Mergers and acquisitions have had patchy record in the past few decades. Many of the high profile mergers have failed or produced dubious payoff for their participants. Their great expectations have often been dashed by the difficulties associated with merging products, operations and cultures in fast changing marketplace. And despite the 50 percent success rate bandied around, the appetite for these deals continues, with merger and acquisition activity now around the US$3000 billion mark.
The worldwide merger of computer companies Compaq, Digital and Tandem almost five years ago was one such high profile merger.
In New Zealand, the names Digital and Tandem are firmly consigned to corporate history, and Compaq’s operation here continues its course of 15 percent revenue growth, (1999 revenue $260 million), continued profit growth with stable staff numbers around 355.
A key to realising the promises and profits of the merger, was building new culture quickly, so that everyone was heading in the same direction.
Compaq’s smart building in Auckland’s exclusive Viaduct Harbour, with its picturesque views of the Waitemata harbour, is no exercise in corporate indulgence, it’s carefully planned exercise in corporate culture-building.
CEO Russell Hewitt wasn’t involved in the decision to construct the new building, but when he arrived 15 months ago, he became chief architect in constructing new company culture.
His challenge was to unite people from the three different companies into strong team under the one brand.
“A lot of companies fail after merger not because of what they do to the merger point, but what they do after that,” says Hewitt.
“When you’re putting the business together there’s huge energy and focus. Everyone’s got assigned tasks, time frames, and they’re motivated because they want to be selected as the people who get to stay on. So there’s real momentum.
“But the danger point is after the event, everyone goes ?ah great, I’ve got one of the positions’ and if you look back over multiple mergers, lot fail because the original aspirations of the merger don’t materialise. There’s less drive to make things happen.
“That’s often because you don’t create new culture, and if you don’t build that culture quickly – which is what happened here – people flail around still in their previous cultures, it’s divisive, and that often leads to company driving in two or three different directions.”
The result can be form of anarchy – one group denies responsibility, and blames others who don’t fit their culture. There was degree of that, even by the then-management’s own admission, but Hewitt is at pains to point out they were playing the cards available at the time in the way they thought best for that moment which required huge effort just to get the physicality elements right. “It’s the speed with which culture becomes priority that determines the success.”
Hewitt arrived at the fit-out stage of the building, which meant he could help design the interior to nurture culture – culture characterised by openness. First time visitors are struck by the transparency and openness, glass walls that stretch through meeting rooms to the harbour beyond and stairwells that cut through the floors. Solid corners have been taken from offices, walls replaced by glass. The space is totally flexible, the floors are raised, work stations and walls can be moved or taken out.
“It means we can shift people, or work stations and offices. That’s good because it gives dynamic feeling. We’ve already changed the configuration once since October.
Building the culture
Parallel with the new building, the new culture was constructed in the following stages: –
1. Engaging the customer
The first thing to tackle was the customer confusion of dealing with three companies under one brand. “It was legacy of the old companies. We had multiple points of representation, which gave people confused view of Compaq – who we are and what we now did.” says Hewitt. “It was also pain for the channel partners which I had first hand experience of.”
This was addressed by establishing virtual teams, by taking the best people to look after customers, and giving customers focal point for contact and appointment of northern and southern region engagement managers within the new structure.
“It’s pointless having great culture if the customers or partners have no idea who you are or what you do. So we started with our customers then worked on the internal things that were inhibitors to us achieving that continuity.”
2. Internal legacy issues
Major legacy issues had to be resolved and tied up . “We prioritised the biggest inhibitors and knocked them over, one at time in parallel with the market facing changes.”
a) Superannuation. Because one group had superannuation and another didn’t, we had disparate benefits policies. Previous efforts kept hitting legal and equality roadblocks. Hewitt finally wound-up the original Digital scheme in conjunction with the trustees and didn’t replace it.
b) Permanent workers. Like many firms these days, Compaq had lot of contract workers – in fact almost third of its people worked as contractors. It meant that permanent staff participated in many benefit schemes like company profit sharing and contractors who had been employed for years did not. Transferring 160 contractors to permanents immediately closed off one of the major points of friction.
c) Share scheme. The major contractor base was also an inhibitor to launching an employee share purchase plan as it would only have been available to two thirds of the staff. Again forcing through the change to permanent status for most staff closed the gap and allowed share purchase scheme to be made available for everyone.
3. New initiatives
? Staff purchases: Schemes to facilitate the purchase of Compaq equipment for home and family were introduced or enhanced.
? Celebration days: Everyone got day off this year. “We’d had great end of the year result, people had worked hard, it was tough, and it was our way [the Executive Team] of thanking them. It’s easy to thank people for doing things or to say people are everything to the company but do little or nothing for them.” Hewitt says he’d do it again, but on an earned rather than expectation basis.
? Wellbeing: Corporate wellbeing is also catered for, with chiropractic students making free visits, flu vaccinations available around the country, and experts in to talk about stress management, and work/life balance etc. These have been well received and heavily supported. “Changing the culture is about doing something different for the staff. These coupled with market success and awareness of brand are the foundation blocks that build your culture.”
Creating the desirable company
“The fact that people want to work here becomes statement about your culture. The ultimate measurement is having high calibre group of people who want to work in this company,” says Hewitt.
He was mortified then, to discover from an internal survey that only 91 percent of people were proud to work in Compaq.
“I was absolutely miffed about the nine percent – I said to them ?some of you in this room don’t want to be here – If you don’t want to be on the ship – don’t be on it.’
“I think everyone comes to work to contribute. After all, work should be place of enjoyment and if you go home and you haven’t contributed that’s what creates frustration.
Hewitt’s also proud of the fact that he’s had five senior people go to overseas postings in the company in the last year.
The latest appointment of Peter Wogan as director of marketing communication for South Pacific has been structured so that Wogan runs the former Sydney-based role out of Auckland.
Together with the other postings to Si