The range of Involvement - extent to which people's various roles are separated or integrated. 4. The range of Emotions - extent to which people are free to express their feelings in public. 5. How Status is viewed - manner in which respect and social status are treated to people. 6. How people manage Time - relative focus on the past/present/future and structuring time in daily activities. 7. Relationship with Environment - extent to which people believe they control the environment or it controls them. Trompenaars Seven dimensions of culture Trompenaars (1993), Trompenaars & Hampden-Turner (1998)
  • 26. 26 Seven dimensions of culture Scale Rules versus Relationships Universalism Particularism the Individual versus the Group Individualism Communitarianism the range of Involvement Diffuse Specific the range of Emotions Neutral Affective/Emotional how Status is viewed Achievement Ascription Time perspective Past Present Future Time structure Sequential Synchronous Relationship with Environment Inner-directed Outer-directed
  • 27. 27 • It is theory of seven cultural value orientations that form three cultural value dimensions. • Identified ten universal human values that reflect needs, social motives and social institutional demands: power, achievement, hedonism, stimulation, self- direction, universalism, benevolence, tradition, conformity and security. • To validate the theory, Schwartz presented analyses of data from 73 countries, using two different instruments. • Using the seven validated cultural orientations, he generated a worldwide map of national cultures that identifies distinctive cultural regions. • Cultural dimensions: 1. Conservatism vs Autonomy - extent to which individuals are integrated in groups. 2. Hierarchy vs Egalitarianism - extent to which equality is valued and expected. 3. Mastery vs Harmony - extent to which people seek to change the natural and social world to advance personal or group interests. Schwartz Cultural value orientations model Schwartz (1992, …, 2006)
  • 28. 28 Cultural value orientations model Scale EGALITARIANISM Social justice Equality EMBEDDEDNESS Social order Obedience Respect for tradition HIERARCHY Authority Humble MASTER Ambition Daring Cultural Dimensions Value Systems SELF-TRANSCENDENCE SELF-ENHANCEMENT OPENESSTOCHANGE CONSERVATION
  • 29. 29 • Based on research of the influence of cultural differences on leadership. • The GLOBE project investigates how cultural values are related to organizational practices, conceptions of leadership, the economic competitiveness of societies, and the human condition of its members. • Cultural dimensions: 1. Power distance - extent to which people expect power to be distributed equally. 2. Uncertainty avoidance - extent to which people rely on social norms, rules and procedures to alleviate unpredictability of future events. 3. Humane orientation - degree to which people encourage and reward fairness, altruism and generosity. 4. Institutional collectivism - degree to which society encourages and rewards collective distribution of resources and collective action. 5. In-group collectivism - degree to which individuals express pride, loyalty and cohesiveness in their organizations or families. GLOBE Global Leadership and Organizational Behavior Effectiveness House et al. (2004, 2007)
  • 30. 30 Cultural dimensions: 6. Assertiveness - degree to which individuals are assertive, confrontational and aggressive in their relationship with others. 7. Gender egalitarianism - degree to which a collective minimizes gender inequality. 8. Future orientation - extent to which people engage in future-oriented behaviors such as planning, investing and delaying gratification. 9. Performance orientation - degree to which high performance and excellence is encouraged and rewarded. GLOBE Global Leadership and Organizational Behavior Effectiveness House et al. (2004, 2007) (cont.)
  • 31. 31 Global Leadership and Organizational Behavior Effectiveness Scale Future Orientation Power Distance Institutional Collectivism Humane OrientationPerformance Orientation Family Collectivism Gender Egalitarianism Assertiveness Uncertainty Avoidance 7 6 5 4 3 2 1 0
  • 32. 32 • The most widely used model of cultural differences. • Hofstede’s model based on the assumption that different cultures can be distinguished based on differences in what they value → value dimensions. • Cultural dimensions: 1. Power Distance - related to the different solutions to the basic problem of human inequality. 2. Uncertainty Avoidance - related to the level of stress in a society in the face of an unknown future. 3. Individualism vs Collectivism - related to the integration of individuals into primary groups. 4. Masculinity vs Femininity - related to the division of emotional roles between women and men. 5. Long Term vs Short Term Orientation - related to the choice of focus for people's efforts: the future or the present and past. 6. Indulgence vs Restraint - related to the gratification versus control of basic human desires related to enjoying life. Hofstede Six value dimensions model Hofstede (1980), Hofstede & Bond (1991), Hofstede & Minkov (2010)
  • 33. 33 Six value dimensions model Scale Individualism versus Collectivism (IDV) Individualism: Preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families Collectivism: Preference for a tightly-knit framework in society in which individuals can expect their relatives or members of a particular in-group to look after them in exchange for unquestioning loyalty Uncertainty Avoidance Index (UAI) High: Maintain rigid codes of belief and behaviour and are intolerant of unorthodox behavior and ideas Low: Maintain a more relaxed attitude in which practice counts more than principles Power Distance Index (PDI) High: Accept a hierarchical order in which everybody has a place and which needs no further justification Low: Strive to equalize the distribution of power and demand justification for inequalities of power - a higher degree of the Index indicates that hierarchy is clearly established and executed in society, without doubt or reason - a lower degree in this index shows more acceptance of differing thoughts/ideas - refers to an individual’s independence from organizations or collectivity
  • 34. 34 Six value dimensions model Scale Indulgence versus Restraint (IND) Indulgence: Allow relatively free gratification of basic and natural human drives related to enjoying life and having fun Restraint: Suppress gratification of needs and regulates it by means of strict social norms Long-Term versus Short-Term Orientation (LTO) Long-Term: Pragmatic approach, encourage thrift and efforts in modern education as a way to prepare for the future Short-Term: Preference to maintain time-honored traditions and norms while viewing societal change with suspicion Masculinity versus Femininity (MAS) Masculinity: Preference in society for achievement, heroism, assertiveness and material rewards for success Femininity: Preference for cooperation, modesty, caring for the weak and quality of life - measures the extent to which members of a society tend to endorse goals characterized by social gender roles/values - associates the connection of the past with the current and future actions/challenges - measures happiness, whether or not simple joys are fulfilled See Indexes: http://www.geerthofstede.eu/dimension-data-matrix (cont.)
