Solomon Bruce Consulting Blog

Sunday, March 21, 2010

Merging companies-- Is the cultural fit right?

  I was in a service business last week that had recently merged with another similar business which was larger and had a greater customer base.  Interestingly, I had used this smaller service business for several years, had got to know most of the staff, as well as the owner and general manager.
  The atmosphere when I walked in was different.  You know how that it is, it is just different.  Yes, the people were friendly, however, the business had been rearranged, some of the pictures were taken down, other pictures put up in their place.  I met with the general manager and told him why I was there and what kind of service I needed.  He told me that his staff would be happy to help me solve my problems!  I said great-- that is what I needed, solved problems.
   As we filled out the paperwork for the service staff to fix my problems, I asked how the change in new ownership was going.  Interestingly, he said that some days things are great, other days, it was not as much fun as it used to be.  Now, I wanted to know what would generate that kind of answer.  As we visited for several more minutes, it became clear to me that the cultural fit of each company was much different.
   The smaller company had a much more "family" type of atmosphere, where rules and regulations were in place, however, there was some degree of tolerance to be able to make "adjustments" if needed because of rules.  In the new company, everything was being done on the computer, and there was no tolerance for deviation.  If the computer said to do something, that was how it was done.  I clearly noticed that some of the staff from the smaller firm were having "learning challenges" with all of the new rules, policies and procedures.  Now, this is natural for change to happen in any type of new organization.  However, the real question that must be asked is "How are our two cultures going to merge successfully?"
    This is not the first time that I have addressed the subject of merging corporate cultures.  Interestingly, it makes no difference if we are talking about a 3 person office merging with a 39 person firm, or a 125 person store merging with a 400 person company-- the issues and concerns are the same.
    During these turbulent times, many business owners that we talk to are looking at merging with another firm.  The answers that we normally hear are the merger will be better for both firms, we will be able to provide services that neither firm is able to profitably provide, able to increase customer base, reduce inventories, etc.  The one element that I do not hear about is how the different cultures will integrate.
    If you are thinking about either buying another company, going into partnerships with another firm, you really need to spend some time on culture of each firm.
    Here are some questions that need to be addressed BEFORE the companies merge:
A.  Do we do things the same way?  Does one firm use automation almost exclusively and the other firm use manual methods?
B.  How will our various staff members integrate into the new combined firm?  What about skill duplication, overlap?
C.  Will more training be required for all staff because of the integration of both firms?
D.  Will more harm than good be done if we decide to merge?

   These are questions that many firms wish they would have considered before they merged.  In many instances, the merger did not work from the beginning.  In other cases, it took several years and much greater than anticipated expense expenditures before the combined firm worked as initially envisioned.
   If you are thinking about merging your firm with another, irrespective of the size of your firm, carefully consider the points above.  The cultural fit of two discrete companies has to be carefully considered in the overall merger process.



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