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When Cultures Clash

When two organizational cultures collide, the aftermath can include differences of both style and substance. Cultural clashes can occur between companies doing business together and can even occur within a single company when departments function differently. What makes cultural differences so challenging is the not-so-obvious fact that culture is just the way things are inside your organization. Rarely does anyone think about how that culture operates; people simply live and conduct business inside it. In many respects, culture is the water in that old Zen saying, “The last thing a fish notices is water.”

When cultures clash, rather than saying to one another, “It looks as if we perceive or do things differently,” most people think the other group is somewhere between nuts and deliberately difficult. There are countless stories of differences that provoke clashes. For instance, large companies partnering with much smaller ones are sources of memorable culture-clash tales. When the large company interacts with the smaller company, rarely are the people from the large company even aware of their effect on the smaller company.

A couple of years ago, I was asked to help a large pharmaceutical company iron out some differences with its much smaller lab partner. The lab company employed fewer than 100 people and had a promising drug in development in a single location. The pharmaceutical company employed more than 20,000 people spread around the globe. The large company had more people assigned to the partnership than the lab had employees. You can foresee where this one is bound.

The pharma employees were forever calling people at the lab, asking for meetings, briefings, and data. Each call, meeting, or data-gathering expedition meant that lab employees were taken away from their lab work to serve the appetite for information of their larger partner. Endless meetings and requests for data were normal operating procedures for the large pharma company. Very formal, very hierarchical, glacially slow. The denizens of the small lab company were more accustomed to peeking in on someone in his or her office or lab, asking a quick question, and then returning to the job. Very informal, very flat, very quick.

Just about the time the pharma team would get up to speed, the organization would begin another round of job rotations. Pharma staff would then cycle off the partnership and rotate to other jobs within their behemoth organization—all part of their normal career-development process. That meant another load of new pharma staff with their own need for briefings, meetings, and unique data and information. People at the pharma company never noticed, much less understood, the negative impact they were having on the lab company. But they were quick to complain about how long it was taking to get the drug through development.

After interviewing a sampling of people on both sides, I arranged for a one-day off-site working session in which they could train their attention on their joint objective of getting this promising drug developed, approved, and into the commercialization stream. They explored their unique contributions to the process and what each side needed from the other in order to move forward. We also delved into the operating styles of each company.

Once both sides understood the needs of the other as well as what the cultural norms were for the other company, they were able to come up with a few workarounds that were meant to streamline things. Workarounds included the development of a common database where new pharma partnership staff could go for information, as well as a briefing process for people newly staffed to the partnership. However, the pharma culture was built around meetings and e-mail, which meant that the database rarely was accessed. Moreover, as people were reassigned, their attention flagged, and they not only failed to populate the database but also lost interest in attending briefing meetings.

It is unfortunate but true that not all workarounds actually work: the project stalled, the large pharma became impatient, and the partnership eventually came undone. In this instance, the arrangement would have worked better if the large pharma had assigned a dedicated team to the project and colocated that team in one setting with the lab. That would have allowed members of the pharma team to have the knowledge and intimacy they required but without the revolving door of people coming into and out of the project. The dedicated team would have then been able to filter information back to the parent company without having to constantly distract the lab team.

Another lesson learned from this project is one that I call “nightmare scenario planning”—that is, sometimes workarounds have their own built-in risks for which another workaround may be necessary! Planning for the possibility that the workaround itself will break down turns out to be pretty smart.

The next time this kind of situation arose, I had the two teams think about possible solutions, and once they proposed something, I had them brainstorm all the possible land mines that could interfere with the outcome. As it turns out, it’s not too hard for teams to project nightmares and possible solutions. All you have to do is ask them:

1. Have you ever seen anything like this solution before?

2. Has this kind of solution experienced trouble in the past?

3. What might cause this kind of project to go off the rails?

4. Does this project have any of those kinds of vulnerabilities?

5. What could we do this time around to lower the risk?

6. What recovery process could we put in place should it blow up anyway?

Next, we will look at two biotech companies partnering in an area with vast commercial opportunity and competitive advantage in light of how early they were to the market. As you will see, they managed to squander a considerable portion of their advantage by failing to understand differences between the two companies and their cultures.

