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People, The Real Tree

Indian corporates master the game of takeovers. But integrating people? That's tough business.

People, The Real Tree
outlookindia.com
-0001-11-30T00:00:00+0553
Earlier this year, when the Aditya Birla Group acquired Canadian aluminium-maker Novelis Inc, it got more than a ranking in the Fortune Global 500. Almost overnight, it also acquired over 12,800 people from five different continents who found it difficult to pronounce 'Aditya Birla', let alone work for an Indian conglomerate. It didn't help much that the Indian employees knew neither Spanish nor German.

As India Inc's appetite for takeovers, abroad or at home, grows only larger, it is coming to realise that not just financial and technological strengths and resources, it's people and culture that can make or mar business marriages. Kumarmangalam Birla, chairman, Aditya Birla Group, speaks for the entire industry when he says, "There is a whole new gamut of challenges that keeps arising—the magnitude and scale of which we have not dealt with in the past."

According to financial advisors Grant Thornton, India, there were 213 mergers and acquisitions (M&AS) in the first four months of 2007, with a total value of $42.92 billion. Of these, 103 were domestic deals worth $1.35 billion. So, be it Tata Steel buying Corus, Wipro Technologies buying Quantech Global Services USA, Bilt buying Malaysian Pulp & Paper, Jindal Steel & Power buying an iron ore mine in Bolivia, the need to handle multicultural teams is forcing HR managers across companies to constantly reinvent HR portfolios and exercises in sync with the companies and territories they are stepping foot in.

It is unfortunate, says Adil Malia, president, HR, Essar Group, that softer issues like people and culture take a backseat during M&AS. "When one company is taken over, there is a sense of the vanquished and the victor. Unless processes are put in place to make them feel on an equal footing, acquisitions cannot succeed," says Malia, who has led acquisitions like those of US-based companies Global Vantedge, Minnesota Steel, as well as the Ontario (Canada)-based Algoma Steel. Typically, says Santhosh Babu, MD, Training Alternatives, an HR firm, "the problems employees face include a feeling of loss as teams are split and merged into new ones. Lack of trust in new team members and unclear roles breed uncertainty and negativity".

Abizer Diwanji, transaction advisor, KPMG, cites the instance of a large overseas acquisition where the promoters tried to run the business without having any knowledge of the geography or the product. "The full management of the acquired company quit after their lock-in period. Consequently, customers and markets were lost and sales did not pick up as the previous employees had enjoyed considerable goodwill in the market," he says. In another case of a bank acquisition in India, the acquired business was run as an isolated unit with no effort towards integration of payscales. As expected, the bank is today worse off with the acquisition.

Business marriages, as Harsh Vardhan, partner-director in Boston Consulting Group, puts it, are like hamburgers with the three layers representing the cultural dichotomies that come to bear influence on future operations. And to meet this challenge, corporates are investing more resources in communicating their vision to the employees of the acquired companies and make them comfortable. Says Naresh Goyal, chairman, Jet Airways, which took over Sahara, "Jet is now equipped with a very motivated workforce. People who were working for Sahara know that we treat our people well as we make them believe that it is their company. This has prepared us for one of the biggest risks of integration—a high attrition rate." The United Breweries Group, which has grown primarily through the acquisition route (its latest being Scotland's Whyte & Mackay), boosts spirits the way it knows best: over beer. Says its president and CFO A.K. Ravi Nedungadi, "Attending social dos and transparency have been some of our tools for bridging the divide."

Mahindra & Mahindra made it a conscious policy not to impose their culture, whether the acquisition is overseas or in India. They are not averse, though, to a bit of ceremony on occasion. When they took over Valtra, a $3.2 billion Finn truck company, the former company owner was asked to bless the Indian side by putting a 'tika' on the forehead of the negotiating team leader Hemant Luthra, president, Mahindra Systech, to build trust before the deal was closed.

After a takeover, Mahindra ensures that workers in merged companies don't feel alienated. Says their president, HR and corporate affairs, Rajeev Dubey, "Even as we preserve core values of the group like innovation, quality and corporate governance, we give enough leeway for the core values of the acquired company to flourish. In Germany, the top brass is German; we have sent one or two technical experts. In China, we sent our people because of the complexities in language and behavioural patterns. We believe a local person can understand the region's sensitivities better."

For the Tatas, it is essential that the chemistry is right between the company that is sought to be acquired and the company acquiring it. Says Jamshed Irani, director, Tata Sons Ltd, "We wouldn't join with any company abroad that does not match up to our cultural and ethical standards. We obviously have a knowledge of would-be partners, their practices and how they operate in the world of business. We know what fits our model of values."

So, when Tata Steel acquired Singapore-based NatSteel, it debated upon and merged the code of conduct of the two companies to arrive at what was acceptable behaviour. Faced with the less favourable disposition of the Daewoo employees in the buyout of South Korea's Daewoo Trucks, the Tatas conducted an image-building exercise where communication material was in Korean. Initiatives were also taken to understand Korean values along with extensive training for Indian teams on Korean language, philosophy and labour practices.

Health products major Dabur had to do several balancing manoeuvres when it acquired Balsara in 2005. First, it extended its mediclaim policy to Balsara employees who did not have any such facility. Then, Balsara managers who had to give up their fancy titles in sync with Dabur practices were transferred to the US and Bangladesh, where they have their overseas operations as country managers. "This considerably enhanced Dabur's image as an employer," says Dabur HR head A. Sudhakar.

Marriages between individuals may be made in heaven, but not the ones in business. These earthly unions require a lot more groundwork to make the partners live happily ever after.
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