Executive summary



CULTURE SHOCK

A study of organisational culture and its influence on Mergers and Acquisitions.

Executive summary

This report outlines the progress in the study of organisational culture, attempting to address the ambiguity surrounding this influential but often unidentifiable organisational characteristic. It aims to add clarity to the numerous theoretical definitions and evaluate the rationale for why organisational culture really exists.

The report looks at various methods and tools for identifying culture within an organisational setting, providing managers with an understanding of how to define and characterise their own organisational culture.

Furthermore, I examine the importance of organisational culture and its influence on the success or failure of merger or acquisition activity, specifically looking at a case of blending organisational cultures within this context.

In conclusion the report provides recommendations for mangers whose organisations are entering into merger, acquisition or joint venture activity, forecasting potential challenges and implications, which arise from the amalgamation of different organisational cultures.

What is organisational culture?

There is no common definition of organisational culture and it still remains a divisive question. However the study of organisational culture has rapidly developed over a number of years as clarity was sought regarding the potential impact of culture on organisational performance.

The two schools of thought, that dominate the theoretical landscape of organisational culture, are the managerial and social sciences perspective. The managerial approach, that believes culture is espoused and influenced by a leader or management team to create one unified performance enhancing culture. Then the social sciences perspective, that advocates, culture as an ambiguous product of the shared experiences between individuals, often developed in an ad hoc fashion resulting in fragmented micro cultural elements within a company.

The most prominent of the managerial perspective is that of Edgar Schein who defines organisational culture as ‘both a dynamic phenomenon that surrounds us at all times, being constantly enacted and created by our interactions with others and shaped by leadership behaviour, and a set of structures, routines, rules, and norms that guide and constrain behaviour.’ (Schein, 2004, p. 1).

‘In the managerial literature there is often the implication that having a culture is necessary for effective performance, and that the stronger the culture, the more effective the organization’ (Schein, 2004, p.7).

Hence the better the understanding of organisational cultures the higher the potential for the organisations success. If adopting this managerial perspective, it is reasonable to suggest that organisational culture can be used as a tool for aligning the values of the employees with the values and objectives of a company, in turn leading to increased motivation, productivity and excellence. Companies also see culture as a strategy for distinguishing themselves from others firms. For example when used to differentiation when recruiting or trying to win business. Others believe culture provides ‘the shared rules governing cognitive and affective aspects of membership in an organisation, and the means whereby they are shaped and expressed (Kunda, 1992, pg 8). In other words culture provides a way individuals to derive meaning from their environment, which in turn affects behaviour. This can be explained using equation B = f(I x E) (Dobson), which suggested that behaviour is a function of the individual and the environment in which they are in. Therefore the environment, which is given meaning by culture, influences the behaviour of the individuals within it.

Both views are not necessarily mutually exclusive. Whilst the management view it believes a unified culture can be created and managed, it is our view that it must also take into consideration the existence of fragmented sub cultures within it that cannot be easily manipulated by management.

Figure 1 – An adapted version of

“In search of Excellence” a seminal work in the study of Organisational culture and corporate performance (Peters and Waterman, 1982); drew attention to the importance of culture and maximising operational effectiveness. Culture becomes significant as ‘the glue holding the organisation together’ (Avlesson 2002, pg 7). Moreover as the figure 1 illustrates, it also determines how organisations think about and implement strategy, allocate resources and design its structure. However most importantly it is a factor in determining employee behaviour.

Why do different organisational cultures exist?

Through our observation of number of organisations there is a notional basis on which to believe different types of organisational cultures exist. Studies indicate that leadership is one of the key contributors to cultural differentiation. Founders and leaders of organisation are believed to impose their values on their organisation these values are taught and reinforced through socialisation and if the resultant behaviour is validated by success it continues. Leadership influence also determines other characteristics of culture, such as attitude to risk, rituals and autonomy.

The leaders role as a cultural driver helps sustain culture based on past experiences but as the diagram below illustrates culture becomes a key function of shaping future action.

Executive Influence on Employee Behaviour Cycle (Dobson lecture no. 6)

Executive

Successful Planning

Work Context

Deliberate Training

Role Modelling

Formal Mechanisms

Employee Behaviour

(see appendix 4 for more factors explained)

How do we identify and define organisational culture?

