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  • Writer's pictureOzzie Paez

Why can't we get along?

Updated: Oct 28, 2020


I’m frequently asked about the implications of mergers and acquisitions.  The issue came up again after Fort Collins’ Woodward, Inc. announced plans to merge with Stamford’s Hexel Corporation.  I consider corporate marriages from leadership, decision-making, and cultural perspectives.  These factors, which are usually overlooked, have doomed seemingly ideal mergers. As Professors Roberto Weber and Collin Camerer observed in their analysis of the 1998 Chrysler-Daimler debacle:

“While culture may seem like a “small thing” when evaluating mergers, compared to product-market and resource synergies, we think the opposite is true because culture is pervasive.  It affects how the everyday business of the firm gets done – whether there is shared understanding… how priorities are set and whether they are uniformly recognized, whether promises that get made are carried out…[1]

These factors are ignored because, unlike quantitative performance measures, we still can’t reduce the human element to data and libraries of algorithms. Qualitative factors like culture, leadership, and decision-making aren’t easily quantified. Instead, quantitative analysts pour over company finances, operational, and market synergies. This process has historically ignored structural organizational barriers and promoted optimistic expectations of new technological advantages.

Structural barriers

Executives and managers from companies with contrasting cultures see the world through very different lenses. Those differences affect decisions on new hires and promotions, resource allocations, risk tolerance, and reactions to potentially disruptive technologies. Splitting these differences after a merger is often impractical because the original companies had operated under different visions. Making matters worse is the common mistake of ignoring these issues during merger negotiations. They are left instead for management to reconcile during the implementation process. It’s not surprising therefore that managers and the workforce, who were not part of the negotiations, often focus on protecting their personal interests, including their jobs[2], rather than the best interests of the new company.

Research from MIT, Harvard, Columbia, and Wharton Business Schools shed light on integration barriers created by cultural, decision-making, and leadership incompatibilities. For example, conservative organizations that only reward technological successes and positive ROIs draw sharp contrasts with those that eagerly embrace technological innovations[3]. These differences can complicate and undermine post-merger efforts to integrate cultures, decision-making and leadership into a cohesive whole.


Technology upgrades are often pursued as means to renew and transform conservative corporate cultures. In this context, merging with and acquiring tech savvy companies are promoted as shortcuts for upgrading leadership, management and technological capabilities. The infusion of “new blood” and technology, it’s hoped, will prove transformational as they diffuse across the merged organizations. Unfortunately, practical experience gained implementing process reengineering and digital transformation initiatives suggest that upgrades in technology and technical expertise are not enough to materially change existing corporate cultures.

Columbia’s David Rogers, author of the Digital Transformation Playbook points out that “Digital transformation is not about technology—it is about strategy and new ways of thinking. Transforming for the digital age requires your business to upgrade its strategic mindset much more than its IT infrastructure.[4]” My experiences implementing dozens of process reengineering projects align with Rogers’ observations. Mergers between conservative and highly innovative tech companies offer little assurance that leadership and management teams will become technologically and strategically innovative.


Merger proposals are supported by detailed financial and market analyses pointing to greater competitive strengths and increased shareholder value. It’s a complicated, expensive process in which quants pour over financial data, market analysts look for synergies, and process analysts identify opportunities to improve efficiency and productivity. They craft the technical-financial case for the respective boards and usually predict a better future based on the companies’ combined strengths.

Yet, for all the analytical rigor, the historical odds of merger success have been less than 50/50[5]. These outcomes suggest that the analytical models used to evaluate proposed mergers are inadequate and incomplete. Given that these models rely on quantitative analysis of operational, market, and financial performance data, we should consider that their inadequacies lie elsewhere. Research and experience suggest that analytical models suffer when they exclude qualitative analysis of differences in corporate leadership, cultures, decision-making, and strategic mindsets.


We shouldn’t be surprised by the poor performance of mergers justified by analytical methodologies that limit and exclude qualitative analysis. The marriage of two organizations involve more than financial, operational, and market synergies. They also involve personal, group and political factors that affect how well workers will support and execute the merged company’s new vision. The process is particularly stressful because it usually includes consolidations of company functions and job cuts that increase uncertainty across the workforce. These conditions magnify conflicts in leadership, management, decision-making, and company vs. personal interests[6].

Harvard’s Graham Allison frames major events involving people and organizations as “large acts.” It’s a reflection that they involve more than intent and negotiated positions. He sees large acts as resulting from “innumerable and often conflicting smaller actions by individuals at various levels of organizations in the service of a variety of only partially compatible conceptions of … organizational goals, and political objectives.[7]

Allison challenges the rational-actor model common in quantitative analysis that presumes reasonable, rational behavior by people and organizations during and in the aftermath of large acts. History, including the historically poor success rate of mergers, supports his position.

Experience and history demonstrate that, to improve the odds of M&A success, analysts and corporate leaders must consider qualitative measures that include culture, leadership styles, decision-making, strategic mindsets, and the impacts of stress and uncertainties on the workforce. These factors should be evaluated, discussed, and negotiated as part of the deal.

These issues may seem trivial but in practice they are neither simple or easy to address. The common practice of deferring them until the implemenation phase creates barriers and increase the odds of failure. These are the inescapable conclusions and lessons from extensive research, experience, and the dreadful record of merger success. In the end, investors deserve better odds of financial returns than a coin toss.


[1] Roberto A. Weber, Collin Farrell Camerer, Cultural Conflict and Merger Failure: An experimental approach, April 2003, Management Science, pages 400-401,

[2] Michele Gelfand, Sarah Gordon, Chengguang Li Virginia Choi, Piotr Prokopowicz, On reason mergers fail: the two cultures aren’t compatible, October 2, 2018, Harvard Business Review,

[3] George Westerman, Didier Bonnet, Andrew McAfee, Leading digital: turning technology into business transformation, Kindle Edition, page 29, 2014, Harvard Business Review Press.

[4] David L. Rogers, The digital transformation playbook: rethink your business for the digital age, Loc 56, Kindle Edition, 2016, Columbia University Press.

[5] Philippe C. Haspeslagh, David B. Jemison, Acquisitions – Myths and reality, January 15, 1987, MIT/Sloan Management Review,

[6] The human side of mergers: those laid off and those left aboard, March30, 2005, Knowledge@Wharton,

[7] Graham T. Allison, Philip I. Zelikow, Essence of Decisions, Location 352, Kindle Edition, 1999, Addison Wesley Longman.

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