Editor’s Note: This is part two of a two-part post by Larry Senn. Part one was posted on Feb. 23rd.
Successful mergers and acquisitions must be based primarily on strategic, financial and other objective criteria, but leaders should not lose sight of understanding and heading off the potential clash of cultures that can lead to financial failure. Far too often, cultural and leadership style differences are not considered seriously enough or systematically addressed.
A great deal of evidence indicates that the ultimate success of mergers and the amount of time it takes to get them on track is determined by how well the cultural aspects of the transition are managed. Yet executives generally spend quite a bit less of their time focused on this than other aspects of the deal.
Editor’s Note: This is part one from a two part post by Larry Senn. Part two will post on Feb. 25th.
Every day in the news lately you read about the latest mergers: airlines, pharmaceutical companies, insurance companies, large retailers like Staples and Office Depot, all consolidating for so many business reasons. Some are successful and create flourishing companies that benefit stockholders and employee’s careers. But here’s the really scary reality: It’s been well documented over many years that up to one third of mergers fail within five years, and as many as 80 percent never live up to their full potential. The main reason for this is what has been called ‘cultural clash’.
I was delighted to recently attend an event at Chief Executive Group honoring our long-time client and my personal friend, L Brands CEO Leslie Wexner, with a lifetime achievement award. There are many company and CEO awards, and Les has been the recipient of many, but this one stood out for me as deeply significant and highly deserving.
The day after this event, I was struck by the comment by Jim Cramer that Les is “Dean of Everything in retailing,” and the notion that he is certainly a leader with much to teach the world.
The longest-serving CEO of a Fortune 500 company, Les is nothing short of an American business legend.
What company in the world has not been going through sudden shifts wrought from major, disruptive change? Consumer technology companies, health care companies, automakers, and smart phone manufacturers are among industries whose very foundation is more like shifting quicksand.
To survive and grow, and even regain competitive advantage, many companies are grappling with ways to transform their businesses in the face of radical change. They are responding in many predictable and time-tested ways: changing CEOs and leadership teams, shifting strategies, rolling out new product lines, amping up innovation, cutting costs and restructuring. These are all the necessary things to do to react to change, but these actions usually only treat the symptoms of a chronic illness – hardening of corporate arteries – without curing the underlying cause.
Companies may be missing out on the most important strategy of all: creating a culture of agility. This should be every CEO’s first strategic priority because it is the culture that enables companies to flex nimbly in any direction and execute any strategy.
In a survey of top leaders by Booz and Company last year 84% said culture was critical to success and yet the majority admitted their culture was in need of a major overhaul. So, how do you transform a culture to meet your company’s needs today? How can you get employees or teams to behave the way you need them to execute your strategies and enhance your performance as well as your employee engagement and the customer experience? How do you get the innovation and agility you need in fast-changing markets? How do you get the cross-organizational collaboration that makes one plus one equal three?
You can do that only by improving the behaviors of people. That’s because culture is nothing more than the collective beliefs and habits of the people in an organization. So in the end, you can only transform cultures by facilitating personal transformation in people.