SPECIAL REPORTNUMBER ONE I999

The human capital audit:The missing elementof merger strategy

BY DENNIS C. CAREY AND MARC A. FEIGEN

The human capital audit:The missing element

of mergff strategyBY DENNIS C. CAREY AND MARC A. FEIGEN

Nv crsut nreorn ofthebusiness press now knowsthat many highly toutedcorporate takeovers havebackfired - some of

th€m spectacularly. It is hardly surpris-ing that top executives who have suledso much on an elaborate financial due&ligence process prior to th€ integrationof two companies are stunned to findtlat, when the two companies integrate,it lelds disappointing and unanticipat-ed rcsults.

These results are forcing executives,boards, and senior manag€rs to rethinkth€ir approach to me4ers and acquisi-tions.Instead of merely looking at po-tential partners who would help achievebusiness goals, they must select theirmerger partner with great care, scruti-

I can Iive with?" Having answered thatquestioD affirmatively, they must the,prepare ahemselves to integrate two busi-nesses that might have radically differentcuitules,

This task is more challenging thanmostbusiness leader recognize, As ex-ecutives consider possible alliances priorto a merger, they discover the limitationsof traditional pre-merger due diligenceexercises.In most mergers, due diligenceteams Ied by investment banlen conductextensive research into the value of a

companyt capital assets. But th€ypayscant attention to its human asseis. Yet,often the most undervalued, underap-preciated, and underdeveloped assets arethe huSe stores ofhuman capital thateach company brings to a marriage.These pools oftalents - and how they

are used - can be the key to creating anew, dlnamic corporate culture, whichis essentiai to any successtul enterprne.Making sure that that n€w cultrre can beachieved may be the most important yetoverlooked element of todayt corporatemergers.

Recendy, some companies have beguntrying to prepare themselves, ManyCEOS are going beyond crunching num-bers, and are conducting an additional"human capital audit," an innovative ex

- assess the managerial talent in the6rm they are considering buying,- determine whether itis possible tocreate a common corporate cuiture,and

- get a head start o:r making thedeal work.

nizing every potential mergeror acquisition target for prob-lems that may not be obviousftom the companyt fnancialpro6le. They must ask them-selves, "Is this a companywhose management, employees, and approach to business

Dsnnis C. Carey is vice chairman of Spencer Sluart LJ.S. and co-head ofthe recruiting fnm's Boad Services Praclice. He is founder and co-chaiman (with Tyco lnternational Chief Executive L. Dennis Kozlowski)ofThe I\,1&A Group, a consortium ol CE0sfocused onthe bestpracticesin merger and acquisiti0ntransactions. MarcA. f€igen isthe mana0in0pariner ol Katzenbach Partners LLC, a management consulting firmbased in NewYork.

By thoroughly examininSthe state of a target company'sinternal culture and thestrengths, weaknesses, andpotential of the people \,r'homanage it and work for it, ahuman capital audit can pro-vide guidance as to vrhether

SPEC!AL REPORT I999 I

a deal is worth unden:king, and at whatprice. And it can help shape a game planfor steering the new corporate entity inpursuit of a unified strategyas soon aspossible. Shaping the culture ofa new,combined company also requires a care-fi:Ily planned and executed strategy. Themore knowledge company leaders haveabout the culture of the newly acquiredcompany, the better positioned they areto make the post merger integration

The high expectationsof mergersThe overwhelming majority of mergersand acquisitions are aimed not at cuttingcosts but at adding strengths and enhanciDg the corporationi abilityto ex-ecute a new strategy in dre marketpla€e.Indeed, savings anticipated throughstrearnlining, consolidation, systems integration, and other operational efficiencies or balance-sheet savings do notgeneraly justit a qi€a1 acquisition pre'mium. Since lanuary I996, the averagepremium paid by an acquiring companyhas been 26010 while the average bookvalue for a Fortune 500 company is only22olo ofits market value. The goal ofasuccessfii merger cannotbe to slash andburn, but to chaage and grow.

