Alexander Hughes PAGES 2-3 > KEVIN DUFFY Outsourcing Trends in Eastern EXECUTIVE SEARCH CONSULTANTS PAGES 3-4 > FONS TROMPENAARS The Culture Shock of Mergers and Acquisitions European Newsletter PAGES 5-6 > INTERVIEW WITH JOHN ALLAN Chief Executive of DHL

SEARCHSEARCH # 29 Successful Multi-cultural Integration – Science, Art or Craft?

s the speed of communication and ease of of multi-culturalism did not provide the results for travel increases, the world seems to get which American parent companies were hoping. A smaller and businesses need to satisfy This has been particularly apparent in Europe where demand on a global basis. This has resulted in many Americans still see Europe as one large increasing numbers of cross-border mergers and country. Today, it is Europe that is leading the drive acquisitions, reported almost weekly in to global expansion, and Europeans who are seen to the press. We read about the failures where be “corporately wise” with a cosmopolitan integration doesn’t work and what went wrong. approach to business, and who are successful at However, companies where integration has been developing multi-cultural businesses. successful quickly become known as a global success story. The key to success for a multinational company has to be “think global, act local”. Any supplier The driving need for multinational and global has to have a team capability of making companies has come about because relationships at a strategic level in big global and some aspects of customer service have moved companies and at the same time for providing a to lower cost economies in Eastern Europe and Asia; top quality service at the operating level in any graduates there are happy to take jobs previously number of countries. The same principle applies in located in the West at a far lower cost than the less a multi-cultural merger. well educated workers in Europe and . This issue of Search features an interview with John Allan, the Chief Executive of DHL, ’s In the past, the USA led the way with global Logistics Division, which includes the acquisition companies out to conquer the world. In many last year of Exel. ••• instances, a complete lack of understanding ••• As the article shows, the Logistics industry is traditionally locally based. Deutsche Post and Exel have grown through a series of mergers and takeovers to become multinational and are well practiced at the process of integration and DHL is now a successful global company. John Allan emphasises the need to VIVIENNE PACKER think globally in the interview. EDITOR OF THIS EDITION OF SEARCH, Success in any multi-cultural integra- IS THE MANAGING CONSULTANT OF ALEXANDER HUGHES UK, tion depends 100% on the BASED IN LONDON. people, but communication is key - make sure good news travels fast. People must be empowered locally All Rights Reserved for All the Photographs All Rights Reserved for and feel valued, and decisions about keeping or not keeping key personnel must be made very quickly to mini- mise uncertainty. Integration must be written about retaining wanted talent As the interview with John Allan seen as short term with the new com- post-merger. In multi-cultural mergers, demonstrates, practice makes perfect in a pany moving on as soon as possible successful international managers multi-cultural merger. A globally diverse to seeking new opportunities. will quickly be sought out by other management team is key to success. companies. For Deutsche Post/DHL, Any company working successfully their experience of mergers and In conclusion, how to make multi-cul- internationally will have a multi- acquisitions over the years has tural integration work? It’s a craft – the cultural top management team. enabled them to become skilled at craft of picking the right team, sending Depending on the focus of the the process of motivating and the right message, and building the business, the language of the com- retaining the right people. new global organisational culture. Ⅲ pany is very important. Deutsche Post, as a German company, chose English as its corporate language SUGGESTED READING… which has made the integration of • The Human Side of Mergers and Acquisitions: Managing Collisions Between DHL and Exel easier. But business People, Cultures, and Organizations by Anthony F. Buono, James L. Bowditch managers must understand the culture (BEARD BOOKS MARCH 2003) of their customers. Again, they must • Successful Mergers, Acquisitions and Strategic Alliances: How to Bridge “think global, act local” but at the Corporate Cultures same time have the ability and expe- by Irene Rodgers, Charles Gancel, Marc Raynauld, Marc Raynaud rience to input to the global company. (MCGRAW-HILL COMPANIES; 1ST EDITION JUNE 15, 2002) • Riding the Waves of Culture, Understanding Cultural Diversity in Business With an unusual approach, by Fons Trompenaars (NICHOLAS BREALEY 1993) Professor Fons Trompenaars has focussed on the culture shock of mer- • Building Cross-Cultural Competence by Fons Trompenaars gers and acquisitions to help indivi- (JOHN WILEY, 2000) duals get through what is a very diffi- • cult time. He has applied the four 21 Leaders for the 21st Century by Fons Trompenaars phases of culture shock to the takeo- (JOHN WILEY AND MCGRAW HILL, 2001) ver process. If you follow the right path, prepare well for the new cul- ture, focus on the positive and check and countercheck the worlds of Alexander Hughes employees and management, the IS AN EXECUTIVE SEARCH FIRM DEDICATED TO HELPING YOU ACQUIRE AND RETAIN THE merger of cultures has a greater VITAL HUMAN CAPITAL YOU NEED TO ACHIEVE YOUR STRATEGIC BUSINESS GOALS. ■ ■ chance of success. Much has been Based in 23 European countries Headquarters in Paris, France ■ 110 Executive Search Consultants ■ 50 Researchers 2 The Culture Shock of Mergers and Acquisitions

