Bryan Parkes on assessing cultural fit along with the financials
All organisations face the problem of how best to organise the business to suit changing conditions, new strategies or new products. In addition, mergers and acquisitions are a key route to growth, but one which changes both the scope and scale of activities.
An organisation’s structure reflects how it deploys its resources to meet its objectives, resulting in suitable arrangements to support current strategies. This structure is typically portrayed in the organisation chart.
But while charts depict the formal ways of tackling units of activity, reporting relationships and coordinating mechanisms, the underlying culture can remain hidden beneath more visible statements of mission, values and objectives. So how do we access the fundamental assumptions, beliefs and symbols which ultimately determine how people work and act together? You could call it the intangible yet distinctive flavour of “how things are done around here”.
Culture can be both vague and powerful but used effectively this “collective programming of the mind” can exert a profound influence and linkage to success. History has shown us that business culture and soft interpersonal skills have often played a part in failed mergers or other forms of collaborations, where “cultural differences” are cited as a reason.
An example of conflicting dominant cultures from the IT industry was with the Hewlett Packard/ Compaq merger, where a study identified a clash between HP’s organised, systematic plans for taking on work at odds with Compaq’s spontaneous, just in time responses – a recipe for failure.
Given the substantial sums expended during the due diligence aspect of an M&A can we find a worthwhile measure for culture?
The “cultural web”, first developed by C Johnson, K Scholes and others looks at the organisational paradigm (or common set of assumptions) by way of three distinct levels. First by company values, supported by, second, collective beliefs. Both of these are capable of being articulated in written strategy and company communications.
But lurking underneath, sometimes visible, but often hidden, is the third, deep-rooted “assumptions” held by the employees and perhaps stakeholders. These often reflect the “glue” that holds the business together, and can make it a force for good or a powerful adversary, particularly in the light of acquisition, mergers or other major change initiatives.
We can access the assumptions of an organisation by trying to build up their cultural web, or a series of six interlinking bases comprising the ideology underpinning the business.
To do this we ask a series of questions from employees, aimed at forming a picture.
1) Stories Who are the personalities, what stories of successes or disasters or behaviours are built around them, what is and not acceptable? In my former company, stories about the construction of the Nat West Tower endured for 30 years. They reflected the company’s core belief about capability and innovation.
2) Routines & Rituals These can include procedures, processes and manuals, employee get togethers, special events, annual reviews. I often think of the NHS consultant ward rounds! What behaviour is encouraged? Can these rituals be changed?
3) Symbols Essentially, physical evidence of the company’s culture such as offices, brand and presentation to the outside world. What strands of strategy are inconsistent? I once visited a company claiming to be “passionate about our clients and our people” although its FTSE share price was given pride of place in the reception. The same builder had a “Directors” office suite and dining room. Enough said.
4) Organisational structure A vertical hierarchy, power centralised or localised, hands on approach or leave well alone? Does it match the proclaimed company flexibility? Does the structure encourage collaboration or competition?
5) Control Systems Are controls rigid? Can managers spend money? Is emphasis on reward or punishment? What is the degree of rigour and reliability, the hard and softer aspects?
6) Power Structure Is power in the hands of one, few or many? What is the reaction to success or failure? Maybe there is an autocratic ogre at the top ruling by fear?! What are blockages to change?
After gathering information about these six “bases”, we are on our way to determining the dominant culture, revealing the pattern underpinning “how things are done around here”.
Then we also have to look at the default or automatic response to risks, opportunity, disasters, client handling, staff retention, appetite for change, independence, respect for rules, attitude to results and other implicit actions? I once worked for a contractor with a management team that had a deeply ingrained attitude, which was described to me in terms of “they’re like a rock you can split in half and see a rich vein of xxxx Ltd”. To some that’’s worthy of praise, but to an incoming modernising manager it’s a recipe for ulcers!
Armed with this analysis, which by its nature will be a mix of tangible and formulated views, it may be possible to compare organisations before a merger, look at how people, teams and companies will form a fit, where integration if favourable and where their may be challenges or conflict. Of course this assumes sufficient time and access to the target, and that’s not always possible.
To conclude, culture is both a force for success, but also failure. It is sometimes challenging to do a pre-merger human due diligence. Like the proverbial iceberg, the problem lies not at the surface but underneath the water line, where damage can sink us. However, with a sound map, accurate radar and experienced crew on the bridge we can navigate our way to success.
Bryan Parkes is a lecturer in construction management at Reading University and has more than 30 years’ experience with well-known UK contractors, 15 at senior operational level. Email [email protected]