Executives who captain merger dealsoften overlook a crucial factor: They arenot just merging plants and techologies

- they are combining people. Whetl.rera merger succeeds or fails depends large-ly on how well the management teamcreates a new strategic direction andshapes a corporate culture to support it.

The history of corporate mergersthroughout the I990s, however, is 6lledwith examples ofmergers that under-mined shareholder value due to a failureto recognize the importance ofshapingan appropriate corporate culture to support a new strategic direciion. The con-solidations that looked good on paperftom a financial perspective suddenly be-came far more unwieldy and unpre-dictable when it came rime to unite peo-ple behind common corporate goals.

AT&T'S hostile takeover of NCR i,1991 and wells Fargo's equally aggressive

2 D]RECTORS & BOARDS

1995 rakeover of FiIst Interstate (see page4) both brought together companies onentirely different paths, and led to noth-ing but the Ioss of market value or mar-ket share. The M&A wave of 1998 haswitnessed similar results. In October, t}lepharmaceutical giants Monsanto andAmerican Home Products suddenlyaborted plans for a merger that had beenvridely praised ,ust five months earlier.Apparently the burden oftwo contra-

Acquirers typically know littleabout the ufiget executiges'motieation afid daily beharior.

- Marc A. Feigen

dictory cuitures outweighed the advantages of nicely matched marketing andproduction strengths (page 4).

What can executives and boards of directors leam liom these and many otherless-than-perfect experiences with cor'porate consolidation? h seems thatjustas a failure to shape the right corporateculture and develop humcan set a merg€r back, a willingness andability to deal with these issues can helppropel it forward.

The often unspoken assumption in amerger is that one companls cdture willpredominate and cast strategic issues in

terms of"ours" versus "theirs": whosesystems, whose manag€rs, whose products come out on top? Answering thesequestions and agreeing on how they wilbe decided largely determines howsmoothly a m€rg€r integrationwill be.

That is why it is so surp sing that little attention is paid to the human elements of mergers and acquisitions. Ac-quiring companies typically do notdevote a sufficient amount of time to athorough examination of the ingrainedways that a target company's er(ecutives,managers, and other emPloyees 80 aboutgetting their jobs done. Acquirers typi-cally know litde about the target elecu-tives'motivation and daily behavior, andhow they relate to each other - in short,they are utterly unfamiliar with the cuI-twe ofthe company they are consider-ing taking over.

At a minimum, any executive con-templating a merger should know theanswerc to a series of questions ihat candetermine how well the merged compa-ny eventually will operate. These include:

- what are the skills aDd leadershippotential of the taBeted company'skey empioyees?

How ell do drey stack up agarnstthe competition?

How would they Iikel). tackle post-merger challenges?

- How would they handle the stress-es and strains of the merger itselfiAnd then there is this critical ques-

tion: Will key executives cash out, losetheir fire, or simply fail to cope on a newmanagement team or in a newpeckingorde

why audit human capital?These are exactly the kinds of questionsthat a human capitai audit can help an-swer. A comprehensive audit results ina balance sheet of human capital assetsand liabiiities - a clear pictur€ of theleadership and keyemployees in place,and their strengths and $eaknesses rela-tive to the industry and the market as awhole. It helps identify potential value tobe developed, and possible Iiabilities tobe deait with. Ideally, such a balancesheet yields benefits throughout an ac-

quisilion process, fiom pre-merger eval-uation through merger negotiations toposFmerger implementation.

In some instances, a thorough humancapital audit undertaken even before adeal is announced can give an acquiringcompafly €vidence of "warning signs"that integration will be more difficultthan 6nancial analysts may realize. Oneof the authors was involved with a clientplanning to announce a merger thatwould create a global communicationstitan with unprecedented scope and re-sources. The investment bankers and duediligence team had given enthusiastic ap-proval. But the human c-apital audit tiatwas quiedy conducted revealed that tietarget company 1^'as bitterly divided intotwo camps.Its attitud€ toward spending,research, 6nd marketing was at odds withthe goals ofthe client. The differenceswere enough to cause the merger plansto be shelved.