FONS TROMPENAARS is world renown for his work as consultant, trainer, motivational speaker and author of various books on the subject of culture and business. As founder and director of Trompenaars Hampden-Turner, an intercultural management firm, he has spent over 20 years helping Fortune 500 leaders and professionals manage and solve their business and cultural dilemmas to increase global effectiveness and performance, particularly in the areas of globali- zation, mergers and acquisition, HR and leader- ship development.

Listed in 2005 as one of the world's most influen- tial, living, management thinkers, he has been awarded the International Professional Practice Area Research Award by the American Society for FONS TROMPENAARS Training and Development (ASTD).

he concept of “culture of excitement begins while preparing partners hits home and the honey- shock” was introduced in for what is to come, and the first moon is over. If you read the T1958 in psychology to des- weeks of working together are press releases of new mergers and cribe the dislocated feeling you get similar to the feeling of going on acquisitions in the beginning and

ARTICLE when you find yourself in a totally vacation. The climate and food the news clippings a year later this new surrounding. I would describe are different and the feeling of dis- picture is often confirmed. [] it as the psychological and emotio- covery and surprise give a good The second phase was described, nal discomfort that you experience feeling. There is nevertheless an by my former colleague Leonel when you live in a totally strange important difference with a vaca- Brug, as the “Sauerkraut phase’. The cultural environment. Culture tion. When your international assi- positive feelings can switch to a dee- shock often leads to stress related gnment or posting is for a number ply negative feeling. Home becomes symptoms such as sleeplessness, of years, you can not turn back to idealized and the strange environment concentration problems, and even the psychological stability of your is ruthlessly criticized. In a sense, it is own home after three the hankering for sweets from home weeks. In a merger or that you never ate when you were In a merger or acquisition, acquisition, the first three there. The thoughts about a white the first three months bring months also bring with Christmas and the coziness of a New them positive feelings. It is Years’ party at home are heighte- positive feelings. exciting to get to know a ned, instead of the truer images of []new partner and learn wet, grey slush and the ordinary skin irritations. The four phases of from each other. Unfortunately, at glass of beer at a boring house party. culture shock, as initially described some point that vacation feeling Meanwhile, the plumbers in the by Clyde Sargeant, can as well be passes. In business we very often guest country also know this phase applied in business to the takeover notice initial excitement, initiated and thus no longer come on time, process. by short-term profits. But within while the workers never understand The first phase is like the a year or two the reality of what you really want. Ya, then “Honeymoon phase”. The feeling looking into the faces of the home seems so much better. ••• 3 ••• The Sauerkruat phase is the unrealistically. At the end of this time of dealing with the small phase, you reach the point when discomforts in daily life. These you realize that the strangers often being with the partner and don’t pay attention to any of your kids, who complain that they irritations and that you are only can’t tell the difference between torturing yourself. At this point the fine sugar and the salt, and you can let go of some of your What can we learn from the that the local children are unreasonableness, the “Rubber experience of culture shock in secretive or mean and constantly wall” falls back to the way it was mergers and acquisitions? Let’s copy-catting. As soon as the and things become better. first look at how to increase the lovely daughter gets her first ear chance of finding Path A or B? A infection, it’s back to home, In the fourth phase, you can walk