Identifying organisational culture is very important when it comes to analyzing a company’s performance as much can be learnt both plight and achievements by recognising the key features of the culture. Identifying organisational culture is also a necessity if the goal is to change it. Schein's work on identifying culture is the leading work in the area of diagnosing culture; his model deconstructs three levels of culture, which exist within an organisation.

Figure 2 – Schein’s three levels of Culture

(Dobson 2007)

Source: Schein 1985

Schein defines organisational culture as ‘both a dynamic phenomenon that surrounds us at all times, being constantly enacted and created by our interactions with others and shaped by leadership behaviour, and a set of structures, routines, rules, and norms that guide and constrain behaviour.’ (Schein, 2004, p. 1).

Figure 3 – Manifestations of culture in an organisation

The diagram above illustrates a number of distinguishable features, which help identify organisational culture. As many of these features exist below a level that is conceivable to many, various tools have been designed to help organisations identify their own cultures, in order to implement change, leverage a particular aspects of their culture or help articulate culture to employees and other stakeholders.

Cooper and Cartwright (1992), suggest a number of creative methods and techniques for identifying culture, which include; thinking of a realistic slogan or jingle, which expresses the culture of the organisation. For example "always sick to the rules" (Cooper and Cartwright, 1992) or describing the organisation in terms of an animal, these methods may not appear to be serious techniques but they can encourage more imaginative ways to describe a abstract concept. More traditional techniques include interviews and questionnaires, such as those developed by Harrison and Herb Stokes or more recently the Organisational Culture Assessment Instrument (OCAI) based on the competing values framework developed by Kim Cameron and Robert Quinn.

These tools allow organisations to attribute meaning to their distinctive cultures, through such analysis create a better understanding of what cultural distinctions exist and the broad categories which types of culture fall into.

What different types of culture are there?

Goffee and Jones' cultural model is one of the most widely used models of culture typology. The model defines corporate culture from a social science perspective on the basis of Solidarity and Sociability. They propose the idea of the ‘Double S Cube’ (Goffee and Jones, 1998, p 21) Many other notable studies have been completed which attempt to define the varying types of organisational culture. Cameron and Quinns, study being the most recent defines their typology on the basis of the competing values model, (1999) “but follows a long tradition of literature and study proposing a variety of dimensions and attributes of organisational culture” (Cameron and Quinn, p 28). As well as the Cameron and Quinn proposal we have selected typologies proposed by Charles Handy Goffee and Jones and finally Cooper and Cartwright’s four types of culture. The table below summarises the key features of each of the culture types within the four different studies.

Figure 4 – Characteristics of four proposals of cultural typology

|COOPERT & CARTWRIGHT (1992) |CHARLES HANDY (1979) |

|Culture type |Characteristics |Culture type |Characteristics |

| | | | |

|Power |Autocratic leadership | |Paternal leadership |

| |Centralised power structure |Club |Centralised power |

| |Individual decision making | |Individual decision making |

| |---- | |Highly networked |

|Role |Bureaucratic leadership | |Trust based relationships |

| |Efficiency focused |Role |---- |

| |Hierarchical power structure | |Bureaucratic leadership |

| |High degree of formalisation | |Hierarchical power/organisational structure |

| |---- | |Slow to adapt to change |

|Task | | |Efficiency driven |

| |Task/goal orientated | |Role based relationships |

| |Cohesive team | |----- |

| |Flat organisational structure | |Meritocratic leadership |

| |High level of autonomy |Task |Network of loosely linked units |

| |Creative | |Task based relationships |

| |---- | |Shared decision making |

|Person/Support |Egalitarian leadership | |------ |

| |Loose organisational structure | |People focus |

| |Collective decision making | |Collective decision making |

| |People focus |Existential |Individuals maintain identity |

| | | |Lassie faire leadership |

|GOFFEE & JONES |CAMERON & QUINN (1999) |

|Fragmented |Low solidarity and high sociability |Clan |Paternal leadership |

| |--- | |Strong people focus |

| | | |Believe participation strengthens commitment |

| |High solidarity and low sociability | |---- |

|Mercenary |---- | |Entrepreneurial leadership |

| | |Adhocracy |Creative focus |

| |High sociability and low solidarity | |Believe innovation creates new resources |