More frequently, a human capitalaudit can help a buyer determine vrhichpotential acquisition to pursue, and con-tribute to a proper price evaluation (es-pecially when a target is being bid oncompetitivelr. In tie case ofthe globalcommunications client, the human capital audit discovered through a series ofinterviews with industry veterans andcompany alumni that th€ target compa-ny was prepared to setde for a dollar fig-ure far Iower than the asking price.

But in the best of cases, a comprehensive human capital audit provides a run-ning start for a successful merger It high-lights where hidden strengths maylie,and where a strategy may face significantbarriers. It provides an evaluation ofwhi€h key executives should take onwhat roles in the new company, howmuch integration to anticipate, andwhich priorities should be set in postmerger activiti€s. An audit .an also revealwhether there is liesh talent in the managerial ranks - an important signal tothe firm's long-term potential - andwhether the top performers intend tostay. One of the risks to an acquiringcompany is the threat ofa post-mergerbrain drain. A professional audit can helpplug it, by letting the buyer know whichexecutives need to be assuted ofa promi,

nent role in the new organization.Ideally, a human capital audit will

help management assess a full range ofpost'merger options, from completelyseParate operations to complete inte-gration. By providing a clear sense ofhow key units tunction, it can help man-agement decide what to integrate and

Th e ht elli gefl c e- gath er in gso rces for a hufian capital au.litare both obeio sandobsc rc,

companlto know as much as possibleabout the human dynamics ofa com-pafly with whom it is about to enter apartnership. Because such intelligencegathering typicaly is made without theknowledge or formal cooperation ofthetarget company, there is necessarily alow'key and conidential quality to this

The sources for this type of informa-tion are both obvious and obscure. Pub-lic sources, induding journalistic profilesofa company, can ofteo provide basicdata about the personalities and cultureofa companl Even isolated anecdotesabout the idios),ncmcies of managementcan offer clues to how a company man-ages its human capital. NationsBank'schief executive, Hugh McColl lr., for et-ample, is known to award a €rystal handgrenade for achievement. One would behard pressed to find a more potent sym-bol of an aggressive corporaie culture.

But a comprehensive audit requiresextensive interviews with the peoplewho know the target companybest, in-cluding analysts, suppliers, and cus-tomers. Some of the most valuablesources of information and perspectiveon a company are its former executivesand other senior manag€rs in the in-dustry. An established executive recruit-ing firm vrith experience in this t)?e ofhuman capital intelligence is able todraw oa a large data bank ofsenior ex-ecutives in the relevant sectot contactswho often yield more information abouta companythan a decadet wo hofbalance sheets. Usingthe skills ofexecutiverecruiting, a firm can tap into alumni ofa target company, including executiveswho have retired or taken other jobswithin the past 18 months. Interviewingthese executives, without disclosing thepurpose ofonet clients, allows direct ac-cess to people who understand the culture of an organization,

Neealless to say, great care needs to betaken in discounting information thatis self-serving or biased. The possibilityofreceivins opinions from a disgrundedformer executive must also be taken intoaccount. But, in general, the thorcughhuman capital audit will get an array of

Contikued ofi page 5

- Desflis C- Carey

what to keep as separat€ operating units.For example, merging back-office func-tions and product management mightprovide economies ofscale, while inte-grating retail organizations would de-stroy more lalue than it seated. In othercases, combining marketing operationsmight yield synergies, while leavingR&D autonomous could maintain in-tellectual (olegiality and pioduct devel-opment focus. To make these decisions,it is va.luable to have a dear idea ofan ac-quired company's human strengths and

Undertaking ahuman capital auditA human capital audit is an act of intel-ligence-gathering, which allows one