  • 35. 35 • This is the latest cultural model to gain world-wide recognition. • It is expanded concept of the Hall’s monochronic (attending to one thing at a time) and polychronic (attending to multiple things at the same time) cultures. • Lewis’s model provides an easy-to-read overview of cultural differences and acts as a guide to interpreting and adapting to different cultural behaviors. • Cultural dimensions: 1. Linear-active - refers to societies where people are task-oriented, highly organized, prefer doing one thing at a time, tend to be logical, efficient and precise → focus on jobs. 2. Reactive - refers to societies where people prefer to listen most od the time, in order to establish both their own and the other’s position → focus on listening to react. 3. Multi-active - refers to societies where people seek harmony, like to do many things at a time, speak and listen at the same time→ focus on building relationships. Lewis Behaviour/communication dimensions model Lewis (1996)
  • 36. 36 Behaviour/Communication dimensions model Scale ReactiveLinear-Active Multi-Active Interconnection satisfactory respect oriented accommodating compromisers target oriented decisive planners people oriented communicative interrelators mediators
  • 37. 37 • Theory of Actions (Parsons & Shils (1951)) 1. Affectivity (need gratification) versus affective neutrality (restraint of impulses). 2. Self-orientation versus collectivity-orientation. 3. Universalism (applying general standards) versus particularism (taking particular relationships into account). 4. Ascription (judging others by who they are) versus achievement (judging others by what they do). 5. Specificity (limiting relations to others to specific spheres) versus diffuseness (no prior limitations to nature of relations). • Group-Grid Theory (Douglas (1970, 1973)) 1. Group – indicating how clearly defined an individual's social position is as inside or outside a bounded social group. 2. Grid – indicating how clearly defined an individual's social role is within networks of social privileges, claims, and obligations. • Cultural Theory of Risk (Douglas & Wildavsky (1982)) based on Group-Grid Theory 1. Hierarchical organizing (e.g. the government). 2. Egalitarian organizing (e.g. Greenpeace). 3. Individualistic organizing (e.g. the markets). 4. Fatalistic organizing (nothing will make any difference). 5. Autonomous organizing (deliberate avoidance of the coercive involvement in the other four). Other national culture models Conceptual dimensions
  • 38. 38 • Standard Analytic Issues (Inkeles & Levinson (1954, 1969)) 1. Relation to authority – personal behaviour adaptation and personal identity representation in interaction with authority. 2. Concept of himself/herself (incl. masculinity/femininity) – what the person thinks he is, like to be, would expect to become. 3. Primary dilemmas and conflicts – ways of dealing with interaction authority versus self. • Cultural Distance approaches: • KS-Index (Kogut & Singh (1988)) based on four Hofstede dimensions (Power distance, Individualism/Collectivism, Masculinity/Femininity, Uncertainty avoidance). • 10 common assumptions on culture distance (Shenkar (2001), Tung & Verbeke (2010)) divided from international business and management research. • Euclidian Distance Index (Barkema and Vermeulen (1997), Drogendijk & Slangen (2006)) based on Schwartz’s dimensions of national culture. • Psychic distance (Dow & Karunaratna (2006)) based on objective data/measures: relative distance of languages, differences in educational level, industrial development, political systems, religion, time zones, and whether the countries in question have previous colonial ties. Other national culture models Conceptual dimensions (cont.)
  • 39. 39 • As is evident from review above, there are many different ways to represent cultural differences. • However, all of the models have important factors to contribute to our understanding of culture as it relates to management practices, therefore, the most productive approach is to integrate and adapt the various models based on their utility for better understanding business and management in cross-cultural settings. • These five relatively distinct common themes that collectively represent the principal differences between cultures are: 1. Distribution of power and authority in society = Hierarchy and Power type cultures. 2. Centrality of individuals or groups as the basis of social relationships = Structure type cultures. 3. People's relationship with their environment = Environment type cultures. 4. Use of time = Time type cultures. 5. Mechanisms of personal and social control = Relationships/Feeling/Emotions type cultures. Convergence of national culture models
  • 40. 40 National culture models Converged dimensions Relationships Power Structure Time Environment Hierarchical vs Egalitarian Uncertainty Avoidance Indulgence vs Restraint Neutral vs Affective Specific vs Diffuse Masculinity vs Femininity Long-Term vs Short- Term Orientation Monochronic vs Polychronic Sequential vs Synchronous Individualism vs Collectivism Individualism vs Communitarianism Universalism vs Particularism Internal-Direction vs Outer-direction High-Context vs Low-Context Achievement vs Ascription
  • 41. 41 National culture dimensions RelationsSmallPowerDistance Individualism Collectivism LargePowerDistance SmallPowerDistance Masculinity Femininity LargePowerDistance SmallPowerDistance Strong Uncertainty Avoidance Weak Uncertainty Avoidance LargePowerDistance StrongUncertaintyAvoidance Individualism Collectivism WeakUncertaintyAvoidance Femininity Individualism Collectivism Masculinity
  • 42. Communication is made possible through symbols, which can be either sounds or gestures. Communication
  • 43. 43 • Language can be defined as a shared communication system allowing exchange of information between two individuals. • From this definition, it can be concluded that language is directly bonded to culture, as it reflects people’s mutual norms, values and beliefs and how they interact within a community and their surroundings → language is central to national identity. • Within a cross-cultural environment, language can be addressed as a barrier for communication for two main issues: – translation problems - it can be very problematic when a word or statement is not fully understood by a person, as it will result in misunderstandings – ’linguistic imperialism’ - a person or group of persons want imperatively the collaboration process to be in their own language Language
  • 44. 44 Non-verbal communication can be defined as human actions and attributes that have socially shared meaning that are intentionally sent or interpreted as intentional, are consciously sent or consciously received and have the potential for feedback from the receiver. • Functions. Replacing spoken messages with gestures. This can be a way to communicate with someone who does not speak your language or serve a utilitarian purpose. Signs and symbols can be used to direct attention to things that they designate. Symbols are however not necessarily universal, what is acceptable in one culture could well be offensive in another. • Proxemics. This refers to the amount of personal space we allow between us and others. • Kinesics. This describes gestures, body movements, facial expressions and eye contacts. All these behaviors are ways that people communicate differently in different cultures. These so-called kinesics again are not universal and can be easily misunderstood. • Silence. This is a form of communication. In some cultures, it means fearful of communicating, in some, a lack of attention, or agreement. • Haptics. Form of interaction involving touch. Use of touch to communicate varies from culture to culture. • Clothing and physical appearance. The cloth really act as communicator when it comes to culture. This has a lot of meaning in different culture and can be used to convey cultural heritage. Non-verbal communication
  • 45. Organizational Culture When we say “culture” in the context of cross-border M&A, it specifically means the organizational culture differences of the merging companies. But it is not enough to know what differences are – the most important part is understanding why these differences exist.
  • 46. 46 • The configurations and managing of organizations are affected by the national cultures; nevertheless, organizational cultures have their own characteristics and dimensions. • Corporate culture refers to the common set of values, traditions, and beliefs that influences organizational behavior; it is a long-term driver of results. • We define organizational culture as the way in which members of an organization relate: • to each other • to their work • to the outside world Two elements determine the strength of corporate culture The number of employees who accept, reject or share in the basic beliefs, values and assumptions The number of shared beliefs, values and assumptions
  • 47. 47 Organizational culture Creating organizational culture An organization’s culture, particularly during its early years, is inevitably tied to the personalities, background, and values of its stakeholders, as well as their vision for the future of the organization. The way they want to do business determines the organization’s rules, the structure set up, and the people they hire to work with them. The industry characteristics and demands act as a force to create a certain orientation culture. Maintaining organizational culture Organization’s culture is shaped as it faces external and internal challenges and learns how to deal with them. When the organization’s way of doing business provides a successful adaptation to environmental challenges and ensures success, those values are retained. These values and ways of doing business are taught to new members as ‘the way to do business’. Stakeholders’ preferences Industry demands Advance values, goals, assumptions Members of organization External stakeholders Environment / Market Leadership Policies & Procedures
  • 48. 48 • Organizational culture starts with a vision/mission statement that provides the members with a purpose • Vision articulates the organization´s purpose • Values offer a set of guidelines on behaviors and mindsets needed to achieve that vision • Whatever the organization´s values are they must be reinforced in review criteria and promotion policies, and baked into operating principles of daily life of the company • So, norms are defined as an established behavior pattern as part of a culture • And practices make an organization differ to another • Through it, culture gives organization a sense of identity and determines, through the organization's legends, rituals, beliefs, meanings, values, norms and language, the way in which ‘things are done’. • However, a successful organizational culture demands people stick with the culture they like, and involves the right culture carriers who reinforce the culture that organization already has.