| | | |---- |

|Networked | | |Competitive leadership |

| |--- |Market |Goal/Market focus |

| |High sociability and high solidarity | |Believe competition fosters productivity |

| | | | |

| | | |---- |

|Communal | | |Coordinated leadership |

| | | |Efficiency Focus |

| | |Hierarchy |Believe control develops efficiency |

Based on the similarities and differences of these different typologies and for the purpose of this study we have aligned and categorised them under broad types primarily determined by the dimensions autonomy Vs degree of power centralisation. Centralisation of power and autonomy are characteristics, that reflect but also influence the development and sustainability of culture. The table below lists some of the features and characteristics of each type of culture.

Figure 5 – The MVENP cultural typology

|Alpha Culture |Bureaucratic culture |

|- Centralised power |- Moderately centralised power |

|- Low autonomy |- Low autonomy |

|Derived from: |Derived from: |

|Cooper and Cartwright's Power culture |Cooper and Cartwright's Role culture |

|Charles Handy's Club Culture |Charles Handy's Role Culture |

| |Cameron and Quinn's Hierarchy |

|Entrepreneurial culture |Collectivist culture |

|- Decentralised power |- Moderate autonomy |

|- High Autonomy |- Moderately decentralised power |

|Derived from: |Derived from: |

|Cooper and Cartwright Task culture |Cooper and cartwrights Person/Support |

|Charles Handy’s Task Culture |Charles Handy's Extentialist |

|Cameron and Quinn’s Adhocracy culture |Cameron and Quinn's Clan culture |

In the current business environment it is difficult for organisational cultures to exist in isolation, particular circumstances such as M&A, cultures are left with little choice but to coincide.

Organisational Culture and Mergers, Acquisitions and Join ventures

Mergers and acquisitions (M&A) are the corporate vehicles of choice in order to realise growth, synergy or greater market share. The perceived ability of M&A to deliver these benefits has driven a decades of volume growth, reaching $2.4 trillion in the last financial year (Thompsons Web source).

The desire outcome of M&A is the maximisation of shareholder wealth; this is derived from the synergistic benefits of the joint organisation, however the key factor is people. The successful integration of the human capital can allow the organisation to focus on helping the people realise the value of the tangible and intangible assets, financial power and market position.

Academic focus on the economic rationale for M&A, has produced numerous strategies for the successful pursuit of such ventures, such as Fairburn, j. and Geroski, P. (1978) and Firth, M. 1980 Ambiguity still surrounds the non-economic factors, which play an integral role in the success of M&A activity. Of those non-economic factors organisational culture and its role within the M&A process has been strongly advocated by practitioners and theorists such as Hall, p and Norburn, D. 1987, Hogan, E. and Overmyer – Day,L. 1994, as a key catalysts for M&A success or failure.

The speed of speed cultural integration has a direct impact on the rate of potential corporate success, according to Walter (1985) socio cultural integration takes between three and five years. Most shareholders would expect returns from an M&A within a much shorter timescale, thus implications when considering bringing people together who may not share the same culture has proved to be extremely significant.

Although the nature of organisational culture determines that empirical study cannot attribute organisational culture to merger failure, evidence from past M&A’s have highlighted how the combination of two or more cultures provides unique challenges for organisations. This becomes particularly salient against a backdrop of “approximately 50% to 80% of all mergers failing to meet expectations” (Bligh, 2006)

The case of AOL and Time Warner (see appendix 1) illustrates the difficulties, which arise from the acquisition process and the implications of bringing two distinctive cultures together. As with many M&A ventures the union of these two companies were unique and mismanaged, consequently the resultant dynamics of this relationship caused significant acquisition failure.

Cultural Compatibility

The resultant cultural dynamics of a combined firm is influenced by the nature of the union, the approach to the activity and the cultures of the individual companies.

A series of major studies conducted by Hall and Norburn (1987) concluded two hypotheses establishing factors, which influenced cultural compatibility of partnering organisations.

