Iceberg Ahead! How Organisational Culture Can Sink Your Next Merger

Are icebergs a good metaphor for cultures in organisations? (Picture Source)
What happens when two cultural icebergs meet in a merger? (Picture Source)

 

If you’ve previously read any articles on the topic of organisational culture, you’ve probably noticed that many include references to icebergs. The metaphor of culture as an iceberg is actually a very good one.

We see only the visible artifacts of organisational culture, the tip of the iceberg, while the underlying assumptions, values and beliefs remain hidden from view, below the waterline. And yet, these hidden values and beliefs shape the way the organisation works on a daily basis.

As occupants of the organisational iceberg we rarely consider what’s keeping us afloat. There is an enormous amount that is unseen, but which is responsible for much of what happens around us. Culture shapes “how we do things around here”.

But beware! The iceberg metaphor also acknowledges that culture can be a hazard.

The Reinforcing Cycle of Culture

Culture is shaped by, and in turn shapes, organisational behaviour. In this regard it is self-reinforcing, and therefore it can be stubbornly stable and difficult to change. If the existing culture is enabling the organisation to achieve great results, then this stability can be a real asset.

However, when two stable cultures meet as part of a merger, underlying assumptions and values come to the surface and can literally sink the new organisation.

How to Sink a Successful Merger

Cultural stability creates challenges once the culture needs to change and adapt. This is a contributing factor in why mergers and acquisitions often run into difficulty. Attempting to merge two different organisational cultures can create enormous tensions.

Organisational members are torn between their attachment to the old culture and the attractiveness, or otherwise, of the new culture. Rarely is the result of a merger the emergence of a composite culture that represents the best combination of the two existing, pre-merger, cultures.

There are two key variables we should consider when two organisational cultures meet. The first is how willing are organisational members to leave their existing organisational culture behind? The second is how attractive to organisation members is the other organisation’s culture?

These two variables provide us with four potential outcomes:

  1. Assimilation: The new culture can be willingly embraced if the new culture is more attractive than the existing one. For example, organisation members see the opportunity to be part of an organisation that is a technology leader and may be disillusioned with the existing organisation’s failure to innovate.
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  2. Integration: When organisational members find the new culture attractive, while still valuing elements of the old culture, they strive to establish a culture that is a combination of elements of both cultures. The effectiveness of integration can vary across a broad spectrum, from the “best of both worlds” to the “lowest common denominator”.
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  3. Separation: There is a real challenge people are wedded to their existing culture and don’t see anything attractive about the new culture. The result can be that the two cultures continue to exist in isolation from each other. This may be sustainable in the short-term but can mean that the expected synergies from the merger are never realised. At an individual level, some individuals will leave the organisation in preference to embracing the new culture.
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  4. Deculturation: This occurs when organisation members are unhappy in the old culture but feel they don’t fit into the new culture either. They feel that culture change is being forced upon them. This leads to frustration and alienation with the result likely to be a highly dysfunctional business.
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The outcomes described above serve to highlight how organisational culture has a large part to play in any merger or acquisition. Culture changer is difficult and needs considerable effort if it is to be successful.

So, when faced with the iceberg that is culture, it’s important to proceed with caution.


billy-byrneBilly Byrne is an IMI associate on the High Impact Leadership programme.

He is an executive coach, leadership development specialist and an associate at KinchLyons, Organisational Psychologists. Billy holds masters degrees in organisational behaviour and coaching. He is a chartered fellow of CIPD and Council Member of EMCC. To date he has completed sixteen marathons.

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