Ethical values mismatched

One of the well-known problems of merging activities of a newly acquired firm into those of the buyer is cultural mismatch. It is not just that there might be different ways of conducting operations but that the unwritten rules on which decisions are made may be based on a different set of underlying values.

A clash occurs when parties take very different positions on either the manner in which some business issue should be dealt with or on the desired outcome. A much deeper problem is that of differing ethical values. While these underpin organisational cultural values, they stem from individual beliefs rather than more widely held corporate norms and are harder to determine.

Our ethical values come primarily from our upbringing as modified by our personal life journey. Most often they express ideological and religious beliefs or beliefs about how societies should work. Our personal ethical values tend to be aligned with those of our friends and, often, work colleagues. We tend to find employment where we are comfortable with the ethical values of those around us. Ethical values can be sufficiently strongly held that we won’t compromise them even if offered generous incentives to do so.

In a merger, culture can be changed to a limited extent, however, only to the level that the new situation is aligned with the underlying ethical values of the individuals involved. Therefore, ascertaining the ethical values of the target firm in a potential acquisition can become critical in achieving post-merger success.

Unfortunately, we do not have an easy way of ascertaining ethical positions. One technique that I use which can assist to avoid major clashes is based on situation scenarios or hypotheticals.

There are many situations in business where there can be multiple legal outcomes. The choice of preferred outcome is often based on our ethical values. There are many more situations where the legal position is somewhat unclear where possible outcomes are more polarised. Sometimes what is the ‘right’ thing to do will very much depend on the way we see the world.

Take, for example, the classic problem of redundancies. Should I lay off the oldest workers, those with the shortest service or those who are least productive, qualified or team oriented, or should I lay-off the most expensive? This choice can bring out very strongly held beliefs in people. Should I terminate my best sales manager because he made inappropriate sexual remarks to a junior employee or should I move the junior to another department rather than risk losing my best sales generator?

Develop a set of scenarios which really make people think hard about the decision and the alternative outcomes which will bring out their underlying ethical positions. Use this internally to discover your own ethical values. The next stage is to request that these be given to executives in the target company as part of your due diligence. If you get a very different situation to your own, you will know that those two business units will never work together.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.