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Sunday, 31 January 2016

Do New Recruits Bring Baggage? It Is a Matter of Culture Clash!

In the early days of my tenure as a Vistage peer group chairman, we had as a speaker the CEO of what he called a "London based corporate finance boutique". Despite this description he proved to be a very entertaining and insightful speaker.

His main message was that sale and/or acquisition of businesses is fraught with complications about which we mere mortals know little and having heard the stories from several of my members I can fully understand.

The fact is that buying and selling companies is a highly specialised activity and we who are more interested in the running of companies don't normally come into contact with the issues associated with the sale or purchase of a business.

The speaker made several very important points one of which was that it is inadvisable to deal with just one company in terms of a potential buyer and it is far more sensible to hold a beauty parade

This was born out by one of my members who sold his company and made sure that he had at least three interested parties to bid for it. In the end he was very successful.

A further point that the speaker mentioned was that while due diligence by accountants was normal for both parties, it is equally important perhaps even more so that the question of a culture match was explored and to seriously considered.

In his opinion at least 50% of all acquisitions fail and 25% of the balance were not very successful. On that basis he suggested that it was usually a clash of culture between the two parties that was the problem.

This is particularly appropriate when as large corporate is acquiring a small entrepreneurial business that has probably been run very successfully with one individual in charge. In that case a culture clash can be terminal.

In fact it can be so traumatic that in many years I have never experienced anybody selling a business and notionally staying in it to be there for more than about six months. The change in culture is just not to the taste of an entrepreneur.

This is not to say that some acquisitions are very successful.  Usually this is because there is a good match of cultures between the two businesses and indeed between the two leaders

In the normal run the sale or acquisition of a business is to say the least an unusual event but the recruitment of executives from outside the business is very frequently a normal experience.

Consider the potential issue of bringing in an executive from a large corporate into a small entrepreneurial business and vice versa for that matter.

In both cases the experience and manner of working is manifestly different from the other and unless both sides are willing to compromise there can be real problems.

Ideally each side should consider this new situation to be a learning experience and should be able to adapt their own working to develop a change that ought to be for the better.

I know of one case where a marketing executive was brought in from a large organisation into a smaller one and he quite frankly cause real issues in the business until after a while people realised that he was offering some great insights as they started to use them.

Culture clash can even be found between departments in a business.  For example the marketing department can operate in a totally different manner from operations and consequently interaction can be problematical.

The crux of the matter is that it is all down to the leader. In every case the leader has the responsibility of designing and driving a culture into the business and furthermore to ensure is that it isn’t just driven downwards by function but it needs to be across all aspects of the company.

The culture of the business or "the way that we do things around here" is the most important factor in the way in which the business is run. It is the most important function of the leader to get that right throughout the business so that success will follow.


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