Mapping Cultural Networks in M&A
Mergers and acquisitions (M&As) are pivotal for companies, promising growth and market expansion. However, M&A is also risky and often fraught with challenges. While financial and strategic fits are typically scrutinized, the softer side—organizational culture—frequently does not receive the attention it deserves. Nevertheless, cultural misalignments are a leading cause of merger failure.
To address this, companies are increasingly turning to methods from social sciences, such as mapping social and cultural networks within organizations. This approach, grounded in network analysis, can uncover the intricate web of interpersonal relationships and communication flows that define an organization's true operational and social structure.
Understanding Network Analysis in Organizational Contexts
Let’s first look at network analysis in general. Network analysis studies the relationships within a group, capturing who interacts with whom and how. What do we mean by cultural network analysis? Cultural network analysis is a methodological approach used to explore and visualize the relationships and interactions within a group, organization, or community, focusing specifically on cultural aspects. This type of analysis combines social network analysis and cultural studies to provide insights into how cultural norms, values, behaviors, and artifacts are shared and transmitted among individuals within the network. With the expression ‘cultural,’ we also mean company culture.
When I started studying social network theory (a long time ago during my dissertation) as part of my research focus on the distribution of innovation, I found many examples of social network analysis in the medical field. Imagine the U.S. Food and Drug Administration approving a new method to treat a certain illness. How does that information go out to doctors and patients, and why do some people use it earlier than others? It’s a fascinating topic, and we can also use it in M&A.
In an organizational context, network analysis involves mapping the connections among employees to reveal the underlying social, cultural, and professional landscape. This can include who people collaborate with, seek advice, or share information with. Network analysis helps organizations and companies identify key influencers, central figures, and isolated groups or individuals. It reveals the formal hierarchy and the informal networks that often dictate how information flows and decisions are made. These insights are invaluable during mergers, where understanding the existing social fabric can help integrate disparate groups more effectively.
The Process of Mapping Social and Cultural Networks
The first step in mapping cultural networks is data collection. Organizations can use surveys, digital communication records (like emails or messaging platforms), and direct observations to gather data about employee interaction. Questions might focus on communication habits, collaboration partners, sources of workplace guidance, how new information comes into networks, and who makes decisions.
The collected data is then visualized using specialized software that visually represents the network. Nodes (dots) represent individuals within the company, while edges (lines) show the connections between them. Various colors and sizes of nodes and edges can indicate different roles, connection strengths, or other relevant variables.
The visual maps are analyzed to identify patterns and key features such as:
Central Nodes: Individuals with connections with many others often serve as information hubs or influencers.
Bridges: Those who connect different groups within the network, facilitating cross-departmental collaboration.
Peripheral Nodes: Individuals with fewer connections, which might indicate isolation or underutilization.
You may think you need to focus on ‘central nodes’ to distribute information effectively, but that’s not enough. Many studies show that ‘bridges’ play a critical role in information moving between different social networks. Within a specific social network, the ‘central nodes’ are critical, but they often don’t have access to new information because they are too involved within the networks. They look inside more than outside. That’s why ‘bridges’ are essential for the distribution of information. The important lesson: Never underestimate people at the thresholds of social networks who bring in new applications, methods, and ideas from other groups or industries.
Other elements are:
Centrality: It measures the importance or influence of a node in the network.
Density: High density means that people interact with high frequency; they are strongly interconnected. You usually measure it by dividing the direct ties by the possible ties.
Clusters: These are groups of nodes that interact with each other.
Structural Holes: Missing connections between parts of a network.
The Role of Social and Cultural Network Mapping in M&A
How can organizations effectively leverage social and cultural network mapping in the context of M&A? Here are some key steps and considerations:
Start early in the due diligence process: Social and cultural network mapping should be initiated as early as possible in the M&A lifecycle, ideally as part of the initial due diligence phase. This allows integration leaders to get a head start on understanding the target company's social fabric and cultural dynamics rather than scrambling to address these issues once the deal is already underway.
Gather data from multiple sources: Effective social and cultural network mapping requires drawing insights from diverse sources. This includes organizational charts and employee directories, emails (for example, from your communication with the target), meeting attendance records, HR data, and even sentiment data from employee surveys and social media. The more comprehensive the data set, the richer the insights can be extracted. During the due diligence phase, the available data depends on the specifics of your M&A deal. In some transactions, you will only get a few of those elements. In such a case, start with what you have and expand the analysis whenever you get more information.
Engage cross-functional expertise: Conducting robust social and cultural network analysis is a highly specialized endeavor that requires expertise spanning disciplines like organizational psychology, data science, and change management. It's critical to assemble a diverse, cross-functional team that can bring complementary skillsets to the table. This may involve enlisting the support of external consultants or research partners in addition to internal resources.
Socialize findings and co-create solutions: Once the social and cultural network mapping is complete, it's essential to socialize the key insights and findings across the integration team and with key stakeholders from both organizations. This isn't a one-way information dump - rather, it should be an iterative process of co-creating solutions and strategies based on analytical insights.
Integrate culture and people considerations throughout: Rather than treating culture and people as an afterthought, social and cultural network mapping should be deeply integrated into the overall M&A integration planning and execution. Culture and people-related considerations should be woven throughout the workstreams, timelines, and decision-making processes, not siloed into a separate ‘change management’ track.
Continuously monitor and adapt: M&A integration is a dynamic, ongoing process, not a one-time event. Social and cultural network mapping shouldn't be a static exercise - it should be an iterative, continuous process of monitoring, sensing, and adapting the integration approach based on evolving dynamics within the combined organization.
When you think about those topics, you probably already do some kind of high-level analysis. Once you start communicating with the target company, you learn quickly how the target company's employees interact, who is more central in the communication, who doesn’t know what is happening in other parts of the company, and how the target makes decisions. Even though it is not a fully developed social and cultural analysis, document the assessment of your M&A team of the key elements.
Conclusion
In the world of mergers and acquisitions, culture is a make-or-break factor. By deeply understanding the social fabric and cultural dynamics of the organizations involved, leaders can dramatically improve the odds of successful integration and value creation.
Social and cultural network mapping is a powerful analytical tool that goes beyond superficial cultural assessments to uncover the true drivers of organizational behavior. By mapping the informal influence structures, communication patterns, and cultural touchstones of both the acquiring and target companies, integration teams can develop far more informed and intentional strategies for blending the two entities.
Ultimately, the ability to navigate cultural complexity is a critical competency for any organization seeking to grow through M&A. As deals become increasingly complex and the stakes ever higher, social and cultural network mapping will only become more essential in the M&A toolbox.
