War and Peace (the condensed version)

Volume 7 Letter 5

After a decade of clashes, skirmishes and sometimes outright war, peace has finally been declared in one of America’s fiercest struggles with a foreign power. You may have heard the news that a ceasefire has been hammered out in Detroit as DaimlerChrysler agreed to sell off an 80% stake in its struggling US manufacturer. In what can only be described as a “match made in hell” DaimlerChrysler has struggled through three financial crises under Daimler’s watch. How did a purchase originally touted as a merger of equals turn into what one academic described as a “Chain Saw Massacre”?

Any business merger is for sure going to have its challenges. However mismatched business cultures do not kill successful mergers, poorly planned programs to integrate the businesses do. The main focus of any merger is usually on reducing costs. While cost cutting is important, neglecting to develop a strategy for integrating the businesses is, as Daimler has discovered a car wreck!

In the absence of a strategy each of the two merging (or perhaps we should say colliding) business cultures will try to gain control over the various business systems. Given that there never is a match of equals, the dominant business will inevitably impose their will on an increasingly de-motivated work force.

So how do you get two businesses to work together so the sum is greater than the parts?

  • In some cases don’t: Imagine a very process-driven company purchasing a very innovative company to access some new technologies. Take the innovative products and give them to the process people to ramp up, but don’t attempt to integrate the innovative people with the process-driven company. This never (and for emphasis “never ever”) works! Keep innovative and process people apart and let them both do what they do well!
  • Have a strategy: Mergers can work. What kills them is holding onto past practices. As the implementation strategy is developed, focus on serving the customers – not past systems.
  • There should be no compromises on quality and productivity: Don’t ever for the sake of “getting along” take a step backward on quality or productivity.
  • It’s about strategy not only about “Cost Cutting”: For sure, mergers can save money in providing a common payroll system, health insurance etc. but saving money does not replace a good strategy.
  • Let the teams develop their own business unit strategies: Corporate goals are fixed but within that framework each business unit needs to define how they will contribute. The merged teams need to develop the business unit strategy together. Telling superiors “what you plan to do” and “how you will to accomplish it” is lot different than being told “what to do”.

Cross border and cross cultural mergers are rife with challenges. Smart companies need to think long and hard about how to overcome them. In my experience when two similar groups are merged, having them develop their own business unit strategy makes the integration almost seamless. It’s amazing how cultural difference disappear when common goals are established and rewards are based on the team reaching them.

Make peace not war!

Further reading:”How to Make Peace between two warring cultures” Financial Times Business Life Section, Judgment Call, P 14 May 23’07

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