Amazon’s 2017 acquisition of Whole Foods was met with a lot of fanfare. In the words of Whole Foods CEO John Mackey, the partnership was “love at first sight.”
A year later, such optimism seems hard to find at Whole Foods.
So where did the love go?
Amazon and Whole Foods’ relationship problems were completely predictable. The two companies may have seen value in capitalizing on each other’s strengths, but they failed to investigate their cultural compatibility beforehand.
They now stand on a fault line where tensions often erupt in mergers. This fault line is what we call ‘tightness versus looseness‘. When tight and loose cultures merge, there is a good chance that they will clash.
Fortunately, when diagnosed early, the tight-loose clashes that crop up in mergers can be handled productively. To increase their chances of achieving cultural harmony, companies should do a few things.
- Prepare to negotiate culture. In addition to negotiating price and other financial terms, organizations discussing a merger need to negotiate culture. Leaders should start by conducting a cultural assessment to understand how people, practices, and management reflect tightness or looseness in both companies. They should determine the pros and cons of their current levels of tight-loose, as well as the opportunities and threats posed by merging cultures. Above all, they should identify areas for compromise: Tighter organizations need to identify domains where they can embrace greater looseness, and looser organizations need to think about how they can welcome some tight features. We call these flexible tightness and structured looseness, respectively.
- Construct a prenup. Once merging organizations better understand the strengths and weaknesses of their company cultures, they should develop a cultural integration plan that articulates which domains will be loose and which will be tight. Mutual input about how each company will change — and a formal contract documenting those changes — can help ensure long-term success.
- Get buy-in. Everyone across both organizations needs to be informed about the integration plan. Simply explaining what the changes will be is not enough; people need to know why they will be implemented. Communicating openly and gaining broad acceptance for changes will help minimize the threat people feel from new ways of doing business.
- Embrace trial and error. Finally, organizations need to be prepared to reevaluate their original integration strategy. No matter how foolproof the plan may seem, issues are bound to arise.
Negotiating tight and loose in organizations takes work, but patience and a willingness to make sacrifices can help merging organizations overcome some of the most difficult challenges.
How will the Amazon–Whole Foods partnership pan out? It’s too soon to say, but spending more time on integrating their cultures could help.
Read full article: One Reason Mergers Fail: The Two Cultures Aren’t Compatible by Michele Gelfand; Sarah Gordon; Chengguang Li; Virginia Choi and Piotr Prokopowicz