SPECIAL FEPORT I999 3

Let's call the whole thing off ...ver professor Bob l\rcGowan, aspecialist in telecommunica-tions issues: "ltlooked good onpaper, but NCR's culture andbrand could notsurvive,"

Not the rightprescriptionIhe Dea[ Merqer ofMonsanto and AmeticanHome Products

Date:June 1,1998{dealcanceled on 0ct. 13,1998)

Deal Size:$33.6 billion

The Polenlial: The pairing ofpharmaceuticals-driven Amer-ican Home Products and thechemicals and biotechnology-d ven lvlonsanto had the mak-inqs of a leading-edge corpora'tion that could set a new pacein the life sciences business, anemerqinq industry that com-bines human and animal healthwith plant science. Both part-ners brought a lottothetable.American Home offered a for-rnida ble marketinq infiastruc-ture, with a sales force of10,000, to launch productsemerging from l\,,lonsanto'spromisinq drug pipeline. l\,,lon-santo brouqht R&D expertiseand an aggressive groMh strat-egy,which American Home's financial resources c ould sup-pon, The two companies wereexpecting to save $1.5 billionover three years by closingoverlapping facilities and elim-inating overlappinq B&D.

The Problems: As one pharma-ceuticals analyst put it, themerger was f raught with "in-compatibilities atthe top." Try-ing to merge afrugal, rigidly runcompany like American Homewith a high-spending, risk-tak

Sorry, wrong numberThe Deal: AT&T acquires NCB

Daie: l\4ay 6, 1991

DealSizq $7.4 billion

The Potential: AT&T ChairmanRobert E. Allen could barelycontain his excitement uponcompleting the unfriendlytake-over of NCB, forecasting "alevelof groMh and successthatwe could not achieve separate-ly." NIuchofthe business mediaaqreed, noting thatthe mergerwould greatly enlarge NCB'scustomer base, provide market-ing and sales supporl and addR&D resources. AT&T wouldgain the critical mass neededfora leadership position in net-worked computinq applications.NCRs expertise in electronictransactions would be joinedwith AT&T s networkinq andsystems integration capability.

The Problems: ltwas liketryinqto mixoilandwater NCB's con-servative, centralized manage,ment culture was turned insideout by AT&T'S reengineering ef-fons. Scientists at both com-panies found few ways otworking together AT&T'S'unionized employees could notmana g e the arrangements towork in the same building asNCB's non-union staff. Thosewho had initially made NCRprofitable bailed out in droves;by I997, only four ofthe top 30pre-merger NCR managers stillworked for the company.

The Besult Whei AT&Tfinallysold NCR,the inability ofthe ex-ecutives and employees tomake the deal work had costAT&T over$3 billion, and NCBabout half of its marketvalue.lnthe words oflJniversityof Den-

4 DIRECTORS & BOARDS

ing firm like [!lonsanto was notan easy fit. The two sidescouldn't agree on who wasgoing to run the company, orhow. Disagreements rangedfrom the proponion offundingfor pharmaceutical versus agri-biotech products,to how manyemployees would be laid off(and which cornpany wouldtake the biggest layoff hit), towho should be assigned to cor'porate headquarters.

The Besult The original merqerannouncementhad hardly senta ttemor in the markets, unusu-al in an industry as exuberantas biopharmaceuticals. Butwhenthe dealwas called off on0ct. 13, shareholders in bothcompaniestooka biq hit. N,lon-santo shares dropped 27% from$50 to $37 (ithad been trading inthe S54 range priorto the merg-er announcement). AmericanHome fell 10%, from $50t0 $45{it had traded in the $49 rangepriorto news of the deal).