  • 49. 49 Cultural Iceberg culture has visible and invisible aspects however, culture is not static Three levels of culture identifies how visible the culture is to an observer: • Artifacts – visible organizational structure and processes, building layouts, behavior, physical settings that reflects who we are/want to be • Espoused Values – what we say we stand for, i.e. vision and mission statements, strategies, goals, philosophies • Enacted Values – what our behavior says we stand for, i.e. policies, procedures that demonstrate what really matters • Underlying Assumptions – shared, usually taken for granted values and beliefs about the world, what success is, what matters, who matters, and why Artifacts Underlying assumptions Espoused values Impact Formative factors: • our Core Values – way of seeing the world and deciding what matters to us • our Interpretations – what that means in our personal and professional lives, and • our observable Behaviors – how we ultimately act Schein (1992)
  • 50. 50 • Culture is the most difficult organizational attribute to change, outlasting organizational products, services, founders and leadership and all other physical attributes of the organization. • The two main reasons why cultures develop in organizations is due to external adaptation and internal integration • External adaptation reflects an evolutionary approach to organizational culture and suggests that cultures develop and persist because they help organizations to survive and flourish; if the culture is valuable, then it holds the potential for generating sustained competitive advantages • Internal integration is an important function since social structures are required for organization to exist; organizational practices are learned through socialization at the workplace, and work environment reinforces culture on a daily basis by encouraging employees to exercise cultural values • Organizational culture is shaped by multiple factors: external environment, industry, size and nature of organization’s workforce, technologies in use, the organization’s history and ownership. according to Schein…
  • 51. 51 The culture is dynamic – it adapts and changes in response to various influences and conditions, and is shaped by and overlaps with other cultures External survival factors • Vision/mission, strategy, goals • Means: structure, systems, processes • Measurements: evaluation and correction Internal integration factors • Common language and concepts • Group boundaries and identity • Nature of authority and relationships • Allocation of rewords and status Deep underlying assumptions • Relationships with nature • The nature of reality and truth • The nature of human nature • The nature of human relationships • The nature of time and space • The unknowable and uncontrollable Orientation • Process vs Result • Open vs Closed System • Tight vs Loose Control • Profession vs Parochial Units • Job vs Employee • Pragmatic vs Normative Culture re-structuring Diagnose current culture Develop plan to engage people in desired change of behavior
  • 52. 52 Benefits • Initially, strong culture was conceived as a consistent set of beliefs, values, assumptions and practices embraced by members of the organization • Strong culture has core values which are intensely held and widely shared; it increases behavioral consistency, enhances control and coordination, improves goals alignment between company and employees • Homogeneity among the value structures of organizational actors can be a source of job satisfaction, commitment, job proficiency and long tenure Disadvantages • One limitation of strong culture is the difficulty to change it, therefore, it may hinder efforts at change • The internalized controls associated with a strong culture result in individuals placing unconstrained demands with themselves and acting as a barrier to adaptation and change • A strong culture contribute to a displacement of goals or sub-goals formation. This means that behavioral ways of doing things become important and overshadow the original purpose of organization A strong culture may act as an asset or a liability for the organization Strongculture
  • 53. “Organizational culture is the way we do things in order to succeed.” // William Schneider Models of Organizational Culture
  • 54. 54 Cultural web model • The Paradigm - what the organization is about, what it does, its mission, its values • Stories - build up about people and events, and convey a message about what is valued within the organization • Symbols - include organizational logos and designs, but also extend to symbols of power such as parking spaces and executive washrooms • Power structures - who makes the decisions, how widely spread is power, and on what is power based? • Organizational structures - reporting lines, hierarchies, and the way that work flows through the business • Control systems - the processes in place to monitor what is going on, staff reviewing systems • Rituals & Routines – communication flows, procedures, management meetings, reports and so on Johnson (1988), Johnson & Scholes (1992 ) Stories Symbols Rituals & Routines Control systems Organizational structures Power structures The Paradigm
  • 55. 55 Organizational Culture Profile (OCP) model • Innovative culture is flexible, adaptable, and experiment with new ideas; these organizations are characterized by a flat hierarchy and titles and other status distinctions tend to be downplayed • Aggressive culture values competitiveness and outperforming competitors; by emphasizing this, it often falls short in corporate social responsibility • Outcome-oriented culture emphasizes achievement, results and action as important values • Stable culture is predictable, rule-oriented and bureaucratic, aiming to coordinate and align individual effort for greatest levels of efficiency • People-oriented culture values fairness, supportiveness, and respect for individual rights – ‘people are their greatest asset’ • Team-oriented culture is collaborative, emphasize cooperation among employees, capable of helping each other when needed • Detail-oriented culture emphasizes precision and pays attention to details • Service culture trains employees to serve the customers well and resolve customer problems in ways they see fit • Safety culture exists in jobs that are safety sensitive O’Reilly, Chatman & Caldwell (1991) Innovative AggressiveDetail oriented Team oriented Outcome oriented People oriented Stable OCP Service Safety
  • 56. 56 Outside focused model • Work-hard, play-hard culture has rapid feedback/reward and low risk resulting in stress coming from quantity of work rather than uncertainty; high-speed action leading to high-speed recreation • Tough-guy / macho / stars culture has rapid feedback/reward and high risk, resulting in stress coming from high risk and potential loss/gain of reward; focus on the present rather than the longer-term future • Process culture has slow feedback/reward and low risk, resulting in low stress, plodding work, comfort and security; stress comes from internal politics and stupidity of the system, development of bureaucracies and other ways of maintaining the status quo; focus on security of the past and of the future • Bet-Your-Company culture has slow feedback/reward and high risk, resulting in stress coming from high risk and delay before knowing if actions have paid off; the long view is taken, but then much work is put into making sure things happen as planned LowDegreeRisk Slow Feedback Speed Fast Feedback Speed HighDegreeRisk Work hard/ Play hard Tough-Guy / Macho / Stars Process Bet-Your- Company Deal & Kennedy (1982, 2000)
  • 57. 57 Organizational ideologies model • Role-oriented culture aspires to be as rational and orderly as possible, competition and conflicts are regulated or replaced by agreements, rules, and procedures; while there is a strong emphasis on hierarchy and status, it is moderated by the commitment to legitimacy and legality • Task-oriented culture values highest the achievement of a superordinate goal, and the organization’s structure, functions and activities are all evaluated in terms of their contribution to this superordinate goal; nothing is permitted to get in the way of accomplishing the task • Person-oriented culture seeks primarily to serve the needs of its members, the organization itself is just a device for it; authority in the power-oriented sense is discouraged, and may be assigned only on the basis of task competence; individuals are expected to influence each other through example, helpfulness and caring • Power-oriented culture attempts to dominate its environment and conquer all opposition, maintains absolute control over subordinates Harrison (1972, 1987) HighConcentration Low Formalization High Formalization LowConcentration Role orientation Task/ Achievement orientation Power orientation Person/ Support orientation
