Mergers Don't Always Lead to Culture Clashes - Essay Example

? Mergers Don't Always Lead to Culture Clashes In what ways were the cultures of Bank of America and MBNA incompatible? The culture in MBNA shows a more laid-back, business-like and highlights a secretive organization. Employees at MBNA are accustomed to lavish lifestyles and the company offers high salaries and generous benefits. Among the perks available include private golf courses, corporate jets and yachts. Bank of America, however, operates on financial efficiency and values low cost approaches. Moreover, Bank of America expanded because of thrift and has managed to focus on size and smarts rather than speed. Bank of America is expected to encounter challenges as the bank attempts to integrate a culture that is totally opposite from the ideals being promoted by the company. The high salaries and benefits received by MBNA employees is one major issue. Although the salaries received by Bank of America employees are relatively competitive, the bank’s management has to decide what approach needs to be done to reconcile the gap. Lowering the salaries of MBNA staff will cause widespread demoralization. Maintaining the high salaries will also affect current Bank of America employees. This is a dilemma that needs to be taken into consideration before addressing the salary issue. Another aspect that requires focus is the perks received by MBNA employees. Bank of America will certainly reduce most of the privileges and to integrate the bank’s vision when it comes to spending. Most important, Bank of American is faced with a question on how to figure out the work mentality of MBNA employees. Although Bank of America intends to promote a culture that balances work and life, the excesses have to be eliminated. Bank of America operates like a machine and values results. MBNA employees are in for a transition that could possibly change their approach towards work. Bank of America has to ensure that the culture is more flexible and open to changes. 2. Why do you think their cultures appeared to mesh rather than clash? The acquisition of MBNA by Bank of America was never described as hostile. Bank of America even presents expanded opportunities for MBNA employees that plan explore in other expertise. One of the mot important aspects that resulted to positive integration on MBNA is respect. Bank of America recognizes the culture of MBNA and how it has developed the organization. MBNA has been successful and Bank of America intends to ensure that the success will be sustained. Respect also drives Bank of American to be more sensitive and do consultations as to what needs to be changed and retained. The integration of MBNA in Bank of American required rigorous planning. Bank of America managers view MBNA managers as arrogant while the latter sees the former as bureaucratic. But these observations are part of the growing pains that Bank of American attempts to hurdle. Bank of America decided to adopt some of the practices in MBNA. The management also created new policies to satisfy both Bank of America and MBNA employees. The executive uniforms in MBNA underwent a hybrid phase change to suit the needs of both parties. Since most Bank of America processes are flexible, modifications are implemented seamlessly. The goal is to prevent clashes and satisfy the different cultures. Despite the adjustments, Bank of America remained firm on cutting costs and the high MBNA salaries were significantly reduced. Although some employees decided to leave, majority of the employees remained. Bank of American sold all but one of the corporate jets and donated the golf course to the State of Delaware. The bank maintains that there are other ways to compensate for the removed perks. The most important part is to ensure that Bank of America’s financial principles are followed but employees still enjoy the best rewards for their hard work. 3. Do you think culture is important to the success of a merger/acquisition? Why or why not? Most observers highlight financial impact, synergies and pipeline expansion as the important considerations for merging or acquiring a company. But one of the most underappreciated elements of an organization is the culture that drives success. Most companies merge not just because of the financial implications but due to aligned cultures that could sustain any form of success in the industry. In addition, some mergers fail because companies ignore the value of cultures and how the variations affect operations. There are three important reasons why culture is important in mergers and acquisition. First, the culture dictates the actions and moulds the employees. Most employees adjust with the existing culture and those who do not fit are forced to find their place in other organizations. The culture also influences attitude towards work their each employee’s role in the organization. Second, the success or failure of any merger or acquisition is dependent on the response of the employees from top to bottom. Cultures, in most cases, causes rifts between employees from merging firms and such problems affect the delivery of service and overall outlook. Finally, cultures serve as branding strategy that companies use to sell their products and services. Some companies are known for their culture and this affects the view of consumers in the market. Merging with other firms could have an impact on the perspective of clients as to how a company operates. In a nutshell, the culture of a company is a backbone that has to be protected and needs to stay upright. Mergers, however, should not be considered a threat but instead an opportunity for the culture to improve. This idea is important because firms have to start propagating flexible cultures. 4. How much of smooth transition, if any, do you think comes from both companies glossing over real differences in an effort to make a merger work? There have been several debates made as to which of he merging firms need to make most of the adjustment. Most mergers exhibited the existing company as the most aggressive; hence the adoption to changes is burdened on the acquired firm. In addition, some companies have rigid cultures and when they acquire another firm, cultural adjustments are hard. Successful mergers have experienced problems in the integration cultures and ensuring that the differences have no impact in the operation and provision of services. Moreover, the adjustment has to be collectively done and properly disseminated to the affected stakeholders. The manner in which the change in culture is communicated will impact the success of the merger. The transition and the extent of adjustment are dependent on the changes that the existing companies plan. There are policies that the acquired company ha that might benefit the acquirer. Firm decisions also have to be made to eliminate culture that has adverse effects to the merged company. The employees from both the acquiring and acquired companies have to adjust. The employees of the former have to understand the culture of their future peers and use the positives to improve their performance. On the other hand, the employees of the latter has to be open to adopting a new culture which is deemed to be better although have negative effects in their work and lives. As discussed in the early parts, the integration starts with acceptance and respect of the difference in cultures. The management has to draw lines that will clearly show which needs to be continued and the practices that have to be stopped. The critical part in this process is the understanding of the employees and their openness to changes and capacity to adopt. References Robins, S.P. and Judge, T.A. (2009), Organizational Behavior 13th edition, Upper Saddle, NJ: Prentice Hall Read More