A merger theycouldnt bank onThe Deal: Wells Fargoacquires First lnterstateDate: November 18, lg95Deal Size S10.9 billion

The Polential: Wells Fargo'shostile takeover of First lnterstate, at an acquisition premi-um of$3 billion (27%), createdthe nation's eiqhth-largestbank, with a strong basethroughoutthe nation's largeststate. Combining Wells' high-tech d e livery systems with Firs!lnterstate's vaunted customercare would not be easy. But itoffered the opportunityto cre-ate a bankwiththe capacitytoplease a wide range ot cus-

tomers while staying ahead ofthetechnological race, and op-erating from the largest re-qional base in the country.President and C00 WilliamZuendt saw potentialfor hugecost-cufting, mincing no wordsas he promised to slash $800million in operating expenses.

The Problems:Thetechnoloqy'focused Wells cutitsworklorceby 26% inthe first 15 months, re-placing traditional bank branch-es with supermarketkiosks andtelephone banking services.Several senior First lnterstateexecutives had already left, re-signing beforeWeils even had achanceto make its plans clear.Michael Abrahams, analystforSutro & Co-. noted that Wells"lost a lot of the people whokept cusiomers happy." Com-petitor banks took advantage ofthe situation, running adsspecif ically targetinq formerFirst lnterstate customers un-happywith declines in servicelevels. Deposits fell by 11.8%within the first'15 monihs ofthemerger,with $5 billion removedin the firstthree months of 1997alone. lt was as lf Krnart did ahostile takeover of Nordstromand eliminated stores, mademerchandise more uniform, cuthighlytrained sales staff, andasked customeas to stand inline.

The Result Wells Farqo hadonce been the most profitablebank in the U.S., measLrred byreturn on equity. Butfiorn thetime of the merger to AugustlgS8, Wells shares rose 47%,less than halfthe 95% risefor$e Standard & Poor's l\rajorBe-gional Banks lndex. As We,lsand First lnterstate sLrfieredmerger meltdown, Zuendt re-siqned- Wells Fargo was ulti-matelyforced to merge with astron q er bank, Nonvest Corp. I

information about a company and howits key leaders conduct business andthe goals they are pursuing. Such re-search €an take a few days or montis, de-pending on tie scope of the acquisition.In assessing th€ state ofa company\ cul-ture and human capital assets, aprospective purchaser must decidewhether its priority is to "get the dealdone quickly" or to get it done right.

Asking tlle right questionsbefore integrationTo determine the feasibility ofcr€atinga successful new corPoraie culture, ahuman capital audit mustbe as rigor-ous as any Enancial analysis. It must as-sess the human capital assets of a targetcompany. And it must be prepared toask a series oftough questions aboutwh€ih€r the internal dynamics of acompany \rould allow it to b€ reshapedin a new, post-merger strategy. Howsuccessfully, for example, are new ideasgenerated in one depatment translatedinto increased performance across alldepartments? To what extent are fto tIine employees motivated to understandand embrace new product and servicelines? Who are the key people who getthings done?

The audit must also probe humancapital liabilities. Are employees pro-moted more often on tenue than on tal-ent? Do ideas "not made here" stand lit-de chance of survival through corporatereview? tue there powertul players whowill impede change?

Through these and other unorthodoxqu€stioDs, a clear picture is drawn of aliof the aspects of corporate culture thatmust be managed to allow the two com-panies to merge successfully. Executivesftom the acquiring company should in-sist that these t}?es of questions be an-swered satisfactorily and should Iook atthe target company for the followingcritical components:

work force compositio[. A potential a€-quirer must obtain a clear understand-ing ofthe woik force that is already inplace ard the hiring and promotion pol;ci€s that have shaped it. It is necessary todetermine what kinds of employees are

r€cruited and promoted at each relevantlevel of the company, including their cre-dentials, background, experience, andwork traits. lvhat criteria determineswho fails, who succeeds, and who ad-vances within the organization? To wharextent are employees who do not matchthe organizationrl moid accepted or re_jected by their coUeagues? Comparingthe company's current work force withthe kinds of employees needed in themerged company will make it possible todevelop an effective appioach to hiring

Porer and d€€isionmaking autho ty.Perhaps the most important elements ofhuman capital management - powerand decisionmaking - are also thethorniest and most comPlicated toshape. It! necessary to determine whotruly has influence within the organiza_tion.\^rhat processes are used to reachdecisions, and what hctors have the mostimpact? Horv do ofdcial corporate poli-cies and procedures compare with theway things actually get done? A newstrategy will require new kinds of deci-sions to be made at all levels. Will theright people come together to make wisedecisions efficiently- and b€ able totranslate decisions into results?