  • 58. 58 Four power structures model Based on Harrison’s culture model. • Role culture is highly autocratic and hierarchical bureaucratic; there is a clear defined structure, power derives from a person’s position, and little scope exists for expert power • Task / Achievement culture emphasizes accomplishment of the task; no single power source, matrix organization, teams are formed to solve particular problems and may develop own objectives • Person / People culture has minimal structure and serve to nurture personal growth and development; organization full of people with similar competence, and power lies in each group of individuals • Power culture concentrates power among a small group or a central figure and its control is radiating from its center like a web; this culture needs only a few rules and little bureaucracy, but swift in decisions can occur Handy (1976, 1985, 1993) HighConcentration Low Formalization High Formalization LowConcentration Role Task / Achievement Power Person / People Handy matched its cultural models to Robert Anthony’s hierarchy of management activity: • Strategic management – is concerned with direction-setting, policy making and crisis handling, therefore it suits power culture • Tactical management – is concerned with establishing means to corporate ends, therefore suits a task culture • Operational management – is concerned with routine activities, therefore it suits role culture
  • 59. 59 Universal corporate culture model • Cultivation culture heralds a system of beliefs or expectations that the organization and its people will accomplish what it deems valuable; it trusts unquestioningly in success, in its people and in the organization. • Collaboration culture springs from the family; its way to success is to put a collection of people together, to build these people into a team, to engender their positive affective relationship with one another and to charge them with fully utilizing one another as resources. • Control cultures prize objectivity, empiricism and the systematic examination of externally generated facts are highly valued; emotions, subjectivity, and ‘soft’ concepts take everyone’s eye off the ball and potentially get the organization in trouble; important values in control cultures are order and predictability, as well as maintaining stability. • Competence culture is based in the achievement motive, defined as need to compete against a standard of excellence; in a competence culture, being superior or the best is paramount, and the culture gains its uniqueness by combining possibility with rationalism. Personal Possibility Actuality Impersonal Collaboration Control Cultivation Competence Schneider (1999)
  • 60. 60 Competing values framework (CVF) model • Hierarchy culture emerges in the relatively stable environment; clear lines of decision- making authority, standardized policies and procedures, control and accountability mechanisms were valued as the keys to success • Market culture emerges when the external environment is hostile rather than benign, the organization is in the business of increasing competition, success is defined in terms of result, profit, market share and penetration • Clan culture is a team-oriented approach with basic assumptions that the environment can best be managed through teamwork and employee development, customers are best thought of as partners, the organization is in the business of developing a humane work environment, and the major task of management is to empower employees and facilitate their participation, commitment and loyalty • Adhocracy culture fosters adaptability, flexibility and creativity if uncertainty, ambiguity and information overload are typical; the glue that holds that organization together is commitment to dynamism, experimentation and innovation InternalFocusandIntegration Stability and Control Flexibility and Discretion ExternalFocusandDifferentiation Clan (Collaborate) do things together Adhocracy (Create) do things first Hierarchy (Control) do things right Market (Compete) do things first Quinn and Rohrbaugh (1983), Cameron and Quinn (2011)
  • 61. 61 The 4 diversity cultures model • Guided Missile culture organizations are managed mostly by objectives, employ matrix management structure, and give the individual a great sense of ownership and potential satisfaction of a ‘win’ • Eiffel Tower culture is likened to typical hardened bureaucracy where the infrastructure’s power is directly related to the importance and/of the position, task and accomplishment outweigh the concerns for relationship, and adherence to the rules and recognition of hierarchy are extremely important • Family culture is built on reputation and employs a respect not only for family, but for anyone that has a deep roots in their successes; managers tend to make decisions not only on their bosses recommendations, but also on others who have influenced their careers and whom they honor • Incubator culture deals with self expression; it is the most egalitarian style of management and is often a very loose structure with ideation being a key performance indicator Personal/InformalStyle Hierarchical / Centralized Egalitarian / Decentralized Task/FormalStyle Incubator (fulfilment- oriented) Guided Missile (project- oriented) Family (power- oriented) Eiffel Tower (role-oriented) Trompenaars & Hampden-Turner (1998, 2004), Trompenaars & Woolliams (2008)
  • 62. 62 This model includes twelve norms that are divided in three different types of cultures and defines culture as the behavior that members think is required in order to meet expectations within the organization. • Constructive culture encourages members of the organization to cooperate and meet the higher needs of the higher order • Passive / defensive culture fosters members of the organization to believe that they need interaction in certain ways just to secure their own position • Aggressive / defensive culture pushes members of the organization to protect their status and security in forceful ways Organizational Culture Inventory model Cooke (1987)
  • 63. 63 • Achievement – people are focused on attaining high-quality results (standard of excellence) and try to think ahead, explore alternatives before acting to minimizing risks of failure • Self-actualizing – people in organization try to fulfill their capabilities and talent in order to reach personal growth, strive to acquire knowledge and experience • Humanistic-encouraging – people help others within the organization to grow and develop; focus lies on coaching and caring for whole team in order to move forward • Affiliative – people strive for cooperation and maintaining good working atmosphere, share their thoughts and feelings, are friendly and cooperative, and make others feel a part of things • Approval – employees have a hard time taking own decisions and seek their leaders approval before applying their ideas • Conventional – employees focus on rules and procedures of the organization and are supposed to act according to set standards • Dependent – performance of employees depends on decision of superiors; they do not question orders from the boss but instead follow blindly • Avoidance – employees do not think about their own personal goals and only acts according to policies of the organization • Oppositional – people are critical and question others work; sometimes this might lead to a better product but sometimes the user comes off as arrogant • Power – users like to control others and focus on their own respect and influence • Competitive – people focus on their own status, compare themselves with others and try to outperform them • Perfectionistic – users make an effort in acquiring perfect results with focus on details using high standards as improving their own self-worth Organizational Culture Inventory model (cont.) Constructive cultures Passive cultures Aggressive cultures
  • 64. 64 Denison’s cultures assessment model The Denison model serves as the foundation for the cultural development activities, and is based on four cultural traits (every divided to 3 sub- measures) of effective organization integrated into a common framework what allows to measure these traits simultaneously. • Mission – Direction, Purpose & Blueprint: defining a meaningful long-term direction for the organization “Do we know where we are going?” • Adaptability – Pattern, Trends & Market: translating the demand of the business environment into action “Are we listening to the marketplace?” • Consistency – Systems, Structures & Processes: defining the values, systems and processes that are the basis of a strong culture “Does our system create leverage?” • Involvement – Commitment, Ownership & Responsibility: building human capital, ownership and responsibility “Are our people aligned and engaged?” Denison (1990, 1994, 1996), Denison & Neale (1996) External Focus Internal Focus Flexible Stable
  • 65. 65 • MISSION – the degree to which the organization is crystal clear about its business direction • Strategic Direction and Intent – the organization’s plan to ‘make a mark’ in its industry, articulated strategic intention convey its purpose and make clear how everyone can contribute • Goals and Objectives – a clear set of goals and objectives linked to the mission, vision and strategy what provides everyone a clear direction in their work • Vision – shared view of a desired future status that embodies core values and captures the hearts and minds of the organization, while providing guidance and direction • ADAPTABILITY – the degree to which the organization understands the customers’ needs, can change in response to changing demands, can learn new skills and technologies to support business success • Organizational Learning – the organization receives, translates and interprets signals from the environment into opportunities for encouraging innovation, gaining knowledge and developing capabilities • Customer Focus – the organization is driven by a concern to satisfy the customer, i.e. it understands and reacts to the customers, and anticipates their future needs • Creating Change – the organization is able to create adaptive change, to read the business environment, quickly react to current and anticipated future changes Denison’s cultures assessment model (cont.)
