Impact Of Culture On The Merger Between Sprint And Nextel

Impact of Culture on the Merger between Sprint and Nextel

Introduction

In the current time of globalized, competitive and fast growing business era, M&A (Mergers and acquisitions) is considered a major growth strategy that helps the companies in attaining economic and business objectives successfully. This growth strategy helps the organizations in entering into the new marketplaces, acquiring new technologies, leveraging business size and sale strategically. But, when two or more companies are carried organized via M&A for the monetary reasons, it is doubtful the two cultures will remain precisely the same. The past research studies on M&A suggest that, 55 to 90% of mergers fail to deliver shareholder returns. Conflict or clash among the organizational culture is one of the major reasons behind the failure of M&A. So, it can be said that, due to lack of cultural integration, most of mergers fails. This research paper analyzes and accesses the impact of Culture on the Merger between Sprint and Nextel. Finally, detail recommendations on what leaders of the two companies could have done to unify their different culture.

Summary of the and Merger among Sprint Nextel

Sprint was one of the largest, reputed, leading telecommunications companies in the America. Before the merger, it was 4^th largest mobile network operator in the USA. The company was serving more than 55 million customers. It was also the largest and biggest in terms of number of employees, customers, servers, revenue, size etc. In the year 2005, Sprint acquired its major competitive company Nextel for a sum of $ 35 billion. Nextel was the main competitors of the Sprint. It was the largest and leading wireless service operator in the USA. The main purpose of Sprint behind the merger of Nextel was to become the leading and main players in the industry. Another business objective was to enhance level of business profitability, productivity and market strength. By the 2008, the company had written down Nextel value of 80%. This merger was failed due to clash among the two company’s cultures. It is because, the company Nextel was known for its entrepreneurial culture whereas Sprint was acknowledged for its bottom down formality culture. The cultural differences and lack of cultural integration among these two companies significantly affected their business, marketing, advertising and growth strategies. On the other hand, the research studies also reflects that, the differences in the culture created misunderstanding and mistrust among these two merged companies. For example, it was complained by most of employees of Nextel that there aggressive as well as more entrepreneurial culture triggered their growth.

Culture Clash: Sprint – Nextel

Basically, organizational culture is all about shared values, norms, and beliefs that play key role in underlining a company’s identity, personality, and uniqueness. Today, it is very complex to merge two organizations organized whose organizational culture is totally different. Most of mergers fail due to mismatched organizational culture. The merger of Sprint with Nextel was failed due to lack of cultural differences. The merger was done for the purpose to develop a stronger customer base and strong business strategy. But, cultural differences created a range of problems and results in employee and customer discontent. On the other hand, it is also analyzed that, the two different cultures have resulted in everything from advertising to cellphone technologies. According to the Washington Post article, this culture clash generated a number of big issues and tensions in the front of both the companies. For example, employees with different organizational culture were unable to take decisions and actions quickly. Moreover, it is also found that, Sprint was using a hierarchy culture with a more structured work environment while Nextel was in adhocracy culture. It means, employees of Nextel was valuing flexibility and responding to market changes quickly. These cultures of companies totally oppose to each other. The adhocracy culture of Nextel was paying attention on values flexibility and external focus. But, Sprint’s hierarchy culture was focusing on values control and internal focus. Both the firms found themselves different with each other.

At the same time, it is also analyzed that, there were a lot of specific reasons behind the failure of merger among the two companies. For example, this merger created a sense fear among the employees of the both companies because of unexpected changes as well as high failure rates. Moreover, employee retention was another major challenge. For case, this merger created negative feelings, thoughts, and attitude about the change. Also, the uncertainty, lack of job security, questions about leadership credibility and trust, and confusion is frustrating for employees. Lack of cultural values and norms were other specific issues that affected this merger. Hence, it can be said that, lack of cultural integration was not only one factor behind the failure of this merger.

Role of Organizational Culture in M&A

Organizational culture play key role in merger as it drive profitable behavior among the employees and shape employees interactions in the workplace. It is also promote positive competition, trust, and leader-follower relationships. It is also important in enhancing individual commitment. Apart from this, it shapes the structure, performance, capability, and effectiveness of teams. A healthy organizational culture promotes productive conflict, team member participation, and team engagement. On the other hand, it is also affect organizational design in the support of mission, vision, priorities and strategies. Hence, it is play critical role in offering policy guidance and enables the organization to bring out the best in each employee.

Recommendations

On the basis of above analysis, it is recommended that, both the companies should have understand and respect to different cultural values. They should have pay attention on recognizing the culture for the company as whole and begun the process of culture change. Apart from this, both should have measured cultural differences before starting the merger process. They should have focused on the delivering the best shareholder returns with good intentions. They should have focused on common economic goals of the new company by avoiding cultural clash. It was also major responsibility of the leaders of both the companies to adopt best leadership strategies to manage the formation of a blended new shared culture. On the other hand, in order to attain the specific and major goals of the mergers, leaders should pay attention on identifying the best parts of both the culture and create a new harmonized culture.

At the same time, to avoid such clashing situation, the leaders and top management should communicate clearly and create a common model of value and vision to merged company. For example, they can create and build a more innovative, supportive and friendly work environment where employees feel heard. It is also important to empower the employees so that shared ideas can be empowered in new teams. In the same way, a shared culture should be created to make the merger successful and avoid issues related to cultural differences. Overall, it is suggested that, a more engaged workforce should be created in order to deal with issues related with M&A.

References

Schein, E. H., & Schein, P. (2016). Organizational culture and leadership, 5th edition (5th ed.) USA: John Wiley & Sons.

Marks, M. L., & Mirvis, P. H. (2011). A framework for the human resources role in managing culture in mergers and acquisitions. Human Resource Management, 50(6), 859-877.

Oberoi, S. (2020). 6 Examples of Merger Failures Owing to Cultural Incompatibility. Retrieved from: https://www.toolbox.com/hr/hr-strategy/articles/examples-merger-failure-cultural-incompatibility/