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Hewitt Associates - 69% of respondents in 162 organizations involved in M & A reported the top challenge to be integrating two organizational cultures.
9
How integration is handled will make the difference between success or failure ...
Earlier realization of financial “deal” goals (e.g. cost synergy, strategic initiatives)
Cultural compatibility
70% 52% 41% 37% 35%
Mutual agreement of road map by partners
31%
Shared responsibility of costs involved 8% 0 10 20 30 40 50 60 70 80 90 100
4
Watson Wyatt M & A Survey 1998 (190 CEOs, CFO, Top Executives)
75% are clearly disappointing or outright failures
50% suffer an overall drop-off in productivity in first 4-8 months
Career Development
Compensation, Benefits & Rewards
Organization Design
& Structure
Business Strategy &
Aligned Culture
Leadership Effectiveness
Employee Communication
Simply put : “ Corporate Culture is the way you do things in your organization”
13
Components of Culture
Behaviour
VISIBLE INVISIBLE
attitude
Core Values
Reflects “What is tangible”, e.g. • Organisational structure & processes • Policies & procedures • Physical environment
Cultural incompatibility is the biggest problem, yet results indicate that it is the area least likely researched during due diligence.
Hard assets
86%
Protect productivity Maintain customer focus Smoother transition Employees are focused on their jobs and not on
personal issues
10
Organizational Effectiveness Levers
Q&A
3
‘Cultural & People’ Issues Often Present the Biggest Challenges
“The hard stuff is easy - it’s the soft stuff that’s so hard to change.”
- Frederick Smith CEO, Federal Express
8
Source: Watson Wyatt Worldwide M&A Survey, November 1998
Additional M & A Statistics
1992 (Coopers & Lybrand) :- In 100 failed or troubled mergers, 85% of executives who were surveyed said the major problem was differences in management style and practices.
5
Source: Watson Wyatt Worldwide M&A Survey, November 1998
Corporate culture is identified as one of the most important integration issues
Communication
The attitudes and benefits about something that are shared by a particular group of a people or in a particular organization (Longman)
The set of important assumptions that members of a community share in common (e.g Schein)
Performance Management
Staffing
11
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
12
What is culture?
Definition of Culture:
Percentage of companies
citing the type of information
gathered during due
diligence
Market share, distribution Technological and business
competencies
Financial aspects of HR function Management capabilities and willingness to cooperate Major shareholders
1996 (British Institute of Management) :- reported the difficulties involved in merging two cultures to be a major factor in M & A failures.
1997 (A.T Kearney) :- reviewed 155 M & A deals and determined most failures to be people-related.
47% of acquired company executives leave within the first year; 75% within the first three years
“People problems” are cited as the top integration failure factor by a sample of 45 CFOs from Fortune 500 companies who have recently merged/acquired
Downsizing Labor relations
Redeployment of workers
0 6
Source: Watson Wyatt Worldwide M&A Survey, November 1998
90% 88% 78%
63% 59% 57% 40% 37% 36% 36% 10 20 30 40 50 60 70 80 90 100
to create and support these behaviors.
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
16
Our Approach to Cultural Integration
Reasons for successful integration
Percentage of companies
citing reason for success
Leadership
Well planned communication throughout the deal process
Early mgt of “What will happen to me?” employee issues Expedient integration
The best way to achieve culture change is to focus on desired behaviors ...
Implementation Plan
Behaviour
Core Values
15
The implementation plan will encompass initiatives
Only 23% of all acquisitions earn their cost of capital
On average, management grade the financial performance of their alliances as a “C minus” (on a scale of A to E)
Reflects the “Way we do things”, e.g. • Degrees of collaboration • Decision-making patterns • Approaches to process improvement
Va1l4ues have little meaning unless they bring about specific behaviors ...
The Importance of Cultural Integration in Mergers and Acquisitions
14 March 2002, Shanghai
Kwan Chee Wei Director Human Capital Group Watson Wyatt Singapore
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
2
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
91%
Retention of key talent
Activities required for “successful” integration
Retention of key managers Integration of corporate cultures
Managing resistance Retraining workforce Alignment of comp & ben prog Recruitment of new staff
HR policy matters
82% 75%
56%
72% 72%
54%
Workforce ential
Organizational culture and dynamics of change
0
47% 46% 10 20 30 40 50 60 70 80 90 100
7
Source: Watson Wyatt Worldwide M&A Survey, November 1998
9
How integration is handled will make the difference between success or failure ...
