This article was produced and financed by BI Norwegian Business School

People should pay greater attention when leaders blame poor outcomes on cultural differences, according to researcher, (Illustration photo: Microstock)
People should pay greater attention when leaders blame poor outcomes on cultural differences, according to researcher, (Illustration photo: Microstock)

CEO takes credit for success; culture is to blame when it goes wrong

Managers often blame cultural differences when a merger or acquisition fails. When it succeeds, they often take personal credit, according to a new study.

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BI Norwegian Business School

BI is a private and independent business school in Norway.

When companies merge, or a company acquires another company, the goal is naturally increased value.

The synergies of the companies that are merging is the magic that will turn two plus two into considerably more than four – to the delight of both managers and shareholders.

In practice, mergers and acquisitions have proved to be a high risk sport. The gains envisaged do not materialise. Many mergers and acquisitions fail.

Culture gets the rap

Managers have a tendency to blame cultural differences when mergers fail, concludes Associate Professor Paulina Junni at BI Norwegian Business School.

Paulina Junni. (Photo: Audun Farbrot)
Paulina Junni. (Photo: Audun Farbrot)

Junni and his research fellows have made a study of 92 mergers carried out by Finnish companies in the period from 2001 to 2004. The material includes both domestic and cross-border mergers.

The researchers were keen to find out how managers explain the outcomes of mergers and acquisitions. The results are published in the international science magazine Strategic Management Journal.

"It can be tempting for managers to blame cultural differences when mergers fail. Culture can cover up other, more complex reasons for why a merger failed. It's a way for managers to reduce their own responsibility for the poor results," says Junni.

The study shows that the tendency to blame poor results on culture is amplified when managers have previous experience with mergers and acquisitions.

"Managers seem to learn that they can easily pin unsuccessful mergers on culture,” he says.

Managers take credit for success

The researchers also asked the business leaders who took part in the survey to assess their role in the implementation of mergers and acquisitions. The study shows that managers are inclined to take personal credit for successful mergers.

"This can lead to the illusion that they have control and also an exaggerated belief in their own abilities," says the researcher.

It goes with the story that when a merger goes terribly wrong, the managers will ascribe the unsuccessful outcome to their own actions. In such situations, they want to show themselves and others that they have a kind of control, even if it didn’t pan out.

Listen to what they have to say

"It may be well worth it to listen carefully to how managers explain their successes and failures," recommends Junni.

Leaders who readily chalk up success to their own excellence, may soon be tempted to take excessive risks at the next crossroad, and thus lead the company into trouble.

People should pay greater attention when leaders blame poor outcomes on cultural differences. As a result, we may not see the real reasons why it was not so easy to merge the companies.

"When cultural differences are negatively implicated in this manner, we risk missing out on the potential benefit inherent in using cultural differences to create value," warns Junni.

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Read the Norwegian version of this article at forskning.no

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