MANAGING THE POST-ACQUISITION INTEGRATION PROCESS: HOW THE HUMAN INTEGRATION AND TASK INTEGRATION PROCESSES INTERACT TO FOSTER VALUE CREATION*

The paper of Birkinshaw, Bresman and Håkanson argue that the underlying processes of a succesful acquistition are task integration and human integration. An effective and successful integration is achieved by separating these two sub-process into a two-phase process.

In phase one that lasts around 5 to 7 years, human integration usually proceeds smoothly and leads to cultural convergence and mutual respect. But task integration is more difficult to achieve and only a satisfactory, rather than an optimal solution will be achieved

In phase two it is important to focus on task integration that can be built on the success of the human integration that had been achieved in phase one.

The paper asks the question: what is the process through which an acquisition delivers on the value creation sought by the acquiring firm.

Human Integration: generating satisfaction, and ultimately shared identity, among employees from both companies. Creation of positive attitudes towards the integration among employees on both sides

Task integration: means value creation as the objective of the acquisition, measured in terms of transfers of capabilities and resources sharing.--> Identification and realization of operational synergies

These two should be seen as two distinct process: but they are not independent of each other as e.g. the aspects of human integration like enhanced employee satisfaction, are likely to make capability transfer and resources sharing easier and task integration in turn, is likely to further cause employee satisfaction and shared identity.

Be careful: (happened also in Nordea case): * that task integration is not achieved at the expense of human integration.
Bank example: the merging of the two banks quickly created an ugly environment in which employees characterized their new colleagues as an ‘invading enemy’. Organizational commitment dropped and many employees voluntarily left. This is a big danger as the competitive firms just wait to headhunt the top employees. This happened in the case of the Copenhagen Center

* Or that human integration moving ahead of task integration: alleviate concerns by carefully communicating and confirming what will not change to the managers and employees of the acquired firm’ before any attempts are made to combine the two organizations.
For the process to be entirely successful both task and human integration have to be effective, but they can occur at different speeds.

The paper proposes that an eventual acquisition success depends on the two parallel processes of task integration and human integration.

Findings:

Task Integration:
What actions are taken over time to manage the task integration process, and what is their impact on the realization of operational synergies?
In all three cases the acquiring company wants to integrate the acquired company, which lets you expect to see a series of actons geared towards the realization of operational synergies.
Managers clearly understood the need to achieve operational synergies, but in none of the cases were these synergies delivered quickly.
Analysis of common threads and likely reasons why operational synergies are not quickly achieved:

Eka Nobel:

* Decentralized approach to R&D to retain personnel and smooth the integration process. The units in question had all requested technical centre status, so Wedlund had agreed, rather than suffer the consequences of knowledgeable people leaving. However, he also explicitly acknowledged that the decentralized configuration would be harder to manage effectively. * Different integrating mechanisms (check if they have integrating mechanism in Nordea Case) but this can have as a consequence that the level of integration is not sufficient.

* Launch manager * Increased the number of technical information seminars, training classes, and international project teams.

Alfa Laval it moved quickly to integrate Sharples sales an marketing operations around the world. But R&D was splitted among three units Warminster, Kimberly and Copenhagen. There was evidence that there was relatively limited interac- tion between the three units. Problem: too weak in the beginning to decide about product rationalizations’ between the three units, with the result that there was significant duplication.

Of Key importance is: * Integration mechanism (common systems and reporting standards) * Clear leadership * Enough communcation
In the second phase started to put in place a variety of systems and procedures designed to build bridges between Warminster, Copenhagen, Camberly and the market support units around the world. His goal of building a ‘virtual R&D organization’ spanning five countries was beginning to take shape by 1996.

Integration of Taylor Instruments into ABB: * Used large number of integrating mechanisms, international task forces, use of common standards, quarterly development meetings, video conference. * By one estimate, many engineers spent 10 per cent of their time travelling between Västerås and Rochester in order to build up strong personal relationships with their counterparts in the other site Same as for Nordea. * In our interpretation, there was an acceptance in principle that integrated development was appropriate, but a reluctance in practice to make the changes or sacrifices necessary to ensure its realization (same as for Phillips case: everybody talks about change, but nobody wants to behave)

After the first phase there is often a learning that is made better in the second phase
Common themes from the three cases studied: * Task integration was not achieved in the extent that was planned at the time if acquisition, * The decision not to push integration harder was made with good reason in all three case a different. See paper
1 Implication: the greater the problems encountered during the integration process, the lower the level of task integration sought in the medium term
Important Conclusions: * Clear allocation of responsibilities in the early stages, to ensure that operational efficiency was achieved and to avoid voluntary departure of key personal * There is a second phase of task integration that begins 3 to five years after the initial acquisition. There is an evolution over time towards greater task integration. The trigger for the second phase of integration is linked to the limitations of the first phase.
2 Implication: Dissatisfaction with a limited level of task integration following an acquisition will in the medium to long term (3-5 years) lead to a renewed efforts to achieve full task integration.

task integration will be facilitated in part by the extend to which the human integration process had been completed.