Organization and communication.Dramatically more important than anyorganizational chart is an understandingofwho in fact talks to whom and whowork with whom to make things hap-pen.Apotential acquirer needs a clearmap of the informal organization. Howeffectively do people work tog€ther,across the organization and up anddown the corporate hierarchy? How dopeople find out what they need to knowto gei things done?

Motivation,'Ib ensure an effective per-formance culture, key employees {,illn€ed to be persuaded to realign theircommitment 10 the new corporate strat-egy. It is important to provide the rightincentives - tangible and intangible -for individual and coliective performance. What do employees at each rel-evant level ofthe company see as their

overall mission and their day-to-daymandate? what incentiv€s actually &iveindividual and team performance? Inwhat ways does the current informalwork regime create bariers to increasedperformance?

Skills and information. Beyond inte-grating systems it is also necessary toplan for the building and sharing of intellectual capital. what gaps in skills andinformation could potentially undermine the newbusiness strategy? Wlatskills and information are valued within the organization, and actually drawnon to drive performance? How wellaligned are theywith the new strategicvision? What skills and information maybe present but not exploited? How difficult is it to access skills and informationwithin the organization? What kind offeedback do executives, managers, andftontline employees receive to improvetheir performance?

Inv€stment in people. Companies mustgive e..ecutives, managers, and employees the opportunityto build their skillsand knowledge, and give tiem access totle toois and evertise that help them gettheir jobs done. A potential acquirer willwant to understand to what exlent em-ployees' skills and knowledge are valu€dand invested in. Do key leaders tolerateoutside ideas and expertise? What ana-ry'tical and informational tools are usedto suppoft individual and collective Per-formance? what resources can be drawnon? will tlese need to change in light ofthe new strategic direction? Successfulmanagement of human capital requiresconstant attenlion to the renewal of peo-ple and ideas consistent with the newbusiness goals.

Audits and integrationA pre-merger human capit audit can bean earlywarning system for a companyprior to proceeding with a merger.It canalso help shape a strategy for how tostructure a transition period so that themerger comes off smoothiy. But once themerger has been accomplished, there re-mains much iobe done to shape corpo-rate culture going forward.

SPECIAL REPORT ]999 5

A new corporate culture needs to beforged by design rathei than by default.When human capital management is onthe agenda of the leadership team beforeit seeks a merger, it remains there aftera deai is completed.

CEOs and boards are expected to becalled upon to articulate a clear strategicvision for the merged company- anddeal wiih bottleneck to that vision onboth sides. The audit enables the transition teams that alrive the integration to

do their work with a head start amedwith knowledge ofwhat human talentmust be prese ed and leveraged- Insteadof hearing the standard eight-word bar-rier to change - "That's not the lary wedo things here" - CEOS know who is inthe vanguard and who can help getthings done.