  • 66. 66 • CONSISTENCY – the degree to which the organization has shared values, systems and processes, which support achievement of the business mission and goals • Coordination and Integration – different functions and units of organization are able to work together well to achieve common goals, i.e. the organizational boundaries do not interfere with getting work done • Agreement – the organization is able to reach agreement on critical issues, including the underlying level of agreement and ability to reconcile differences when they occur • Core Values – members of the organization share a set of values which create a strong sense of identity and a clear set of expectations • INVOLVEMENT – the degree to which individuals at all levels are truly engaged in and ‘own’ the business direction, and positioned to help the business succeed • Empowerment – individuals have the authority and ability to manage their own work, what creates a sense of ownership and responsibility toward the organization • Team Orientation – value is placed on working in teams towards common goals to which all employees feel mutual accountability • Capability Development – the organization continually invest in the development of employee’s skills in order to stay competitive and meet on-going business needs Denison’s cultures assessment model (cont.)
  • 67. 67 Hofstede’s 8 dimensions Multi-Focus model This model consists of six autonomous dimensions or variables and two semi- autonomous dimensions: D1 – Means- vs Goals-oriented D2 – Internally vs Externally driven D3 – Easygoing vs Strict work discipline D4 – Local vs Professional D5 – Open vs Closed system D6 – Employee- vs Work-oriented Strategic windowDysfunctional window 0 50 100 Dimensions of organizational culture D1 , D2 , D3 , D4 , D5 , D6 Variable X Variable Y 0 50 100 Dimensions of organizational culture D7 , D8 Low High Hofstede & Minkov (2010), Waisfisz (2015) D7 – Degree of acceptance of leadership style D8 – Degree of identification with your organization
  • 68. 68 D1 - Organization effectiveness – Means- vs Goal-oriented (process vs result) • Means-oriented culture places importance on how work gets done; the focus is on the way people do work and an emphasis on avoiding risk • Goal-oriented culture identifies with what work gets done; there is a strong focus on achieving an end result D2 - Customer orientation – Internally vs Externally driven (pragmatic/flexible vs normative/rigid) • Employees within an internally-driven culture see themselves as experts; they feel they know what is best for the client and customer and act accordingly • Employees working in an externally-driven culture are very customer-oriented and will do whatever the customers wants D3 - Control - Easygoing vs Strict work discipline (loose vs tight control) • In an easygoing culture, the approach to work is informal, loose, unpredictable, little control and discipline what facilitate a high level of improvisation • In a strict culture, there is a fair amount of planning, which leads to efficiency and productivity, people are cost-conscious, punctual and serious D4 - Focus – Local vs Professional • Local organizational culture allows a great amount of predictability as employees identify with their boss and/or their teammates, are short-term directed, internally focused and there is strong social control to act, look, and talk in a certain way • In an organization with a professional culture, employees identify with their profession and/or the content of the work Hofstede’s 8 dimensions Multi-Focus Model (cont.)
  • 69. 69 D5 - Approachability – Open vs Closed system • In an open system, newcomers are welcomed easily, people are inclusive and take the approach that almost anyone will fit in the organization • A closed system is more exclusive, where newcomers have to prove themselves D6 - Management philosophy – Employee- vs Work-oriented • In a culture with an employee-oriented management philosophy, leaders take responsibility for the happiness, well-being, and satisfaction of their employees, even if this is at the expense of the work • In a work-oriented (job-centered) culture, a focus on high task performance can come at the expense of employees, there is heavy pressure to perform the task even if this is at the expense of employees D7 - Degree of acceptance of leadership style • This dimension tells us to which degree the leadership style of respondents’ direct boss is being in line with respondents’ preferences D8 - Degree of identification with your organization • This dimension shows to which degree respondents identify with the organization in its totality Hofstede’s 8 dimensions Multi-Focus Model (cont.)
  • 71. 71 In practice, an organizational culture is not completely homogeneous. Normally there exits a dominant culture, generally accepted and followed by the majority of people. However, in addition to this dominant culture, organization might have some subcultures that overlap and may even disagree with each other. Subcultures reflect common problems, situations or experience that organization faces. • Dominant culture – expresses the core values shared by a majority of the organization’s members = distinctive identity of an organization • Subculture – shares the dominant culture’s core values as well as other values that characterize their own departments, geographical units, etc. • Counterculture – its values are in opposition to those of the dominant culture • Co-cultures – groups of people living within a dominant culture who are clearly different from the dominant culture (basis: gender, race, ethnicity, sexual orientation, religion, social class, generation) Subcultures Dominant culture Core values
  • 72. 72 • The most basic unit in the expression of cultural norms is the individual. A single person mirrors the behavior of those around him, thus adapting to and strengthening, the culture he finds himself in. • Individual culture is the result of numerous aspects of a person’s life, and reflects his own personal values, how he prefers to act, how he likes to treat others and be treated by them. • Individual culture can change over time as person needs to adapt his individual behavior to suit the general orientations of those around him – he either replicates and reinforces cultural norms, or alters and modifies them. • Whether a person is able to adapt his individual cultural preferences depends on whether or not those preferences are core or negotiable. Core cultural preferences are those that a person holds very dear, whether for an ideological reason or because he believes in their importance in his life or society. • When a person experiences a cultural gap with another person or group around a core cultural preference, it is normally too difficult for him to adapt or style switch to match the preferences of those around him. Individual / Personal culture
  • 73. 73 • Every profession develops its own code of conduct, professional norms; this brings pride in their profession and loyalty to the profession – members become more loyal to their profession than to a particular organization. • Professional culture differentiates the characteristics and value systems of particular professional groups. Professional culture • Through personnel selection, similar education and training, on-the-job experience, peer pressure, etc., professionals tend to adopt the value system and develop behaviour patterns consistent with their peers; they learn to ‘walk and talk’ alike. • The positive aspects of the professional culture are shown in strong motivation to do well and a in a high level of professionalism. • A negative aspect is that professionals may adopt value systems that lead to developing a sense of personal invulnerability. • It should be noted, that professional affiliations can create different linguistic repertoires or codes for intra- and/or inter-group communication. Organizational culture Professional culture Industrial culture Market
  • 74. 74 • Compared to professional culture, occupational culture is a broader construct as result of similar occupational backgrounds and experiences of different groups of organizational members. • Occupational culture develops through social interaction, shared experience, common training and affiliation, mutual support, associated values and norms, and similar personal characteristics of members of a particular occupational group. • Occupational culture is a reduced, selective, and task-based version of culture that includes history and traditions, etiquette and routines, rules, principles and practices that serve to buffer practitioners from contacts with the public; a kind of lens on the world, it highlights some aspects of the social and physical environment and omits or minimizes others. • Occupational culture develops distinct jargon and shapes perceptions of reality by developing classification systems to describe experiences and concepts. • Occupational culture may have greater influence over work styles and perspectives than an organization’s policies and procedures, since it crosses organizational boundaries and is often imported. Occupational culture
  • 75. 75 Individual identity Individual identity is the concept a person develops about himself that evolves over the course of his life. This may include aspects of his life that he has no control over, as well as choices he makes in life. The person demonstrates portions of his individual identity outwardly through what he wears and how he interacts with other people. He may also keep some elements of his identity to himself, even when these parts are very important. Individual identity develops over time and can evolve, sometimes drastically, depending on what directions we take in our life. Professional identity Professional identity is the image a person has based on the way he performs a job or operates within a career field. Building a professional identity often involves a mix of education, professional training and personality. People earn degrees and professional certifications to demonstrate knowledge, credibility and expertise in a given profession. Personality and professional etiquette create distinction among the people in a profession who have similar backgrounds.