first suggestion is to prepare well where the doctors are at least four different paths. Path D is a for the new culture you are going well educated. Usually, the dead path (10 percent), where to. In an acquisition this should breadwinner can at least fall back you keep kicking and screaming be a part of the ‘cultural due on the regular patterns that a in protest and it is better to go diligence’. In addition, in the first similar organizational culture stages of a merger or offer, so their shock is often acquisition you can delayed. Here you can also see A third piece of also focus on the many comparable issues with an culture shock common or shared acquisition. The leaders of the advice is to give a lot of aspects that exist in parties involved concern themsel- attention to the family the two businesses, ves with creating economies of[]instead of the diffe- scale and resolving technical rences that will often management questions, which home. In the M&A situation, the lead to negative consequences. have to do with the increase two parties dive in to the divorce A third piece of culture shock of profits, and their shock and the acquisition or merger is advice is to give lots of attention also comes later. However, the reversed to make sure that the to the family. Three quarters of the majority of those employees losses do not continue. Path C failures can be directly linked to actually executing activities think heads in the direction of cynicism this. In a merger this means conti- back with melancholy to the time (20 percent), you remain annoyed, nually checking and counter- when the systems and values but you push these feelings aside. checking the worlds of manage- were clear and they were not Alcohol and Nicotine become ment and employees. Finally, it so dependent. your best friends and you share makes a difference to know about your black humour over this the stages that the organization The third phase is also known as strange country with the other needs to go through. Sometimes, the “Rubber wall”. The ultimate ‘addicts’. You keep working, when you are in the depths of reaction to stereotypical images but it is not a pleasure. In contrast complex issues, it seems impossi- are found here. Nothing is good to this you can find yourself ble to see even a little bit of light at anymore; even the delicious in choosing Path B and the the end of the tunnel, simply paella doesn’t have enough preservation of your emotional because you are so far in, it is diffi- shrimp in it. Every situation stability (40 percent). Here cult to see the ideal path to the becomes negative and judgments you feel at home in your new ‘enriched adjustment’ that lies overblown or taken completely environment, though you wouldn’t before you. out of proportion. Perceptions can mind going home. Finally, Remember, if you persevere and be bent totally out of shape. This 30 percent choose Path A, take the right path, the new organi- also happens with acquisitions, an ‘enriched adjustment’, where sation will give you more challen- you see that the parties focus on the two parties learn from ges and happiness than the old and the negative characteristics of each other. you will feel at home again. ■ the other and blow these up 4 Most Important Element in Cross-border Mergers? The People by Dominic White

Interview with John Allan, Chief Executive of Deutsche Post's Logistics Division, DHL.

JOHN M ALLAN, CBE is a Member of the Board of Management, Deutsche Post World Net and Chief Executive of DHL’s logistics business, comprising of DHL Exel Supply Chain, DHL Global Forwarding and DHL Freight. His appointment followed the DPWN ] acquisition of Exel plc in December 2005. John Allan joined Ocean Group plc, as Chief Executive, in September 1994 from BET. In May 2000 Ocean Group and Exel (formerly NFC) merged to form Exel plc. A mathematics graduate from Edinburgh University, John Allan started his business career in marketing with Lever Brothers, moving on to Bristol-Myers and Fine Fare. He joined BET in 1985 and was appointed to the main board in 1987, with specific responsibilities as Director of Business Services (Europe) and Group

