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.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Le Blue Dude, Mar 12th, 2008 @ 3:14pm

    Nice 360?

    so, you basically agree that the result of such a merger would be a doomed company?

    reply to this | link to this | view in thread ]

  2. icon
    Nick (profile), Mar 12th, 2008 @ 3:18pm

    My thoughts exactly from 4 weeks ago.

    reply to this | link to this | view in thread ]

  3. identicon
    Lucretious, Mar 12th, 2008 @ 5:30pm

    One is reminded of Electronic Art's past developer buy-outs and the subsequent falling out of said developers. John Riccitiello recently admitted that trying to force EA's corporate group-think down their throats led to mass departures.

    reply to this | link to this | view in thread ]

  4. identicon
    Anonymous Coward, Mar 12th, 2008 @ 7:28pm

    Microhoo, that's funny!

    reply to this | link to this | view in thread ]

  5. identicon
    inc, Mar 12th, 2008 @ 10:26pm

    This is like Hostway's acquisition of Affinity Internet. A culture of trying to provide the best to customers even if it cuts a little into the profit margin on capital expenditures has been replaced with a save money at all costs attitude. This caused a hasted move which Affinity dubbed as a bad idea and needed more planning but was met with artificial deadlines to get out of a data center before next month's bill. It would've been cheaper to stay after losing 25% of the customer base.

    reply to this | link to this | view in thread ]

  6. identicon
    rendom, Jan 8th, 2009 @ 5:13am

    megaupoad downloading

    Need more files from Megaupload? Find “more” at

    reply to this | link to this | view in thread ]

  7. identicon
    uncommon employment, Jan 18th, 2011 @ 1:32pm

    Any corporate industries those who have presence in the current market . They understand the importance of creativity as it is the only feature which make you special from others. As the attribute of creativity is no one's monopoly.

    reply to this | link to this | view in thread ]

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