Managing Cultural Transformation In Indian Companies
Posted in Human Resources Articles, Total Reads: 1730
, Published on 02 June 2014
An organization is essentially a group of people working towards the achievement of a common goal.The way the people work towards the organizational goal defines the inherent characteristic of the organization and hence, its culture. All organizations have their unique personality which we call its culture. Organizational culture has been described as the shared values, principles, traditions and the actions of the people. It determines the way the people behave with others inside the organization as well as outside it. The collection of individual behavior of all the members of an organization result in what we call an organizational culture, which in turn determines the basic norms of how an organization functions. It includes values, vision, working language, beliefs and habits. It affects the way people, and group, interact with each other, clients and other stakeholders. In short, it is the way of life at an organization.
A company grows either organically or inorganically. Organic growth refers to increase in the market share by increasing the factors of production which results in higher supply of goods/services. In contrast to this, inorganic growth refers to the increase in the market presence but through mergers and acquisition of same or related or new businesses.
In the wake of inorganic growth, an organization is bound to feel the tremors of change in organizational culture. Merger and acquisition result in the close interaction between the employees of the firms; wherein each witnesses a completely different way of life of the other.
In anthropology, there is term “acculturation” which means “changes induced in (two cultural) systems as a result of the diffusion of the cultural elements in both directions. In context of M&A, acculturation can be defined as development of a shared culture based on the interaction of the beliefs and values of the two independent cultures. It needs development of mutual trust, cooperation, consideration and accommodation of the involved parties.
Hofstede based the organizational culture on 5 parameters, which are as follows:
1. Power Distance (PDI): The degree to which employees accept hierarchical structure and centers of power.
2. Uncertainty Avoidance (UAI): It measures the risk taking appetite of the employees.
3. Masculinity (MAS): The degree to which emphasis is laid on success, money and material well-being as opposed to feminism where emphasis is laid on quality of life.
4. Individualism/Collectivism (IDV): It is the preference of taking care of oneself and close relations as opposed to interdependence on others
5. Long Term Orientation (LTO): It relatesto the choice of focus for people’s efforts: the future,present or the past.
Indian culture is highly complex and pluralistic; containing seemingly inconsistent andcontradictory orientations. Indians, for example, are polite, non-assertive,emotional, tolerant and feminine in some of their orientations. These characteristics,however, are juxtaposed by a strong need for material influence, power and control, statusin society, and other signs of masculinity. The acceptance of organizational hierarchy, readiness toaccept change (or acceptance of risk/unknown outcomes), participation and identificationin group activity (or collectivism), perseverance at work and having longer term of goal grossly describe the five major values in Indian business world and work culture.
In contrast to this, western culture is more assertive and straight-forward. They seek empowerment from leaders who grant autonomy and delegate authority to subordinates. They also respect bold, strong, confident and risk-taking leaders.They stress on personal achievement and individual rights. Western organizations are more prone to challenging authority if they do not find the leader to be competent enough. Western organizations reflect more individualistic working style.
Thus reconciliation is needed when a merger/acquisition occurs between Indian and Western organization.
Participants in mergers are human and driven both by their shared culture and individual personalities. Cultural influences have the potential to be broad and far reaching. It is important that when merger and acquisition takes place between two culturally different companies, well-chalked out plans are in place to handle any kind of dissonance. This can be done by laying out cultural program that has definite goals to be achieved.
Few of the steps that can be taken to achieve cultural integration are:
1. Change Management Work team should give due importance to organizational culture: Culture should be recognized as a major challenge that the Change Management team.This team assumes an essential role in achieving integration goals.
2. Pace of transition: The transition of culture in an organization should be a smooth process and any sudden changes should be avoided.
3. The leadership should be accommodative and participative rather than authoritarian: A shift in leadership style can generate turnover among employees who object to the change. This is especially true for top talent, who are usually the most mobile employees. Loss of top talent can quickly undermine value in integration by draining intellectual capital and market contacts.
4. Consider the strengths of both existing cultures, not just the weaknesses: When two companies merge or one company is acquired by another, best of each company’s culture should be taken and adapted. The core competencies of the engaged companies should be retained.
5. Build the employee brand with a view toward how it will be understood by employees: Retaining the employees is a goal of integration. Effort must be made to secure their loyalty, When one company is acquiring another, then the emphasis should be on making the acquiring company's brand attractive, in terms of the career opportunities, rewards, and the sense of identity that it offers to acquired employees. When equals are merging, it is important to find a common point that will not be so novel as to appear alien to all employees.
6. Promoting mutual respect among the employees of the interacting companies: It is important to focus on the flow of work: how objects or information are passed from group to group or whether information is shared effectively. The interfaces should be designed, improved, or fixed so that they help create business value. If employees start to act in ways that lead to achieving desired goals, that can create trust and mutual respect among employees who have not worked together before. Underlying cultural beliefs should then tend to coalesce around effective and enjoyable shared behaviors.
During mergers and acquisitions, human resource is highly susceptible to be left disillusioned. However if the employees’ sentiments and expectations are well-managed, then human resource can be used to gain competitive advantage. When the leadership of the resultant firm displays concern for the welfare and morale of the employees of both the interacting firms, employee engagement levels can actually soar.
This article has been authored by Rashi Goel & Ritika Agarwal from Xavier Institute of Management, Bhubaneswar
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