1、W W W.W A T S O N W Y A T T.C O M14 March 2002,ShanghaiKwan Chee WeiDirector Human Capital GroupWatson Wyatt SingaporeThe Importance of Cultural Integration in Mergers and Acquisitions 2Agenda M&A Statistics A Case Study WWs Approach to Cultural IntegrationWhat is Culture?Q&A 3AgendaM&A Statistics A
2、 Case Study WWs Approach to Cultural IntegrationWhat is Culture?Q&A 4Cultural&People Issues Often Present the Biggest Challenges5Watson Wyatt M&A Survey 1998(190 CEOs,CFO,Top Executives)n75%are clearly disappointing or outright failuresSource:Watson Wyatt Worldwide M&A Survey,November 1998n50%suffer
3、 an overall drop-off in productivity in first 4-8 monthsn47%of acquired company executives leave within the first year;75%within the first three yearsn“People problems”are cited as the top integration failure factor by a sample of 45 CFOs from Fortune 500 companies who have recently merged/acquiredn
4、Only 23%of all acquisitions earn their cost of capitalnOn average,management grade the financial performance of their alliances as a“C minus”(on a scale of A to E)6Corporate culture is identified as one of the most important integration issues Source:Watson Wyatt Worldwide M&A Survey,November 1998Ac
5、tivities required for“successful”integrationDownsizingRedeployment of workersRecruitment of new staffRetraining workforceAlignment of comp&ben progLabor relationsManaging resistanceIntegration of corporate culturesRetention of key managersRetention of key talentCommunication37%40%59%57%36%63%78%88%9
6、1%90%0102030405060708090 10036%7Cultural 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%01020304050607080Organizational culture and dynamics of changeWorkforce potentialHR policy mattersMajor shareh
7、oldersManagement capabilities and willingness to cooperateFinancial aspects of HR functionMarket share,distributionHard assets90 100Technological and business competencies75%Percentage of companies citing the type of information gathered during due diligenceSource:Watson Wyatt Worldwide M&A Survey,N
8、ovember 19988Reasons for successful integrationSource:Watson Wyatt Worldwide M&A Survey,November 1998Percentage of companies citing reason for success8%41%31%37%52%70%Shared responsibility of costs involvedEarly mgt of“What will happen to me?”employee issuesCultural compatibilityMutual agreement of
9、road map by partnersExpedient integrationWell planned communication throughout the deal processLeadership0102030405060708090 10035%9Additional M&A Statistics n1992(Coopers&Lybrand):-In 100 failed or troubled mergers,85%of executives who were surveyed said the major problem was differences in managem
10、ent style and practices.n1996(British Institute of Management):-reported the difficulties involved in merging two cultures to be a major factor in M&A failures.n1997(A.T Kearney):-reviewed 155 M&A deals and determined most failures to be people-related.nHewitt Associates-69%of respondents in 162 org
11、anizations involved in M&A reported the top challenge to be integrating two organizational cultures.10How integration is handled will make the difference between success or failure.nEarlier realization of financial“deal”goals(e.g.cost synergy,strategic initiatives)nProtect productivitynMaintain cust
12、omer focusnSmoother transitionnEmployees are focused on their jobs and not on personal issues11Organizational Effectiveness Levers 12AgendaM&A Statistics A Case Study WWs Approach to Cultural IntegrationWhat is Culture?Q&A 13What is culture?Definition of Culture:8The attitudes and benefits about som
13、ething that are shared by a particular group of a people or in a particular organization(Longman)8The set of important assumptions that members of a community share in common(e.g Schein)14Reflects“What is tangible”,e.g.Organisational structure&processes Policies&procedures Physical environmentReflec
14、ts the“Way we do things”,e.g.Degrees of collaboration Decision-making patterns Approaches to process improvementComponents of CultureValues have little meaning unless they bring about specific behaviors.VISIBLECore ValuesBehaviourINVISIBLEattitude15The implementation plan will encompass initiatives
15、to create and support these behaviors.Core ValuesBehaviourThe best way to achieve culture change is to focus on desired behaviors.16AgendaM&A Statistics A Case Study WWs Approach to Cultural IntegrationWhat is Culture?Q&A 17Our Approach to Cultural IntegrationPerformGapAnalysisDesign DesiredCulture-
16、Top Team WorkshopValidation/OwnershipCustomer StrategyAssess Current Culture-Interviews Focus GroupsCulture AuditBusiness ObjectivesDISCOVERDefiningOrganizationalCultureImplement Culture Change Programs-Training Org.Dev.CommunicationMeasurementDELIVERReinforcingOrganizationalCultureKnowledge sharing
17、,involvement,and communicationsDevelop Culture Change Programs-Leadership Development,Culture Change Teams&Learning&DevelopmentINVENTDevelopingOrganizationalCulture18Agenda M&A Statistics A Case Study WWs Approach to Cultural IntegrationWhat is Culture?Q&A 19A Case Study:Background InformationnTwo o
18、rganizations merged to form a new entitynBoth organizations existed as government statutory boards with regulatory functionsnNew company got listed on the local stock exchange with a clear bottom-line objectivenNew company aims to be performance-driven,improve competitiveness and grow through strate
19、gic partnerships20 Interviews Focus Groups Management Workshop Interviews Focus Groups Corporate Culture AuditThe Process of Culture Development 21Mission#1 in the region Customer Focused Profit DrivenInternal Environment Professional and flexible Better decision making process Clear Performance-bas
20、ed rewards More Inter-department collaboration Tailored employee communicationStrategy Bottom-Line orientation Profitable products and services Cost efficiency Market confidence Expansion into other markets Strategic alliances Service efficiency Technology is importantExternal Environment Intense co
