Cultural Due Diligence


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Companies, mergers and investments don't fail because of lousy products - it's culture and behaviour that determine distinction! Make your company, merger or investment stand out sustainably by focussing on what really matters: the people and their behaviour!

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Cultural Due Diligence

  1. 1. White paper Kroese Cultural Due Diligence Since all your competitors are smart, they will have made similar strategic choices in their market approach. How does your organisation realise a sustainable difference? Competitive advantage is about distinction.
  2. 2. Cultural due diligence. White paper.
  3. 3. Corporate culture is a ‘hard’ issue <ul><li>Companies, acquisitions and investments generally don’t fail because of lousy products, bad intentions or insufficient plans. </li></ul><ul><li>If they fail, they mostly do so, because of the way their leaders and management behave: the choices they make, the way they solve problems, the way in which they (fail to) cooperate. </li></ul><ul><li>In short: because of the culture . </li></ul>
  4. 4. Corporate culture is a ‘hard’ issue <ul><li>The effects of wrong corporate behaviour are never immediate, especially during, or after prolonged periods of success. </li></ul><ul><li>While profits, turnover and market share may still be rising, underneath these ‘hard’ symptoms, scenarios may unfold that at some point in time result in sudden decline: even the most dramatic failures may be years in the making. </li></ul>
  5. 5. Corporate culture is a ‘hard’ issue <ul><li>Corporate culture is a long-term driver of results. </li></ul>LONG-TERM DRIVERS SUSTAINABLE RESULTS
  6. 6. Cultural due diligence <ul><li>Why? </li></ul><ul><li>a financial due diligence assesses the financial health of a company. This is always a picture at a certain point in time. This picture deals mostly with the past ; </li></ul><ul><li>a cultural due diligence assesses the quality and sustainability of a company’s health.; </li></ul><ul><li>and therefore supports decisionmaking, because it contributes to a better understanding of a company’s future . </li></ul>
  7. 7. Cultural due diligence <ul><li>For whom? </li></ul><ul><li>companies that want to improve their organisational performance </li></ul><ul><li>companies engaged in takeover or merger processes </li></ul><ul><li>corporate finance specialists, M&A advisors </li></ul><ul><li>private equity funds, venture capitalists </li></ul>
  8. 8. Cultural due diligence <ul><li>Features </li></ul><ul><li>A strategic instrument to effectively evaluate or monitor a company’s culture and provide know how on improvement. </li></ul><ul><li>analysis of cultural key characteristics provides a key performance indicator, which depicts a company’s cultural strength in one figure ; </li></ul><ul><li>it can be broken down to four key parameters that define an organisation’s cultural strength; </li></ul><ul><li>the components of each parameter, and their score, define priorities, weaknesses and points of interest . </li></ul>
  9. 9. Cultural due diligence <ul><li>Benefits </li></ul><ul><li>Corporate improvement: </li></ul><ul><li>insight in the organisation´s cultural strengths and weaknesses: </li></ul><ul><ul><li>both on management level and organisational; </li></ul></ul><ul><li>agreement on priorities for improvement; </li></ul><ul><li>ingredients for an improvement plan </li></ul><ul><li>Corporate finance support (mergers, acquisitions, investments) </li></ul><ul><li>insight in the organisation´s cultural strengths and weaknesses; </li></ul><ul><li>better understanding of cultural fit; </li></ul><ul><li>agreement priorities for improvement and/or change; </li></ul><ul><li>support in decision making (how solid is the plan?) </li></ul><ul><li>ingredients for change plan or integration plan. </li></ul>
  10. 10. Culture drives distinction CORPORATE CULTURE MANAGEMENT CULTURE BRANDING & MARKET COMMUNICATION do they know us? COMPETITIVE EDGE (KROESE DISTINCTION INDEX ®) recognition DISTINCTION DRIVERS innovation sales brand image do they prefer us? do they buy from us? is our portfolio developing well? BEHAVIOUR do we feel involved? internal leadership creativity cooperation are we an effective team? do we have enough successful ideas are we making progress?
  11. 11. Cultural key questions (among others) <ul><li>Management/leadership: </li></ul><ul><li>what are the values they are driven by? </li></ul><ul><li>are they subservient to the company interest ? </li></ul><ul><ul><li>are they here for this company, or are they mere mercenaries? </li></ul></ul><ul><li>is there a sound management board dialogue, dominated by a search for consensus? </li></ul><ul><ul><li>focus on the right people, team-cohesion </li></ul></ul><ul><ul><li>agreement on corporate and strategic reality </li></ul></ul><ul><ul><li>agreement strategic priorities </li></ul></ul><ul><ul><li>discipline in follow-up and execution </li></ul></ul><ul><li>what is the balance of (informal) power ? </li></ul><ul><li>Mergers / investments: </li></ul><ul><li>what is the cultural fit in leadership? </li></ul><ul><li>key priorities for change after merger/acquisition? </li></ul>
  12. 12. Cultural key questions (among others) <ul><li>Organisational: </li></ul><ul><li>involvement and loyalty of key employees. </li></ul><ul><li>is there mutual respect and understanding? </li></ul><ul><li>how effective is their cooperation? </li></ul><ul><li>how involved are people in problem solving and making progress? </li></ul><ul><li>is there a genuine longing for improvement? How doe this show </li></ul><ul><li>are they rich in ideas? </li></ul><ul><li>how successful are they in execution? </li></ul><ul><li>Mergers / investments: </li></ul><ul><li>what are key-features of the company’s identity? </li></ul><ul><li>what is the cultural fit? </li></ul>
  13. 13. Method <ul><li>The way of working depends on the level of discretion required </li></ul><ul><li>Open/transparent </li></ul><ul><li>online survey; </li></ul><ul><li>qualitative analysis: interviews, desk research </li></ul><ul><li>Discrete, e.g. in case of merger evaluation </li></ul><ul><li>provide insights and checklists to management </li></ul><ul><li>assist in assessment, based on feedback </li></ul>
  14. 14. More info… <ul><li> </li></ul><ul><li>Kroese brands & behaviour bv </li></ul><ul><li>Handelsweg 59 e </li></ul><ul><li>1181 ZA AMSTELVEEN </li></ul><ul><li>THE NETHERLANDS </li></ul><ul><li>[email_address] </li></ul>