1. In what ways were the cultures of Bank of America and MBNA incompatible? 2. Why do you think their...


1. In what ways were the cultures of Bank of America and MBNA incompatible?

2. Why do you think their cultures appeared to mesh rather than clash?

3. Do you think culture is important to the success of a merger/acquisition? Why or why not?

4. How much of the smooth transition, if any, do you think comes from both companies glossing over real differences in an effort to make the merger work?

A lot of mergers lead to culture clashes and, ultimately, failure. So in 2005 when banking giant Bank of America (BOA) announced its $35 billion acquisition of credit card giant MBNA, many thought that in a few years this merger would join the heap of those done in by cultural differences.

MBNA’s culture was characterized by a free-wheeling, entrepreneurial spirit that was also quite secretive. MBNA employees also were accustomed to the high life. Their corporate headquarters in Wilmington, Delaware, could be described as lavish, and employees throughout the company enjoyed high salaries and generous perks—from the private golf course at its headquarters to its fleet of corporate jets and private yachts.

Bank of America, in contrast, grew by thrift. It was a low-cost, no-nonsense operation. Unlike MBNA, it believed that size and smarts were more important than speed. It was an acquisition machine that some likened to Star Trek’s relentless Borg collective.

In short, the cultures in the two companies were very, very different.

Although these cultural differences seemed a recipe for disaster, it appears, judging from the reactions of BOA and MBNA employees, that the merger has worked. How can this be?

BOA had the foresight to know which MBNA practices to attempt to change and which to keep in place. Especially critical was BOA’s appreciation and respect for MBNA’s culture. “On Day 1, I was directed that this was not like the ones you are used to,” said Clifford Skelton, who had helped manage BOA’s acquisition of FleetBoston Financial before moving on to MBNA.

To try to manage the cultural transition, executives of both companies began by comparing thousands of practices covering everything from hiring to call-center operations. In many cases, BOA chose to keep MBNA’s cultural practices in place.

In other cases, BOA did impose its will on MBNA. For example, because MBNA’s pay rates were well above market, many MBNA managers were forced to swallow a steep pay cut. Some MBNA employees left, but most remained. In other cases, the cultures co-adapted. For example, MBNA’s dress code was much more formal than BOA’s business-casual approach. In the end, a hybrid code was adopted, where business suits were expected in the credit card division’s corporate offices and in front of clients, but business causal was the norm otherwise.

While most believe the merger has been successful, there are tensions. Some BOA managers see MBNA managers as arrogant and autocratic. Some MBNA managers see their BOA counterparts as bureaucratic.

What about those famous MBNA perks? As you might have guessed, most have disappeared. All but one of the corporate jets is gone. The golf course was donated to the state of Delaware. Gone, too, are most of the works of art that hung in MBNA’s corporate offices.

Of course, BOA made another, more recent and much larger acquisition: Merrill Lynch. Whether the BOA–Merrill merger proves a success is still too early to tell.

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Related Book For  answer-question

Organizational Behavior

ISBN: 978-0132834919

15th edition

Authors: Stephen P. Robbins and Timothy A. Judge

Question Details
Chapter # 16
Section: Exercise Questions
Problem: 11
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Question Posted: August 01, 2018 12:40:53