  • 76. 76 Organizational identity is defined as an enduring, distinctive and central statement perceived by an organization’s members to answer questions such as • “Who are we?” • “What are we doing?” • “What do we want to be in the future?” The organizational culture is the context in which organizational identity is developed. Centrality means that the statement should include features that are important and essential to the organization Distinctiveness emphasizes that the identity statement should be able to distinguish the organization from others and helps the organization locate itself in a specific classification. A distinctive identity statement usually includes organizational ideology, management philosophy and culture Durability emphasizes the enduring nature of organizational identity. It implies that organizational change is difficult to start because the loss of organizational identity will have strong impact on the organization Culture Identity Image The members of organization express their understandings of their organizational culture through organizational identity, which in turn, affects the perception of others outside the organization about the organization. The outsiders’ perception, or organizational image, in turn, affects the organizational identity, which again is reflected in the central elements of the organizational culture.
  • 77. 77 Individual culture socialization Individuals have first been socialized in their national cultures already in their childhood and possibly later as well, in professional cultures before socializing in the organisational culture. However, professional and/or occupational cultures are still expected to persist in organizations because of professional/ occupational affiliations. National cultures have a strong impact on an individual’s perception and understanding, affecting him throughout his lifetime. Socialization refers to the process by which the culture values of organizational members are brought into line with the organizational culture National culture • nationality • ethnicity • region • gender • religion • generation • educational systems • etc. Professional culture • academic • business • banking • legal • medical • engineering • etc. Organizational culture • incl. subcultures Progressive socialization that occur during a person’s life
  • 78. Post-Merger Cultural Integration Two out of three mergers fail due to not taking care of cultural differences. Do you want your acquisition to work? Take culture into consideration.
  • 79. 79 M&A insights on culture • Financial acquirer is not always the cultural acquirer. The company providing acquisition currency (the financial acquirer) should not necessarily impose their culture on the target. At times, an acquisition is driven by importing the target’s culture, or “way of doing things,” such as in situations when the target has innovative products/services or “know-how.” In these cases, the target becomes the cultural acquirer. • Culture must support the business strategy. For instance, if a business strategy is built upon innovation, the culture must be aligned across all enablers (i.e. processes, systems, structure) and oriented toward instilling such an environment by encouraging and embracing creativity and invention. • Not an overnight process. Once similarities and differences in culture are identified, aspects of these cultures to be preserved and enhanced must be identified. Culture will need to be shaped gradually. • Culture is an outcome, not an input. Organization culture is an outcome of good, or poor, integration. Relentless focus on business performance backed by the right processes, systems and incentives will create a sustainable culture. One does not have to change culture as a pre-condition to integration. • Culture is not “good” or “bad” - it just is. An entrepreneurial culture is “loose” for some and “undisciplined” for others. Focusing on leveraging cultural strengths to improve business performance will ultimately create a stronger culture. • Sub-cultures matter. Culture can prevail differently in different parts of the organization. Sub-cultures exist based on function, demographic and/or geographic differences, but may be most pronounced in organizations with an aggressive acquisition history. To affect change, sub-cultures must be recognized and addressed separately yet kept in alignment with the broader organization. • Starts at the top. Culture is a reflection of the behaviors and attitudes exhibited by the organization’s leaders, their adherence to the strategy and their decision making. From our experience, the higher up you go in the organization, the clearer the distinction of cultural differences.
  • 80. 80 Culture has direct influence on the deal’s bottom line. While successful cultural integration is clearly a critical element in deal success, many companies do not know how to successfully navigate it during a transaction. As result, the cultural differences lead to decreased productivity, declining market share and lower revenue – negative effect on value of the deal. • Leadership ownership • Clarity of M&A logic and PMI as change management case • Coherent deal-making and organizational cultures • Early understanding of cultural similarities and differences • Adaptability and flexibility to change culture for both sides of transaction • Communication and active management of changes to culture • Clarity of behavioral directions • Ineffective leadership • Incoherent deal-making and PMI processes • Poorly planned or challenging integration • Failure to recognize or reconcile differences in organizational behavior • Lack of awareness, tolerance or understanding of social drivers of behavior • Inability to drive change • Lack of linkage between required behavior change to business results Time Value Current value Pre-M&A expected value Post-M&A real value Valuecreation Valuedestruction M&A deal’s value leak Culture related factors
  • 81. Cultural due diligence is the process of analyzing a culture with the purpose to identify and outline the cultural strengths and weakness (and risks and opportunities) in relation to the goals and objectives of that organization. Cultural Due Diligence
  • 82. 82 • M&A cultural due diligence refers to the determination of cultural compatibility in merger or acquisition. Cultural compatibility does not necessarily equal cultural similarity, but rather refers to whether two cultures are ‘combinable’. Pre-acquisition cultural due diligence may enable an acquirer to determine whether and how a combination of different cultures in the post-acquisition stage has high chances of success. • Recommended that an acquirer analyze its own organizational and national cultures prior to undertaking acquisitions to identify the cultural factors that are crucial for the future integration of cultures involved. Only then due diligence will help organization uncover the key issues that can impede negotiations and integrations. • Cultural due diligence is different from HR due diligence: • HR DD - focuses primarily on historical and projected headcount, personnel turnover patterns, profiles of senior leadership as well as their compensation packages to resolve the inequities in the compensation plans between the two organizations and other similar issues • Cultural DD - focuses on the assessment of values, visions, missions and beliefs, leadership and management styles, perceptions about the organization, management and the way things are done in the target entity, and their compatibility with those of the acquiring organization
  • 83. 83 Cultural DD as diagnostic process • Identifies target entities using cultural fit as a criterion during M&A strategy planning phase: • By having ‘cultural fit’ (‘cultural compatibility’ ) as a criterion for identifying a target entity, the acquiring company sort out organizations that are culturally dissimilar from the list of potential targets. • By assessing the multiple layers of cultural ‘fit’ (e.g. national, industry, organizational, individual) and considering a range of response scenarios, new types of strategic acquisitions are possible. • Evaluates cultural compatibility between acquirer and target organization: • Organizational values, beliefs, vision or mission • Corporate objectives • Organizational policies, procedures and practices • Understands the concerns and anxieties of the employees in general and key talents in particular in the target organization. • Saves the merged organization from the potential conflict arising out of ‘them vs us’ (=‘talk merger vs act acquisition’ ) syndrome. • Prepares the leaders to achieve M&A outcomes and for a future merged entity. Cultural assessment should: • Provide organizational and national cultures analysis • Determine the degree of cultural alignment between organizations and come up with a culture alignment plan for the areas of divergence • Present a complete risk assessment, signaling the potential organizations / people-related collisions • Identify synergies that sign success Diagnose collision risks between: • Two companies’ views at each other today • Two companies’ views of their shared future • Senior management perspective • Functions / departments • Companies and their customers • Companies and their investors • Companies and their industry • Companies and their suppliers
  • 84. 84 External culture indicators – formal aspects (‘the way we saw they get things done’): • Vision / mission statements • Structure • Rituals and ceremonies • Behavior and patterns of behavior • Policies and procedures • Work environment and layout • Infrastructure and technology in use • Social medial, website content • Relations with external stakeholders Identify meaningful cultural differences National cultural factors Employees may identify both with their original culture and new culture, and experience conflicting values: view to time, task vs relationships orientation, leading vs following, open vs indirect feedback, free will vs fate, labor relations and reward philosophy, labor code, dress code, community involvement, country- unique cultural norms, practices, and traditions. Industry and professional cultural factors Depending on different level of economical development, its globalization, education or political factors industries or professionals may have different cultural features: professionalism, attitude to unions and associations, perception of quality, social responsibility, self-identity, loyalty.
