Important Lessons for Managers From the Rocky First Days of the P&G/Gillette Merger

How to run a smarter business.
Dec. 3 2013 11:51 PM

Culture Clash

Even a merger made in heaven can get off to a rocky start.

Two workers eyeing one another suspiciously.
With enough effort, the corporate-culture wars can be won—by both parties in a merger.

Photo by Dmitriy Shironosov/Hemera

In 2005, Procter & Gamble acquired the shaving giant Gillette, in what Gillette investor Warren Buffett called a “dream deal.” The synergies were obvious—the merger would create, again in Buffett’s words, “the greatest consumer products company in the world.” P&G CEO A.G. Lafley also highlighted the two firms’ similar cultures as a strength of the merger.

Two years later, however, the Wall Street Journal ran a front-page story describing the cultural challenges that Lafley faced in integrating the organizations. It wasn’t anything like deep-seated differences in values or mission that was the source of friction. Rather, the two groups had different modes of communicating and deliberating on decisions. Gillette, for example, had a “memo culture”; P&G’s “Proctoids” favored face-to-face meetings. Gillette came to rapid decisions, while at P&G judgments were made more deliberatively.

You’d think these sorts of cultural hurdles would be easy to overcome, especially given the promise of strong technological and strategic advantages. Yet attempts to get disparate groups to work with one another—whether across departments or across companies—are often fraught with unanticipated complications and misunderstandings. It’s a challenge that’s familiar to any manager, where you’re running a Fortune 500 firm that needs to absorb a freshly merged group of employees, a division manager trying to get staff from the sales and engineering departments to talk to (rather than past) one another, or onboarding a new worker who’s used to a different way of doing things or communicating. A 2003 experiment by economists Colin Camerer and Roberto Weber was designed to identify and study the frictions that result when two distinct cultures are forced together. The experiment’s findings shed some light on why we’re so resistant to “cross-cultural” interactions, and what we might do to bridge cultural gaps, large and small.

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The goal of the experiment wasn’t to replicate precisely the conditions that prevailed when P&G and Gillette were forced together—the aim of experimental economists is to strip a situation down to its rudiments in order to capture the essence of a real-world phenomenon, in this case the clash of cultures. In Camerer and Weber’s lab, each participant in the experiment viewed a matrix of 16 office scenes on a computer screen. The participants were randomly paired up and put in the role of “manager” or “employee.” Managers’ screens highlighted and numbered eight of the pictures. Their job was to communicate to the employee, through instant messaging, the eight highlighted scenes in order. The employee had to identify the picture the manager was describing. Simple enough.

As the participants repeated the task, they found that IM-ing produced a shorthand that helped them identify pictures more quickly and accurately. Camerer and Weber give the example of one manager who, in the first round, describes a picture as “The one with three people: two men and one woman. The woman is sitting on the left. They’re all looking at two computers that look like they have some PowerPoint graphs or charts. The two men are wearing ties and the woman has short, blond hair. One guy is pointing at one of the charts.” A few rounds later, the description of the same scene is abbreviated to “PowerPoint.” It took just a few iterations to get vastly more efficient at performing the task at hand. After 20 rounds, the pairs were able to reduce their exercise time from over four minutes to less than 50 seconds.

You can think of this shorthand as a kind of culture. Camerer and Weber then produced cultural collisions by adding a second employee under each manager. Each group then repeated the task, with the manager now conveying his descriptions to his old employee and to his new one. Managers were paid based on the average speed of their two charges, so most stuck to their “PowerPoint” shorthands to communicate with their old partners. Why not? It had worked before.

But the old methods didn’t work with the new additions. The new management groups argued about how to identify scenes. Predictably, frustration followed, on both sides. (“I don’t care if they’re wearing ties—just tell me if you see the PowerPoint!”). It wasn’t pretty.

The story has a happy ending, sort of. After playing half a dozen times or so, the new groups became accustomed to the shorthand, and most got their times back under a minute. People—and organizations—do adjust.

Similarly, Gillette and P&G have resolved many of their cultural differences, but not without a serious investment of time and money. In 2009, Gillette completed a $50 million renovation of Gillette’s “World Shaving Headquarters” in South Boston, forcing senior Gillette executives out of their well-appointed offices at the Prudential Center and into a new, open-layout campus where—as at P&G’s Cincinnati headquarters—not even top executives have doors on their offices. The new complex also had ample common space and world-class conferencing facilities that helped everyone adopt more of a face-to-face culture. CEO Lafley also established a special task force to work on bringing the two cultures together, everything from figuring out how to merge communication styles to helping Gillette employees build up social networks around the merged firm.

But even managers who make every effort to ease merger-related issues may find that they still face some challenges. After Camerer and Weber’s new three-person teams began improving their efficiency, simmering resentment remained. In a questionnaire handed out after the experiment, the original employees consistently rated the manager as better at his or her job than did the new employees. And managers rated the new employee as less competent than his or her original partners—even though everyone recognized that neither was to blame for the post-merger drop in performance. In fact, the new employee’s job was rated as harder by all members of the team. And everyone involved found the process of adjusting to the new employee harder than they had anticipated.

The experiment provides an evocative illustration of the difficulties of bringing two distinct groups together—marketers and engineers; project designers and bean counters. And in the real world, it’s harder to force new teams to tough it out until they grow accustomed to one another’s habits: Without a lot of effort to smooth transitions, there’s a good chance they’ll retreat in frustration to a familiar circle of colleagues (just as the manager and his or her original employee in the experiment probably wished the groupings could have stayed the way they’d been before). In the midst of cultural adjustment, we tend to lose sight of the fact that with sufficient effort, differences can be overcome.

Finally, the experiment should be a reminder that—as with many other aspects of management—empathy and understanding can be critical in the moment when cultures collide. When things aren’t going well, we have a tendency to blame the person rather than the person’s difficult situation. If we’re able to overcome this fundamental misattribution of blame, it may help a lot of teams work together for the greater good of the organization. 

Ray Fisman is a professor of economics at the Columbia Business School and co-author of The Org: The Underlying Logic of the Office. Follow him on Twitter.