INTERVIEW JOHN ALLAN Marketing Director. [ So John, tell me a bit about DHL, Deutsche Post's logistics To be an effective local operator, you have to develop division. highly competent local management teams who can John Allan: We serve between 75pc and 80pc of the largest manage locally in local conditions. You can't send out a companies worldwide across most industries. In our team from Germany or England for instance and hope the clients include the likes of Marks & Spencer, Tesco, locals will bend to your ways. Arcadia, and Wal-Mart. We serve most of the fast moving We have very deliberately set out to create a multi-ethnic consumer goods majors, such as Procter & Gamble and management team and we have almost exclusively local Unilever, General Mills and Nestle. In our technology managers. That is quite different from having a very strong business our customers include Dell and Nokia, and national culture, which is traditional in our industry. in our automotive business we serve companies such as Ford and Chrysler, offering highly IT intensive How did you avoid falling into that traditional ''mono- solutions, running warehouses and pick up services, as culture'' trap? well as spare parts distribution. John Allan: I tried within Exel to get staff to think of us as a truly global company, not a British company in lots of When did you join the logistics industry? different locations. I think Deutsche Post came to precisely John Allan: In September 1994 I joined what was then the same decision to have a globally diverse management called Ocean Group. The company had been a disparate team, so in putting our business together we have been shipping conglomerate and the board decided on a helped by the fact that both had very diverse management change of CEO. It was on my watch that we decided this teams in terms of nationality. We weren't just trying to whole of area of global logistics represented a big oppor- integrate a bunch of English guys with a bunch of German tunity. At that time world trade was taking off and manu- guys. To be truly globally successful you have to open facturing was moving to lower cost economies. So I trim- yourself up to talent from all around world. med the business and focused on logistics. In 2000 we merged with National Freight Corporation, which had the How, since Exel was acquired by Deutsche Post, have you Exel brand name, and we focused on that well-respected stopped your staff in your domestic market, the UK, fee- brand. At that time Deutsche Post was taking the same ling threatened? approach as us. John Allan: It's a very difficult tightrope to walk. Exel's senior management was in UK and Deutsche Post sugges- What challenges did the new global approach throw up? ted when they bought Exel that the logistics business's John Allan: The view we took early on, which was helped headquarters be based in the UK. That was tremendously by having a air and sea freight forwarding business, was helpful, and meant that management attrition was very low. that we had to master two skills simultaneously. On the one hand we had to manage big complex relationships How do you avoid losing your best people in a merger or with big global companies, which is an enormously sti- takeover situation? mulating challenge, but quite difficult. At the same time John Allan: Well the results so far from the Deutsche Post we had to provide a very high quality service locally - it acquisition are good, but it's early days. is no consolation to your client if you are keeping them I don't think you can take it for granted that if your com- happy at boardroom level and simultaneously screwing pany is taken over that everyone will turn up for work the up their operations all around world. 5 next day. But the key thing is that we told people they true on the Exel side. So, because people already had would be empowered to manage their business and experience of merger integration, that's made our life would not lose their local responsibility and see things dramatically simpler. take a horrible change for the worse. Of course fine words on day one are all very well, but it's the actions When a company is expanding internationally it also has you take afterwards that really count. to overcome the potentially huge hurdle of language barriers. How has the company tackled that issue? How have you incentivised your people throughout the John Allan: Deutsche Post took a very far sighted decision integration process? some years ago that English would be its corporate John Allan: We very quickly got the new management language and DHL's official language. My personal team into planning the future of the business. One integration has been helped by the fact that the board tendency is for people to think 'we are not in charge of papers in English and meetings are conducted in English the business planning anymore'. We wanted to disabuse for the two of us on board that are English. Deutsche people of that, partly as an integration tool, but also to Post clearly decided that if