Cultural Fit: A Critical Factor in Determining the Success or Failure of Strategic Alliances
Strategic alliances continue to increase in popularity and represent significant inorganic growth opportunities for businesses today, even outpacing mergers and acquisitions. Managing cultural disparity is one of the major challenges especially in multi-national and global relationships. Failure to address and proactively manage cultural differences can result in significant financial losses. Historically, there have been a number of prominent and promising relationships that failed due to a number of reasons including culture. These relationships include the likes of AOL and Time Warner, Daimler/ Chrysler, Suzuki and VW, LEGO and Shell and many others.
One way to address potential culture clash is to conduct a thorough evaluation and understanding of a potential business partner’s culture prior to establishing a strategic partnership. This should be done as part of the overall due diligence process when evaluating and selecting potential partners. Often, thorough due diligence is not performed at the outset and the result is a challenging relationship that is fraught with conflict, mistrust and disappointment.
Making an alliance work is “heavy lifting” that requires the talent of experienced and skilled alliance leaders. Knowing how to develop synergies between diverse cultures takes time, effort and learning. There must be clear and open communication, a willingness to compromise on approaches; and bonding and trust must be established within the entire organization. Without following these critical steps the relationship is unlikely to prosper or achieve its target goals.
Building trust between partners is key to managing culture disparity. My “real world” experience indicates that the ability of the partnership to manage these cultural differences is vital to driving tangible value.
Culture is defined as the characteristics and knowledge of a particular group of people, encompassing language, religion, cuisine, social habits, music and arts.
In business, culture can manifest itself in how an entity does business, the policies and values they adhere to, and how they treat their employees, customers, and partners.
Understanding and dealing with cultural disparities is a major challenge facing alliance leaders today. Global and multi-national relationships are even more challenging due to extensive language and geographic disparities.
The following paragraphs provide a closer look at the deeper layers of culture permeating business today. Understanding these will help our teams better address relationship challenges and help the partnership prosper.
There are three layers of culture that require understanding and attention:
National Culture- the norms, values, behaviors in the society where the groups of people reside. It is important to recognize and understand how groups within a national or ethnic culture think, work, learn, communicate and behave. There are unique differences that various national cultures have towards hierarchy and gender. This is an important aspect to consider when building multi-national and global business relationships.
Organizational Culture- a company culture can best be defined as the way a company conducts its business. It is represented in the norms, values, policies and practices that exist within an entity. It is often represented in the structure within an organization, the policies and practices deployed and how employees move through the organization.
Professional Culture – is represented by the norms and values portrayed by groups of people within a particular business function or discipline ( i.e. HR, marketing, sales, legal, finance, manufacturing etc.). People representing different occupations typically adopt certain biases, practices and behaviors associated with their discipline or profession. These biases and practices must be identified and dealt with when building a trusted and valued partnership.
Building a foundation of trust with strategic partners is hard work that takes patience, open communication, and a willingness to embrace compromise. These are traits that may not exist in every partnership. It is best to evaluate cultural fit thoroughly from the outset, before considering establishing a partner relationship. Cultural challenges will exist in every partner relationship and alliance leaders must be given the knowledge, tools and training to be able to address these challenges head-on while establishing trust. Cultural compatibility can be achieved if the right partners are chosen with a willingness to collaborate toward a shared goal.