  • 85. 85 Internal culture indicators – informal aspects (‘the way they really get things done’): • Values, belies and assumptions • Attitudes • Heroes and stories • Unconscious behaviors • Leadership and management style • Business drivers • Employees’ practices and perceptions • Organizational ability or resistance to change Identify meaningful cultural differences Organization cultural factors Self-image, corporate values, decision-making process, attitude toward risk and reward, communication process, commitment to employees development and safety, emphasis on people vs tasks, concerns about social responsibility, code of conduct, leadership and management style indicators, traditions. Subcultures factors Organizational structure, intercompany hierarchies or functions may have different subcultures: top-executives vs managers, blue collar vs white collar job, degree of functional importance, individual vs team oriented groups.
  • 86. 86 Cultural integration framework Day 1 M&A pre-deal phase M&A strategy development phase Self- identification phase • Acquirer’s culture self-assessment (real culture vs desired culture) • Cultural evaluation of potential target companies (regarding possible conflicts in fundamental matters and degree of estimated integration difficulties) • ‘Blind’ cultural assessment of selected target companies before negotiation (deal negotiation preparation) • Detailed cultural due diligence as part of general DD process • Cultural integration process (cultural synergy)Socio-cultural integration phase • Identification of cultural risks and potential conflicts • Evaluation degree of cultural integration difficulty • Cultural alignment / integration planning (for both organizations or target company) • Estimation of resources required for cultural alignment / integration
  • 87. • Cultural due diligence is a tool that offers a systematic way to diagnose and address intercultural issues in a merger or acquisition. The aim of it is to synchronize some important elements within a culture. These elements are related to people: how people feel and think, what actions do they completed, how people do tasks, what rules get imposed, and what images and phrases have significant sense. • In cultural due diligence is necessary to examine our own cultural identities as well as others’ cultural beliefs, traditions and values to gain a better insight of their ‘truths’. This process involves standing back of our emotional responses when we recognize that other cultural points of view may differ entirely from our own. • Cultural due diligence can determine the degree to which change can or cannot occur smoothly within the companies involved in M&A due to the fact that some cultural differences can be overcome, others cannot. This is the reason why cultural due diligence is of central importance to the non-operational pre-merger activities.
  • 88. “Culture is more often a course of conflict than a synergy. Cultural differences are a nuisance at best and often a disaster.” // Geert Hofstede Stress Management
  • 89. 89 • Even the best-orchestrated mergers can be threatening, unsettling and stressful for some employees. • Some common merger stressors include: uncertainty, insecurity and fears concerning job loss, job changes, job transfers, compensation changes, or power, status, and prestige changes. • They can lead, in turn, to organizational outcomes such as absenteeism, poor performance and higher employee turnover. • To reduce merger stress, merger stress management plan need to be implemented, which could include the following strategies: • Merger stress audit – assesses of employees perceptions of the merger. • Realistic merger previews – informs employees about what to expect once the acquisition takes place, in order to help them through the transition. • Individual counselling – helps employees overcome merger stress and fear and suggested coping strategies may help alleviate negative reactions. • Merger stress management – enables employees to share their fears and concerns, and would be guided through methods and processes to alleviate these dysfunctional stress responses.
  • 90. 90 Cultural shock Cultural shock grows out of the difficulties in assimilating the new culture, causing difficulty in knowing what is appropriate and what is not. The cultural shocks appeared occurred during the closeness operations between organizations are reflected on three main levels: • Conflicts at the level of structures and working systems • Conflicts related to the management style • Conflicts related to exercising the power Culture shock is often described as a "personal disorientation" that accompanies transition into a new culture. Satisfaction/Happiness Time in new culture Adaptation / Integration Honeymoon Culture shock Adjustment Mastering Experimentation Unreality and euphoria Fantasia Acceptance of reality Interest Search
  • 91. 91 • Demands – issues like workload, work pattern and the work environment • Control – what influence the people have about the way they do their work • Support – including the encouragement, sponsorship and resources provided by the employer, line management and colleagues • Relationships – including promoting positive working to avoid conflict and dealing with unacceptable behavior • Role – whether employees understand their role within the organization and whether the organization ensures that the person does not have conflicting roles • Change – how organizational change (large or small) is managed and communicated in the organization Workplace stressors Stress Support Control Demands Role Relation- ships Change Identify the stress risk factors Monitor and review Record your findings Evaluate the risks Decide who might be harmed and howWork-related stress management
  • 92. 92 Merger-Emotions syndrome • Denial – the first employees’ react to the announced merger; they say it must be ‘just a rumor’ • Fear – when the merger becomes a reality, employees become fearful of the unknown • Anger - once employees feel that they are unable to prevent the merger from taking place, they begin to express anger towards those who are responsible; they feel like they have been ‘sold out’ after providing the company with loyal service • Sadness – employees begin to grieve the loss of organizational identity and reminisce about ‘the good old days’ • Acceptance – when mourning period has elapsed, employees begin to recognize that to fight the situation would be useless; they begin to become hopeful about their new situation • Relief – employees begin to realize that the situation is not as unpromising as they had had predicted • Interest – once people become secure with their new positions or with the company, they begin to look for positive factors, benefits and challenges they can achieve through the new organization • Liking – employees discover new opportunities that they had not envisioned before and begin to like their new situations • Enjoyment – employees discover that the new situation is working out well and feel more secure and comfortable Acceptance News of the merger Commitment to the situation Enjoyment Liking Interest Relief Denial Fear Anger Sadness Hunsaker & Coombs (1988)
  • 93. 93 Self-esteem Shock Denial Anger Depression Acceptance Experimentation Discovery Integration Acquisition Old status quo Chaos Integration in practice Performance Transforming idea discovered Acquisition Time Time Kubler-Ross’s (1970) Weinberg (1997) Motivation 2. Proactive phase Time 1. Alarm 3. Mixed feelings 4. Frustration 5. Reactive phase Geyer & Kohlhofer (2008) 1. Uninformed optimism pessimismoptimism Time 2. Informed pessimism 3. Realism 4. Informed optimism 5. Rewarding completion
  • 94. 94 Effective emotional change management Change curve is unavoidable and expected as people learn and grow through the change event. The depth and duration of disengagement can be managed through effective management of key human factors that helps people to move more quickly from cultural endings to new levels of engagement and productivity: speed of integration, trust, communication and retaining key people. 1. Forming - characterized with anxiety and uncertainty as people just starting to come together. Leader direct. 2. Storming - where conflict and competition are at its greatest as people feel confident and begin to address some of the more important issues surrounding them. Leader coaches. 3. Norming - a sense of community, cohesive organization is established, tasks are set, leadership is shared. Leader facilitates and enables. 4. Performing – organization has a shared culture. Leader delegates and oversees. 5. [Adjourning - involves completing the task and breaking up the team.] Productivity Time Change in demand Unwelcome change duration depth Ending Neutral zone New beginning 1. Forming Tuckman (1965, 1977)
