Time Warner and AOL merger / culture clash, Human resource, mergers bricks and clicks

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Q B1.1: Are major problems likely when combining different cultures in this combination of "bricks and clicks"?

The merger of American Online (AOL) and Time Warner has launched a new trend of emerging organizations: the combining of traditional, established companies with Internet powerhouses.

There are several different thoughts regarding this issue in merging companies with different cultures. Some specialists in the industry argue that most of the deals don't really fall apart on a culture issue. As an example, Dennis Kozlowski mentioned that most collapses on price are not due to cultural differences between the companies. He also considered the employees and managers of a company as flexible persons who can easily adjust to different cultures in the case of a merger or an acquisition. On the other hand, other specialists such as Jan Leschly stipulate that most of the benefits of mergers are diluted due to management differences and "culture clashes".

I will use the framework from Howson Peter to consider the particular cultural topics to watch in the case of a merger:

Attitude to risk and uncertainty

Attitudes to rules and regulations

Speed of change

Speed of decision making

Focus on the big picture rather than detail, or the other way around

Time horizons

The importance of hierarchy, status and the maintenance of power

Formal versus informal systems

The degree of openness: how much information is shared?

Individual versus collective responsibility

I assume, for my example, that a large "brick" company that is operating in a "mature" market acquires a smaller but high-growth "click" company. A high-growth e-business may have a culture based on:

A confident attitude to risk and uncertainty. Employees that have known only success in a high-growth industry may be less risk-averse and different from people that are operating in a status quo industry ,

High speed of change and high speed of decision making. Because the industry is growing fast, the technology is evolving constantly and the competition is arising to grab market shares, a "high speed of change" and "high speed of decision making" culture may exist in a "click" company. The opposite may characterize a blue chip company.

Short time horizons. I assume that the investment time-horizon for "clicks" companies are shorter than for "bricks" companies due to the fast changing technology.

A flat hierarchy and informal systems. In smaller companies, there are often less hierarchical layers and more informal systems in comparison to a large company.

High degree of openness. More and more young companies apply some corporate policies to enhance the degree of openness (e.g., open-door policy, management by walking around, employee empowerment). I think this is also due to the higher level of education of the employees working for those high-tech companies. On the other hand, I would expect that the management of an industrial manufacturing company shares less information about the strategy (either corporate or operational) of his company with its workers. Also the management approach can be different between two companies: as an example, AOL had a very centralized approach to management and, on the other side, Time Warner had a decentralized one due to its size.

Making matters worse, the average age of the employees working for Internet companies may be lower than the average age of the "bricks" company. There is a generational gap between AOL's "twenty-something's" and Time Warner's "graybeards". When it comes to making deals or launching new ventures, they could move at two speeds.

Finally and more specifically, one of the biggest hurdle for AOL Time Warner was cultural. Prior to the merger, Time Warner business units competed with each other for customers, advertisers and revenue. Business unit heads were rewarded in cash based on their unit's performance. Now they must work together as well as with their...
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