by Timothy Lee

Filed Under:
culture, mergers, software development

microsoft, yahoo

Culture Clash Could Doom Microhoo!

from the internal-frictions dept

We don't link to anthropologists much on Techdirt, but Grant McCracken recently wrote a really interesting post on the cultural dimension of corporate mergers. McCracken points out that culture matters a lot in a company's success. Every really successful firm succeeds by developing a distinctive corporate culture that boosts productivity by giving employees a shared set of assumptions about how to do business. In many cases, employees become like the proverbial fish in water: the corporate culture is so pervasive that the employee barely notices it. In other cases, employees explicitly debate the meaning of their shared corporate identity: Google employees commonly debate the most "Googly" way to approach a particular problem.

When two firms merge, the existence of a shared corporate culture can no longer be assumed. Differing cultural assumptions among employees are likely to produce new frictions. One company might be more bureaucratic, work longer hours, have different procedures for evaluating new products, or have any number of other differences in the way they do business. Any of these disagreements can be a barrier to the smooth functioning of the merged company. If the two separate firms are to become a single, organic one, management must find a way to convince employees of the acquired firm to embrace the culture of the acquiring firm. If they fail, the company will limp along with simmering disagreements over strategy and tactics. That was a big part of the problem with the AOL Time Warner merger, for example.

These kinds of cultural assumptions are particularly important in the software industry, where success is often driven by the ability to recruit and retain the most talented programmers. One of Google's key advantage over the last few years has been the perception that it's a more cutting-edge place to work than Yahoo! or (especially) Microsoft. Many smart programmers view Microsoft as too big, bureaucratic, and slow-moving to develop really innovative products, and since they want to work on hot new technologies, they often go elsewhere. Acquiring another multi-billion-dollar company is likely to exacerbate this perception, especially if it causes some of Yahoo!'s best programmers to jump ship in the process.

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