“Hypothesis 1 – the extent to which there exists a fit between the culture of the acquiring organisations and the acquired organisation will be directly correlated to the success of the acquisition.

Hypothesis 2 – Where a lack of fit in organisational culture exists, the success of the acquisition is determined by the amount of post acquisition autonomy granted to the acquired organisation.” (Cartwright and Cooper, 1992, p 75).

The hypotheses suggest the better the fit the more likely the success of M&A activity, therefore emphasising the importance of careful assessment of culture when conducting such activity.

Cultural compatibility is influenced by the relationship between the partnering firms, as it sets out the way in which the firms relate to one another at a corporate, and operational level. Cartwright and Cooper (1992) characterised three such relationships, “according to motive objective and power dynamics of the combination” (Cartwright and Cooper, 1992, p 75).

Figure 6 – Characteristics of different M&A approaches

| |Characteristics |

|Open marriage |Acquiring firm confident about the leadership, direction and operation of acquired firm,|

| |and plays a supportive role. Acquired firm maintains a high level of autonomy and |

| |maintains existing culture. E.g. |

|Traditional marriage |Acquiring firm unsure or unhappy with leadership and performance of acquired firm, seeks|

| |to assume operational management and overhaul process and controls. Acquired firm has |

| |little or no autonomy and is expected to adopt culture of the acquiring firm. |

|Collaborative marriage |Merged firms have mutual understanding of the capabilities and benefits that can be |

| |derived from the partnering firms. Shared learning across all areas of the firms is the |

| |key characteristic of such a relationship. There is an exchange of positive cultural |

| |traits and integration of good practice. |

Of the three illustrated by Cooper and Cartwright, only the traditional marriage and collaborative marriage have direct implications on the success of compatibility. Whilst the traditional marriage causes a greater instance of culture conflict, the collaborative marriage is not without its challenges, particularly if the terms of partnership are not effectively communicated to the staff of the two firms, leading them to believe what is actually happening is a traditional partnership.

Chances of successful collaboration in both traditional and collaborative marriages will be often affected by the ability of the respective organisations to understand the other culture(s) and willingness to accept and/or adopt the culture(s). This in turn is determined by the perceived and actual similarities or differences between the various types of cultures and therefore the cultural distance between them.

Cultural distance

Using the degree of autonomy and centralisation of power as dimensions to measure types of cultures, the graph below illustrates the subsequent cultural distance between our cultural types, from which conclusion on the ease of cultural collaboration can be drawn.

Each obvious cultural type is deconstructed into its constituent cultural types, rating each component on a scale of one to five for each measure. The scores of each consistent is averaged to derive a value for our cultural types. (See appendix 5 for detail).

Graph 1 – MEVNP Cultural distance map

This graph shows a negative correlation between autonomy and centralisation of power, indicating that the higher employee autonomy the less centralised the power.

Our four types of culture are located in quadrants Q1 and Q3. These four cultures represent the mean position of culture types, which constitute our four cultures.

Both the entrepreneurial and collectivist cultures are positioned in Q1 (moderate to high autonomy/low to moderate power centralisation), whilst the Alpha and Bureaucratic cultures are positioned in Q3 (low to moderate autonomy/moderate to high power centralisation). The graph indicate the Entrepreneurial and Alpha culture represent the furthest cultural distance and therefore represent the cultures with the greatest difference and least propensity to achieve a cultural match.

As a management tool the graph provides can be used to indicate which cultures are likely to work well together and which are likely to face collaboration challenges, based on the distance between cultures and the direction of cultural adjustment.

Take for example:

In a traditional marriage scenario the entrepreneurial firm is acquiring the firm with a collaborative culture.

In a collaborative marriage scenario the entrepreneurial firm is merging with the firm with a collaborative culture.

In the case of AOL Time Warner it was a collaborative marriage scenario with the entrepreneurial firm acquiring an alpha culture firm,

Implications for employees

The process of M & A has profound effects on the employees of the firms that are engaged in such activities. Regardless of organisational culture, the M&A activity represents a period of potential and significant change, which in turn prompts particular reaction from employees.

