Culture Clash in Mergers

Source: CPA Practice Management Forum

In merger talks, culture is a major theme. But what exactly is culture? Webster’s New World College Dictionary, 2002, includes this definition: “The ideas, customs, skills, arts, etc., of a group that are transferred, communicated, or passed along as in or to succeeding generations.” In a CPA firm, culture includes: types of partners, types of work, types of clients, degree of accountability and delegation, work-life balance, organizational structure, compensation program for partners, the position of marketing, degree of trust among people, attitudes, degree of tolerance, acceptance of change, and core values.

Core values may encompass many of the other elements listed. They define the firm and are the most permanent element of the firm’s culture, i.e., they don’t change. They should not be created by the partners alone, but should be the result of input from everyone in the firm.

Differences among the roles of partners in firms center on:

·          Compensation differences between rainmakers and others.

·          The value of chargeable v. marketing and other nonchargeable time.

·          The value of leadership and management.

·          The importance of training and mentoring.

·          The amount of control delegated.

·          The importance of community involvement.

·          Whether marketing rewards are dependent on results or effort.

·          The extent to which individual partners are permitted to depart from firm policies and procedures.

When differences exist on these issues between potential parties to a merger, the merger will be in serious jeopardy. This is especially true of the last item on the list.

Differences in accountability can obstruct mergers. Accountability means taking responsibility for meeting performance objectives and suffering the consequences if they are not met.

The same is true of recruiting differences. If one firm merely hires bodies to fill roles while another hires for the long term, the result will be two very different firms in terms of service quality.

From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, April 2005, p. 10.