I love you, you're perfect; now change.

For as long as big companies have bought small ones, this approach to post-merger integration has been nearly as common as it is self-defeating. When a deal is coming together, commercial logic is emphasized and cultural differences are often overlooked. Later, when the two sides must work together, different ways of doing things start to become major impediments. The acquirer imposes changes on the target but succeeds mainly in alienating its new employees and diminishing the value of the business it bought. Eventually, both sides identify the basic problem as a culture clash - without a great deal of thought about what's really going on in such clashes and how they can be avoided, or at least softened.

It's true that the state of the art has advanced at some experienced acquirers. Many organizations now routinely conduct cultural due diligence, exploring matters such as how a target's employees will fare in a team-oriented organization. Some companies, such as Cisco Systems Inc., have even introduced "culture blockers" - people assigned to safeguard value-creating qualities in small companies they acquire. For example, culture blockers might initially prevent Cisco's compensation system from replacing a "skin-in-the-game" model that rewards target employees for long hours spent bringing a new product to market.

But even the most sophisticated acquirers still find cultural challenges to be among their thorniest. Recognizing the differences in a general way is the easy part. It's not such a surprise that entrepreneurial types are different from company lifers, that a vice president of sales in a small company has a very different job from someone with the same title in a large organization or that large-company reporting requirements can be burdensome for small companies. The harder (and much more valuable) part is understanding the differences in detail and then focusing on the ones that really matter.

We refer to these operationally significant cultural attributes as the mission-critical 5%. These are the few critical cultural differences that, if left unattended, can derail a deal. As for the other 95%, it's mostly cultural noise. That's not to say that differences in dress code or vacation policies don't matter at all. But it's essential to distinguish what is mission-critical from what can wait. By getting right the 5% that's critical, aligning the rest becomes much simpler.

These mission-critical cultural attributes are invariably found in areas that bear directly on a company's performance - that is, within one of eight operating protocols:

• Spending habits,

• Corporate metabolism,

• Decision-making,

• Work habits,

• Organizational structure,

• Communication practices,

• Performance management, and

• Exercise of power and authority.

You may recognize this list as things that caused significant friction in your first year of marriage. Who keeps the checkbook, whether you're laid-back or a go-getter, which important decisions are made together or independently, who's responsible for doing what, how you discuss issues, how you let each other know what you need and appreciate and, last but not least, who's in charge of what. The first year is all about figuring out how to live together - what you can tolerate and what must change.

Where are the cultural disconnects most commonly found? One place to look is in the realm of decision-making, especially if a founder exits or takes on a very different role after his company is acquired. When the company was independent, he may have been involved in every single important decision. Often acquirers fill that vacuum on paper, with a redrawn organization chart, but not really in practice. Forging a new system takes a deep understanding of the real roles of the remaining leaders and a willingness to educate them on what's expected in the future.

A related problem often crops up in performance management. Small companies tend to try lots of new things but - in an environment where most senior people are generalists - tend not to be too rigorous about holding people accountable for the success or failure of a particular initiative. Large companies often have the opposite qualities. To prevent culture clash, large companies may need to introduce accountability in small doses, attaching rewards so people can see that it's not only results but also discipline that will matter.

Culture is known as a "soft" issue for good reason. Come down too hard in an area that seems nonnegotiable to an acquirer, and you risk collateral damage to a capability that made the target valuable in the first place. Some degree of cultural tension is an inevitable byproduct of combining two organizations. But if an acquirer proceeds with care, and concentrates on the things that really matter, its chances of success greatly improve. - Stephanie Snyder 

Stephanie Snyder is senior vice president of mergers and acquisitions at Pritchett LP in Plano, Texas.

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