Work, Design and Team process: Mergers and acculturation

Mergers and acculturation

Mergers have proven to be a significant and increasingly popular means for achieving corporate diversity and growth. The role of acculturation in mergers is addressed in this paper and an interdisciplinary acculturative model of the planning and implementation of mergers as a strategic alternative is proposed. It is proposed that the degree of congruence between the preferred modes of acculturation for the acquirer and the acquired company will affect the success of the implementation of the merger.

Organizational culture

Culture is the beliefs and assumptions shared by members of an organization. It is assumed that although a firm may have a dominant culture, many subcultures may coexist and interact. Most of the studies attempting to identify the factors that affect the success of mergers as a strategic alternative mention the importance of more subtle issues. However, there appears to be a gap between the research about the various classifications of mergers and the research about the role culture plays in the overall implementation of mergers.

Mergers in strategic management research

The research on relatedness has shown that although unrelated acquisitions can be successful, firm that diversify into related businesses through internal or external means, on the average, outperform those that diversify into unrelated ones. The choice of degree of relatedness between the two firms in mergers depends upon the motives behind the merger. These motives can include achieving operation synergies in for example production. To obtain these synergies, a firm must select a merger target that is in varying degrees related to its business. Depending on the type of merger and the motive, the acquiring company must decide on an implementation strategy. That strategy determines the extent to which the various systems of the two firms will be combined and the degree to which the employees of the companies will interface. In related mergers, the acquirer is more likely to impose its own culture and practices on the acquired company in contrast with unrelated mergers. Thereby, initiating extensive interaction among the employees of the two firms.

Overall, achieving operating synergies has been less than successful. Possible obstacles for achieving desired synergies are:

-differences in managerial style

-differences in compensation systems

- resistance by the members of both firms in changes of structure

- difference in personnel characteristics and employees’ willingness to adapt to culture and practices of the other company.

Shrivastava focused particularly on the importance of postmerger integration of the two companies in determining the success of the merger. He identified three different levels of intergration: 1:procedural, 2: physical, and 3: managerial and sociocultural.

Acculturation in anthropology and cross-cultural psychology

Acculturation = changes induced in (two cultural) systems as a result of the diffusion of cultural elements in both directions.

The process occurs at the group and individual levels in the three stages of contact, conflict, and adaptation. In organizations, the various systems such as structure and technology affect the organization and its members more directly. Furthermore, in organizations members can choose not to accept the culture of the other organization by simply leaving the organization, or the acculturation process can be bypassed if most members of the acquired company are fired. In mergers, the motive for the merger and the type of merger, both factors are associated with the acquirer, cannot be overlooked.

Modes of acculturation

There are four modes through which acculturation takes place. These modes define ways in which two groups adapt to each other and resolve emergent conflict. In the case of mergers, the characteristics of the acquired and the acquiring companies determine which mode of acculturation will be triggered.

1.Integration

Integration is triggered when members of the acquired firm want to preserve their own culture and identity and want to remain autonomous and independent. Integration involves interaction and adaptation between two cultures and requires mutual contributions by both groups, it does not involve a loss of cultural identity by either. As a result, the acquired company’s employees try to maintain many of the basic assumptions, beliefs, cultural elements, and organizational practices and systems that make them unique. at the same time they are willing to be integrated into the acquirer’s structure. However, integration can take place only if the acquirer is willing to allow such independence.

Overall, integration leads to some degree of change in both groups’ cultures and practices; the flow of cultural elements is balanced because neither group tries to dominate the other.

2.Assimilation

Assimilation is always a unilateral process in which one group willingly adopts the identity and culture of the other. Therefore, the members of the acquired firm willingly relinquish their culture as well as most of their organizational practices and systems, and they adopt the culture and systems of the acquirer. Overall, the acquired firm will be absorbed into the acquirer, and it will cease to exist as a cultural entity.

3.Separation

This involves attempting to preserve one’s culture and practices by remaining separate and independent from the dominant group. Separation is likely to take place when members of the acquired organization wants to preserve their culture and organizational systems and they refuse to become assimilated with the acquirer in any way or at any level. Overall, separation means that there will be a minimal cultural exchange between the two groups, and each will function independently.

4.Deculturation

Deculturation involves losing cultural and psychological contact with both one’s group and the other group, and it involves remaining an outcast to both. Deculturation occurs when members of the acquired company do not value their own culture and organizational practices and systems, and they do not want to be assimilated into the acquiring company. As a result, the acquired company is likely to disintegrate as a cultural identity.

Factors that determine the course of acculturation

The course of acculturation depends on the way in which the acquirer and the acquired company approach the implementation of the merger. From the acquired company’s point of view, the degree to which members want to preserve their own culture and organizational practices and the degree to which they are willing to adopt the acquirer’s culture and practices will determine their preferred mode of acculturation. In the case of the acquirer, the culture, particularly the degree to which the firm is multicultural and the diversification strategy regarding the type of merger, will determine the preferred mode of acculturation. The term multiculturalism refers to the degree to which an organization values cultural diversity and is willing to tolerate and encourage it.

If an organization simply contains many different cultural groups, it is considered to be a plural organization; if in addition, the organization values this diversity, it is considered to be multicultural. The second variable that determines the course of acculturation for the acquirer is the diversification strategy regarding the type of merger – the degree of relatedness between the acquirer and the acquired firms. If the merger is with a firm in a related business, the acquirer is more likely to impose some of its culture and practices in attempt to achieve operating synergies. On the other hand, an acquirer is less likely to interfere with the culture or practices of an unrelated acquisition.

Acculturative model for the implementation of mergers

The basic contention of the model is that given the members of the two organizations may not have the same preferences regarding a mode of acculturation, the degree of agreement (congruence) regarding each one’s preference for a mode of acculturation will be a central factor in the successful implementation of the merger. When the two organizations agree on the preferred mode of acculturation, less acculturative stress and organizational resistance will result, making acculturation a smoother process. Acculturative stress is defined as individual states and behaviors that are mildly pathological and disruptive. Incongruence is likely to lead to high amounts of acculturative stress and disruption for both individual and group functioning.

The last feature of the model is its dynamic nature. The model suggests that the mode of acculturation that occurs, the process of implementation, and the outcome of the merger will, in turn, affect the cultures and practices of two organizations. The dynamic nature of the model suggests that over time two merger partners may each move from one mode of acculturation to other modes and, therefore, the degree of congruence between each one’s preferences may change.

Discussion and implications

It is suggested that a successful merger involves not only thorough financial and strategic analysis and planning, but also planning regarding congruence between the two companies’ preferences about the implementation strategy for the merger. The concepts of acculturation and congruence suggests that many of the problems associated with postmerger integration of two firms can be avoided or managed if they agree on the mode of acculturation. Organizations encompass different subcultures. As a result acculturation may take different courses for various subgroups within the acquired organization and different degrees of congruence are likely to result for each subculture. Therefore, each subculture need to be managed differently.