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Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,Kwan Chee Wei,Director Human Capital Group,Watson Wyatt Singapore,The Importance of Cultural Integration in Mergers and Acquisitions,Agenda,M & A Statistics,A Case Study,WWs Approach to Cultural Integration,What is Culture?,Q & A,2,Agenda,M & A Statistics,A Case Study,WWs Approach to Cultural Integration,What is Culture?,Q & A,3,Cultural & People Issues Often Present the Biggest Challenges,“,The hard stuff is easy - its the soft stuff thats so hard to change.”,-Frederick SmithCEO, Federal Express,4,Watson Wyatt M & A Survey 1998(190 CEOs, CFO, Top Executives),75%,are clearly disappointing or outright failures,Source: Watson Wyatt Worldwide M&A Survey, November 1998,50%,suffer an overall drop-off in productivity in first 4-8 months,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,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),5,Corporate culture is identified as one of the most important integration issues,Source: Watson Wyatt Worldwide M&A Survey, November 1998,Activities required for “successful” integration,Downsizing,Redeployment of workers,Recruitment of new staff,Retraining workforce,Alignment of comp & ben prog,Labor relations,Managing resistance,Integration of corporate cultures,Retention of key managers,Retention of key talent,Communication,37%,40%,59%,57%,36%,63%,78%,88%,91%,90%,0,10,20,30,40,50,60,70,80,90,100,36%,6,Cultural incompatibility is the biggest problem, yet results indicate that it is the area least likely researched during due diligence.,46%,47%,54%,56%,72%,72%,82%,86%,0,10,20,30,40,50,60,70,80,Organizational culture and,dynamics of change,Workforce potential,HR policy matters,Major shareholders,Management capabilities and,willingness to cooperate,Financial aspects of HR function,Market share, distribution,Hard assets,90,100,Technological and business,competencies,75%,Percentage of companies citing the type of information gathered during due diligence,Source: Watson Wyatt Worldwide M&A Survey, November 1998,7,Reasons for successful integration,Source: Watson Wyatt Worldwide M&A Survey, November 1998,Percentage of companies citing reason for success,8%,41%,31%,37%,52%,70%,Shared responsibility of costs involved,Early mgt of “What will happen,to me?” employee issues,Cultural compatibility,Mutual agreement of road map,by partners,Expedient integration,Well planned communication,throughout the deal process,Leadership,0,10,20,30,40,50,60,70,80,90,100,35%,8,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.,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.,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),Protect productivity,Maintain customer focus,Smoother transition,Employees are focused on their jobs and not on personal issues,10,Organizational Effectiveness Levers,Career,Development,PerformanceManagement,Staffing,Compensation,Benefits &Rewards,EmployeeCommunication,OrganizationDesign & Structure,BusinessStrategy & AlignedCulture,LeadershipEffectiveness,11,Agenda,M & A Statistics,A Case Study,WWs Approach to Cultural Integration,What is Culture?,Q & A,12,What is culture?,Definition of Culture:,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,),Simply put :,“,Corporate Culture is the way you,do things in your organization”,13,Reflects “What is tangible”, e.g.,Organisational structure & processes,Policies & procedures,Physical environment,Reflects the “Way we do things”, e.g.,Degrees of collaboration,Decision-making patterns,Approaches to process improvement,Components of Culture,Values have little meaning unless they bring about specific behaviors .,VISIBLE,Core Values,Behaviour,INVISIBLE,attitude,14,Implementation Plan,Implementation Plan,Implementation Plan,The implementation plan will encompass initiatives to create and support these behaviors.,Core Values,Behaviour,The best way to achieve culture change is to focus on desired behaviors .,15,Agenda,M & A Statistics,A Case Study,WWs Approach to Cultural Integration,What is Culture?,Q & A,16,Our Approach to Cultural Integration,PerformGapAnalysis,Design DesiredCulture,-,Top Team Workshop,Validation/ Ownership,Customer Strategy,Assess Current Culture,-Interviews,Focus Groups,Culture Audit,Business Objectives,DISCOVER,Defining,Organizational,Culture,Implement Culture Change Program,s,-,Training,Org. Dev.,Communication,Measurement,DELIVER,Reinforcing,Organizational,Culture,Knowledge sharing, involvement, and