BST HR Support / Post-merger integration
How a multinational water technology company overcame the cross-cultural differences following a local acquisition and turned this into a success. To keep this company anonymous we’ll name it ‘The Company’)
‘The Company’ is a leading water technology company with global operations. Its current business strategy is to extend these operations throughout different markets. As part of this strategy, ‘The Company’ Corporation acquired the small Turkish water treatment company MiM Su Teknolojileri in February 2013. This company operated in the Turkish market.
Takeovers such as this are not without risks. There are enormous cultural and process-based differences between a globally operating company and a local company. To contend with such problems, one has to find the best of both worlds: blending the organizational expertise and processes of the global company with the local strength and skills of the newly-acquired company. This business case is a typical example of the challenges we often come up against with takeovers of this kind.
To set the post-merger integration on the right path, ‘The Company’ Corporation requested Business Support Turkey (BST) to put into effect a package of HR Support Services.
‘The Company’ is a manufacturing company involved in the production of water heating equipment for the domestic and industrial markets. It is the largest manufacturer and supplier of water heaters in North America. The company has 24 locations worldwide, with production facilities in North America, China and the Netherlands. Its business strategy is to become the world leader in innovative and energy-efficient water technology solutions geared to comfort and convenience.
‘The Company’ saw great potential in the Turkish water treatment sector, hence its takeover of the successful Turkish company, MIM Su Teknolojileri Ltd.
What can go wrong?
There is no formula for success, which works in the same way on a global level. Both these companies were successful despite their cultural differences and the size of their operations. In the takeover process, it was important to respect and benefit from the cultural differences and to implement the thorough work processes of ‘The Company’ in the new Turkish business location. Being aware of these cultural differences and tackling these challenges was crucial to this success.
Corporate cultures in the West tend to be more individualistic, being focused on success and with small hierarchical differences. In Turkey, the corporate culture is virtually the converse of this, with emphasis on the collective, on relationships and on success, not to mention the major hierarchical differences that pertain.
What can go amiss?
These cultural differences are crucial factors when implementing HR policy. The difference in culture between the parent company in the West and the newly acquired business in Turkey could lead in time to tensions, misunderstandings, frustration and discord. In particular, key staff at the Turkish business location might turn their backs on the company in the face of what they may consider as the new parent company’s over abrupt and rigorous organizational processes.
A new departure
When BST became involved in the post-merger integration project, we started out with conducting an analysis of the situation. Heretofore, the newly acquired company —now called ‘The Company’ Turkey — had been managed by word of mouth. Now it was taken over by a globally operating company that operates according to very detailed and elaborate procedures and guidelines, which include a comprehensive employee handbook and a list of ethical codes of conduct. Applying these directly to the Turkish company just would not work. Nevertheless, they had become a subsidiary of the global operation and therefore had to find a way of modeling their business operations on the working methods of this multinational company.
An extensive package of HR modules
To avoid these risks, the BST team put through an extensive package of HR modules in respect of the post-merger integration with the purpose of thoroughly tackling these cultural differences and risks. The preparation of these modules involved much work, including the drafting and modification of job descriptions, job-specific competence lists, employment contracts, personnel files, salary schemes, fringe benefits, and so on. They had to be in line with the procedures of the company and meet the provisions of Turkish law.
We relied on the Assessment Centre Method when devising the Performance and Talent Management module. We were able to identify the current level of competencies via a series of interviews, role-play, in-basket exercises, presentations and group exercises. We then determined which competencies each manager still needed to improve upon in order to enable them to deliver on the commitments that are required by a global company. We translated this into personal development plans and each manager was given feedback on the results of the assessments on a one-to-one basis.
Without exception, the response we found from staff was positive and everyone was more than willing to put in the commitment that was necessary. As a result, the value of the local talent, i.e. the people who understand the company, its customers and the sector well and who remain very loyal to their company, was placed on a very solid footing.
‘The Company’’s objective is to grow in Turkey as well as globally. In this context, it is important to be in a position to offer staff conditions that are competitive while at the same time making it possible to attract a new, high-quality workforce. BST carried out a detailed analysis of the remuneration packages available on the Turkish labour market and on that basis drew up a salary and fringe benefits scheme, which will allow ‘The Company’ Turkey to compete on the labor market.
We recorded all our findings in an Employees Handbook that is specifically geared to the Turkish market.
Cooperation from top management
Takeovers such as this will fail or succeed depending on the positive input from the top management of the acquired company. They are the people who in the coming years will be charged with implementing the HR systems we have devised and with ensuring that the HR modules continue to be consolidated. We had a very good working relationship with the Turkish management and have every confidence that they will bring this post-merger integration to fruition.
BST’s programme of action comprised of the following:
▪ Analysis of the current HR policy and management processes.
▪ Job descriptions for each position.
▪ Preparation of competence lists for each middle manager – what is expected of them in the global company?
▪ Realization of Assessment Centre Method so as to identify the competencies of the six middle managers.
▪ Drafting of personal development plan for middle management.
▪ Analysis of the training requirements for the six middle managers and other staff together with the preparation of an annual development plan.
In summary, we paid heed to the following in particular:
▪ The requirements of a small company versus those of a globally operating
▪ The guidelines of a multinational company. We adapted these to suit a Turkish company.
▪ The Turkish regulatory framework
▪ Consolidating and reinforcing the motivation and talent of the local workforce
The BST team performed much of this work in 2013 and 2014.