The Hindu Business Line : What does a company do when it suspects someone is leaking its boardroom secrets?

Story so far: A visit to the neighbourhood bookshop has me pondering about how mergers and acquisitions can turn a company's culture on its head. Can a culture clash between the acquirer and the target company account for many failures, I wonder.

Episode 146

How to manage the clash of cultures after an M&A deal? Can it ever happen that the `better' culture wins though it be of the taken over company? Or is it always that the acquirer's culture prevails? These are some of the questions I'd left you with last week.

"Dear Swati, each company has a culture, a particular way of doing things. For instance, in the hospitality industry, culture of a company shows in the way its staff receive people, greet, and so on. In many organisations personnel are referred to by their initials. In some places, it is mandatory that Mr, Sir, Ms, etc be used; else, it is considered impolite and rude," writes Anil Kumar Pillai, Faculty, School of Communication & Management Studies, Kochi.

"Whenever an organisation acquires another, it takes time to change its culture. The top management, depending on its ability to impact the employees, defines the culture. This prescription is followed and gradually becomes a way of life in the organisation. There are instances in Indian industry where employees working in a professional organisation feel insecure when, say, a family-managed organisation acquires it."

Perhaps, vice versa too may be true. "Nowadays we have the top executives of the acquirer company telling the employees of the acquired company that all's well and that status quo would prevail. But the reality turns out to be something else. The purpose is to retain the key employees of the acquired organisation till the acquirer company's personnel change the culture through the existing in-charges."

What a strategy! "We know of organisations where all personnel wear the same uniform irrespective of their hierarchy. We also have organisations where there is a different toilet for employees in the managerial cadre. There are also instances where directors try to infuse a cultural change by hiring from outside the industry to encourage innovation and the so-called out-of-the-box thinking." Thanks Anil.

"Dear Swati, I feel calling one culture `better' than the other would be like comparing one form of medicine to another," mails in Sriram Kannan. "It is the people in the two organisation who determine which culture would prevail. This is like the cure that the medicine gives to the patient; whether it is allopathy or homeopathy does not matter." Interesting analogy.

"Today's business scene is replete with major M&A deals which involved companies operating in contrasting culture. Tata Tea's acquisition of Tetley, Videocon's acquisition of Thomson and AB Electrolux business are just some of the instances where companies, considered dormant and `rustic' in home country, took the plunge and created international waves by seamlessly merging the interests of conflicting cultures. Regarding the situation highlighted in the episode, it is true that shop assistants were really helpful in guiding and identifying book enthusiasts to their `knowledge' destination. However, what one should not forget is that during those times, public access to information about new book releases or reviews, and interaction with authors or publishers were a rarity." True, Sriram.

"The scene is not the same in today's situation. Internet book reviews, online book launches, gift passes to book launches, special lunch with author/publisher are some of the goodies that today's buyers are pampered with. With the details of every topic available at the click of the mouse, it is natural that today's book houses do not find it cost effective to employ helpers in their premises." But Sriram, I'd say that with increasing use of technology, importance of personal touch too increases.

"Dear Swati garu, when cultures vary from organisation to organisation, it is evident that the culture of the merged/acquired organisation is bound to transform into that of acquiring one," says P. V. Sudhakar Rao, Deputy Manager, SBI, Ongole. "Organisational culture is the outcome of combination of organisational structure, delegation of powers, rules and regulations, systems and procedures, surveillance, follow-up, training, and so on. As far as human culture is concerned, there is very little scope for its manifestation within the organisational framework." Fine analysis, Sudhakar.

"Dear Swati, first of all I would like to congratulate you for bringing up such a burning issue," writes Deepika Rani, a management student. "The merger bug has bitten private and public sector organisations of all sizes. It seems a day doesn't go by without an announcement in the news of one high-profile amalgamation or another. Culture and people issues have been cited as the most common factors for M&A failure in various studies. Research has shown that 70 per cent of deals fail to achieve their anticipated synergies, and 50 per cent suffer an overall drop-off in productivity in the first 4-8 months." Alarming numbers! "The first step in managing a cultural collision is to understand the current culture of both organisations. A cultural résumé should be created to outline the current cultural state of both businesses. The acquirer should seek to identify commonalties and differences in such areas as partner/target company culture, leadership models, organisation structure, performance management systems and workforce development approaches." Useful prescription, Deepika.

"Integration is all fine and good, but to become a market leader after the merger requires unity of strengths. Understanding how each potential partner thinks and acts is critical not only to the transition phase, but more importantly, to the combination phase and the achievement of long lasting results," says Deepika.

"If the management is right, and financial institutions have trust in them we can really turn around companies," writes Surya Chaitanya, presumably about an earlier episode on sick units. "I don't really find it as investing good money in bad company, or investing in a dead horse. In most of the cases, the companies turned sick because of poor strategies and inept marketing research."

Anand A. Wadadekar alerts me about www.eminds.in, "the smartest network of qualified professionals like CAs, CSs, CWAs and corporate lawyers who want to get together with one common objective, that is, learning unlimited." Some impressive statistics about the portal are: "Average visits per month: 8,000; average hits per month: 4.35 lakh; total members: 2,550; new members added each month: 300-350." All the best!

*********

Leaks of boardroom secrets

Recent weeks have been unusually bad for the company, at least going by whatever news trickled to us. For instance, in a few of our strongholds, we lost market-share though in decimal percentage points. And, some of our well-planned campaigns didn't kick off as expected, because our rivals upstaged us by a whisker.

So, it was a pensive boss whom I met one afternoon. He was evidently worried about the way things were. "Somebody is leaking boardroom secrets to our rivals!" he said. And that reminded of me what had happened not long ago in Hewlett-Packard. "What do we do, sir? Investigate?" I asked.

He shook his head. "Investigation can raise new suspicions, and we'll be antagonising many people in the process. Don't forget what happened to Patricia Dunn in HP." I nodded. The resilient Chairwoman had to quit only days ago. All because the private investigators she had engaged let the company down by adopting questionable methods of probing. "What is the solution then?" I asked. He let the poser hang, and went on to discuss other topics, such as the training program for the freshly-recruited CAs and so on.

Yet, when returning to my desk, the thought that continued to linger in my mind was this: What does a company do when it suspects that someone is leaking out its secrets? Send in your thoughts by Friday.

Swati_CA@hotmail.com

http://Swati-CA.blogspot.com

More Stories on : Economic Offences | Swati CA

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Measuring post-employment benefit obligation under AS-15

A closer look at terminal handling charges?

Fundamentals of technical analysis

Treat colleagues with respect

Govt plan to set up IIITs

1 lakh rural computer kiosks planned

Just Do IT

Is money paid on compassionate grounds tax-exempt?

What does a company do when it suspects someone is leaking its boardroom secrets?

Redefine achievement

Truth in 5 minutes or less

Time is `gold dust'