Mergers Dont Always Lead to Culture Clashes.

1.1. In what ways were the cultures of Bank of America and MBNA incompatible?

Both organizations retained a dominant culture; however, the cultures of Bank of America and
MBNA were incompatible. MBNA featured a formal style. It was characterized as free- wheeling,
entrepreneurial spirited, and secretive. This organizations employees were accustomed to high-
life, above average salaries and generous perks. They were used to a formal dress code. Its
management was perceived as arrogant and autocratic. MBNA believed in speed.

In contrast BOA was a less formal organization which grew by thrift, maintained low-cost, no non-
sense operations, featured a more casual dress code, and believed in size and smarts rather than
speed alone. Its management was perceived as bureaucratic.

1.2. Why do you think their cultures appeared to mesh rather than clash?

The primary factor which allowed to avoid clashes but to mesh can be attributed to the systematic
way management handled the cultural transitions. The executives of both companies began by
comparing thousands of practices covering everything from hiring to call-center operations.

BOAs ability to foresee which MBNAs practices to keep and which to change was a huge
success. BOA, being the acquirer and the more frugal and thrifty of the two imposed its will on
MBNA in some case. For example, because MBNAs pay rate was well above market, many
MBNA managers were forced to a pay cut. Though some left, most of the employees remained.
Low turnover is an indication of how successfully the two cultures meshed. In other cases, the
cultures co-adapted. For example, MBNAs dress code was much more formal than BOAs
business-casual approach. In the end, a hybrid code was adopted, where business suits were
expected in the credit card divisions corporate offices and in front of clients, but business causal
was the norm otherwise.

Although different from one another, both organizations shared some similar core values. Being
the acquirer BOA never tried to force their culture on MBNA. As mentioned in the case different
cultures may be a recipe for disaster, however, these two mergers showed appreciation for each
others characteristics, choosing the best ones from both sides and creating a new set of values that
led to a new culture. As a result, their cultures appeared to mesh rather than clash.

1.3. Do you think culture is important to the success of a merger/acquisition? Why or why
not?

Yes, I think that culture is important to the success of a merger or an acquisition.

Organizational culture refers to a system of shared meaning held by members that distinguishes
the organization from other organizations. No two organizations have the same culture. A merger
or an acquisition is an artificial bonding of two cultures. If the two cultures are forced onto each
other collisions would occur between the two cultures which would constraint the achievement of
the goals of the new organization.

Statistics indicate that up to one third of mergers fail within five years, and as many as 80 percent
never live up to their full expectations. A great deal of evidence indicates that the ultimate success
of mergers and the amount of time it takes to get them on track is determined by how well the
cultural aspects of the transition are managed.

In a merger or an acquisition, the companies try to understand the behaviors that have led to each
organizations growth, that is the organizational culture in other terms. The ability to understand
both companies cultures at the outset can help uncover any bad signs that are nonnegotiable and
can prohibit the deal from moving forward. Understanding cultures also helps identify possible
synergies between the two companies and whether a target would be better achieved as a combined
entity.

1.4. How much of the smooth transition, if any, do you think comes from both companies
glossing over real differences in an effort to make the merger work?

The real culture of an organization cannot be glossed over. It might be possible to cover the things
at the beginning but sooner the real culture of each other would be visible during coexistence.
However, if the two organizations believe and commit themselves to make the transition a success
a systematic approach could be followed. Through this kind of approach, the merger can be made
to work.
There has to be some negotiation and probably compromise in a merger so both sides can work
efficiently as a new team. Both companies have to keep the overarching goals of the newly formed
organization in place for the merger to happen quickly and efficiently.

Companies need to address critical issues head-on during a merger. Practically, some core
differences could still remain unaddressed in order to facilitate a quick transition. However, in a
successful merger, the most critical differences will be dealt candidly. Cultural differences cannot
be entirely eliminated, as employees who have been used to working in a certain way will not be
able to change their behaviors overnight. Even if some issues are glossed over at start, if these are
critical to business, they need to be addresses as part of the integration process.

Therefore, glossing over would make the transition look smooth at the beginning but not in the
long run.