You can never transfer culture

Sharing from a conversation about The China Chapter; one of the chapters of The Global Best Certification program developed by Dr. Miguel Cerna, and brought to Europe by Verve.

The questions this time came in regard to the influence on organizational culture if one’s company is to merge with a Chinese partner.

“How do we transfer our organizational culture so that the business continues to grow as it has been for the last fifteen years?”

My answer was simple and straightforward: You can never transfer #culture .

“Are we losing our company’s culture?” She asked, adding “That may kill the business”.  I sensed a “I’m not doing it” kind of tone of voice with the last statement.

Let’s elaborate a bit.

#organizationalculture is affected more or less depending on the depth and length of the cooperation project. Let’s take #mergersandacquisitions as an example of the type of cooperation that would necessarily affect culture.

First, a hard truth: M&A are never about culture. They are about business in the sense of increasing revenue, which, without merging with or acquiring a business may take too much effort to achieve. Professor Rima Tamosiuniene published a very good article in regard to M&A. The curious mind may find it here. You may also want to take a look at this recent research on the topic.

Literature, empiric and otherwise, does not include culture as one of the reasons for making M&A, if anything, culture is referred as to a barrier rather than an asset. The most idealistic reason for M&A I find is synergies, rather than that, reasons are pragmatic such as increasing supply-chain pricing advantages, tax benefits, eliminating competition, growing the business, diversifying, achieving economies of scale, vertically integrating the business, etc.

No culture! And yet, it is culture that makes, or not, a business thrive. Research conducted by McKinsey&Co. in 2019 showed that “some 95 percent of executives describe cultural fit as critical to the success of integration.” My experience so far continues to show me that such certainty about the role of culture comes after investments are done and pain points cannot be ignored any longer.

M&A can be seen as a loss or as an evolution of culture. The last one is a more desirable one. When this does not happen, when cultures do not evolve, people, organizations, and countries fall into stagnation, which equals moving backward. And with the speed of changes in the marketplace, catching up becomes much harder if not impossible. Even without merging, cultures must evolve; how soon and to what extent is a topic for a different sharing.

In terms of cooperation projects with China, one should be prepared for both cultural adaptation (first) and evolution (change). Where there is adaptation, evolution happens almost unnoticed. This is unavoidable if cooperation is to succeed.

“But the Chinese partner should adapt too, no?”

Sure, and they will for sure, as long as they see adaptation as the vehicle to reach their goal. One key cultural factor in China is pragmatism.

What to do?:

Before formally entering M&A, we must understand the culture with which we are about to partner. Only then can we estimate the level of adaptation and how our current culture may evolve, which in turn would help us to prepare the necessary mindset so that people from both sides willingly cooperate and compromise. Without such willingness, cooperation won’t happen, and without cooperation, one or both parties may face soaring losses.

Again, you can never transfer culture. But we can evolve by merging the best of the existing cultures intending to cooperate with each other.

Feel free to reach out with questions or share your comments.