Wednesday, February 18, 2009

In the wake of the deal

We learned this week that Oracle is on a buying spree, taking advantage of the weak economy to pick up a few bargains. It’s sort of like what we’d do in terms of upgrading our housing situation right now – if only we had the cash on hand to do it.
      Oracle does have a lot of cash on hand - $7.4 billion, to be precise. So CEO Larry Ellison has gone shopping, beefing up his company’s product and service offering by buying 10 different companies in the past 12 months.
      While safeguarding its future bottom line with a broader selection of offerings, the company’s near-term challenges are happening below Ellison’s radar screen: the actual integration of these often disparate companies and cultures into the behemoth that Oracle has become. A telling comment by one employee, quoted in the Wall Street Journal (2/17/09), points out the nub of this problem.

Some former employees … say the acquisitions spawned confusion in-house as people got thrown together on new projects. ‘My manager would put me on projects that are totally irrelevant for my skill set,’ said one former consultant who joined Oracle when it bought PeopleSoft Inc. in 2004. The changes became so frequent, he says, he eventually stopped trying to remember the names of groups he was assigned to.”

Merging one company into another is a big mountain to climb, all the more difficult when the acquired company is large, with a lot of employees in a variety of operations, located in numerous places around the world.
      The big numbers guys – people like Larry Ellison and his peers – can seal the deal and head off looking for the next bargain. In their wake are a lot of people who have to make the latest deal work, sewing together the mismatched seams that occur at many points of contact.
      For instance, noses get out of joint when people in the acquired company lose the cherished titles they had earned in their formerly independent firm. Maybe a “senior vice president” at XYZ Software is now a “director” in his new company, one of hundreds with that title. Sure, his salary and benefits stayed the same, but he lost his corner office and the perks and respect that went with being an SVP. Ruffled feathers like that need to be smoothed, lest the birds fly away.
      At its heart, the integration is all about hundreds of important tasks like that – the dotting of i’s and crossing of t’s – that consume thousands of man-hours in weaving together two organizations to assure that the original intent of the acquisition is realized.
      Integrations aren’t completed when the deal closes. That’s just the starting point. And typically, as much as one, two or even three years later, there can still be a lot of loose ends.
      Individuals at some foreign operations might still be operating under “temporary” contracts and not officially part of their new company. I’ve seen cases where local labor laws prevent the new company from even issuing new business cards until all the laws have been satisfied to enable these people to become official employees of the acquiring company.
      The HR people, meanwhile, tear their hair out over these complications, trying to sort out the nuances and keep everyone happy and productive.
      The IT operation is another matter. Among other tasks, they have to align two networks to assure that people on both sides of the integration can readily communicate. Even in a company like Oracle, it likely takes months before employees in the acquired firms have full access to internal web sites, Shareware and assorted applications.
      And business can’t stand still while these details around payroll, benefits and IT access are sorted out. People on both sides of the integration are expected to be working together from Day 1, creating, selling and servicing products, and keeping customers happy.
      In all this, communication plays an important though limited role. The temptation is to fly at the 20,000-foot level, looking for the common cultural links that help one group better understand and merge with the other. We can develop narratives that distill the essence of the acquisition strategy that brought them together, and use that to help shape internal messages and reinforce the core themes. That’s an important part of the process.
      But at the end of the day, the most valuable communications are those that establish broad internal awareness and understanding of the challenges everyone is facing, while providing timelines to give people a sense that there is light at the end of the tunnel; communications that anticipate and answer people’s burning questions, the open issues that keep them awake at night. That’s what matters most.