An employee is influenced by whether or not they have voluntarily initiated or proceeded into change. The option to self-select a change of state is a key determinant in shaping the predisposition to accepting cultural change. Involuntary change often leaves employees disempowered, and a perceived loss of control over their working environment. (Cooper and Cartwright 1991).

Culture forms a key psychological reference point for employee identity. A degree of uncertainty is created by a change of culture depending on the extent to which they derive their identity from this cultural.

Uncertainty triggers fear of the other organisation, which may develop into resentment, tarnishing future relationships with members of the partnering organisation. According to Altendorf, 1986 and Sinetar, 1987 uncertainty can lead to lower morale, job dissatisfaction and unproductive behaviour.

The end result of this chain of events can be merger or acquisition failure, as is witnessed in the case of AOL Time Warner where warring departments and divisions lead to the “failure” performance of largest merger in history.

Implications for managing cultural change

Consideration for merger or acquisitions spans both economic and human factors. Evidence suggests that despite there being a considerable understanding of the tools for managing the economic and operational elements of M&A, there are a still grey areas in regards to cultural change and management in merger and acquisition situations.

The scope of this study limits the depth in which we can examine and assess the various tools a manager can employ to effectively manage cultural change, integration or collaboration. We have therefore made a number of recommendations for the management of Culture change in an M&A context.

Pre-merger

• A full assessment of other organisations culture

Incorporated into due diligence, it is prudent to undertake a full assessment of the organisations culture. Using tools such as the OCAI questionnaire, interviews with senior management and our cultural mapping instrument, it should be possible to accurately capture the physical manifestations of culture, however will only be able to identify faint signs underlying values and basic assumptions, that exist beneath the surface. In light of this information management should be able to loosely diagnose culture type and uncover any potential challenges a merger may face and aid management in mitigating such events and managing relationships between the two firms.

• Managing the flow of information

Managers assume the role of gatekeepers responsible for managing the flow of information to all relevant parties. During pre merger it is not unusual that suspicion within organisations can develop amongst employees who may suspect and fear change or distrust the target organisation. At this stage it is important that there is an appropriate level of transparency regarding information in order to quell any concern and rumour, that may harm successful cultural integration later in the merger process.

During merger

• Measured and planned interaction

First opinions developed through information and interactions can influence opinions of influential employees, which can then be used to develop negative opinions of the other organisations culture. (Asch, 1946; Luchins, 1957). Intervention through creating opportunities for interaction between groups and individuals from the partnering companies, can help establish a better understanding of the other people and begin to go through the process of developing norms, values and assumptions through shared experiences. This will also give the management the opportunity to assess the dynamics

Post merger

Post merger considerations can fall into three broad categories: monitoring performance, managing integration and monitoring the dynamics of the new group.

In managing the integration of the previous cultures, several of the methods used at the previous stages can be re employed to reinforce the change. Such methods include continuous consultation Management articulating the new culture, can help strengthen the understanding of the new culture, although at this stage interaction between employees will be taking place concurrently, these interactions will play a part in developing shared experiences, norms and values which contradict the espoused culture. It is therefore crucial to monitor the dynamics of employees and dominant groups within the organisation to garner a better understanding of how relationships are being formed and behaviour is being shaped. Ways of doing this include employee surveys, staff away days and targeted consultation.

Financial and operational performance post merger is one of if not the key metric by which success of a merger will be measured, subsequently monitoring of these aspects of the new business will be a priority area for management. A common pressure for managers experiencing mergers or acquisitions is maximising rate of business and cultural integration in order for the business to fully harness the human resource and exploit the economic benefits of the merger or acquisition. Monitoring the financial and operational effectiveness of the firm post merger can be evidence of degree of integration the new organisation has been able to achieve and indication as to what work still remains to be done to consolidate and establish a unified organisational culture.

Conclusion

The study of culture in the context of M&A raises a number of issues for not only employee’s managers but also the organisation.

Financial and operational performance of a post merger organisation is one of the fundamental if not key metric by which M&A success is measured. The part played by culture is largely undetermined however as the 1999 Hewitt associate survey of 218 major organisation stated, integrating culture is cited as the top challenge for 69% of the participants.