CULTURE CLASH PART 1: COMMERCIAL CONFLICTS

Two biotech organizations formed a partnership to deliver on a large market opportunity. One company (Diagnostics) had extensive expertise in developing tests to detect certain diseases, while the other (Therapeutics) had a solid track record in developing treatments. Although the two companies saw some natural synergies between their products, they failed to see the sharp differences between the organizational cultures that guided how each operated. One culture was markedly hierarchical, which led to silos operating in isolation from one another. The other was a much more collaborative culture, in which cross-functional teams were formed to guide new products through development and into the marketplace. Their original partnership had been formed several years earlier, and the companies were first to the market with a significant product: a test, or assay, that detected a serious health threat, along with an effective treatment. However, as the two organizations moved down the road to expanding sales, they began to experience challenges in their business relationship.

Both sides had thought the initial contract was fine before they had a commercially viable product ready for the market. Over time, though, sales grew beyond initial expectations. Diagnostics employees began to think they deserved a heftier share of the revenues and became convinced that the terms were no longer fair. As their sense of having been wronged grew, they also became suspicious of the other, larger company and its motives. As previously noted, the larger company, Therapeutics Inc., had more experience in the actual development and commercialization of treatments, whereas the smaller company had more expertise in the development of tests. In line with typical marketing practices in the industry, the test and the treatment were well linked. As a consequence, the larger company endeavored to get closer to the smaller company in an effort to learn more about the test development and approval process.

The closer it got, the more Diagnostics began to suspect that Therapeutics was trying to learn how test development worked so that it could bring the capability in-house. In truth, Therapeutics wanted to learn more about the Diagnostics processes only so that it could pair its own product development with the test development in order to shorten time to market. As much as Therapeutics tried to assuage the fears of Diagnostics, tensions continued to mount, and each organization began to hinder the progress of the other. Over a several-year period, lawsuits had been filed, arbitration processes had been entered, and the companies had become increasingly adversarial.

As the tangle worsened, both companies resorted to enlisting legal teams to try to sort out various conflicts around commercial terms, regulatory approval, clinical affairs, and product development. Each side had its own processes and procedures, which it vigorously defended. Eventually, they reached an impasse, with another arbitration process on the verge of moving to the courts for resolution. The constant delays were allowing competitors to catch up, and large chunks of market share were being lost.

As is often the case, the initial discussions had centered on how blending their different capabilities might lead to commercial advantage. Had the two companies also spent some time on their internal processes, decision making, information sharing, and the like, they might have arrived at a more workable agreement. If they had also employed a version of the nightmare scenario planning mentioned earlier, they might have easily identified some underlying trust reservations that could have been ameliorated early on. It was later revealed that Diagnostics had a few key managers who were deeply suspicious of all large companies, while Therapeutics assumed from the outset that its commercial development experience would naturally give it the deciding voice when the partners had differences of opinion.

Workaround: Bring in a Neutral Third Party

Therapeutics was on the cusp of throwing the whole thing to the lawyers, when a senior member of the team called my company to ask for advice. The conversation started out with looking for ways to influence Diagnostics. We turned the tables by asking what Therapeutics thought the problem looked like from the Diagnostics point of view. After a series of questions, it became increasingly clear that as intransigent as Diagnostics appeared to be, so too were several key players within Therapeutics.

The conversation shifted from “how do we change them?” to “how do we change ourselves?” This was by no means the first time we had to help a company realize that the first change it needed to make was internal. The Therapeutics challenge was one of both control and influence; the company had a few levers it could pull that might prove useful, but in order to pull them it had to first influence its own key players to think and behave differently.

What started out as a question of how to work around the other company evolved into a series of questions about how to work around its own internal issues and perceptions. Therapeutics needed to address hardened positions that had developed among its groups. The Regulatory Affairs, Clinical Affairs, and Commercialization groups had all begun telling themselves different versions of the same story about how the other company was lost in the jungle.

We helped them analyze the issues from the perspective of Diagnostics, including what kind of evidence Diagnostics might be looking at to support its contention that it had been taken advantage of and how its contributions were being minimized. It didn’t take much exploration for Therapeutics executives to realize that they had behaved in a typical large-company fashion, thinking only of their own interests and not taking the time to understand how various terms and conditions might be perceived by or might actually inhibit the other side. Once their own groups saw the possible implications, they were able to soften their positions enough to entertain a more open exploration with the other company.