The audit helps CEOs maintain astable corporate environment and steman exodus ofthe most valuable exec-utives, technical experts, and front-line

supervisors,Aad, of course, a human capital audit

can determine from the outsetwheth€rit is possibie to shape a new corporateculture, and how to go about it. Tradi-tional due diligenct is often compared toa chance to "kick the tires." Since topmadagement must also decide wherethey want to take the new vehide, a comprehensive human capital audit can helpthem chart a road map that the entirenew comPany can follow. I

Commit to the cultural integration...or go!ln June 19g7,3Com Corp. and U.S. RoboticsCorp. completed a merger agreement thatwas, atthe time,the second-largest corp0-rate merger in the history oi hiqhtechn0l0'gy. As presidentand chieioperatinq otficerofU.S. Bobotics, John McCarmey helped nego-tjate that dealand continued to workas pres-ident ofrhe ClientAccess Blsiness Unit of3com untillVarch l998.ln a recent interview,he discussedthe impoftance and challeiqeof creatinq a new corporate culture in inte-gratinq n/vo cornpanies-

0. Tell us about whar you saw when U.S.nobolics merged with 3com.

Ithinkthat in mostlarqe mergers,the inte-gration process is extremelydifijcuhand oftenlrnderestima&d, even by fte mosltalented ex-ecutives. Bridging the diiferences in culturebetween two organizanons is noteasily done.Thats afair description of wtrat we iaced with3Comandll.S.R0botics.lntheyearf0llowinothe merqer, mycompanystrudqled in partbecause ofexternalfactors inthe market. butin partbecauseolthe challenqes posed bycuitura inteqration. These problems occurredever though lbelievedthen and continuetobelieve nowthatthe underlyinq strategy of the

0. Whal made it dilricultro bridge the two

Th e t',!o companies were very diffe rent. lJ.S.Boboticswas a more aqgressive, rambunc-tious, fast-moving organization thatwas ex-tremely cornpetitive inside and outside olthe

c0mpany. We were very market'driven. 3com,0n the other hand. was a m0re deliberate,planning' and process'oriented, technol0-

O.oidthose difierencBs surp s€ you?

No. Both sideswere aware ofthe culture dif-ferences. Each saw inthe o rerelementsthatitwould like t0 emulate. We thought of mov-instoward a new corporaie culturethat re-flecledthe best of both cultures

0. Howmuch limewas spent in prsparingro bridg. those cullural differcnces?

ln hlndsight, iot nearly enough. lt was anissue thatwas addressed, but not subjectedto nearlythe degree of scrutinythattechnol-oqy, market, and financialissues were. Frcmmy experience in merqers and acquisitions,thats quitetypical.

O. What were the resulls ol lhat insulficisnt

The most directmanifestationwasthat near-ly all ofthe seni0r U.S. Bobotics team left inthe firstyear afterthe merger Some ofthosedepal1ures were a natural outgroMh 0f alarge merger, of course,8ut s0me ofthemwerc a directresultof people notenioyjngft enew environment. ltt notthat it was neces-sarily better or worse. lt simply did notmatchtheir personalities and business attitudes.

0. Wtat do you nowwish you had done dil-lerenlly?

We would have been able to rnove faster andavoid a diff iculttransition if the leadership hadspent more time during the negotiations andimmediately atterward in definlng the ele-ments ofwhatwe wanted the new.uiixre tobe-andiien defininqthe steps to achievethat cuhure.lnow rcalizethatin any biq merg-er,focusing on the common culture js as irn-portant as f ocusing on product integration,strategy, or technoloqy.

O. How impofanl is leaderchip in thal

Its essential. Fromthe outse!the collectiveleadership has to show 6 united lrontand atenacious commitmentto that. IVIerger inte-gration is a real leadership chailenge. and itneed s th at commitm eit. Looking back,lbe-lieve itis essentialthat members oithe seniormanaqementteam who donl share a com-mitmentto the new cultural outcone simpLy

O.Whal advicewouldyou givelo executivesnowinvolved in. mergeroron the brink of

ldentiiylhe key elements 0ithe culture vouwant the companyt0 have. understand thetypes of behavioryou'llneed to createthatculture. And then be absolutely ruthlessab0ut ensuring that those behaviors aread0pted. What I learned is thatthe behaviorand attitudeofmanagersare much more im-portant in determining how a company isgoinq to behave than deciding which per'

6 DIRECTORS & BOAROS