Earlier realization of financial “deal” goals (e.g. cost synergy, strategic initiatives)
Cultural compatibility
70% 52% 41% 37% 35%
Mutual agreement of road map by partners
31%
Shared responsibility of costs involved 8% 0 10 20 30 40 50 60 70 80 90 100
4
Watson Wyatt M & A Survey 1998 (190 CEOs, CFO, Top Executives)
75% are clearly disappointing or outright failures
50% suffer an overall drop-off in productivity in first 4-8 months
Career Development
Compensation, Benefits & Rewards
Organization Design
& Structure
Business Strategy &
Aligned Culture
Leadership Effectiveness
Employee Communication
Simply put : “ Corporate Culture is the way you do things in your organization”
13
Components of Culture
Behaviour
VISIBLE INVISIBLE
attitude
Core Values
Reflects “What is tangible”, e.g. • Organisational structure & processes • Policies & procedures • Physical environment
Cultural incompatibility is the biggest problem, yet results indicate that it is the area least likely researched during due diligence.
Hard assets
86%
Protect productivity Maintain customer focus Smoother transition Employees are focused on their jobs and not on
personal issues
10
Organizational Effectiveness Levers
Q&A
3
‘Cultural & People’ Issues Often Present the Biggest Challenges
“The hard stuff is easy - it’s the soft stuff that’s so hard to change.”
- Frederick Smith CEO, Federal Express
8
Source: Watson Wyatt Worldwide M&A Survey, November 1998
Additional M & A Statistics
1992 (Coopers & Lybrand) :- In 100 failed or troubled mergers, 85% of executives who were surveyed said the major problem was differences in management style and practices.
5
Source: Watson Wyatt Worldwide M&A Survey, November 1998
Corporate culture is identified as one of the most important integration issues
Communication
The attitudes and benefits about something that are shared by a particular group of a people or in a particular organization (Longman)
The set of important assumptions that members of a community share in common (e.g Schein)
Performance Management
Staffing
11
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
12
What is culture?
Definition of Culture:
Percentage of companies
citing the type of information
gathered during due
diligence
Market share, distribution Technological and business
competencies
Financial aspects of HR function Management capabilities and willingness to cooperate Major shareholders
1996 (British Institute of Management) :- reported the difficulties involved in merging two cultures to be a major factor in M & A failures.
1997 (A.T Kearney) :- reviewed 155 M & A deals and determined most failures to be people-related.
47% of acquired company executives leave within the first year; 75% within the first three years
“People problems” are cited as the top integration failure factor by a sample of 45 CFOs from Fortune 500 companies who have recently merged/acquired
Downsizing Labor relations
Redeployment of workers
0 6
Source: Watson Wyatt Worldwide M&A Survey, November 1998
90% 88% 78%
63% 59% 57% 40% 37% 36% 36% 10 20 30 40 50 60 70 80 90 100
to create and support these behaviors.
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
16
Our Approach to Cultural Integration
Reasons for successful integration
Percentage of companies
citing reason for success
Leadership
Well planned communication throughout the deal process
Early mgt of “What will happen to me?” employee issues Expedient integration
The best way to achieve culture change is to focus on desired behaviors ...
Implementation Plan
Behaviour
Core Values
15
The implementation plan will encompass initiatives
Only 23% of all acquisitions earn their cost of capital
On average, management grade the financial performance of their alliances as a “C minus” (on a scale of A to E)
Reflects the “Way we do things”, e.g. • Degrees of collaboration • Decision-making patterns • Approaches to process improvement
Va1l4ues have little meaning unless they bring about specific behaviors ...
The Importance of Cultural Integration in Mergers and Acquisitions
14 March 2002, Shanghai
Kwan Chee Wei Director Human Capital Group Watson Wyatt Singapore
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
Q&A
2
Agenda
M & A Statistics What is Culture? WW’s Approach to Cultural Integration A Case Study
91%
Retention of key talent
Activities required for “successful” integration
Retention of key managers Integration of corporate cultures
Managing resistance Retraining workforce Alignment of comp & ben prog Recruitment of new staff
HR policy matters
82% 75%
56%
72% 72%
54%
Workforce ential
Organizational culture and dynamics of change
0
47% 46% 10 20 30 40 50 60 70 80 90 100
7
Source: Watson Wyatt Worldwide M&A Survey, November 1998