At the suggestion of Therapeutics, both companies agreed to bring in outside help in the form of negotiation and alliance expertise. As part of the outside assistance, both companies sent their key executives to an off-site location, and together, the two teams underwent two days of negotiation training, developing a deeper understanding of win-win mind-sets and processes.

Of the original dozen contentious issues, all but one was resolved during the weekend retreat. The lone remaining issue concerned revenue splits stemming from the initial contract, and the two CEOs agreed to take this one themselves. A couple of weeks later, the revenue debate had been resolved as well, and the two teams were back to collaboration, jointly facing the competition rather than treating each other as the competitor.

The good news: they were back in the game. The not-so-good news: the time spent in adversarial spats over the previous three years had allowed a competitor to finish development of its own assay and treatment. From a virtual 100 percent share of the market, the partners now had 60 percent. The net impact? About $40 million per year in lost revenue.

CULTURE CLASH PART 2: BETTER TO BE RIGHT OR RICH?

While this particular workaround did blunt the main point of contention, it did not really clear up some of the underlying trouble spots that had precipitated the conflict. Perhaps our fascination with quick fixes is at the root of many of our problems. In the case of Therapeutics and Diagnostics, once the contentious contractual matters had been settled, the two companies moved forward in examining a couple of new public health issues for which they were well positioned.

Meanwhile, the two organizations had not really identified the ground-level trust issues, and more challenges soon developed. This time, however, the challenges were not due to the business arrangement; differences in culture were the source of friction. The cultural differences had been there all along, but the two senior teams had been satisfied to tackle the contract complaints without looking at the substantive differences in how the two companies operated.

Therapeutics had developed an internal culture of collaboration. Management routinely rotated across functions and business units, which yielded a broad range of experience and insights across the various areas of the business. Over time, Therapeutics employees had become accustomed to encountering differing points of view and had learned how to collaborate with other internal groups.

Diagnostics, though smaller and younger, was characterized by a much more hierarchical management structure out of which had emerged several somewhat isolated silos. Within Diagnostics, Regulatory Affairs and Clinical Affairs were part of a single group whose job it was to navigate FDA approvals for the assay. Product Development was its own silo and generally took over once certain FDA approvals had been granted.

Over at Therapeutics, Regulatory, Clinical, and Product each had its own management, but because of the collaborative nature of the organization, each had become accustomed to seeking and accepting input from the others. With this seemingly innocuous difference in organization, the partnership embarked on developing an assay and product for a newly emerging public health issue. Both organizations agreed that they would seek to “fast-track” the development, testing, and approval process.

The goal was to utilize a process that had been developed for an earlier product, although the earlier product and the current product had different indications (conditions that make a particular treatment or procedure advisable). Because the indication was different, the FDA would be scrutinizing the application, and in two different areas: how well the assay worked in terms of detection and how effective the treatment was for the indication.

Diagnostics was much more familiar with the approval process for detection versus the process for efficacy or downstream commercialization, given that it makes and markets assays, not treatments. Therapeutics understood the detection approval process somewhat but had considerable knowledge about what would be required to gain approval for commercialization. The collaborative style of Therapeutics produced a series of recommendations for their Regulatory and Clinical Affairs counterparts at Diagnostics intended to help speed up the approval for eventual commercialization.

Can you guess the conflict that was about to emerge? Members of the combined Regulatory and Clinical groups at Diagnostics were not interested in the collaboration offered by Therapeutics, viewing the offer to help as interference. In addition, the original suspicions that Therapeutics harbored a desire to usurp the capabilities of Diagnostics lingered within the Regulatory Affairs organization.

Members of the Product Development team at Diagnostics well understood the challenges and solutions being presented by Therapeutics. However, given the hierarchical and silo nature of the company, they were not provided a seat at the table. The director of the combined Regulatory and Clinical groups “owned” the process and was not about to let anyone else into his playground.

The result? The FDA approved the detection assay but withheld the approval for commercialization. That led to another series of fierce fights between the two companies, with each blaming the other for the outcome. Diagnostics claimed that all would have been fine had it not been for the distractions and interference, while Therapeutics claimed that all approvals would have been granted had its advice been followed and the nature of the clinical trials adjusted to include the all-important effectiveness proof.

In hindsight, Therapeutics realized that it was not getting its messages heard because of the walls in place between Regulatory and Product Development at Diagnostics. Therapeutics had been taking its message to the wrong group; had it gone to Product Development, the message would have been understood. Still, given the walls between the silos, even that might not have been sufficient to get the minor changes made that would have garnered full approval for both detection and commercialization.

