The role of organizational culture in merging process

Organizational Culture is a pattern of basic assumptions that are considered valid and that are taught to new members as the way to perceive, think, and feel in the organization. Integration processes had become a need into a globalized world, where companies need to expand themselves in order to compete with bigger competitors and gain expertise for customer satisfaction and recognition.

The most common integration strategies used are Mergers and Acquisitions (M&A), which its principal objective is the fusion or the acquisition of two companies in the same sector. In which its purpose is to increase the market presence in other countries and expand operations with a determined cost.

This is an important decision that companies have to take with a structured plan, analyzing all the variables involved before and after the integration process. The company has to decide if it would grow more with a partner or through a merger, than it would by its own. Sometimes, the organizations take this decision because they have internal conflicts that they would not resolve by themselves, and they need capital injection to survive in the market.

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In the integration process, merging implies the reconstruction of a new social identity, which is the real source of value creation in acquisitions, and in order to create value there must be economy of scale, economy of scope, Increased revenue or market share, Geographical or other diversification and Resource transfer.

The integration process means that two organizational integration variables are particularly relevant in the acquisition process. The first one is the motive for the acquisition, and the second one is the process of implementation, including the “acculturation” process, that occurs when the conflictive subgroups have Cultural differentiation and reject integration.

The success of a particular integration strategy depends primarily on the manager’s ability to reconcile the need for strategic interdependence between the two firms, The need for organizational autonomy, the existence of cultural fit and Managing the cultural differences.

In this process of integration the companies need to take into account the importance of transference of technology and knowledge because both companies are using learning process in order to achieve common goals. This is a necessary condition to the merger process. Taking into account that there are two Challenges to take into account the market situation and the Cultural Convergence.

What are the practical steps to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process to occur between the two groups of people in their process of cultural and behavioral integration?

The key factor to minimize the feelings of uncertainty normally expected by employees, and also to facilitate the learning process to occur between the two groups of people in their process of cultural and behavioral integration is Cultural Convergence, because sometimes is more effective if one company makes all the efforts in order to manage and address the cultural differences and not to try to achieve in ideal cultural fit that sometimes is impossible to reach.

This process take many steps an planning, however those conflicts can be observed in the post-merger stage and this is even more complex because the firms have already invested much money and resources and they cannot lose them. In the case of the banks, the German and American banks made all the possible efforts in order to reduce the cultural clashes to the minimum level.  

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In the case of th emerger of AVIANCA AND ACES, both companies have approximately 5.325 direct workers, which would enter in a cultural change process with Amauta, an International firm that is an expert in this kinds of matter. Korn Ferry Internacional is going to make an executive evaluation and its going to hire an outplacement firm to help to the reduction process and realocation of the personnel.

Finally, employees are the direct contact to the clients, and if is not possible to transmit the new corporate values to them, the effort of avianca and aces to became a good option within the market would be in vain.

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