Culture integration: What can go wrong?

Credit unions believe they have distinctive histories, folklore, personalities, products, markets, artifacts, business operations, and boards. Typically, people are proud of their credit union cultures or, at minimum, have learned how to operate effectively within them. In the weeks before signing a letter of intent, the CEO and executive team of Credit Union A and Credit Union B share their cultural attributes.

Cultural similarities and differences

One of the breakdowns in a potential merger is culture; both parties believe their culture is positively strong and needs to prevail.  In initial meetings, representatives from both organizations meet and share their cultural narratives. What is typically noticed first is that both credit unions use the same or similar language to describe their culture; this produces a good feeling about the possibility of being merged.

In reality, a merger brings together credit unions with different cultures. Even though the same descriptors are used, they may exhibit other behaviors for each cultural descriptor.

After some time, the honeymoon phase begins to dissipate, and anxiousness starts to surface.

The differences between the two cultures become the focus. People notice how their credit union differs from a potential partner’s and begin to pay attention to what makes it unique. Even when cultures may not be noticeably distinctive, employees tend to see them that way. Hence, understanding the way a culture clash unfolds is necessary to create a new culture.

1. Perceive differences: There is heightened awareness of and conversation about differences in leadership styles, the organization chart, governance, decision-making processes, and levels of authority and empowerment.
2. Magnify differences: Next, the differences are magnified and become more distinctive in a “we” versus “they” conversation. Once the polarity starts, it’s often difficult to come back to see what is possible.
3. Stereotypes: Typecasting starts as embodiments of the other culture. For example, Credit Union B may describe employees of Credit Union A as disenfranchised and unempowered. Credit Union A may describe Credit Union B employees as being from the Wild West, and everything goes.
4. Put-downs: The culture clash reaches full height in the days before legal day one, as each credit union puts down the other as inferior. “We” becomes the superior culture, and “they” are denigrated. Credit Union B, in one example, described the CEO leadership of Credit Union A as a benevolent dictatorship. Credit Union B described its culture as a collaborative leadership team and wanted to maintain an open and inclusive culture. 

Levels of acculturation

A common mistake in credit unions is the expectation that the culture will survive and easily blend with the other credit union’s culture. The unfounded assumption is that nothing will be lost and everything will be the same. This unrealistic expectation leads to anxiety, heartache, wasted resources, and a lack of faith and trust in leadership.

In a merger or acquisition, four levels of acculturation are most prominent. Understanding these distinctions ahead of the business deal execution, intentionally deciding what level of acculturation is realistic and needed, and taking effective action for the change is leadership’s responsibility.

1. Cultural pluralism means both cultures coexist.
2. Cultural integration blends the two present cultures.
3. Cultural assimilation occurs when one culture absorbs the other.
4. Cultural transformation occurs when both organizations acknowledge and sometimes abandon previously vital elements of their current cultures, co-create new elements, and work side by side to adopt new values and norms.

Starting the cultural conversation for action

Each merger or acquisition scenario is unique, and it is foolhardy to believe there is a one-size-fits-all solution for combining management teams and organizations. However, the acculturation conversation must start very early in the cycle. This significant conversation requires subject-matter expertise to facilitate the desired end state, uncover blind spots, and create an effective action plan. Your Chief People Officer or Human Resource Officer may have acculturation transformative expertise. If not, seek advice elsewhere.

Several steps are needed to harness the power and strength of each culture to contribute to a favorable combination that serves the new organization’s financial and strategic objectives. There will be a cultural impact, and leaders must minimize the adverse effects before signing the deal.

1. Define a desired cultural end state.
2. Articulate each organization’s culture and how artifacts, decision-making, work groups, workforce, workspace, and meetings support that culture.
3. Understand each culture’s positive attributes to decide if they should be integrated with the new culture.
4. Create an action plan and accountabilities for culture in organizational elements, language, and action.
5. Deepen cross-cultural learning.
6. Drive the combination toward the desired end. This step requires cross-organizational support from all leaders and players, starting with the board of directors.
7. Reinforce the emerging culture through substance and symbolism.
8. Continually manage and reinforce the culture.

In closing

Credit unions’ roots are in people helping people, and each one believes it has a unique culture. There are positive attributes to partnering, merging, and acquiring other credit unions, and yet such actions do not necessarily mean we abandon what made us unique from the beginning. Intentional conversations early in the cycle are imperative to the acculturation of two organizations joining to service their combined membership.