It took another sequence of CEO-to-CEO conversations to get the message understood within Diagnostics. The companies did manage to conduct a second round of testing following the advice from Therapeutics, and the product eventually received FDA approval to go to market.

All told, the delays put them into the market two years late, resulting this time in $80 million in lost revenues. The number grows even larger when you factor in how much market share they surrendered while having to repeat the clinical trials.

Some high-profile players wound up losing their jobs, and the trust between the two companies continued to erode.

Workaround: Plan for Differences

If you are trying to influence a person, a department, or even a company, it is imperative that you understand what is driving the other’s behavior. What matters to this party, and why does it matter? What if there are differences in how the two of you plan? How does each party make decisions? Who gets to be involved?

Heed the lessons from Therapeutics and Diagnostics: culture matters! Rather than assume that some other group will behave the way your group behaves, you should assume that there may be differences and plan accordingly.

In this instance, Therapeutics was eventually able to influence Diagnostics after conducting what the company now calls a “constituency analysis.” Others may call this a stakeholder analysis. You, in turn, could say, “People do things for their reasons, not my reasons.”

While thinking more about the underlying interests of their counterparts at Diagnostics, managers at Therapeutics also learned a basic lesson about understanding how the other company is organized, who runs which groups, and who is likely to be impacted by the joint effort. Once they had this basic understanding in place, the next thing they needed to do was meet with key managers (stakeholders) to find out what was important to each group and how decisions got made internally.

Here, the hierarchical nature of the organizations led department heads to jealously guard their turf and do whatever they could to claim credit for advancement or success.

Therapeutics managers began to understand that their own preference for collaboration ran counter to the command-and-control nature of their partner and the autonomy of key silos. Armed with this insight, they then briefed their CEO on the issues and what would likely be required to move forward. From there, another CEO-to-CEO meeting took place. Therapeutics acknowledged that understanding and support for its commercialization suggestions would naturally lie within the Diagnostics Products organization and that the two CEOs would need to figure out a way to get the Diagnostics team on board.

A few meetings later, and after some internal due diligence, the Diagnostics CEO, true to the command-and-control nature of the company culture, issued instructions to the various groups about how they were to proceed, and the process was back on track.

HOW DO YOU DEAL WITH DIFFERENCES?

Cultural differences can exist between departments or geographic locations within the same organization as well as between different companies or partners. One of the major challenges presented by cultural differences is that we rarely call the differences something as bland as “differences.”

When we label the differences as something difficult, wrongheaded, or just plain ignorant, we begin to view others as adversaries. As in the case of the two biotech companies, differences in approach can lead players to impute negative motives to the other side.

In all likelihood, your job requires you to interact with other groups or departments within your company, perhaps with external companies as well. Each group or department has developed ways of doing things that to its members seem natural and correct. Those ways of doing things could be very different from how your constituency does things, even if you are both in the same industry or are theoretically doing similar jobs. If you are noticing some differences in approach or style, you could benefit from taking some time to assess how you operate similarly and how you operate differently. From there you can engage in a conversation with the other group to make certain you are all on the same page.

WORKAROUND QUESTIONS

Sometimes a workaround can be discovered or at least anticipated before the roadblock ever darkens the path. If you are partnering with someone, here are some questions to consider before launching or lurching down the path. These questions apply equally well to partnerships between two people, between two teams within the same company, and between two companies. You may need to explain that exploring these questions might seem like covering old ground but that what you are really doing is checking to see if you both are on the same page and have the same understanding of expectations and operations.

1. What is your common intention or purpose?

• What are the drivers and key interests of the other group?

• What are your drivers and key interests?

• Are both sets of drivers and interests aligned, in conflict, or just different?

• What risks are each of you trying to protect against?

2. What are your important goals and outcomes?

• Which goals and outcomes are shared?

• Who else is going to care about this besides you and your direct partner?

• What are the unique goals and outcomes for each party?

3. What areas of focus and responsibility do you each have?

• Should you each have rights to consult with the other on decisions or processes?

4. Have you seen anything like this work well in the past?

• Are there any lessons or practices that you should consider for this effort?

5. Have you seen anything like this get in trouble in the past?

• What should you do if problems or disagreements arise?