As we have examined in the case of AOL Time Warner and Daimler Chrysler culture does have a tangible impact on the functioning of an organisation post merger. In these instances, cultural differences and management of thereof led to significant difficulties and merger failure.

However looking at companies which have been able to forge strong cultures E.g. have benefited from positive post merger experience. This goes some way to strengthening the argument that strong cultures equal good business.

This is also supported by numerous studies including Hall and Noburn (1987) who hypotheses a direct correlation between success and cultural fit.

In light of this and the growing volume of research advocating the importance of culture in M&A, against a backdrop of high rate of merger failure and growing volumes of investment. Organiastions must at thee very least consider culture, cultural compatibility and resultant cultural dynamics when entering into M&A activity.

This report offers a guide through this area of study, highlighting tools and methods, which can be used in diagnosing culture and evaluating cultural fit.

In conclusion, it is important however to stipulate that the uniqueness of each organization and their approach to M&A will mean that various tool and methods will not prove to be 100% accurate or always deliver merger success. Much has been done to articulate the economic rationale for M&A and considerations for entering into such activity therefore we must also stress that culture cannot be assessed as a measure for merger success in isolation but as a plethora of factors which influence the success or failure of M&A Activity.

APPENDICIES

Appendix 1 - CULTURE SHOCK - AOL TIME WARNER CASE STUDY

Appendix 2 - Goffee and Jones Typology

Appendix 3 - Factors distinguishing culture in organisations

Appendix 4 - MVENP Cultural distance map

Appendix 1 - CULTURE SHOCK - AOL TIME WARNER CASE STUDY

This case study concerns the merger of AOL and Time Warner. The case study serves to illustrate a number of points in particular.

1. Motives for merging

2. Difficulties with cultural compatibility

3. Ineffective management of Cultural integration

The merger of AOL Time Warner occurred at the peak of the dot com boom period, characterised by a flurry of M&A activity and millions of dollars in venture capital invested in the hi tech media sector.

The rise of the internet as a supposedly financially viable medium attracted plenty of attention from “old media” looking for ways to adapt to the increasingly digitised world. Giants such as Time Warner, News Corp, and others had amassed huge fortunes from the media industry but soon saw upstarts in the digital business such as Yahoo, AOL and Google on the horizon quickly changing the nature of the market and potentially eroding their profits and market share. Meanwhile these new businesses had forged and developed an industry out of almost nothing in a short period of time and sought to encroach on Old media territory.

AOL’s Aim was to create a “digital giant” capitalising on their position as a global Internet service provider with access to around 20 million subscriptions worldwide. Founded by Chairman Steve case and lead by CEO Robert Pittman both respected media industry players, AOL had the potential to exploit is large customer base in a way no other internet company had been able to at that time. Time Warner aware of the changing landscape and AOL saw an opportunity to use their intimate knowledge of new media platforms combined with Time Warner’s large portfolio of content, which include publications, book publishing, motion pictures and music.

The nature of the acquisition was unusual in that AOL was the acquiring company despite being the smaller of the two firms. They proceeded with acquiring Time Warner for $182 billion in stock and debt (CNN Web, 2000) however Time Warner would be providing 70% of the profit streams (CNN Web, 2000). Research indicates that both parties sought to pursue a more collaborative marriage, turning to Robert Pitman who was charged with the responsibility of merging these two companies to “cross pollinate” ideas in order to extract the synergies that existed as a joint company. Pittman remained optimistic about the likelihood of such collaboration taking place in his own words stating “the truth is these two companies are a lot alike,. What we both think about is the consumer, what people are doing and how do we serve them and create new value (New York Times January, 2000). What was assumed possibly due to the structure of the acquisition and the planned business model was that this was more of a traditional marriage, and concerns amongst senior staff began to surface. “managing Time Warner is like herding cats” says Time CEO Don Logan, to make matters worse, there’s a huge cultural gap between AOL’s twenty something’s and Time Warner’s greybeards. When it comes to making deals or launching new ventures they move at two speeds. Its lets do lunch” vs. “lets skip lunch.” AOL would say we’re as entrepreneurial as a couple of 90 yr olds. (Business week, January 2000) this statement from a senior Time Waner executive highlights the difference in the perception of the cultural compatibility of the two organisations.

