Review: [untitled] Author(s): Anthony F. Buono Reviewed work(s): Mergers and Acquisitions: Managing Culture and Human Resources by Günter K. Stahl ; Mark E. Mendenhall Source: Administrative Science Quarterly, Vol. 50, No. 4 (Dec., 2005), pp. 647-650 Published by: Johnson Graduate School of Management, Cornell University Stable URL: http://www.jstor.org/stable/30037226 Accessed: 28/09/2010 12:21 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=cjohn. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

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Book Reviews

Other Reviews Mergers and Acquisitions: Managing Culture and Human Resources. Gunter K. Stahl and Mark E. Mendenhall, eds. Stanford, CA: Stanford University Press, 2005. 434 pp. $75.00. Roughly 20 years ago, Business Week (Prokesch et al., 1985) ran a cover story questioning whether mergers "really worked," focusing on the extent to which the organizational combination strategy actually enhanced such desired outcomes as market share, profitability, and shareholder value. The analysts' conclusion was "not very often." During the subsequent two decades there has been a literal avalanche of work, by scholars and practitioners alike, delving into the nuances, subtleties, and dynamics underlying the merger and acquisition (M&A) process, with an eye toward enhancing our understanding of this complex strategy and improving M&A performance. The literature is too voluminous to even reasonably cite, but a few oft-noted works include Buono and Bowditch (1989), Haspeslagh and Jemison (1991), Hitt, Harrison, and Ireland (2001), Jemison and Sitkin (1986), Mirvis and Marks (1992) and Schweiger (2002). Yet despite all of this work and related intervention, a recent Business Week cover story (Henry and Jespersen, 2002) reached essentially the same conclusion as its 1985 counterpart, pointing out that M&As continue to wreak havoc on organizations, often destroying shareholder value in the process. In an effort to explore the underlying reasons for this continued failure, a select group of scholars and executives interested in the sociocultural and human resource (HR) dimension of organizational life came together to examine the "soft" side of the M&A process. Mergers and Acquisitions emerged from this small conference, bringing together an impressive cast of international contributors-from different disciplines, research domains, and geographic regions, representing both the academic and corporate worlds-to examine this "neglected" area in the M&A literature. In the volume, over 50 scholars present 19 chapters that examine a broad range of issues and challenges involved in managing the post-combination transition phase, enhancing leadership and trust building, retaining and motivating organizational members, implementing social and cultural integration processes, and facilitating interorganizational knowledge transfer and learning. Each of the chapters, which are written by noted M&A theorists and researchers, is followed by an executive commentary, in which the practitioners generally provide a laudatory note of appreciation for the insights the scholars provide. The majority of executives also pay homage to the critical role that values, trust, the "right philosophy," and people play in an M&A's ultimate success. Although these comments suggest enlightened corporate support for thoughtful, multidimensional integration efforts, skepticism lingers, especially in the context of similar past comments by such corporate figures as TYCO's Dennis Kozlowski and Merrill Lynch's David Komansky, both of whom also stressed the importance of values, trust, and investment in human resources when 647/ASQ, December 2005

acquiring other firms (see Carey, 2000). The academicians raise thoughtful points and recommendations about the "shoulds" of the post-combination process (e.g., companies should invest in cultural due diligence, managers should create a bond of trust with organizational members). But a basic theme that runs through the executive commentaries is that there is little real direction as to how these "shoulds" might be accomplished, how to choose when different possibilities conflict with each other, or how these prescriptions fit with the realities of organizational life. As Jean Luc Scalabre, former president of Syngentra Korea Ltd. (one of the volume's executive contributors) notes, many M&As are still driven by cost-reduction tactics rather than strategic planning, with overly ambitious short-term financial goals, which are often set "beyond realistic achievement," dominating the process

(p. 80). Following an introductory section (two chapters) that captures the importance of post-combination integration, there are two theory-based sections on conceptualizing (five chapters) and managing (four chapters) sociocultural integration, a section with six case analyses from a variety of industry and national contexts (with varying degrees of depth and detail) that are cast as "lessons from experience," and two final chapters that synthesize the book's contents, drawing out the ramifications for avenues of future research and lessons for practice. Though each of the chapters is generally informative and well written, a frustrating aspect of the volume is the different levels of analysis that are used to support various arguments. For example, one of the early chapters by David Schweiger and Robert Lippert provides a thoughtful integrative framework that underscores the importance of linking strategic objectives, sought-after synergies and integration plans with broader cultural considerations and HR activities, underscoring the importance of early planning efforts. As an example of a "successful" effort, the authors point to the work done by Compaq's HR teams, which analyzed Digital Equipment Corporation's (DEC) culture "from afar," providing them with the insights they needed to "successfully merge" the two companies (p. 30). This brief illustration appears to reinforce their argument, but closer scrutiny suggests that Compaq was less than successful in drawing the two companies together. In fact, it has been suggested that Hewlett-Packard's (HP) subsequent acquisition of Compaq was complicated by a lingering Compaq-DEC cultural "hangover," in which Compaq's "merged" workforce was still stereotyping and differentiating themselves as "Digital Classic" and "Compaq Classic" employees during the HP acquisition (Buono, 2005). If similar depth and detail were drawn on, as provided, for example, in Torsten Kuhlmann and Peter Dowling's analysis of the DaimlerChrysler combination, the Compaq-DEC illustration might well point to a different dynamic. Researchers entering the field will find the volume both thoughtful and thought-provoking and could justifiably consider it "must reading." Informed M&A scholars, however, are likely to have mixed reactions, finding some new insights entrenched in reasonably well-traveled ground. While it is dif648/ASQ, December 2005

