Is Cultural Fit Enough?
Danone and White Wave made headlines recently when Danone made a bid to acquire the company known for their Horizon Organic and Silk brands. I was driving and only partially listening to the two CEOs during an interview on CNBC when I heard the CEO of White Wave, Gregg Engles, say something about that it wasn’t just a good business fit, but that it was a good cultural fit as well. My ears perked up at that statement. You so rarely hear that kind of talk these days — let alone by a CEO of a company. So when I got home I did a little research on the two companies. I’ve never been inside their walls, but their websites do have similar missions and purposes — better health, healthier food, commitment to the environment and their people. I can see why Mr. Engles said that. The question is, is it enough to support the acquisition and its business goals?
This talk of cultural fit also brought two memories into my head. One was a similar statement from the President of a pharmaceutical company that had just been bought by Johnson & Johnson. Someone in the audience had just asked him why Johnson & Johnson? The other memory was from work I recently did with a small marketing communications firm — really two firms that had merged in the last eighteen months.
Big Company/Small Company
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In the first scenario, the President of this newly acquired company said that the reason they even agreed to be purchased by J&J was because the cultures and values were so similar and aligned. He was very sincere and I could tell that not only did he really believe that, but also he felt it was the basis for a smooth transition. Although that may have been true, the size differential between the two companies actually was a source of issues than anything else. When you are small, even if your values are the same and you think there is a cultural fit, you still will have to change a lot of your business processes. And if you are big, you just naturally assume that the way you do things is better — which may or may not be true. Maybe people thought that because the cultures were “so similar”, it wouldn’t be a problem. In this particular case, the issues actually grew over time. It created more problems to be solved and more things to work out. A lot of it could have been avoided if people hadn’t assumed that the cultural and values based fit prevent any problems. This oversight cost the company time and money in lost productivity and regrettable personnel losses. It didn’t have to be that way.
Two Very Different Cultures
In the second scenario, two similarly sized marketing communications companies merged so size was not the problem. The merger was based on perceived synergies. Leadership admitted that the cultures were really different, but they didn’t think that would be a big issue. Surprise! Unfortunately, they underestimated the depth of each company’s culture and how it would affect their merger plans. Every change leadership wanted to make was resisted. Every. Step. Of. The. Way. The leaders are frustrated, their employees are frustrated and no one seems to want to do the one thing that will end their frustrations — bring the two cultures together to create a third, new culture. They are a few years into it and it still impacts productivity and their ability to capitalize on the synergies they envisioned.
Culture Eats Strategy for Lunch
These two scenarios are both cautionary tales for the Danone-White Wave acquisition. Whatever they plan to do — leave it alone (like Danone did with Stonyfield) or bring it into the fold — it will work best if they have a plan that includes some focus on the culture and its impact on business. As several wise people have said over the years “culture eats strategy for lunch”. Danone and White Wave will do themselves and their shareholders, not to mention employees and customers, a big favor if they remember that in the weeks and months ahead.
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