communications,Develop Culture Change Programs,-,Leadership Development,Culture Change Teams & Learning & Development,INVENT,Developing,Organizational,Culture,17,Agenda,M & A Statistics,A Case Study,WWs Approach to Cultural Integration,What is Culture?,Q & A,18,A Case Study: Background Information,Two organizations merged to form a new entity,Both organizations existed as government statutory boards with regulatory functions,New company got listed on the local stock exchange with a clear bottom-line objective,New company aims to be performance-driven, improve competitiveness and grow through strategic partnerships,19,Interviews,Focus Groups,Management Workshop,Best Practice,Research,Interviews,Focus Groups,Corporate Culture Audit,Current Culture,List of Desired Values,Behaviour Indicators,Culture Development,Programs,Desired Culture,The Process of Culture Development,20,Mission,# 1 in the region,Customer Focused,Profit Driven,Internal Environment,Professional and flexible,Better decision making process,Clear Performance - based rewards,More Inter-department collaboration,Tailored employee communication,Strategy,Bottom-Line orientation,Profitable products and services,Cost efficiency,Market confidence,Expansion into other markets,Strategic alliances,Service efficiency,Technology is important,External Environment,Intense competition,Increasing customer demands and sophistication,Leveraging leading-edge technology,Core Values?,What is the Current Culture?,21,Defining the new Core Values,Strategy,Mission,Internal Environment,External Environment,Core Values?,22,Core Values:,Customer service quality,Bottom-line driven,Defining the Core Values,# 1,in the region,Customer focused,Profit driven,Mission,Core,Values,Mission,Strategy,External Environment,Internal Environment,23,Core Values:,Bottom-line driven,Objectivity and integrity,Product innovation,Customer service quality,Technology leveraged,Defining the Core Values,Bottom-line orientation,Profitable products and services,Cost efficiency,Market confidence,Expansion into other markets,Strategic alliances,Service efficiency,Technology is important,Strategy,Core,Values,Mission,Strategy,External Environment,Internal Environment,24,Intense competition,Increasing customer demands and sophistication,Leveraging leading-edge technology,Customer service quality,Speed and efficiency,Flexibility,Technology leveraged,Core Values:,External Environment,Defining the Core Values,Core,Values,Mission,Strategy,External Environment,Internal Environment,25,Professional and flexible,Better decision making process,Clear performance - based rewards,More inter-department collaboration,Tailored employee communication,Internal Environment,Defining the Core Values,Core Values:,Core Values:,Employee of choice,Efficient decision making - initiative, flexibility,Objectivity and integrity,Open communication,Teamwork,Core,Values,Mission,Strategy,External Environment,Internal Environment,26,Mission,Customer service quality,Bottom-line driven,New set of Core Values,Internal Environment,Employer of choice,Efficient decision making - initiative, flexibility,Objectivity and integrity,Open communication,Teamwork,Strategy,Bottom-line driven,Objectivity and integrity,Product innovation,Customer service quality,Technology leveraged,External Environment,Customer service quality,Speed and efficiency,Flexibility,Technology leveraged,New Set of,Core Values,27,New Core Values,Organisation,Bottom-line driven,Employee oriented,Teamwork,Technology leveraged,Customers / Stakeholders,Customer service quality,Objectivity and integrity,Product innovation,28,Interviews,Focus Groups,Management Workshop,Best Practice,Research,Interviews,Focus Groups,Corporate Culture Audit,Current Culture,List of Desired Values,Behaviour Indicators,Culture Development,Programs,Desired Culture,The Process of Culture Development,29,Reinforcing New Culture,Desired Culture,Communication,Performance Management,Culture Development Initiatives,Performance Mgmt Plan,Total Rewards Strategy,Culture Development Team,Learning& Development Plan,Communication Plan,Leadership Development Plan,30,Employee acceptance and support was enhanced through a comprehensive communication plan,Knowledge sharing, involvement, and communications,Phase,Scope,Purpose,Phase 1,Awareness Building,This is what is happening,Company-wide,*,Link change initiatives with strategic plans,*,Give specific information about the process.,*,Announce senior managements involvement,Phase 