addressed if the deal goes forward. Before a valid cultural integration strategy
can be developed on the part of the acquiring company, or between the two
merger partners, a clear understanding of the nature of both companies’ cul-
tures must be fleshed out. This crucial step is often neglected – and sometimes
totally ignored – in most M&A planning processes.
One common mistake that is often made in the cultural due diligence
process is that measures used to delineate the culture are superficial in nature
(such as the number of levels in the organizational structure, the type of
employee benefit programs, level of detail in policy manuals) and do not ade-
quately plumb its depths (Mendenhall, Caligiuri and Tarique, 2001).
Metaphorically, cultural understanding has often been likened to an ice-
berg (Black et al., 1999; Schein, 1987). The tip of the iceberg, visible to the
observer, does not reflect the way in which it is connected to a much larger
mass beneath the ocean’s surface. Similarly, the external manifestation of cul-
tural dynamics – artifacts and behaviors – do not reflect the behind the scenes
dynamics that create them and sustain them. Nor is the meaning that the arti-
facts and behavior have for the members of the culture easily comprehended
by the naïve observer. Thus, fleshing out an understanding of the external
terrain of organizational structures, amount of work done by teams, human
resource policies, etc., does not give a true understanding of the entire culture
of the company. Unless the cultural due diligence team strives to understand
the normative structure that creates micro-level behavior and artifact manifes-
tation, and the core values that in turn create the normative structure, and the
foundational assumptions regarding elementary issues around the very exis-
tence of the organization itself, any cultural integration strategy will be flawed.
Superficial cultural analysis may isolate behavioral predispositions of the com-
pany, but it does not answer the question of ‘why’ the behavior occurs and
continues to occur. Understanding why a company operates the way it does
makes all the difference in creating useful post-merger cultural integration
strategies.
Evans et al. (2002) suggest that cultural due diligence teams must focus
their efforts on data collection that would extract ‘deep knowledge’ of the cul-
ture. Cultural due diligence teams need to ask questions, and find answers to
questions such as (p. 270):
- What are their core beliefs about what it takes to win?
- What drives their business strategy? Tradition or innovation?
- Is the company short-term or long-term in its outlook and execution of initiatives?
- How much risk is the company used to accepting?
- Is the company result-oriented or process-oriented?
- How is power distributed throughout the company?
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