Monday, February 13, 2006

Cultural Compatability

An amusing bit from a recruiting perspective, critiquing the widely-held belief that “talent” is the be-all-end-all in adding new employees. I particularly like the analogy of a company to a human body, the existing employees to antibodies, and new hires to foreign pathogens. I think the point is well-taken, and the reason so many new hires do go on to succeed - and despite being “pathogens” find themselves embraced by their new colleagues - is because their new employers hired them based on how well they would “fit” in the new corporate culture. Once the “fit” is established, the talent can flourish.

Considerations of fit and cultural compatibility are similarly worth thinking about when acquiring a bunch of new employees via a buyout or merger. On the individual level, and particularly where there is even a whiff of job overlap, the “antibodies” will be out in force to reject the new arrivals. This may just be something to be aware of and try to deal with during integration. However, at the company level – and particularly when the employees acquired are a big part of the value – such cultural considerations can be paramount. If the “systems” are different enough between acquirer and acquired, you run a big risk of quickly losing those people you paid so dearly for. And because you can’t change your own corporate culture, this is a problem that is hard to effectively mitigate with even the best planning and integration execution.

Obviously, considerations of cultural incompatibility are very hard to quantify. And they can be overblown, particularly by those seeking to scotch a deal that otherwise makes sense (I note with amusement that one of the many funny objections to Mittal’s $22B hostile bid for Arcelor – a merger in the steel industry – is that the companies are culturally incompatible). But where corporate culture matters, it must be factored in as a risk to the deal’s value, and meticulous plans must be made to make the invading pathogens feel more like a B-12 booster than a common cold.


regina said...

Welcome to the blogosphere. We probably know alot of the same people. I worked for AirTouch in SF for many years. Good post.

Josh King said...

Thanks - I enjoyed working with my AirTouch compatriots; I mainly dealt with folks in legal, external affairs and tax.