Mergers, Acquisitions and Satchmo's Paradox: A Word To The Wise

Peter Drucker is famously noted for saying “culture eats strategy for breakfast” and it is my belief that strategy without culture is “all hat and no cattle.” In a fairly recent issue, Forbes Magazine published an article written by George Brat titled: “The Root Cause of Every Merger’s Success or Failure: Culture.” In the article he says many notable things, including the following:

·     When you merge cultures well, value is created. When you don’t, value is destroyed.

·     The game is won or lost on the field of cultural integration. Get that wrong and nothing else matters.

·     A merger is supposed to be an exercise in value creation. Yet, 83% of mergers fail. The vast majority of leaders get something very wrong along the way.

·     The key to a successful merger is deciding which culture to merge into which. Co-creating a brand new culture from scratch is a lot of hard work with a relatively low probability of success.

·     Corporate culture is the only truly sustainable competitive advantage and the root cause of any merger’s failure or success.

·     Make clear choices about the new, combined entity’s behaviors, relationships, attitudes, values and environment. Then insist on embracing those choices as a condition for staying on board.

One time when a reporter asked Louis Armstrong what jazz was, he is said to have responded that if you had to ask, you’d never know. Peter Vaill, a leading organizational development professor and author of Management as a Performing Art, interpreted that comment to mean that Armstrong had been immersed in jazz for so long, he no longer knew what it was like to be ignorant of that musical form. Since he couldn’t understand what it was like to not know jazz, he found it impossible to describe it. He just knew. Vaill called that experience Satchmo’s Paradox (Satchmo, in case you didn't know, was Louis Armstrong’s nickname). It’s when you know something so well you are terrible at communicating it to someone else.

I read Vaill’s book back in 1989 and it made a lasting impression on me. In fact, if Vaill were to apply Satchmo’s Paradox (which he subsequently referred to as The Layman’s Lament) to the all-too-common occurrence when attempting to communicate a company's culture to another company and its leadership, the thought process would likely look something like this:

"You understand that you don’t understand our culture, but you don’t understand what it is you don’t understand. Not only do I not understand what it is you don’t understand about our culture, I don’t fully understand how I came to understand what it is that I understand. I understand that my understanding of our culture is more advanced than yours, but I don’t understand exactly how it is more advanced. Nor do I understand how to simplify things for you. What’s more, your lack of understanding concerning our culture feels chaotic and confused. You can’t begin to explain simply to me what it is you don’t understand so that I can help you understand it. We have a problem if you are to come to understand what I understand and if I am to come to understand what you don’t understand."

Like it or not, it is the CEO's job to build a strong, cohesive company culture and to connect their team to that culture. One telltale sign that a CEO is asleep at the helm is if they cannot describe their company culture in definitive, discrete ways. Cultures that engage and enrich people don't "just happen." To be effective in their role as the keepers of culture, CEO's must be as principled and intentional as they are (hopefully) visionary. And if they are, there is a very good chance they will avoid Stachmo's Paradox and its disastrous side effects when driving the M&A process.