An employee who has been in the crossfire of two different corporate cultures is doubly valuable.

Oksana Goncharova, Vedomosti.ru, 09.10.2014

Working for a company that has undergone a merger is a distinctive experience. However, one should not rush to leave: a professional who has been in the crossfire of different corporate cultures is worth much more than even two inexperienced professionals.

The critical adjustment phase following a corporate merger can take anywhere from several months to a year, and it’s often the case that business process integration occurs faster than employees can become accustomed to their new co-workers, says Olga Suvorova, managing partner of Suvorova & Partners Executive Search: “The joy associated with the fact that one’s company was not on the receiving end of the acquisition subsides quickly. Shortly, it is replaced by uncertainty that becomes irritation when new arrivals appear in the office and business – bringing with them their own rules of conduct, business methods, relationships, and even objects – from kitchenware to the paintings on the walls.”

Particularly tense situations can arise when those merging are two successful companies with well-defined corporate cultures, the expert notes: no matter the efforts made by the market participants for the integration to go smoothly, business and personnel losses are unavoidable. The intensive period of employee departure gradually slows within the first year to year and a half, but by the end of the third year following the merger, up to 70% of managers of the acquired company may leave, observes Suvorova.

What’s good for an American

How does one reconcile the excessive relaxation of Americans and the scrupulousness and propriety of Germans – this question was set some time ago by the management of two merging companies: the Eaton Corporation (Cleveland, USA), which by that time had already been operating in Russia for 4 years, and the Moeller Group (Koln). The former has spent more than a century developing solutions for effective management of electric, hydraulic and mechanical power. The latter produces electrical equipment and automation systems. Management was faced with the challenge of melding together companies occupying two different market niches, with differing corporate cultures and a vast number of employees.

“Moeller was a privately held company, while Eaton, which had just purchased it, was publicly traded, – says Igor Anufriev, General Manager of Eaton in Russia. – Experience demonstrates that public companies have a clear focus on financial performance, while private firms prioritize long-term prospects. In our case, the opposite happened: the German Moeller was determined to achieve short-term financial results, while the American Eaton set its sights on long-term goals.”

The respective management styles were also diametrically opposed, continues Anufriev: “Moeller was run by one or two leaders, who were endowed with nearly unlimited powers. In Eaton, on the other hand, a democratic and relaxed style of management flourished.”

The Germans were meticulous about tracking expenses, while the Americans had a more easygoing attitude towards expense planning. The Germans made their focus on sales, whereas the Americans prioritized marketing and development of strong relationships with clients and partners. In the German company, employee departure and arrival times were tracked almost to the minute, while in the American company, where performance was judged based on professional results, such measures were viewed with distaste. Even approaches to recruitment differed. In the American firm, for example, language knowledge requirements were comprehensive: along with other employees, regular sales managers were expected to be well versed not only in conversational but also in technical English. Germans were not as strict in this regard. The Americans preferred to hire people with potential and invest in them, while Germans were more likely to look to those who were ready to fill a particular role immediately.

Streamline or destroy

The friction between two cultures may be so strong that employees might begin departing the company without even attempting to become part of the new team, experts warn. For example, when Procter & Gamble acquired Gillette, many Gillette team members elected to leave before ever transferring to the P&G office. “They were convinced that P&G, which successfully develops its own employees, would not allow for the rapid career development of outsiders, – recalls Suvorova (her company at that time conducted interviews with resigning employees from both sides). – Gillette, for example, had its own well-established network of distributors, and when the newly formed company chose to transfer the entirely of the Gillette business to P&G distributors, Gillette employees that were interviewed told me that this was a serious mistake. In their opinion, the successful business that they had been building over many years was being destroyed. The point of view of those at P&G was just the opposite: they were convinced that this decision would streamline the Gillette business, make it more effective.”

Finding a third path

Oftentimes, having learned about the acquisition of their company, management decides that their team has been dealt a loss, notes Suvorova. A primary question on everyone’s mind is which of the two General Managers will take over leadership of the newly formed company. For some reason, many prepare themselves for the victory of the party making the acquisition. “This is not always the case, – Suvorova says. – As an example, we can refer to the deal between Cadbury and Dirol. In that case, although Cadbury was the party making the acquisition, the Dirol General Manager became General Manager for Russia and many management roles were assumed by Dirol employees.”

At its Russia office, Eaton decided to try a different approach - to bring in someone with a neutral position, i.e. a Russian. Having representatives of both cultures under his management, he was able to act as an arbitrator. According to Anufriev, this kind of management approach allowed the company to reduce personnel loss to a minimum: overall, no more than 10% of employees left the company.

“All of upper management was able to find a place in the new organization, – he says. – We made an effort to draw all the very best from the Americans and the Germans. The former introduced durable relationships with partners and high-quality marketing into the new corporate culture. The latter brought to the table their drive and focus on business results. As for working hours, here the Americans came out on top: there are no strict controls on employee’s time.”

Experience for all

Olga Suvorova

Managing Partner, Suvorova & Partners Executive Search

“When speaking with upper management and discussing the wisdom of leaving a company after news of a merger, my advice is not to rush to any decisions. Mergers and acquisitions are such a common occurrence in our time that sooner or later, most professionals will face such an experience. It’s better to accept the situation and undergo the integration process, in so doing demonstrating your maturity and competitiveness. It’s advisable to spend 9-12 months in the newly formed company, enriching your experience through immersion into a new business environment, learning to use new tools and only after that making a decision about staying or leaving.”

Unifying around values

“At one point we were advising on a merger of two pharmacy chains, – says Yuri Pakhomov, a partner at the “Shag” consulting center. The new owner too wanted to take the best attributes of both companies and incorporate them into the operations of the newly formed chain. At the individual pharmacy level this was simple: the standards and procedures observed by employees of the two respective chains did not differ substantially, so when transferring from location to location, employees were able to adapt quickly in a new environment. Things went less smoothly with the central office. Two accounting departments were to be consolidated into one, and a question arose as to which Chief Accountant would take over the new department. And then there were the two IT departments, two warehouses, etc.”  

In this situation, the consultant notes, it is less important to hold on to valuable specialists than it is to receive from them a comprehensive understanding of the principles and technologies that allow the respective departments to function. This is necessary in the event that one employee remains in the leadership role and the other decides to leave the company.

Another objective was to assist the owner and new General Manager in making a choice as to who would take charge of each subdivision. “In conducting an assessment of managers, we took into account not only their level of professionalism, but also their psychological compatibility with the new General Manager, the degree of similarity in their approach to management and even similarities in their attitudes and values.” – Pahomov shares.

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