Exam 8: Organizational Culture

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When one company acquires another, the acquiring company is getting the company's "resources, its processes, and its business model, with the priorities embedded therein." While the resources are easily observable, the company's processes and business model are largely embedded in the unwritten, unarticulated assumptions that make up the group's culture. Before an acquisition takes place, managers of acquiring companies must understand their own company's culture, including its strengths and weaknesses. Then the managers must understand the culture of the company to be acquired. Culture clashes sometimes occur when one company acquires another. In extreme cases, the end result of the incorporation of one company into another is that the culture of the acquired company gets completely replaced by the culture of the acquiring firm. Or, in some rare cases, it is the reverse where the acquired firm's culture becomes the dominant culture of the new entity. The most challenging instances are those where the aspired goal is to truly merge the two cultures into a new one. In this instance, leaders must carefully assess which elements of each organization's culture to incorporate into the new culture and then proceed to do it in a deliberate and thoughtful way. Regardless of which approach to culture is followed, it is important to make sure that the two entities have broadly compatible cultures such that employees of both organizations can be brought together under a common banner.