ACQUISITION OF INMARKO : «TOWARDS A NEW ORGANIZATION»
21% Market Share Increase provided by the integration of the Inmarko’s Market Knowledge, Position and Brands combined with Unilever’s Finance Resources, Technologies and Marketing Experience
dE
The main competitive advantages Summary
• • • •
• Finance • Technologies • Close relations to the biggest retailers • Marketing competencies
Knowledge of the market Strong market positions Brand portfolio 13% of ice cream market
Org. Structure
Change Management
Structure Talent & Reward HR
• Further strengthen the leadership Inmarko ice cream market • Sustainable competitive advantage through a combination of resources and capabilities of the two companies • More balanced portfolio of brands • 4 of 8 top ice cream brands on the russian market
10% of the market
Time-line
5% of the market Contacts
Source: Team analysis
3% of the market
21
%
market share of Inmarko
2
Summary
Structure
Change Management
Contacts
2,6 times of productivity Increase and 3,3M EUR Improved Cost Efficiency is due to Staff Optimization, Production Increase and Synergy in Cost Structure
dE
73 686 68 528
7,0% Feedstock and materials
5,0% Salaries
5,0%
Transportation
7.6M EUR
-4.3M EUR
of synergy
of salaries harmonization
8 188 7 581 7 779 8 646 8 214
10,0%
Advertising
11 800 10 620
5,0% Storage
Feedstock Transportation Storage and materials
Advertasing
3 2,5 2
2,6
1,5
1,9
1 0,5 0
Productivity in 2008 Productivity in 2009 With Employees Optimization Without Employees Optimization
Salaries
3.3M EUR of costs reduction
Plan A
Plan B
Productivity increase, times
2.6
1.9
FTE Optimization
949
Production increase, tons
70000
70000
Cost decrease per ton
5%
5%
Possible Outcomes for Productivity Increase
Source: Team analysis
8 021 7 620
Choice
3
Summary
Structure
Change Management
Contacts
New Organizational Structure of Inmarko is aimed at Market Entering. Main Departments will still operate autonomously, the existing management will be partly dismissed and Control will be managed due to Financial Means.
dE
Degree of integration chosen Financial controls
Change with controls
Functional integration
Possibly
Unlikely
Total integration
Acquisition motive
Financial synergy
Market entry Vertical expansion
Asset potential Market penetration Economy of scale Likely
«Change with controls» is is the most likely degree of companies’ integration . This integration can be described as: • Replacement of existing management or creation of new management positions • Introduction of new technologies or implementation of more efficient working practices in the acquired company. • The acquired company is left to operate the business with little interaction with other units. • Financial controls are implemented to ensure that the acquired company complies with the strategies and objectives of the head office.
Strategic interdependance
Need for organizational autonomy
High
Low
High
Symbiosis
Preservation
Low
Absorption
Holding
Source: Hubbard (2001) model, Team analysis
The symbiotic approach is preferred because of the substantial transfer of competencies and capabilities and to gain additional synergetic effect from the functional autonomy
4
Summary
Structure
Change Management
Contacts
Inmarko’s Departments Integration into Unilever’s Matrix Structure is more efficient and will ensure its Accountability to Unilever Vice Presidents, remaining an autonomous Organization
dE
Corporate purpose, strategy and values East Center
Customer development Vice President
Customer development • Commercial sector • Legal
-20%
Key accounts Moscow
Supply Chain • Production • Logistics
Supply Chain Vice President
-20%
Marketing Finance HR QA/QC System
472 (8%) 477 (8.2%) 4833 to Unilever
Fired
Source: Appendix #2, Team analysis
Inmarko Personnel
Персонал
Appoint a director from Unilever in each of the Inmarko new departments Finance It will help to sustain control of organizational operations and to obtain synergetic effect
5
Summary
Structure
Change Management
Contacts
Inmarko’s and Unilever’s corporate cultures do not have any clear challenges. Synergies of this process have to be stimulated and institutionalized. Leadership Direction
▪ Community leader ▪ Command & control ▪ Patriarchal ▪ Visionary ▪ Strategic/directive ▪ Consensus-driven
Coordination and control
▪ ▪ ▪ ▪
People focus Operational controls Financial controls Values/professional standards
Innovation
▪ ▪ ▪ ▪
External sourcing Top-down Bottom-up Cross- Pollination
Motivation
▪ Values ▪ Inspirational leaders ▪ Opportunities ▪ Incentives
Environment and values
External orientation
Accountability
▪ Open and trusting ▪ Competitive ▪ Operational/disciplined ▪ Entrepreneurial ▪ Customer/ channel ▪ Competitor/ market ▪ Business/ partner ▪ Government/ community ▪ Structure/role design ▪ Performance contracts ▪ Consequence systems ▪ Personal obligation
Dimensions
Inmarko
Unilever
Leadership
leadership is their joint commitment, they are the team of leaders. They support healthy competition inside the team.
