Organization design blog

This past week has been about system conversions. In any design project they are fraught with difficulty. They've been brought to my attention in four different circumstances this week, two business and two personal:

a) The merger of United and Continental airlines
b) The trusted traveler program
c) The collapse of my personal laptop
d) My leaving one job to start another in a different organization.

First the merger of United and Continental: I fly United a lot and was interested to see how they would handle the merger with Continental when it was announced a couple of years ago. The main way I've experienced it is through their frequent flier program. So late last year I got a mailing saying my card that was due to expire in January, would be valid until the end of March. This mailing was sent to a prior address but it finally got to me. I checked to confirm that I had, in fact, changed the address in my passenger profile, which I had, so I don't know how that happened but put it down to merger glitches.

I liked the way that with this announcement came a little gold sticker, saying "valid until the end of March" that came with the instruction to stick it on the frequent flier card. I imagined a bunch of people trying to work out what the best method was of getting to this solution and wondered how much the gold stickers cost. What was the rationale for them? Couldn't they have instructed everyone that all cards expiring January 2012 would be valid till end March and saved on the stickers?

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Yesterday I arrived in London from Washington DC on United Airlines flight 918. In May 2010 United announced that it was going to buy Continental and at the time the NY Times commented:

"Combining Continental and United would also create a global behemoth. Continental would bring its strong presence in Latin America and Europe, while United has strong positions in Asia, including China and Japan."

Nevertheless in August last year the deal won approval and was completed in October 2010.
I've flown a few times on United since then and been looking for any signs of the acquisition from a passenger standpoint. The first obvious thing is the logo change, and the adverts that assure us that that things are going well. What other things have I noticed?

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When Disney acquired Pixar, in January 2006, Robert Iger, CEO of Disney, agreed to an explicit list of guidelines for protecting Pixar's creative culture. For instance, Pixar employees were able to keep their relatively plentiful health benefits and were not forced to sign employment contracts. He even stipulated that the sign on Pixar's front gate would remain unchanged.

Two years after the acquisition some analysts were surprised that it was working successfully:

How Disney and Pixar are making the integration work holds lessons for other executives faced with the delicate task of uniting two cultures. Tactics that have served the companies well include the obvious, like communicating changes to employees effectively. Other decisions, including drawing up an explicit map of what elements of Pixar would not change, have been more unusual.

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Today's business news is Cadbury's decision to be bought by Kraft. Swiftly reading the UK press it seems that the general mood is one that this is foolish decision generated by short term profit rather than long term value. There is nothing that I've read so far that indicates any intention by Kraft of preserving aspects of Cadbury's business. The signs are not good for Cadbury's jobs, the brand, or anything that will enable Kraft to get any return on its investment. This may well turn out to be an AOL-Time Warner lookalike in terms of outcomes although AOL-Time Warner was billed as a merger, while the Kraft/Cadbury is being billed as a takeover i.e. an acquisition.

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Today I was reading in the Financial Times a piece about the Lenovo acquisition of IBM's PC business. The piece was timely as I'm just in the middle of writing a section of the book on the organizational culture implications of acquisitions. Additionally I am a ThinkPad user and my current one (bought in 2007) has logos of both IBM and Lenovo so I have a certain amount of interest in the well being of the organization - particularly in terms of its customer support services.

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We had a long discussion at work today about due diligence related to mergers and acquisitions. In our experience most of the due diligence is centred on the easily quantifiable and little on the less easily quantifiable e.g. behaviors around pay and reward, or attitudes to workforce development and training. However, when it comes to 'successful' merger or acquisition it is the less quantifiable stuff that is frequently the deciding factor in whether the merger or acquistion will deliver the promised value. So our challenge is to develop and apply rigor around making the qualitative organizational aspects quantifiable, and get these included in due diligence processes.