Peter Drucker famously said “culture eats strategy for breakfast,” meaning no matter how confident you are with your strategy, culture will always determine your success (or failure, as it turns out). What he forgot to mention was: if you don’t watch your lunch and dinner, culture will eat that too.
If you are like me and have worked on a project at the tail end of what seemed to be a successful multinational divestiture, you know what I am talking about. The impact of two strong, opposing cultures aggravated by transition fatigue can have an incalculable impact on the completion of your project. Your best-laid plans can leave your clients wanting more…for breakfast, lunch, and dinner.
Can’t We All Just Get Along?
Let’s look at a real-world example of how dominant cultures in a divestiture can throw off a project.
Two multinational companies operating in the same sector entered into a partnership. The larger, more mature company divested manufacturing sites to its younger, leaner counterpart. The two would share some aspects of operations but primarily shift to a contract manufacturing relationship, which added complexity to the situation.
At first, it seemed like a classic divestiture with a meticulous transition service agreement (TSA). What it turned into was an inconveniently long transition hampered by two incompatible cultures. The two companies butted heads and struggled to maintain a collaborative relationship, and the exit strategy fell flat from expectations.
It reminded me of that guy in your friend group who you really don’t like. You can deal with his loud awful jokes and annoying laugh for a while…but after a while (and in this case, years), it’s going to create discord, and the proverbial sh*! will hit the fan. People can only be polite for so long.
So here’s what happened: early in the deal, there was a miscalculation of one of the most important components of a TSA agreement: its duration. Typically, you agree on how long the transition will take and have clearly delineated roles to ensure everyone understands how that transition will go.
But extended transitions between parties with clashing cultures can increase risks to business continuity and trigger costly penalties for the acquirer if they fail to perform. And that’s exactly what happened.
Too Many Cooks in the Kitchen
When you’re near the end of a lengthy transition process, you’ve got to figure out how to be an effective liaison between companies with different ways of working, how to use client-facing time wisely, and accept that counter-intuitive broader business decisions may not have your project’s success at the top of the list of priorities.
For our project, we thought we had a great change strategy at the onset. We applied a tried-and-true change framework to our project, but didn’t anticipate what came next: the risk-averse seller wanted us to lead the change for the risk-tolerant buyer, who never asked for our support.
The result? Lip service, lies, cover-ups, and exaggerations of success. The only thing both sides could agree on was that they were both ready for this transition to end.
Change Management professionals, like me, have to deal with ambiguity daily. But when you combine transition fatigue with clashing cultures, you get genuine volatility and unpredictable risks.
While there’s no panacea for situations like this, there are a few warning signs to be on the lookout for and some tips to lessen risks:
- The seller is the sponsor, but the buyer is the client: The implication here is that the buyer is incapable of managing the change on its own. This undoubtedly causes tension between two parties, especially at the managerial level. To reduce risks associated with this, ensure high influence managers are correctly identified and managed closely.
- One company builds the change strategy and the other executes the plan: On our project, the TSA terms stated such an agreement was made. As you can probably guess, the “younger, leaner” company got tired of being told what to do by its “older, bloated” counterpart. The result? The buyer became less transparent about their execution, lowered standards, and overstated success…to ensure the transition was completed on time. Capturing reliable performance data to measure change success can require creativity working around blockers.
- Neither party can agree on a project name: When both parties use different names for the same project, consider this a harbinger of things to come. They may strive for a cooperative relationship but expect much less. In these situations, anticipate a hefty increase in communications and prepare for challenges getting messaging approval.
- Employees feel like they are stuck between two worlds…sometimes for years: Divestitures often convey employees along with the sale of physical assets to the buyer. The bottom line is this eventually takes a physical and emotional toll on people. This may be unavoidable, so being smart about client-facing time can go a long way to help relieve fatigue.
If you see any of the warning signs mentioned, be alert that the transition may not go smoothly. Be strong with your strategy so that neither culture dominates, at least as best you can. Remind both parties of the end goal: a smooth transition for the divestiture. You are all, in fact, on the same team, despite the fisticuffs that may ensue.
You may need to loosely manage both parties as they go their own way, giving them increasing freedom to do things the way they want to (this is, after all, the very definition of culture). Communication is, as ever, key for sticking to your strategy as best you can. Those meetings with both sides may be painful and arguments may spring up. You will serve as referee, so prepare for that.
Even if you start out with a sophisticated transition plan and dreams of a collaborative relationship between the buyer and seller, you may end up with nothing more than conflict and coverups at the finish line. If you aren’t paying attention, a successful exit strategy can all be eaten alive by the clash of two cultures over a long and complex TSA.