Human Integration:
‘what actions are taken over time to manage the human integration process, and what is their impact on employee satisfaction

Eka Nobel:
The key features were: * rapid communication of information about the acquisition as soon as it was announced; * convening of meetings to answer questions and allay fears; * quick decisions about what would happen to the various units; * international team meetings where both sides got to know one another.

best human integration

Alfa Laval * Problems with the human integration process, because of the hostile starting conditions (the good for Nordea that the merger was not out a hostile takeover) * Several ex-Sharples respondents commented that there was ‘not enough commu- nication’ either from Alfa Laval management or from the Copenhagen unit * Copenhagen respondents, in turn, felt that they had been underinformed from the start. * One commented that the acquisition was ‘a complete surprise’ when it was announced. * Both companies had limited respect for each others capabilities.

Alfa Laval case indicated a human integration process that was not entirely effective, and which in our opinion was not complete even in 1996. The Camberly unit, in particular, still saw itself in large part as ‘Sharples, UK’. The impression we gained on visiting the site was of an organization that was very proud of its heritage, and one that had not changed significantly since the acqui- sition.[15] * Most of the management team, and many employees, had over 20 years of service, and this was clearly one cause of the inertia in the operation
By contrast, Warminster had suffered a high level of voluntary personnel loss throughout the period of study, such that almost all R&D and engineering staff from the Sharples days had subsequently left.
ABB
* Shows what is important to make a successful acquisition: * Quickly assign responsibilities to different units. communication strategy, likewise, was carefully managed, and widely regarded as effective. * One Key area where ABB was not completely effective was in managing the concerns of employees (engineers) that expressed doubts about the long-term future of their operation (This could be also a problem of Nordea employees) * Such an uncertainty lead employees to leave the company, thus losing important and skilled people.
In this case assessment of their own situation an respect to employees of the other company improves with time
In this case no cultural convergence: this indicates a rather lower level of human integration than in the other cases.

Check cultural convergence bei den ersten beiden:

Conclusion from the cases: 1. the human integration process clearly takes a long time (6 to 7 years) 2. Human integration process is extremely difficult to master:
People (in acquired companies) expect you to give them unreasonably high levels of assurance about their future that you could not give to any group of employees. 3. Obsessive concern with employee satisfaction maybe misplaced. human integration and thus employee satisfaction is only a means of achieving synergies and/or superior operating performance * Sometimes some dissatisfaction among employees is acceptable of the task integration process requires it.

4. There may be organizational advantages to maintaining a certain level of tension and fostering cultural heterogeneity as there will be a continuing rivalry between different units and locations, which can be in part constructive.

Overall Conclusions
1) task integration process was slower than anticipated, and typically undertaken in a manner that first achieved acceptable performance in the individual operating units before any serious attempts were made to integrate across them.
This observed behavior is in part a function of * bounded rationality: individuals responsible for each unit were more concerned about their own unit’s performance than about the combined opera- tions of the whole * risk aversion: task integration process that was forced too quickly could potentially fail badly, e.g. through unclear responsibilities, unwanted resignations etc.
The relationship between the task integration process and acquisition success is mediated by the current performance level of the individual operating units. A very low level of performance in the individual operating units will limit the effectiveness of task integration as a driver of acquisition success. Solution first maximize the performance of individual units, second integrate those businesses
2) human integration process appears to facilitate the effectiveness of the task integration process. Thus, if the task integration process is pursued before human integration has begun, there is a high likelihood of acquisition problems, because the individuals on each side do not know one another, and because there is a high level of suspicion about the motives of the acquirer’s management The relationship between the task integration process and acquisition success is mediated by the level of human integration already in place. Thus, a very low level of human integration will limit the effectiveness of task integration as a driver of acquisition success.
Acquisition success is a function of both human and task integration
In theory it may be optimal that both happen at the same time and the same level