Encourages its employees to sustain high behavior standards in their daily work, corresponding to the company’s values: integrity, respect, responsibility,
Direction
Value the atmosphere of mutual help and support in order to achieve the joint goal.
There is action-driven leadership. It’s thoughtful action, intelligent risktaking.
Coordination/control
Aspire to make the company comprehensible for those who work with it. Achieving high quality results due to high professional standards
Achieve goals due to people with a winning mindset, passion for consumers and appetite to drive personal performance
Innovation
It means constant search for new, bright, unusual, positive ideas and solutions in our industry.
The company is committed to the pioneering spirit
Motivation
Involve employees through trust and openness
People-driven leadership is encouraged. It means investing in people’s development
Environment/ values
They are open and friendly to contacts and communication, competitive and entrepreneurial
Committed to integrity because it creates our reputation, so it never compromises on it.
External orientation
Fulfillment of accepted obligations on time and on a full scale. achieving high quality results.
Committed to responsibility because they want to take care of their consumers, customers and employees.
Accountability
Flexibility and attention to every market and to every consumer.
There is performance-driven leadership. It’s staring reality in the eye. It’s owning Unilever’s overall performance.
Clear challenges
Source: A McKinsey perspective on getting practical about culture in M&A, Team analysis
Some differences
Strong alignment
6
Summary
Structure
Change Management
Contacts
70% of mergers and acquisitions fail to achieve their anticipated synergies, and 50% suffer an overall dropoff in productivity in the first four to eight months. "People problems" were cited as the top integration failure factor. So appropriate change management is crucial
•Employees need to understand and accept: •The purpose behind the M&A; •The picture of how the new entity will look like; •A step-by-step plan to get there •Part to play in the outcome.
Neutral zone
• Identify who gets what; • Provide information about what is currently changing; • Ceremoniously mark the endings.
•Employees may feel disoriented in the neutral zone; •Temporary structures may be needed; •Leaders are required to monitor the pulse of the firm on regular basis.
Ending
New beginning
CHANGE LEADERSHIP
Career
Work content
Affiliation
Benefits
Compensation
Talent and reward
HR Due Diligence
Change Management
Risk Identification
Risk Heat Map
People Cost Structure Talent Culture Regulatory Engagement
People Cost Risk
Structure Risk
Talent Risk
Culture Risk
Regulatory Risk
Engagement Risk
High risk
Medium risk
Low risk
7
Summary
Structure
Change Management
Contacts
The system of talent and rewards in Unilever will also to introduce employees of Inmarko into a new system of performance management and corporate culture Talent management Leadership development program (used to teach new leaders for a company and teaching Unliver corporate culture)
Eastern Department LMS – learning management system (on-line education and on-line assessment of collegues)
Central Department
949 FTE Total Personnel Changes
9.2М EUR
Moscow Department Performance management
4833 FTE
•Rates (1 to 5) for the work of an employee, •3+1 goals – 3 workplan goals, 1 development plan goals •Feedback of HR managers and SOL-behaviour
Total Salary Changes
Total Personnel in Inmarko
Reward management Compensation package (medical plans, health care spending, life insurance)
482 000 EUR
Marketing Performance-related rewards – bonuses (employee performance defines an amount of money)
Performance management wheel
Harmonization Transition Cost
Key Accounts Finance
HR
QA\QC Systems
472 FTE
Total Amount of Employees for Transition
8
Summary
Structure
Change Management
Contacts
One of the most important aspects of HR Due Diligence is managing successful post merger people integration is proactively addressing the risks associated with people and organization. Key People and Organizational Related Risks Risk Heat Map for Inmarko’s Acquisition People Cost Risk
Structure Risk
Talent Risk
Culture Risk
Regulatory Risk
Engagement Risk
Pension & Benefits Rewards Liability Contract Liability Termination Indemnities
Work Structure Risk Right Sizing Risk Information Flow Risk
Key Talent Retention Harmonizing Talent Processes
Leadership Style Decision Making Process Personnel Interactions Beliefs Around Personal Success
Employment Contracting Labor Law Agreements
Employee Motivation Levels
High Risk
Medium risk
Low risk
Possible Productivity Drop in M&A without appropriate HR Due Diligence
Factors Motivating Innovation Mandate or edict
2,06
Part of expected duties
2,37
Peer pressure
2,74
Compensation
2,97
Career advancement
20 % Rise In Productivity
3,37
Senior management exposure
3,74
Peer recognition
4,06
Sense of personal accomplishment
4,49 0
1
2
Source: KPMG Post-merger people integration, team analysis
3
4
5
Engaged employees are 20 percent more productive than the disengaged 9
Summary
Structure
Change Management
Contacts
Effective change management is the key to seamless post merger integration. The need for constant communication with the employees in all the three types of organizational experiences cannot be over emphasized.