At this point alarm bells should have began ringing, it is clear that awareness of a potential culture clash was not fully recognised by the leadership of the organisation.

In regards to the management of the cultural change the awareness of potential culture clash did not seem to be recognised either as the HR executives core to the management of cultural integration and change harboured the opinion that “anything that slides under the banner of cultural change is doomed to failure” and that “one of the stupidest things you can try and do is to try and tell organisations that they cant have their own culture” Although cultural autonomy is a philosophy an organisation can encourage, when facing a merger situation where the intention is to encourage operational collaboration, cultural collaboration is not only necessary but inevitable.

Due to a poor diagnosis of the cultures from the leadership, assuming compatibility was certain, and poor communication of the true nature and expectation of the relationship by the evidence it was clear that the AOL Time Warner relationship may have been doomed from the start.

The contrast between Time Warner “the big, too complex and too slow moving” (BBC Web news) organisation to AOL’s agile, dynamic culture seemed too stark to manage. As a result the AOL Time Warner partnership suffered a 66% fall in stock price. (USA Today, 2005) The AOL figurehead of the acquisition Robert Pitman was dismissed and replaced with Time Warner veteran followed by AOL being dropped from the corporate name. The fallout of what has been dubbed the worst merger of all time continues amid talk of a possible de merger championed by AOL Founder Steve Case, in a recent report by the FT into this merger disaster. Although extreme the AOL Time Warner case shows how significant an impact culture shock can really have.

Appendix 2 - Goffee and Jones Typology

NEGATIVE

POSITIVE

Networked Communal

LOW

Sociability

HIGH

Fragmented Mercenary

LOW HIGH

Solidarity

Double S Cube’ [Goffee and Jones, 1998, p 21]

Goffee and Jones set out their approach of organisational culture their two-by-two matrix S-Cube. Solidarity relationships driven by logic are defined by Goffee and Jones as based on common tasks, mutual interests, and clearly understood shared goals and belief that all the involved parties, whether they personally like each other or not.’ [Goffee and Jones, 1998, p 28].

On the other hand sociability driven by emotion is defined as ‘a measure of friendliness among members of a community. Sociability often comes naturally’. [Goffee and Jones, 1998, p 23].

Appendix 4 - Factors distinguishing culture in organisations

Although leadership is arguably the most influential factor which help to differentiate the culture of an organisation:

Dominant individual and dominant group values- Dominant groups through their influence on the working environment can shape the dominant culture of the organisation.

Organisational structure - the structure of the organisation influences the interactions between people in different departments or divisions. These interactions help establish the key elements of culture such as values, behavioural norms and basic assumptions. Therefore flat structures which have greater mobility and access to individuals across the firm are likely to encourage a more unified culture than those which have less access to individuals across divisions and departments leading to a more fragmented culture.

Nature of industry - will cultivate different cultures, some industries such as the hi-tech industry for example are more entrepreneurial and therefore lend themselves to more task based cultures. However the banking industry is more bureaucratic and therefore fosters a more constrained culture.

Societal values - the values of the incumbent society sets the context in which the organisational culture will then develop. Hofstede’s study into national culture examines the influence of national cultures on the organisation.

Appendix 4 – MVENP map of cultural distance

|  | Constituent Cultures |Autonomy |Power |

|  | |  |  |

|Alpha |Power |1 |5 |

|  |Club |1 |5 |

|Average Score |  |1 |5 |

|  |  |  |  |

|Bureaucratic |Role |2 |4 |

|  |Role |2 |4 |

|  |Hierarchy |2 |4 |

|Average Score |  |2 |4 |

|  |  |  |  |

|Entrepreneurial |Task |4 |2 |

|  |Task |5 |1 |

|  |Adhocracy |5 |2 |

|Average score |  |4.6 |1.6 |

|  |  |  |  |

|collectivist |Person/support |3 |2 |

|  |Existential |4 |1 |

|  |Clan |3 |3 |

|Average score |  |3 |2 |

References

Books

• Alvesson, M. (2002) Understanding Organizational Culture, London: SAGE Publications