it was going to be a global raise their eyes from the short term task of integration company it, it had to change because, to the extent world to seeking new growth opportunities. has a global language, it is clearly English, or American. I think it was extremely far sighted. How many staff does Deutsche Post's logistics business employ and how many redundancies are you making as a What's been the hardest thing about the integration result of the integration? between Exel and DHL? John Allan: Exel employed 110,000 staff and Deutsche John Allan: The biggest challenge is simply that there is Post's existing logistics business employed 40,000. a huge amount to do. We have over 950 integration However, we are talking about job losses in hundreds projects going. People have been burning the midnight rather than thousands, because most of our people are oil to keep customers happy too, so customer attrition has involved in face-to-face delivery to customers. The been very low so far. We were obviously apprehensive amount of crossover is relatively thin, and the new jobs that some customers would think they would have too we create from business growth will actually mean that much business with us or didn't like either company, but on a net basis we will grow our staff numbers signifi- I can count one a single hand the number of customers cantly. that have gone and we made it up with new business from existing customers. You have decided to major on the DHL brand, what have been the implications of that within the business? Finally then, what is the most important thing to focus John Allan: The thing is that if people believe the subs- on when integrating two companies in a cross-border tance of the business is going to be good, they are astoni- merger? shingly good at managing with such changes. I remember John Allan: It is the people. They and your customers are back when Exel acquired Tibbet & Britten. We were your prime assets and if you focus you energies on those 70,000 people, they were 35,000, and one the first day and getting your people to start thinking about the future after the acquisition I went out to visit a load of Tibbet & rather than the past you stand a good chance of succee- Britten sites, and in every one they put together a ding. You've got to know what it is you're trying to Powerpoint presentation on what their business did. achieve and measure it. It's not rocket science - it's a lot Without my asking, they had all gone into Exel's website, of people working very hard. pulled out our logo on their own initiative and started using it immediately. But it can't always be that easy surely? John Allan: No, of course not, it's quite a challenge. DHL's people within Deutsche Post for instance have seen the DOMINIC WHITE is Communications arrival in the group of a larger logistics Editor of the Daily Telegraph which business and were obviously initially he has written for five years, covering worried they were going to become a bit player. We survey our people regularly to all sectors of business and finance. make sure we know what they really feel, Prior to that, he spent five years rather than sitting here in a glorious in trade journalism also covering cocoon thinking everything's fine while business issues. He has a post people are gnashing their teeth outside. graduate diploma in journalism from And if a guy has worked there 20 years City University in London. and is very proud you have to manage that. It can be an extremely positive thing Contact: [email protected] but the question is, when does it become dysfunctional and counterproductive? DOMINIC WHITE Both DHL and Exel had grown through lots of acquisitions. What did that mean for the businesses ALEXANDER HUGHES EUROPEAN NEWSLETTER when the two were combined? Maurice Rozet We've probably acquired 100 companies in Editor in Chief. John Allan: Editorial Committee. Richard Aeschmann, Robert Baldwin, Essaid Bellal, the last 12 years between us, so there is not a monocul- Gavan Burden, Benoît Chaignon, Miguel Codina, Christian Coffinet, ture. I sat down and did an analysis of the nationalities of Michel Garretta, Richard Hes, Fivos Kiousopoulos, Marc Lucchini, Steven Maisel, Vivienne Packer, Dana Patrichi, Bert-Jan Pit, Michel Rosset, senior management in DHL and the biggest national Julien Rozet, Elizabeth Thomas-Gache grouping were, amazingly, not German, but Dutch. Jennifer Rowell-Gastard International Coordinator. [email protected]

Moreover, no national group accounted for more than Head Office. #29 15pc of the management team. The same diversity was 57, bd de Montmorency – 75016 PARIS FRANCE Tel.: (33) 01 44 30 22 00 Fax: (33) 01 42 88 33 95 www.alexanderhughes.com • e-mail: [email protected] Offices in Europe. Antwerp, Athens, Barcelona, Belgrade, Bratislava, Brussels, Bucharest, Casablanca, Ekaterinburg, Frankfurt, Geneva, 6 London, Luxembourg, Lyons, Madrid, Milan, Moscow, Paris, Prague, Graphic designer Seville, Sofia, St. Petersburg, Turin, Utrecht, Warsaw, Zurich. Printed Oct 2006 •