2,Program Status,This is where we are going.,Company-wide,*,Demonstrate senior management commitment.,*,Identify managers and employees issues.,*,Gain information from pilot tests.,*,Provide the big picture.,Phase 3,Roll-Out,This is what it means to you.,Program Specific,*,Provide specific information on the changes,being made and how they will affect people.,*,Provide training in new roles skills and methods.,Phase 4,Follow-Up,This is how we will make it work.,Team Specific,*,Listen to and act on managers and employees,needs to implement changes.,*,Refine changes to ensure success.,31,Communication Plan,Communication of Core Values to ALL employees,Core Values statement,Video from CEO,Divisional briefings,Incorporate into orientation for new staff,Incorporate into Performance Management training via competency model,32,Performance Management,Using the Balanced Scorecard approach, we helped,develop the organisation scorecard,develop the departmental scorecards,define the performance targets,Developed a competency model based on Core Values,Performance management training for all employees,33,Recognition,Programs,Bonuses/Incentives,Individual Merit,Base Pay,Benefits,Performance,Results-Related,Programs,Core,Programs,Stock,Total Rewards Strategy,34,Culture Development Initiatives,Learning & Development Plan,Identify organisational development needs,Develop learning and development plans that link to business and strategic objectives,Leadership Development Plan,Conduct one-to-one sessions with management team members to develop individual leadership development plan,Culture Development Teams,Build cross-functional teams,WW facilitates the interactions, planning and decision making of the teams,Encourage and appraise the demonstration of desired behaviours,35,Leadership Development Plan,“,Leaders walk the talk.”,The degree to which the Top,Team accepts the change plan as the best one under the circumstances,The degree to which the Top,Team accepts the new culture as being in line with their personal goals.,The competence of the organization, in terms of abilities, systems, infrastructure in achieving the change plan.,The extent to which the Top Team shares the interpretation of the new culture.,In any change initiative, the critical point is to give people the competencies they need to make change happen. This should start from the leadership team who needs to act as,Role Models,.,Through a self assessment, we assisted members of the senior management team to build an individualized leadership development plan.,36,Learning and Development Plan,LEARNING AND DEVELOPMENT,provides the knowledge, skills and the information sharing forum to help employees change their behaviors to match the culture and vision.,Tackles the areas needing development in the whole organization.,The training or development might take several forms: project work, customer visits as well as classroom training.,We identified the organization-wide gaps and a development plan to bridge them. We then monitored the implementation of the plan.,37,Teams created within each Business Unit to address existing barriers that prevent the desired culture from being demonstrated. Issues may involve:,rules and policies,goals and measures,physical environment,organizational structure,HR culture teams can address these issues:,staffing and selection,training and development,ceremonies and events,rewards and recognition,Culture Development Teams,CULTURE DEVELOPMENT TEAMS,instill new culture,values and behaviors by solving critical business problems, caused by old work culture and thinking, that prevent us from most effectively supporting the strategy.,38,Organization Measurement,Surveys,“,We keep a continual pulse check on whether we are staying true to our culture/ vision.”,MEASUREMENT,Regularly tracks the current state and progress to enable readjustment of goals and methods,Methods might include:,Culture Audits,360 Degree Feedback,Employee Opinion Surveys,Customers Surveys,39,Lessons Learned,Important to get the CEOs personal involvement in culture development or any other major HR initiatives,Understand the CEOs style and personality and adapting the approach accordingly.,Intimate involvement of client (HR team) at all stages of project e.g.,getting their sign off on any communication documents,interview questions,presentation slides,liaison for all meetings,Be open to changes in project scope and deliverables,40,
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