From the September 2010 issue of Investment Advisor • Subscribe!

September 1, 2010

Culture Shock: How to Manage a Successful Merger

A successful merger is more than just favorable financials. It's personal

Culture clash has been blamed for many uncomfortable mergers, including the Normans' takeover of Saxon England in 1066 and Bank of America's 2009 acquisition of Merrill Lynch. The current downturn has forced many businesses to merge or go under, while an increasing number of advisors are thinking of cashing out in order to retire. More clashes between different cultures seem inevitable.

In a new book, Win at Work!: The Everybody Wins Approach to Conflict Resolution (Wiley, 2010), Diane Katz points out that most of us are unconscious of the unspoken rules governing how we act, dress, and relate at work.

As social beings, we generally want to fit in with our peers. In the early days of the species, sticking out as "different" put us at risk of being banished from the communal fire. Today, we may have a hard time coping when our tribe of like-minded individuals merges with another tribe that does things differently. With the assistance of two veterans of a successful merger, Greg Friedman and Susan Dickson of Private Ocean, a wealth management firm in the San Francisco Bay area, I've explored how culture differences can be resolved, allowing a more productive M&A transition and more choices for those affected. With thanks to Greg and Susan, here are some examples, accompanied by knowledgeable advice.

Q. I was recently brought into a multi-advisor practice with a mandate to improve customer service. In my opinion, the core problem is that the employees feel overworked, underpaid, and unheard by top management. Their unhappiness has translated into a culture of doing as little as it takes to get by. What's the best way to approach changing the spirit?

A. When I relayed this question to Greg Friedman, president of Private Ocean, he said bluntly, "I believe that fish rot from the head down."

Friedman finds that a good work environment results when people are respected for their work, and collaboration and acknowledgment of individual contributions are modeled and encouraged. He says, "As leader of a company, I try to create an environment that makes people think, as soon as they wake up in the morning and put their feet on the ground, 'I'm gonna do great things for great people, and be appreciated for that.'" He makes sure associates treat each other well. "I use the terms 'internal' and 'external' clients, which are similar," he notes. "We don't treat each other differently than we treat our clients."

Clearly, any culture change has to start at the top. If you have carte blanche to propose changes as you see fit, you may have no qualms about leveling with the big boss(es). Many of us would hesitate to bear such bad tidings to the corner office, but there may be no alternative to becoming a "courageous follower," as business consultant Ira Chaleff advises in his book of the same name (Berrett-Kohler, 2009).

Part of your recommendation might be for the boss to hire a good executive coach who can help him improve his leadership and managerial skills. It may take a while, but I would expect a significant culture shift to occur as he develops into a leader who is liked and respected by his employees, and who can inspire them to give their best.

Q. Our founding partner has a bee in his bonnet about our firm needing a mission statement. I've reviewed many examples, and they're mostly generic blather. I'd like to create a statement that truly expresses why we're in business. How can I frame this process so that the people who participate will get beyond generalities to define the authentic "us"?

A. Susan Dickson, Private Ocean's COO, believes you're on the right track if you seek to involve your co-workers. "Organizations are living, breathing organisms made up of the people who inhabit them," she told me. "So when you are talking about a mission statement, you need to have a retreat and bring all the players together, let the founders tell their histories and their stories, and allow others to offer their input in envisioning the future and creating that statement. People who participate in the process are a lot more likely to be engaged and to buy into the mission statement."

I am a strong advocate of regular staff retreats, especially when guided by an outside expert or team of experts. An unbiased facilitator can encourage everyone in the firm to participate fully, giving even the top brass an opportunity to reveal vulnerabilities as well as strengths. A retreat to develop a mission statement seems to me an excellent way to initiate a soul-searching process that can be repeated as the firm grows.

Q. My client's small electronics business has just been bought by a huge Japanese corporation. His young staff is used to working in jeans and sandals and calling everyone in the company by their first name, while the new Japanese managers wear a suit and tie every day and are punctilious about deference due to rank. I foresee a major culture clash in the offing. Is there hope for East and West to meet amicably?

A. Merging an informal, laid-back culture with another that is more formal and hierarchical is definitely a challenge. Greg Friedman thinks the merged firm is unlikely to develop a hybrid set of attitudes and behaviors if their cultures are very different. "I suspect that within a year, everyone will be either in suits or in jeans," he predicts. "One side will win."

More optimistically, Susan Dickson suggests bringing together as many people as possible from both cultures, introducing them in a relaxed atmosphere, and allowing them to get to know each other. For example, a company picnic or lunch at a casual restaurant, where formal constraints wouldn't operate, might be a good way to launch friendly relations.

Dickson also proposes looking for opportunities to incorporate traditions from both cultures. For example, the company might institute "funky Fridays" in exchange for the staff dressing more neatly from Monday through Thursday, thus introducing casual dress into the Japanese managers' culture in a way that isn't offensive or disrespectful.

Q. We've been having bad luck keeping new hires, and I'm not sure why. In exit interviews, they just say they got a better offer. What questions should we be asking in interviews to weed out job-hoppers?

A. "I think you're looking in the wrong direction," Greg Friedman responds. "You probably don't have an effective onboarding process to bring new people in and integrate them well."

He points out that such a process should incorporate training, structure, and mentoring. The turnover problem should be greatly reduced if these factors are addressed, assuming you do a good job in interviewing. Friedman adds that the interview process should include at least three or four visits with different interviewers and different types of questions. "Everybody can be in 'showtime' mode for the first few visits," he says. "But by the third visit, you start to get closer to who people really are."


Olivia Mellan, a speaker, coach, and business consultant, is the author with Sherry Christie of The Client Connection: How Advisors Can Build Bridges That Last, available through the Investment Advisor Bookstore at www.invest-store.com/investmentadvisor. She also offers money psychology teleclasses , and leads intergenerational retreats for wealthy families. E-mail Olivia at moneyharmony@cs.com.

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