Thursday, July 10

M&A - Merger of cultures

It was an unusual request for healthcare giant Dr Reddy's Laboratories (DRL). In 2006, Catherine Dulak, while relocating to India from the US with her husband who was to join DRL, insisted on bringing her seven pet cats along.
The pharmaceutical company got the feline beauties shipped pronto in customised cages made on the basis of the specifications set by airlines and government agencies.
From feline imports to gastronomic solutions to worklife balance, India Inc is ready to offer the moon to prepare the ground for a smooth blend of Indian operations with the acquired outfits.
While non-Indian Infosys workers freshly recruited and posted in India get a chef specially flown in to cook food according to their taste buds, dal and curry are making their way into the office canteens of a Chinese company acquired by Mahindras.
Welcome to the world of mergers and acquisitions and cultural integration. As India Inc's appetite for companies on foreign shores grows, it is fast realising that the only way to address post-acquisition jitters is through sugared pills.
Acquisition, after all, is not just about getting bigger with new technology and brands, and more moolah. Today, it is equally, if not more importantly, about acquiring people who work for the company-labour unions, staff, officials and executives.
For instance, when Aditya Birla Group acquired Novellis in Canada, it got 12,800 people of different nationalities scaling five continents. For Tatas, the iconic Jaguar Land Rover brands came along with 16,000 people.
And human beings can't just be taken over with a brazen "Good morning, you are sold". It is not easy to make the two parties bond when, as Aditya Birla Group's HR head Santrupt Mishra says, people can't pronounce Aditya Birla and Indians know neither Spanish nor German.
The integration process is not without its share of humour. Globe-trotting CEOs can often be heard joking about the "morning after" syndrome after an acquisition.
Jokes apart, with more and more companies on the prowl, what was earlier envisaged as a filler for spare time has actually become serious business.
India Inc has been building its portfolio of acquisitions- Tata-Jaguar and Land Rover deal in the UK, Sona Okegawa's buyout of Thyssen-Krupp in Germany, Wipro's purchase of Unza in Singapore, Larsen and Toubro's acquisition of switchgear businesses of Malaysia's Tamco and Jindal Steel and Power's takeover of an iron ore mine in Bolivia, to name just a few.
Management experts suggest Indian companies should set an agenda of merging human resources by resolving cultural issues of the people in both the acquiring and the acquired companies.
Confidence building measures are an integral part of integration. Employees of the acquired company are usually gripped by low morale, restiveness, fear of job cuts, insecurity about the takeover and its implications, says, Adil Malia, president HR, Essar Group.
"When a company is taken over, there is a sense of the vanquished and the victor. It is only fair to put in place processes to make people feel they are on an equal footing. Otherwise acquisitions cannot succeed," says Malia, who has led Essar's acquisition of US-based Global Vantedge and Minnesota Steel and Canada-based Algoma Steel.
Also, employees of acquired units are terrified of being ordered around by a new boss and changes in management and in their designations.
Ganesh Shermon, head, human capital advisory, KPMG, says acquisitions can even fail over two diverse sets of employees in an acquired entity disagreeing over something as mundane as the practice of a female employee garlanding a foreigner company head. "If it goes unexplained, such a trivial issue may kick up a storm," he says.
No surprise then that the likes of Ratan Tata and Anand Mahindra pitch in with their ideas, initiatives and presence to ensure a smooth blending of people. Mahindra & Mahindra (M & M) banks on its cross functional teams that were set up two years back.
"High potential" candidates in the team get strategic training in soft skills and cross-cultural sensibilities. Ratan Tata's mantra is "light touch" integration. The organisational set-up has been rejigged to function independently and tap synergies.
Executives have been placed in charge of five core functions which are performed with a common approach across the Tata Steel Group. They then report to managing director of Tata Steel, B. Muthuraman and well as CEO of Corus, Philippe Varin.
Many mergers signify the coming together of the developed and emerging economies. Given the diverse circumstances and contexts, concerns range from compliance of corporate governance norms to child labour to policy on sexual harassment.
For Arcelor Mittal, already a European company with an Indian face, the yardsticks are in-house expertise, clear lines of succession and a winning streak while for the Tata Group, which is an Indian multinational, inculcation of the Tata way-ethics and values- is paramount.
"We obviously obtain prior knowledge about our would-be partners, their practices and how they operate in the world of business," says Jamshed Irani, director, Tata Sons. Ratan Tata likes to ensure a good connect with the management as per his corporate philosophy.
Tata prefers the management of an acquired entity to continue without undue intrusion. "We aim to put our imprint on the company, through the negotiation board, but the existing managers continue to run the company," says Tata.
Vijay Mallya's United Breweries Group, after acquiring Whyte and Mackay in France, has been keeping spirits up the way it knows best-over beer.
Says CFo Ravi Nedungadi, "Attending social dos is one of our tools to bridge the divide." M & M has used language skill courses- English for the Chinese staff and vice versa to integrate operations in China, says V.S. Parthasarathy, executive vice-president.
The company also created a bigger common canteen where managers eat with the rest of the staff to develop bonhomie. Along with Chinese food, Indian palate ticklers like dal and curry have been introduced too.
Anjali Bansal, country head of Spencer Stuart, feels that such efforts should be complemented by bringing in nuances of culture into the integration process.
Given the diversity of cultures and languages within India, it is not surprising that Indian acquirers have straddled the two worlds rather deftly. Indian companies have taken pains to go the extra length to make their new brand brethren comfortable.
Prabir Jha, Global HR head of DRL, has stuck to the elaborate and leisurely lunch which the employees of Roche-the Mexican company it acquired- were used to.
Though it is a luxury for Indians, the intention was to retain the practice so as not to create an impression that DRL was out to have its own way.
For Ravi Kant, managing director, Tata Motors, the real hurdle in the duediligence for the acquisition of Daewoo Commercial Vehicle Business in Korea was language. It became difficult to give a presentation to the Koreans.

