Corporate Culture: Problems and Limitations of Change after a Takeover

Seminar Paper 2013 23 Pages

Business economics - Business Management, Corporate Governance


Table of Contents

Executive Summary

List of Abbreviations

List of Figures

1 Introduction

2 Problem Definition

3 Objectives

4 Methodology

5 Main Part
5.1 Theoretical Models of Corporate Culture
5.1.1 Deal & Kennedys Four Cultures Model
5.1.2 Edgar H. Scheins Three Levels of Culture
5.2 The Need for Culture Change
5.3 Ways to Change Culture
5.3.1 Cycle of Cultural Evolution in Organizations, Dyer
5.3.2 Culture-Management-Process
5.4 Problems and Limitations of Changing
5.5 Business Case “Credit Mutuel Group”

6 Results and Conclusion


Executive Summary

Corporate culture is an important phenomenon of organizations. Values, visions, norms, language, beliefs and habits of the organization are fixed in the cultures contents. A good working culture is important for the company’s success and profit situation. The globalization leads to a dramatic process in the economic markets. Takeovers, cooperation and mergers are typical consequences of the new economic era. This market process is also responsible for the collision of corporate cultures. Different needs justify that willful intervention in the culture system after a takeover. Dissatisfaction, isolation and inefficiency are only a few reasons why a cultural change is recommendable. For a successful change it is decisive to know everything about the old culture and to know what to do for changing it. Several theoretical models and strategies have been developed for this issue. The most reason why a change fails is that problems and limitations have not been taken into consideration or have not been handled the right way. Culture-guides should lead the employees thru the changing process and should help orientating. The change of a culture is a long way and many do are not patient enough to wait. The success of a change is based on many task but the important task is to recognize that problems occurring during the changing process are usual and the solving of these problems lead to the new culture. Problems are indicators for mistakes or wrong planning which have to be solved. Changing operators have to recognize problems as chance for succeeding.

List of Abbreviations

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List of Figures

Figure 1: Deal & Kennedy “Four Cultures Model”

Figure 2: Edgar H. Scheins Three Levels of Culture

Figure 3: Cycle of Cultural Evolution in Organizations, Dyer

Figure 4: Culture-Management-Process

Figure 5: Comparison Citigroup Inc. vs. Credit Mutuel Group

1 Introduction

In the age of globalization, markets become more and more dynamic. For reasons of synergetic potentials, improvements in productivity and possible savings many companies are looking for investments to make themselves more efficient[1]. Today, takeovers or mergers and acquisitions are usual part of economic life and make a high demand on the work of the Human Resource Department. In the first half year 2012 over 20.000 transactions were counted in this sector in spite of the Financial Crisis we are facing these years[2]. Beside the legal and bureaucratic complexity, the HR department has to manage the whole personnel consequences resulting from the merger. Integration of employees, cancellation and change of employment agreements, renegotiation of collective agreements and restructuring of work time schedules are only a short enumeration of the multiplicity of demanding duties and responsibilities, which have to be handled. One important challenge for the HR department is the right exposure with different corporate cultures. The integration of companies in organizations can fail, if cultural differences are not considered[3]. On these grounds identification and influence of organizational culture are critical factors which decide over success or failure of an acquisition. Comparable to domestic political problems within the integration of foreigners with different cultures and religious faith, the establishment or change of an existing organizational culture is a sophisticated and sensitive issue, especially when the responsible people do not even know about their own cultural structure.

2 Problem Definition

The reason why the integration of a company after a takeover fails is not only the ignorance of organizational culture; it is also the lack of knowledge about how to change an existing culture. The changing process is also a complicated and often nontransparent case with many possible problems and limitations which have to be considered. That means that there is no general roadmap of changing or establishing a culture, rather every single cultural change needs its own new roadmap developed. This new roadmap evolves from solving different kind of problems during the changing process. And sometimes there are limitations of change which have to be accepted.[4]

3 Objectives

The objective of this assignment is to discover what problems and limitations could occur during the changing process of an organizational culture after a takeover. It will be also seek to identify how to handle typical problems and to recognize insuperable limitations. Theoretical models for recognizing a culture type and models for changing an organizational culture should help identifying this problems and limitations.

4 Methodology

The main part of this assignment will start with a theoretical overview of different models, developed to describe different indicators of corporate culture. It will begin with the model of Deal and Kennedy which is based on four different types of organizations. These types vary in how quickly the organization receives feedback, the way members get a return on their investment, and the level of accepted risks[5]. Afterwards, the Three Levels of Culture Theory by Edgar Schein will be explained. This model defines the organizational culture as something observable, but also as a result of values and basic assumptions[6]. After the specification of the named models, needed for identifying cultural structures within the community, possible methods aiming for a cultural change will be defined. At the same time problems and limitations will be discussed in this part. A short example of a failed changing try and the appeared problems and limitations will be given to establish a practical relevance. This example will be based on the takeover of the Citigroup retail banking subsidiary company in Germany. In a following chapter the results will be discussed and afterwards a conclusion of this issue will be set.