Book Reviews

ficult to highlight specific contributions in a book of this nature, with so many solid chapters, Danna Greenberg, Henry Lane, and Keith Bahde's chapter on organizational learning in cross-border M&As, Georg Schreyogg's chapter on corporate culture diversity, Stein Kleppesto's analysis of the construction of social identities, and Rikard Larsson's examination of synergy realization particularly stand out. Although the volume's emphasis clearly fits my bias and orientation, I would have hoped that by now we would be striving to integrate truly different disciplines and research domains, for example, with chapters written collaboratively by scholars from finance and organizational studies or operations management and clinical psychology. As the editors rightly suggest, focusing solely on financial measures in making a decision to merge or acquire is "like playing a piano with only the white keys and ignoring the black keys and pedal" (p. xv). Unfortunately, by focusing on the "softer" side of organizational life, a significant part of that "piano" is still not being played. The volume is clearly aimed at researchers more than practitioners, and its content succeeds in raising a series of questions and propositions that should keep scholars occupied for the next twenty years. Although there appears to be growing consensus on a number of critical issues (e.g., management efficacy during the post-combination integration process is far more influential than pre-combination factors, sociocultural factors should be included in the due diligence process, the level of desired integration has a significant effect on postcombination processes), many of the paradoxes inherent in the M&A process remain just that-paradoxes without any seeming resolution. In fact, the book makes clear that virtually the same dilemmas and paradoxes my colleague Jim Bowditch and I identified in the late 1980s-including the manageability of organizational culture, tensions around the appropriate speed of integration, and the difficulties that emerge when combinations are truly strategically significant (Buono and Bowditch, 1989; Buono, Weiss, and Bowditch, 1989)-are still to be resolved. Overall, Stahl and Mendenhall, and the contributors, should be justifiably proud of the volume. Yet, though the book makes an informed contribution to our seemingly never-ending quest to find the holy grail of M&A, questions linger as to how much our understanding and insight have really advanced over the past twenty years. The volume's basic theme-that the "traditional" factors (e.g., strategic fit, payment method, acquisition premium paid) typically used to predict and explain M&A performance are useful only if postcombination integration processes are taken into consideration-was clearly laid out over 20 years ago (see, for example, Management Analysis Center, 1983). The volume is offered in the hope of serving as a "catalyst" for scholars in the M&A field. Perhaps it will. It is clear that many basic questions remain unresolved. As the book underscores, we still have a long way to go to figure out exactly what to do and how we should do it. The challenge is to ensure that, going forward, M&A research is conducted in systematic and practical ways that truly capture the transdisciplinary reali649/ASQ, December 2005

ties-strategic, financial, operational, and human-of complex phenomenon.

this

Anthony F. Buono Department of Management Bentley College Waltham, MA 02452 REFERENCES Buono, A. F. 2005 "Consulting to integrate mergers and acquisitions." In L. Greiner and F. Poulfelt (eds.), Handbook of Management Consulting: The Contemporary ConsultantInsights from World Experts: 229-249. Mason, OH: Thomson South-Western. Buono, A. F., and J. L. Bowditch 1989 The Human Side of Mergers and Acquisitions: Managing Collisions between People, Cultures and Organizations. San Francisco: Jossey-Bass. Buono, A. F., J. W. Weiss, and J. L. Bowditch 1989 "Paradoxes in acquisition and merger consulting: Thoughts and recommendations." Consultation: An International Journal, 8 (3): 145-159.

Carey, D. 2000 "Lessons from master acquirers: A CEO roundtable on making mergers succeed." Harvard Business Review, 78 (3): 145-154. Haspeslagh, P., and D. B. Jemison 1991 Managing Acquisitions: Creating Value through Corporate Renewal. New York: Free Press. Henry, D., and F. F. Jespersen 2002 "Mergers: Why most big deals don't pay off." Business Week, October 14, pp. 60-65. Hitt, M. A., J. S. Harrison, and R. D. Ireland 2001 Mergers and Acquisitions: A Guide for Creating Value for Stakeholders. New York: Oxford University Press. Jemison, D. B., and S. Sitkin 1986 "Corporate acquisitions: A process perspective." Academy of Management Review, 11: 145-163.

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Management Analysis Center 1983 Making Mergers Work in the Financial Services Industry. Boston: Management Analysis Center. Mirvis, P. H., and M. L. Marks 1992 Managing the Merger: Making It Work. Englewood Cliffs, NJ: Prentice-Hall. Prokesch, S. E., W. J. Powell, Jr., J. Daily, T. Carson, Z. Schiller, D. Cook, S. Scredon, W. Symonds, and J. M. O'Connell 1985 "Do mergers really work? Not very often-Which raises questions about merger mania." Business Week, June 3, pp. 88-99. Schweiger, D. M. 2002 M&A Integration: A Framework for Executives and Managers. New York: McGrawHill.