*Mergers, acquisitions and cultural integration
Dr Reddy's Laboratories: The firm allows individual and institutional cultures to flower. It ships cats for executives relocating to India and permits long siesta lunches in Mexico.
TATA Group: For Ratan Tata, ethics and values are paramount and he prefers light touch integration between Indian and global operations.
AVB Group: To drive home the image of the company, employees of Novellis were asked to draw the picture of an animal that they thought represented the Aditya Birla Group.
Mahindra &; Mahindra: High potential candidates get strategic training in soft skills and crosscultural sensibilities.
Sona Koyo Steerings: Surinder Kapur is swamped by mails from the ThyssenKrupp team thanking him for making them feel like one big family.

The Tatas hired an army of translators and interpreters and within 72 hours, all the audio visuals, group brochures and other relevant material in English were translated into Korean and sent across to the management. Daewoo employees were also treated to a variety of Indian cuisine at an Indian evening.
Integration exercises are, however, more than just noodles and curries. Human resource maxims like compensation, benefits and training of employees are equally in vogue once the pay packets and skill sets have been figured out.
The inherent risks are of an exodus. When M & A deals fail to achieve anticipated synergies, there is every chance of talent fleeing the company.
Corporates like Apollo Tyres, Wipro and Tatas are thus arranging regular exchange visits of their employees.
Tatas have even had the labour unions from Jamshedpur visit the Corus facility to send out a message about their work culture.
DRL, which has shifted the head of the engineering unit in Roche, Mexico, to Hyderabad to integrate the skills and fill in the gaps in its Indian plants, has not lost a single person despite high attrition elsewhere in the industry. "This is without any loyalty bonus or golden handcuffs," says Jha.
Companies are also keen to extend its open-door HR policy to the expat workforce.
For instance, the practice of setting aside an afternoon slot of 2-3 p.m. for employees to interact with the senior management.
Vijay Mallya's mantra is not to impose his people on the acquired team so as to foster confidence. Mallya has only three representatives in Whyte & Mackay, the rest are French.
He allows employees to compete for various management positions. It has helped in getting people's loyalty to the company, explains Nedungadi.
In London, Anup Sahay, chief integration officer, Tata Steel and his team have made comforting gestures like retaining the two-day weekend compared to the Indian six work days.
With Corus in a poor shape due to long years of debt and low morale, plenty of fun and recreation has been introduced even in the midst of serious work, in a true Indian style.
Marriages may be made in heaven but not of the business kind. Though Indian companies have woken up to the demands of peoples integration, there is still scope for adopting global practices to make the earthly unions work better.

Reference: India Today "Merger Mantras", 14th July and Factiva.com

No comments:

Post a Comment