  • 95. M&A, in the end, is not like war. In merger or acquisition, both “they” and “we” want success, and both may find it far more effectively by learning to assimilate the culture of the enemy until there is no enemy at all. Impact of Merger on Culture
  • 96. 96 Typology of cultural integration Cultural integration in terms of the degree of change required by the acquiring company and the acquired company: • Preservation (stand-alone) - requires little change by either company / easiest way • Absorption - requires fundamental changes in the acquired company and little change in the acquiring company / easier way • Reverse merger - requires a high degree of changes in the acquiring company as it adopts the way of the acquired company / harder way • Transformation - requires more fundamental changes for both companies / hardest way • Best of both – requires substantial changes in both companies / hard way ABSORPTION Acquired company conforms to acquirer Cultural assimilation • Imposes acquirer’s preferences • Fast-paced timeline TRANSFORMATION Both companies find new ways to operate Cultural transformation • Develops new culture and values • Gradual shift to strategic control PRESERVATION Acquired company retains independence Cultural autonomy • Protects advanced qualities • Management at arm’s length REVERSE MERGER Exceptional case of acquired company ruling Cultural assimilation • Adopts acquired company’s values, practices and norms BEST OF BOTH Additive from both sides Cultural integration • Sum greater than parts • Collaboration and transferred capabilities Acquiring company Degree of change Acquiredcompany Degreeofchange low high lowhigh Mirvis & Marks (1992)
  • 97. 97 The acquiring company accepts the acquired company’s cultural differences unequivocally. The acquiring company allows the acquired one to operate as an autonomous business unit but usually intervenes to maintain financial control by integrating reporting systems and procedures. The strategy used by the acquirer in this type of acquisition is non-interference. Open Marriage (autonomy or semi-autonomy) The acquirer sees its role as being to dominate and redesign the acquired organization. These types of acquisitions implement wide-scale and radical changes in the acquired company. Their success depends on the acquiring company’s ability to displace and replace the acquired company’s culture. In essence, this is a ‘win/lose’ situation. Traditional / Redesign Marriage (absorb and assimilate) It relies on an integration of operations in which the equality of both organizations is recognized. The essence of the collaborative marriage is shared learning. In contrast to traditional marriages, which centre around destroying and displacing one culture in favour of another, collaborative marriages seek to positively build on and integrate the two to create a ‘best of both’ culture. In collaborative marriages the two organizations are in a ‘win-win’ situation. Modern / Collaborative Marriage (co-create a new identity) Cultural compatibility When an company acquires or merges with another, a new organization may take one of three possible forms depending on the nature of the two cultures, the motive for and the objective and power dynamics of the combination.
  • 98. 98 Difficulties of implementing mergers • Conglomerate merger – the acquired company is usually one of many under the corporate umbrella; since the companies are unrelated in product or service, internal changes to the acquired company, which will remain relatively autonomous, are likely to be minimal, and there will be few cultural consequences • Vertical merger – most of the interaction between the two companies is at the corporate level; the level of complexity at the corporate level increases, this leads to the demotion of some executives to middle management, loss of social standing, which often leads, in turn, to a higher level of executive turnover • Concentric merger – there is a tendency to combine some operations and sharing of expertise between the two companies, which may be resisted by the employees of both companies • Horizontal merger – downsizing and voluntary quits usually precede or immediately follow the merger; the intense interactions between the employees of both companies may result in conflict and the compatibility of styles and values between management and staff becomes central in personnel decisions Degreeofrelatedness Difficulty of implementation Conglomerate lowhigh low high Vertical Concentric Horizontal
  • 99. Culture, by itself, cannot be seen as reason of the failure of post-merger integrations. What makes culture a stumbling block in many M&A deals are the differences that arise during the integration. Challenges of Cultural Integration
  • 100. 100 • As a rule, the financial, legal, technical, and organizational aspects of the merger draw more of the focus while the human and social aspects fall behind. • Result: not enough is done before, during, and after the merger to help people unite successfully • Cultural integration is given lip service but gets shortchanged on investment and attention • Communication with employees about the merger and new culture is sporadic, inadequate, limited to ‘a need to know’ basis • Leadership doesn’t identify culture risks during due diligence. No leaders agreement on the desired culture to work toward (cultural alignment) • In most acquisitions, the organizational cultures of two companies are compatible. This doesn’t mean that the cultures are exactly the same, but rather that they don’t conflict in certain fundamental respects, such as management style and corporate governance practices. Why organizational cultures don’t merger?
  • 101. 101 Cultural clash • People don’t buy in to the newly merged organization. They don’t get the right information from leaders about the purpose and plan for the deal, which leads to distrust and fear about the future, disengagement, and loss of their loyalty. • People don’t understand each other. They don’t learn about the cultural features of the merging organizations, and can’t connect with new colleagues. • People don’t collaborate, or even work against each other. Different systems and business styles keep employees apart; ‘us vs them’ mindset produces internal competition and conflict. • People are distracted from the core business. A poorly planned integration takes too much time and attention; productivity drops, eroding the company’s revenue and customer base. • People leave. They don’t feel like they fit in anymore, or they’re unhappy with the problems and delays of integration. Social merger • People have allegiance to the newly merged organization. They are comfortable and confident in the new company and feel a sense of belonging and united identity, are fully engaged with each other and with their work. • People have positive relationships with each other. They talk to their new colleagues and share their history and ways of doing things. • People cooperate to serve the business. They share information and best practices, answer questions, and act as though they are all on the same side, know when to adapt their processes so that customers are served better. • People stay. They are invested in the new entity they’re building and feel respected and valuable. = Psychological synergy
  • 102. 102 • When dealing with people from another culture, one may know something about their language, the space to use while dealing with people, awareness about your culture and how to apply one’s cultural behavior with that of the other culture. • Cultural intelligence is the capability to work effectively in culturally diverse environments. It covers such areas as: • Linguistic intelligence – helpful to learn about the customer's’ native language and using international business English can increase effectiveness when communicating with persons of other cultures • Spatial intelligence – involves the space used during meetings, negotiations, introductions, etc., and understand the effects of manipulating the spatial dimension • Intrapersonal intelligence – reflects a person’s ability to understand his inner world (from which many people are entirely disconnected), awareness of one’s own cultural style in order to make adjustments to international counterparts • Interpersonal intelligence – includes the ability to understand other people and their motivations, has a keen ability to relate to others as individuals • In order to work with a cultural integration, a person is supposed to recognize and adapt with the differences in cultures – possesses cultural intelligence. Cultural intelligence