• Cameron, K. and Quinn, R. (1999) Diagnosing and Changing Organizational Culture, New York: ADDISON-WESLEY

• Cartwright, S. and Cooper, C. (1992) Managing Mergers, Acquisitions and Strategic Alliances, Oxford: Butterworth-Heinemann

• Deal, T. and Kennedy, A. (1982) Corporate Cultures, London: Penguin Books

• Goffee, R. and Jones, G. (1998) The Character of a Corporation, London: HarperCollinsBusiness

• Handy, C. (1979) Gods of Management, London: Pan Books

• Hellriegel, D., Slocum, J. & Woodman, R. (2001) Organizational Behavior (9th edition) USA: South-West College Publishing

• Huczynski, A. & Buchanan, D. (2007) Organizational Behavior( 6th edition) Essex: Pearson Education Limited

• Jackson, T. (1993) Organizational Behavior in International Management, Oxford: Butterworth-Heinemann Ltd

• Kunda, G. (1992) Engineering Culture: Control and Commitment in a High-Tech Corporation, Temple University Press

• Martin, J. Cultures in Organizations, New York:OUP

• Pettinger, R. (1996) Introduction to Organisational Behaviour, London: MACMILLAN

• Robbins, S. (1990) Organization Theory. Structure, Design, and Applications, New Jersey, Prentice-Hall

• Schein, E. (2004) Organizational Culture and Leadership, San Francisco: Jossey-Bass

Internet sources:

• Case, S. (2005) It’s Time to Make It Apart, The Washington Post, Sunday, 11/12/2005. Available



dyn/content/article/2005/12/10/AR2005121000099.html [30/10/2007]

• Johnson, T. (2000) That’s AOL folks, CNN Money. Available [04/11/2007]

• BBC News (2005) Case calls for Time Warner split. Available [26/10/2007]

• Thomson (2007) Merges and Acquisitions Continue to Dominate Exit Scene For Full Year 2006. Available [26/10/2007]

• AltAssets (2007) Freeman & Co. details record 2006 financial services deal activity and projects continuing trends will produce robust deal volume in 2007. Available [25/10/2007]

Articles

• Bligh, M. (2006) Surviving Post-merger ‘Culture Clash’: Can Cultural Leadership Lessen the Casualties?

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Stories and myths

The way do feel about things

around here

The way we think about things around here

Strategy

Rituals and Routines

Symbols

Power Structures

Organisational Structures

Control systems

The Paradigm

CENTRALISED

POWER

Alpha

Culture

Bureaucratic

Culture

Collectivist

Culture

Entrepreneurial

Culture

Q4

Q3

Q2

Q1

Structure

Formal Policies & Procedures

Source: Johnston, G. (1992) ‘Managing Strategic Change - Strategy, Culture and Actions’, Long

Range Planning, 25, (1) p.31.

DECENTRALISED

POWER

HIGH AUTONOMY

LOW AUTONOMY

• Small cultural distance

• Similar cultures

• Less dominant culture adjusting to the organisation with stronger functions of autonomy and centralisation

This scenario can be expected to work reasonably well, although may face some issues due to the displacement of much of the collaborative culture.

Direction of cultural adjustment

Collaborative culture

Entrepreneurial culture

• Small cultural distance

• Similar cultures

• Both cultures making an equal and small cultural adjustment

This scenario can be expected to work better than example 1 due to the small adjustments both have to make and subsequently the less of each culture will have to be displaced.

Direction of cultural adjustment

Entrepreneurial culture

Collaborative culture

• Furthest cultural distance

• Different cultures

• Equally dominant culture types, although AOL made a larger cultural adjustment due to factors such as being the smaller and younger company, and also during times of difficulty the joined firm reverted to a more structured culture

Direction of cultural adjustment

Alpha

Culture

Entrepreneurial culture

See Appendix 1 for case study.

Technology &

work processes

Resources

Staff

The way we feel about things

around here

LOW AUTONOMY

HIGH AUTONOMY

DECENTRALISED

POWER

CENTRALISED

POWER

Alpha

Culture

Bureaucratic

Culture

Collectivist

Culture

Entrepreneurial

Culture

Q4

Q3

Q2

Q1

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