Focus on People for Successful International Acquisitions

When Daimler and Chrysler merged in 1998, the combined company was expected to become the largest car manufacturer in the world. What was supposed to be a marriage of equals, instead became a cautionary tale for international acquisitions.

While a number of factors derailed the alliance, there’s a general belief that the cultural differences between the two companies – one German, the other American; one a high-end brand, the other perceived as blue collar – played a huge role in working relationships that grew increasingly toxic.

As a counter example, the merger between Renault and Nissan is a text book case of two companies whose merger surpassed all expectations.

The French and the Japanese have very different cultures from each other, far more so than the US and Germany. As part of the merger process, both Renault and Nissan made significant monetary and time commitments in order to develop an understanding of their cultural differences. The result was the creation of an agile company that was able to working effectively with each other and respond quickly to changing market dynamics and customer feedback.

One example of the cultural agility came from Carlos Ghosn, Renault Nissan’s chief executive when he sought to replace a seniority-based reporting structure with one that was based on merit. Japanese culture makes this unacceptable. Through Ghosn’s learned agility in leading a Japanese workforce he instead created a double hierarchy reporting system that respected both merit and seniority. It was a resounding success on every level.

Any company can learn from the experience of these titans. All acquisitions can achieve their growth objectives faster and avoid catastrophe by increasing the agility of the organization. For international acquisitions, where language and distance complicate communication further, the cultural agility of the people in their combined organization is paramount.

Complexity Requires Cultural Agility

Culture comes in many forms: regional, religious, gender, age, industry and organizational. For multinationals to be successful, they must demonstrate the ability to comprehend a multitude of cultural preferences and ambiguities. By doing so, business leaders can communicate in a way that resonates across cultures and creates genuine teamwork. This is culturally agile leadership. Unfortunately it is not yet being adequately introduced to many organizations that are still learning outdated cross cultural and diversity approaches.

Companies invest heavily in their people during an acquisition. However, there is often an over investment in teaching the wrong things. Daimler Chrysler for example, spent millions training employees such things as “German Dining Etiquette” and “Sexual Harassment in the US workplace.” While those are worthy of consideration, rather than focusing its efforts on dining etiquette, the company needed to focus on assumptions about the workforce on the other side of the merger and engendering a willingness to develop relationships with employees in the other culture.

Human Resources isn’t necessarily to fault, since they were likely making the best choices among the offerings available to them. The heart of the problem is that the vast majority of cross-cultural training is based on an outdated model.

Modern cross-cultural training began post World War II with the expansion of US companies working with their counterparts in Japan, Germany, France and Italy. With the exception of the US, these countries are fairly homogeneous. As a result, experts could make broad generalizations about national communication and behavioral styles and be fairly accurate.

Of course, international business is far more complex today. China, India and Brazil are the world’s fastest growing economies and U.S. companies are looking at these markets as high growth opportunities. But within the boundaries of each of these countries are cultures that vary by region – cultures within a culture. Making broad generalizations about a culture are now doomed to fail. China, for example has 56 ethnic groups and 1652 different languages are spoken in India.

The Culturally Agile Organization

Evolving an organization to become culturally agile is a three-part process.

Understanding

Every person and every organization has a degree of cultural agility. The first step is to understand the current degree of organizational and leadership agility through:

  • Conducting a Cultural Agility AuditTM of both organizations
  • Assessing preparedness with company leadership
  • Conducting focus groups with current and prospective customers

Development

Based on the Cultural Agility AuditTM, areas for development can be identified. Development can include:

  • Understanding the impact of culture on working habits, communication and choice of words
  • Training culturally agile skills including self awareness, curiosity, and effective communication
  • Examining the implications on strategy, marketing, organizational development, operations and safety

Reinforce and Grow

Support culturally agile behavior through:

  • Coaching for agility
  • Ongoing training through podcasts, company newsletter, webinars, etc…
  • Assimilating the skills into the DNA of the organization

In international acquisitions, executives tend to focus the majority of their attention on due diligence, strategic planning and finance. However, these “hard” areas typically contribute only 25% of the problems that arise.

On the other hand, 75% of problems relate to people. As a result even a modest improvement in this area can create dramatic results.

Leadership’s focus on creating a culturally agile organization must begin early in the acquisition process to achieve maximum impact. The results for the organization are lasting and speed the success of the acquisition and the growth of the organization as a whole.

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