5 Main Part

5.1 Theoretical models of Corporate Culture

In the past many theoretical models have been established to explain organizational cultures. They all try to explain the different types and groups of the settled culture and the behavior aspects of their members. As a definition can be said, that corporate culture is something common, that counts for every member of the organization. Through values, standards and believes it leaves its marks on their behavior. For the member of the culture community the culture itself is something which is simply there. The members do not reflect the situation and everything happens unconsciously. An important fact is that corporate culture growths from the past. It is established from the unit of the members and it can be changed by them. Another important detail is that corporate culture is influenced by other culture types. The culture of a country, of an industry-sector and organizational sub-cultures affects the acting of the culture members.[7] As mentioned, many theories were established to explain this phenomenon. For reasons of clearness only the models of Schein and Deal and Kennedy will be explained in the following text. These models are well-known an important explanations for this issue.

5.1.1 Deal & Kennedys Four Cultures Model

Deal & Kennedy established in 1982 a model, which tries to describe corporate culture with the aim of two dimensions. The first dimension focuses on the level of risks taken and the second on how quickly the organization receives feedback. With this framework and the examination of hundreds of organizations Deal & Kennedy could distil four generic cultures.[8] Figure 1 shows the identified cultures. The Process Culture takes low risks and receives slow feedback. This type is usually to find in banks, insurance companies, in government agencies or in strong regulated industries. The strong work regulation leads to an inflexible work flow system. There is a given work flow for nearly every issue, so that there is no decision making risk for the employees. But problems or new challenges cannot be handled in time; usually it will take time until a new work flow is settled to manage the new task. An advantage is that the employees have no big responsibility for their decisions if they follow the given map and as a result no regular decision will endanger the company.

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Figure 1: Deal & Kennedy “Four Cultures Model”

Source: Deal & Kennedy (2000), pp. 107 – 108

On the other hand the workers do not know how effective they work, because they are not getting a fast feedback. They are forced to concentrate on how to do something and not on what they are doing. Efficiency and innovations are hard to establish in this culture type. Typical rites and rituals are long and structured meetings, ceremonies like for retirement and a strong hierarchy structure.[9]

The Work Hard / Play Hard Culture takes low risks and gives fast feedback. This type is hardly to find in typical sales organizations. Activity and strong leaders are the way to success. Reports and action plans minimize the risks and drive the success of the employees. Quick feedback helps the workers to check their efficiency and to set corrective plans to succeed. Typical rites are after work parties, contests meetings and promotions. The motivation of the employees is one of the biggest tasks which have to be handled by the management. A big advantage of this culture type is the fast and strong activity of the culture members. Through a high self-motivation, employees work fast and hard to reach their goals and to get one of the top performer. Within this culture the members want to succeed and to be one of the best, this attitudes lead to an economic growth without any effort of resources. Disadvantages of this culture type should also be named. Product and service quality can decrease if everything is going too fast. People have a fast success, but they do not ask themselves if the work had the right quality. Fast decisions can also deliver bad results and lead into a crisis, which means that activity is not a guarantee for success.[10]

The next culture type describes companies which have a high risk in decision making but the return on their investment (feedback) comes very slow. The Bet-Your-Company Culture usually appears in the industry sector. Companies spend millions of dollars for a project, they even do not know if it works. Big oil companies are a good example. They build off shore oil rigs to explore a new source, but they do not know if it is efficient or if they will find enough oil to make a profit out of the investment. This example shows the risk of a project and the time of regarding feedback. Making right decisions is very important for the organization. Typical rites are project meetings and a high qualification of the staff. Solving problems or making decisions can take a long time. It has to be sure that everything has been calculated before a decision will be made.

Last but not least the Tough-Guy / Macho Culture can be described by a fast feedback and a high level of risk. This culture type is typical for the entertainment industry, police departments or consulting companies. The financial investments are high and the feedback comes quick. The high level of risk for the investments is a reason why the pressure in this sector is so high. A made decision decides over success or failure and consequently over the future of the decision maker. As a result it can be noticed, that this culture consists of individualists and tough guys who can impose their will. The advantage of this culture type is the high motivated individualists. Their self confidence can change results and turn developments around. A disadvantage is that decisions are made by those who can get their own way best. No clear arguments and calculations decide over decisions, but those who can sell them best.[11]

These culture types describe the relationship between market conditions within the company moves and the corporate culture. It can be noticed that some market sectors depending on the level of risk and the time of feedback, have independently developed the same culture type.[12]


[1] Deal & Kennedy (1999), pp. 111 – 117.

[2] Borell & Jager (2012), n.p..

[3] Cameron & Quinn (2011), pp. 1 – 2.

[4] Deeg & Weibler (2008), pp. 127 – 133.

[5] Deal & Kennedy (2000), pp. 107 – 108.

[6] Schein (2010), pp. 23 – 32.

[7] Deeg & Weibler (2008), pp. 103 – 104.

[8] Deal & Kennedy (2000), p. 107.

[9] Deal & Kennedy (2000), pp. 119 – 123.

[10] Deal & Kennedy (2000), pp. 113 – 116.

[11] Ibid., pp. 108 – 113.

[12] Deeg & Weibler (2008), p. 109.


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University of applied sciences, Nürnberg – IOM
corporate culture problems limitations change takeover



Title: Corporate Culture: Problems and Limitations of Change after a Takeover