21、mpetition Increasing customer demands and sophistication Leveraging leading-edge technologyCore Values?What is the Current Culture?22Defining the new Core ValuesStrategyMissionInternal EnvironmentExternal EnvironmentCore Values?23Core Values:Customer service quality Bottom-line drivenDefining the Co
22、re Values#1 in the region Customer focused Profit drivenMissionCore ValuesMissionStrategyExternal EnvironmentInternal Environment24Core Values:Bottom-line driven Objectivity and integrity Product innovation Customer service quality Technology leveragedDefining the Core Values Bottom-line orientation
23、 Profitable products and services Cost efficiency Market confidence Expansion into other markets Strategic alliances Service efficiency Technology is importantStrategyCore ValuesMissionStrategyExternal EnvironmentInternal Environment25 Intense competition Increasing customer demands and sophisticati
24、on Leveraging leading-edge technology Customer service quality Speed and efficiency Flexibility Technology leveragedCore Values:External EnvironmentDefining the Core ValuesCore ValuesMissionStrategyExternal EnvironmentInternal Environment26 Professional and flexible Better decision making process Cl
25、ear performance-based rewards More inter-department collaboration Tailored employee communicationInternal EnvironmentDefining the Core ValuesCore Values:Core Values:Employee of choice Efficient decision making-initiative,flexibility Objectivity and integrity Open communication TeamworkCore ValuesMis
26、sionStrategyExternal EnvironmentInternal Environment27Mission Customer service quality Bottom-line drivenNew set of Core ValuesInternal Environment Employer of choice Efficient decision making-initiative,flexibility Objectivity and integrity Open communication TeamworkStrategy Bottom-line driven Obj
27、ectivity and integrity Product innovation Customer service quality Technology leveragedExternal Environment Customer service quality Speed and efficiency Flexibility Technology leveragedNew Set of Core Values28New Core ValuesOrganisationnBottom-line drivennEmployee orientednTeamwork nTechnology leve
28、ragedCustomers/StakeholdersnCustomer service quality nObjectivity and integritynProduct innovation29 Interviews Focus Groups Management Workshop Interviews Focus Groups Corporate Culture AuditThe Process of Culture Development 30Reinforcing New CultureDesired CultureCommunicationPerformance Manageme
29、ntCulture Development InitiativesPerformance Mgmt PlanTotal Rewards StrategyCulture Development TeamLearning&Development PlanLeadership Development Plan31Employee acceptance and support was enhanced through a comprehensive communication planKnowledge sharing,involvement,and communications Phase Scop
30、ePurposePhase 1Awareness BuildingThis is what is happeningCompany-wide*Link change initiatives with strategic plans*Give specific information about the process.*Announce senior managements involvementPhase 2Program StatusThis is where we are going.Company-wide*Demonstrate senior management commitmen
31、t.*Identify managers and employees issues.*Gain information from pilot tests.*Provide the big picture.Phase 3Roll-OutThis 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.
32、Phase 4Follow-UpThis 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.32Communication PlannCommunication of Core Values to ALL employees=Core Values statement=Video from CEO=Divisional briefings=Incorpo
33、rate into orientation for new staffnIncorporate into Performance Management training via competency model33Performance ManagementnUsing the Balanced Scorecard approach,we helped develop the organisation scorecarddevelop the departmental scorecardsdefine the performance targets nDeveloped a competenc
34、y model based on Core ValuesnPerformance management training for all employees34Recognition ProgramsBonuses/IncentivesIndividual MeritBase PayBenefitsPerformanceResults-RelatedProgramsCoreProgramsStockTotal Rewards Strategy35Culture Development InitiativesLearning&Development PlanIdentify organisati
35、onal development needsDevelop learning and development plans that link to business and strategic objectivesLeadership Development PlanConduct one-to-one sessions with management team members to develop individual leadership development plan Culture Development TeamsBuild cross-functional teams WW fa
36、cilitates the interactions,planning and decision making of the teamsEncourage and appraise the demonstration of desired behaviours36Leadership Development Plan“Leaders walk the talk.”The degree to which the TopTeam accepts the change plan as the best one under the circumstancesThe degree to which th
37、e TopTeam 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 critica
38、l 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.37Learning and Deve
39、lopment PlanLEARNING 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 w
40、ork,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.38Teams created within each Business Unit to address existing barriers that prevent the desired culture from being demonst
41、rated.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 recognitionCulture Development TeamsCULTURE DEVELOPMENT TEAMS insti
42、ll 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.39Organization MeasurementSurveys“We keep a continual pulse check on whether we are staying true to our culture/vision.”MEAS
43、UREMENT Regularly tracks the current state and progress to enable readjustment of goals and methodsMethods might include:Culture Audits 360 Degree Feedback Employee Opinion Surveys Customers Surveys40Lessons LearnedlImportant to get the CEOs personal involvement in culture development or any other m
44、ajor HR initiativeslUnderstand the CEOs style and personality and adapting the approach accordingly.lIntimate involvement of client(HR team)at all stages of project e.g.getting their sign off on any communication documents interview questionspresentation slidesliaison for all meetingslBe open to changes in project scope and deliverables
