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Cultural Due Diligence: Accepting the Truth
By Mary van der Boon
(this article first appeared in www.expatica.com/hr)

The attitude of a company’s CEO is crucial to business success. But how do you tell the CEO that the real problem lies within his or her own company? Mary van der Boon talks about the need to bridge the gap between the mission statement and reality.

In the words of an old Slovenian proverb, one should always tell the truth…and leave immediately afterwards.

Believing Your Own PR

Anyone who doubts that a company’s mission statement often bears little resemblance to reality has only to look at Enron’s Annual Report for 2000:

Our Values
We have an obligation to communicate. Here, we take the time to talk with one another… and to listen.
We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment.
We work with customers and prospects openly, honestly and sincerely.
We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone.

Under the heading ‘Respect’, CEO Kenneth Lay assures us that ‘we treat others as we would like to be treated ourselves’. There is no doubt that when he signed the report, Mr. Lay genuinely believed this statement to be true. And yet the problems at Enron did not just appear suddenly the year after this report was published.

A Parallel Universe

How to reconcile what is, in fact, a parallel universe: that which senior management so fervently wishes to be true (or at least to be believed) and the true nature of the beast?

Know thyself (followed as quickly as possible by ‘heal thyself’) takes on crucial importance in mergers and acquisitions, but also when companies venture into international business arenas after successful dominance of a local market. As many companies have come to realise, often through bitter and costly experience, the first strategic partner you get to know overseas is yourself.

Genuine Shock

Norman Broadbent partner Elizabeth Marx describes the very real impact of organisational culture differences on those involved in the process. "For those who have been through organisational mergers, the reality often does not match the initial positive rhetoric. Staff suffer high levels of stress and the rationale for the merger - producing higher shareholder value - is often put into question. The failure rate of many international mergers may be the direct result of a culture shock that is similar to the shock executives experience when they are posted abroad for the first time - a feeling of foreignness, otherness or the unfamiliar". One oft-cited example of this corporate culture shock is Daimler-Chrysler: despite repeated promises to benefit from the unique aspects of both cultures, most Chrysler executives were quickly shown the exit by the Daimler board.

A Crucial Role for HR

Stanford management professor Jeffrey Pfeffer says that while integrating organisational cultures effectively is important to the success of acquisitions, it is difficult to accomplish because it requires changing individual and organisational values and beliefs. Human resources may provide firms with a competitive advantage in this process, especially if they are aligned with the organisation’s business strategy. An organisation’s culture influences the degree to which strategic planning and human resources are integrated, however, and this is seldom a seamless fit. Watson Wyatt consultant Alan Schnur told a workforce.com survey recently "sometimes CEOs and the line don’t really want HR to be strategic. HR is given a double message: Get out of the box, stay in the box." But for every organisation in which strategic HR is an oxymoron, there is another in which HR is actively helping to run the company.

Vision of the Future

According to Corrinne S. Shearer, District Activities Director with Carefree Senior Living in Las Vegas, CEOs must have a picture of the culture that is required to support the organisation's strategies. This requires CEOs to have a vision of the future that is understood and shared by all within the organisation, a vision on where the organisation wants to go, and how it plans to get there. It should also include more immediate goals to guide managers' and employees' efforts in the short-run. HR is in a unique position to lead this process. Mark Clemente, president of Clemente, Greenspan & Company in New Jersey believes "ultimately, many mergers fail because of human resources-related issues, such as culture clash. A company that embarks on a merger or acquisition without early and direct input from HR is living extremely dangerously."

Understanding how the culture of an organisation impacts the bottom line and profitability of a company can be revealing. Companies can maximize their profitability by defining all of the elements of its culture, deciding if they like what they discover and assessing if their behaviours and actions are supportive of the culture.

Searching for the Truth

In corporate culture assessment, do they really shoot the messenger? Most effective audits are conducted by outside consultants who have expertise in this area. They can tell the CEO and senior management exactly what they’ve heard and observed without having to worry that their job is in jeopardy in their role as the messenger. Monika de Waal, managing partner of Unique Sources BV in Delft, has helped develop a cultural due diligence model that can be used to effectively assess the impact of different cultures in international business ventures. "Cultural due diligence can provide valuable insight into which problems need to be solved before effective co-operation can take place and trust can be established".

"The CDD provides a lens on four different levels of cultural encounters: organisational, national, functional and individual. The combination of these four proves to be extremely valuable for the client to look into the complex processes of working interculturally, multidisciplinary and internationally".

She has experienced the difficulty firsthand, however, of (to quote organisational psychologist Richard Hagberg) ‘telling the CEO his baby is ugly’. Says de Waal ‘The critical success factor in breaking bad news is the insight of the client into his or her own cultural awareness concerning the various types and levels of culture’. And this insight, says de Waal, is a competency that it is possible for anyone to learn.