When the proposed merger of New York University Medical Center and Mount Sinai Medical Center unraveled this year, blame was placed, predictably, on the cultural differences between the two organizations.
"It was a real culture clash," a faculty member told the New York Times. "Any notion that the two would become one and everyone would forget where they came from was dispelled pretty quickly."
According to Gary Rosenberg, senior vice president at Mount Sinai, it was a well-founded comment. "While mergers of any healthcare organization are difficult," he says, "the culture clash in academic settings is much more complex."
Culture can be a make-or-break factor in the merger equation. If properly understood, aggressively addressed, and aligned with the business and strategic goals, culture can go a long way in speeding and sustaining the new union. If it's ignored-or, as in the case of Mount Sinai and NYU, if the differences are too great-it can almost single-handedly sour the deal.
So how does an organization ensure that the cultural piece of a potential merger supports and sustains the union? It's a tough question with no easy answers. But based on the merger experiences of a number of organizations, several steps can be taken to increase the chances of success:
Understand what culture is and what it's not. Because it's so frequently misunderstood, culture is often trotted out as the all-embracing merger scapegoat. The fact is, blaming a failed merger on "cultural differences" is about as conclusive as blaming a failed marriage on "irreconcilable differences."
Simply put, culture is how people work. It includes both formal and informal decisionmaking processes, the allocation of resources, the division of power, the behaviors required, the level of risk allowed, and how people are selected, developed, rewarded and led.
While an organization's culture supports and frequently grows out of its core values, the two are not the same. Cultures can change and evolve. But those bedrock tenets that form the foundation of an organization are much tougher to budge. If merging organizations have similar core values, they may-with effort-be blended. But no amount of wheeling and dealing can bring them together if they're too far apart.
Nor should culture be confused with inflated egos, territorial jealousies or partisan power trips. All these issues must be addressed; they can be powerful organizational saboteurs and barriers to the development of positive new cultures. But don't dignify these antics under the mantle of "cultural differences." Call them what they are: desperate acts of self-preservation.
Perform a "cultural due-diligence" as part of the pre-merger effort. It's a refrain heard over and over: "We spent all that time and money on lawyers and accountants. We created an airtight financial deal enjoyed by all. But the dealmaking and legal wrangling didn't address the cultural differences that now threaten the new organization." Certainly not. That's why organizations need to address the culture before the deal. Leadership needs to understand the "old" cultures of the merging organizations as well as the "new" cultures that will be required as a result of the merger.
Before Capital Health System and Polyclinic Medical Center merged to form Pinnacle Health System, the Harrisburg, Pa., organizations assessed their cultures and found a number of differences, including management styles. Although some profound issues had to be addressed as a result of the assessment, John Cramer, president and chief executive officer of Pinnacle, says it helped generate a level of trust that otherwise might have been missing.
Harmonize the leadership to drive the new culture. Understanding the various cultures at work is one thing. Blending them or creating new ones is quite another. To do it effectively requires solid leadership. Says Mount Sinai's Rosenberg: "Senior people are crucial culture carriers."
To be effective carriers, the new leadership team-from executives to managers and supervisors-needs to understand and commit to the new vision, business strategy and culture. At the same time, it must let go of the old culture in order to allow the new one to emerge.
Note that we said understand and commit. We didn't say like or blindly accept. Real buy-in takes time. "People don't have to agree," says Gary Horan, president and CEO of Our Lady of Mercy Healthcare, a Bronx, N.Y.-based system that has gone through two mergers. "But they need to be loyal to the institution, flexible and have an open mind."
Recognize the "cultural diversity" of organizations. Despite what most of us have been told, culture isn't an either/or concept. Again, don't confuse culture with values. Certainly your organization must have a single set of core values and an overarching "system culture." But within the system-depending on geographical, operational and even socioeconomic differences-different business organizations may require their own sets of behaviors and ways of working.
Our Lady of Mercy, for example, works hard to maintain a culture in its White Plains, N.Y., hospital that's very different from the one in its Bronx facility.
Be honest and patient. Creating new cultures to support a merger takes a wealth of time and trust. Success doesn't happen overnight.
John McMeekin, president and CEO of Media, Pa.-based Crozer-Keystone Health System, says there's still resistance to change seven years after the merger he led. "It's been seven years of shaping and honing," he says, reflecting that at times the process has been "painful and wasteful." But, he adds, "You can't force-feed values and cultures."
Know where you're going. Unfortunately, that's a problem with too many healthcare mergers today. Beyond the economies-and safety-of size and numbers, the missions of many mergers tend to quickly blur. All too often, these unions are little more than a circling of wagons to protect those in the party from marketplace interlopers. Sadly, rather than build a cohesive vision, strategy and culture to help them fend off their competitors, they turn their weapons inward, firing on each other.
If the merger is to succeed over the long haul, then it must look beyond survivability and profitability. It must be built on a clear vision, grounded on solid values and supported by cohesive cultures.
Bolster is a partner with the Hay Group and heads the firm's national healthcare practice in the South. Fralicx heads the Hay Group's healthcare practice in the Midwest and leads its Center for Change Management and Measurement.