Event
1
2
3
4
5
2009 6 7
8
9
10
11
12
Providing the information about what is currently changing
Define key customers for organization Giving employees timescale for clarification of the new structure Conduct joint workshops Develop a decision-making process.
Rationalizing of the workforce Coach new skills and behaviors Forster development of the merged team and delegate new responsibilities to the team Encourage delegation and inovation Review the results of integration Celebrate success as a group
29.12.2008 - 01.03.2009 Ending
01.08.2009 - 31.12.2009 New beginning 02.03.2009 - 31.07.2009 Neutral
Source: Appendix #3, Team analysis
10
Summary
Structure
Change Management
Contacts
Contacts
Nikita Trofimov
Tatyana Suslova
Valery Danilik
Petr Gnatyuk
Moscow State Institute of International relations (University)
Moscow State Institute of International relations (University)
Gubkin Russian State University of Oil and Gas
Moscow State Institute of International relations (University)
5264305@gmail.com
tatyana.sus93@gmail.com
Valery.danilik@gmail.com
petergnatyuk@yahoo.com
+7(903)5264305
+7(915)3975725
+7(985)1841889
+7(916)6677555
11
Appendix 1 Integration of the departments FTE Marketing Finance HR QA\QC Key Accounts
23 236 61 64 88
Hormonizing Costs Per Department (EUR) Hormonizing Costs Per Employee (EUR) Number of FTE for Transition 23478 1021 472 240909 Hormonizing Costs (EUR) Reduced Salary for Inmarko (EUR) 62269 481818 5144205 65331 89830
Dismissal in Inmarko's Departments Number of FTE after Dismissal Salary after Dismissal (EUR) 1577 238 311
Eastern Department Central Department Moscow Depatment
Dismissed FTE
Salary Reduction (EUR) 477
Total Personnel Changes for Transition and Dismissal 949 Total Personal in INMARKO after Restructurization 4833 Total Salary Reduction (EUR) 9115480
3971275
Salary Reduction (EUR) 8648208 2968205 4268688
Possible Benefit from Outsourcing (EUR) 397128
2162052 742051 1067172
Appendix 2 NEW BEGINNING
ENDING
NEUTRAL
Organizational Level
Identify who is losing what; Expect a reaction and acknowledge the losses openly; To provide the information about what is currently changing.
Temporary structures may be needed to manage the transitional issues. Leaders are required to monitor the pulse of the firm on regular basis. Motivation levels falls and anxiety rises
Employees need to understand and accept: The purpose behind the M&A; The picture of how the new entity will look like; A step-by-step plan to get there Part to play in the outcome.
Team Level
Clearly define roles and responsibility in the new company; Define key customers for the team; Discuss team background;
Need to develop a decision making process; Maintaining flexibility by reviewing goals and processes; Conduct joint workshops/ to openly resolve the issues cooperation.
Encourage delegation more frequently; Encourage innovation.
Individual Level
Provide full and early communication of reasons behind the merger; Discuss the implication of merger with individuals and team; Giving employees timescale for clarification of the new structure.
Hold a wake for the old company and keep a bit of memorabilia (photos, T-Shirts); Forster development of the merged team and delegate new responsibilities to the team; Need to coach in new skills and behaviors.
Foster communication at all levels between the two parties; Review and consolidate the changes since the beginning; Celebrate success as a group.