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Friday, March 25, 2022
Corporates | M&A | Corporate Culture
Society is built around culture.
In each interaction, culture frames the way we connect to one another.
As such, the impact of culture within a business cannot be understated. Corporate culture can either become the solid foundation upon which a strong business is built or sow weakness into the very fabric of a company.
But ‘culture’ is often forgotten.
As something that is not always seen, it means it is not always understood. However, leading business owners need to consider the nuanced impact that culture plays in their overall business success – something reiterated in a recent publication out of the Harvard Business Review.
The Harvard Business Review (HBR) names it ‘The Culture Factor’, but what exactly is ‘culture’?
Broadly, it refers to the social behaviours, norms, mindsets, and patterns that make up human societies. By definition, it is the ‘tacit social order of an organisation: It shapes attitudes and behaviours in wide-ranging and durable ways.’
According to HBR, there are 8 distinct cultural styles - Caring; Purpose; Learning; Enjoyment; Results; Authority; Safety; and Order.
For instance, Tesla exemplifies a ‘Learning’ culture driven by Elon Musk’s forward-thinking. The company accepts this in its problem-solving to discover creative solutions that set them apart from competitors.
Alternatively, Huawei exemplifies an ‘Order’ culture. Their ‘wolf culture’ demands gruelling hours and accepts bending the rules to get ahead. While it has landed them in controversial headlines on multiple occasions, their culture is noted as a key reason for their success.
While each of these companies exemplify one culture well, HBR notes how common it was to see pairings within the eight cultures. For instance, ‘learning’ and ‘enjoyment’ were often seen together, as were ‘safety’ and ‘order’.
So, when it comes to choosing a culture to embrace, there is opportunity to be flexible. What is most important is aligning your corporate culture with your corporate values and goals.
For instance, a start-up technology company who wants to focus on innovation will naturally favour a ‘learning’ and/or ‘enjoyment’ culture that breeds creativity. Alternatively, a vegan food and beverage company might rather favour a ‘caring’ and/or ‘purpose’-driven culture.
What is clearly noted is the inextricable relationship between culture and leadership.
A culture that aligns with values, motivations and needs of a workforce offer an invaluable shared purpose.
Two of the largest bankruptcies in history have been found to be caused by culture. After General Motors filed for bankruptcy in 2008, investigations showed their excessive focus on cost shaped an ultimately destructive workplace culture. Similarly, in 2001, Enron’s came with reports that highlighted how its ‘pressure-cooker culture’ was one of the direct causes for bad decision-making.
However well-planned or carefully considered a strategy is, if it does not consider culture then it’s not as robust as it could be.
To start with, consider how to communicate ‘culture’ to a workforce. Think of the above-mentioned ‘learning’ culture that describes Tesla. While Elon Musk might naturally be a learning-focused individual, he needed a way to instil that value into Tesla. As such, culture was actively nurtured by verbally encouraging engineers to think outside the box and not let conventionality constrain them while problem-solving.
Likewise, in your company, you can nurture a culture by telling your workforce what you expect of them and what they can expect of you. Doing so requires C-Suite and senior management individuals to truly understand and support the culture, as they will be key in exemplifying it themselves or overseeing its development in their respective departments and teams.
Communication, therefore, is key.
In many cases, culture is overlooked in M&As - creating an imbalance in cultural dynamics and consequently impacting post-merger performance.
Deloitte highlights that differing cultures in M&As can be seen in decision-making styles; leadership styles; the ability to change; employee work dynamics; and beliefs regarding what is considered “success”.
As is so often the case, the ‘human element’ of business plays a significant part in its success.
Through gaining a deeper awareness of culture – how it works and noticing the impacts of it – leaders can maximise its value and minimise its risks.
As we work with founders and business owners, we draw from these insights and incorporate an understanding of culture into our approach to mergers and acquisitions.
After navigating through the complexities of business and finance, it can be ironic to find that humans are the most complex of them all. But human complexity – when understood and nurtured – has also been at the heart of this world’s greatest achievements. For that reason alone, we believe it is worth taking a moment to explore.
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