CRACKING THE CULTURE CONUNDRUM

The ‘Lucky 13’ questions to help you plot a successful partnership

Campbell Tickell

Guest blog by Greg Campbell, Partner at Campbell Tickell

As the outside world becomes more uncertain, funding gets tighter and risks increase, the pressure grows for organisations to seek safety through mergers and partnerships. Becoming part of a larger entity, or bringing in a smaller partner, can deliver economies of scale, greater efficiencies, and increased capacity to face the challenges – expected and unexpected – of the operating environment. No wonder then that a growing number of charities have been exploring the potential for inorganic growth and greater safety through numbers.

Delivering a successful merger has never been easy though. It has always been true that the great majority of discussions between non-profit organisations fail to go all the way. Even for well-run partnership projects that commence in earnest, in our experience one in three typically fail to complete. People whose experience of M&As (mergers and acquisitions) has been wholly shaped in the commercial sector sometimes struggle to appreciate this, but it is much harder to achieve a merger when the incentive of shareholder financial returns is absent.

How then can one succeed? Received wisdom is that one is looking for four ‘fits’:

  • Strategic and business fit;
  • Geographic fit;
  • People fit; and
  • Culture fit.

The first three are relatively straightforward to define. When one looks at the business streams of two prospective partners and models how they might combine, broadly speaking there is potential to achieve synergy and coherence through a merged entity or there isn’t. The geography – whether through consolidating existing areas of operation, or facilitating moving into adjacent areas – either works or it doesn’t. And putting together the two top teams, at executive and non-executive level, is either going to work for both organisations or it isn’t.

Time after time though, we find that the biggest obstacles are clashing cultures and organisational behaviours. So how can we define and interpret an organisation’s culture and assess whether there is a potential fit with a would-be partner? What are the signs to look for?

A number of critical questions need to be examined:

  1. Do the two organisations share a similar outlook in terms of their mission, what they are trying to achieve, and who are their principal client groups?
  2. Do they really understand what their own culture looks like?
  3. Do they place greater store on maximising social value or on commercial operations, or do they seek to balance these?
  4. What are their growth ambitions?
  5. Do they have a similar appetite for risk, and is there broad alignment in their approach to managing and mitigating risk, and achieving business assurance?
  6. Do they agree on their proposed governance structure, in particular whether their focus is unitary or federal?
  7. Whom do they regard as their primary stakeholders and how do they engage with them?
  8. What do they see as the right pace for integration?
  9. To what extent do trustees and executives operate as a combined team?
  10. Is their decision-making focus top-down or bottom-up?
  11. How diverse are their leadership teams?
  12. How do they communicate, internally and externally?
  13. Do they lean more towards outsourcing or insourcing the delivery of critical services?

When these questions are examined, it will be considerably more straightforward to assess whether a formal partnership between the two parties will be achievable, and whether it will deliver optimal results.

Our experience suggests that most charities pay lip service to the culture question until it is too late. High level examination of mission, vision, strategic plans and other defining publications, is often deemed sufficient. Rarely do organisations interrogate their business to understand if there are any areas of culture and behaviours that might jar and derail the process if that risk is not managed.

Of course, even when a good fit in all four areas is identified, there is no guarantee that a deal is going to work. Getting the process right, in particular identifying the showstoppers at the outset, and ensuring that the programme is effectively timetabled and managed, is a major trick in itself. A failure to identify and address the dealbreakers in the preliminary stages is likely to lead to a failure of the deal further down the line.

 

Greg Campbell is a Partner at Campbell Tickell

greg.campbell@campbelltickell.com

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