Friday, July 27, 2007
Timing is everything, they say. Back in April I came across an article in the Wall Street Journal about some of the issues facing Procter and Gamble (P&G) as it works to create the intended synergies between its Crest toothpaste and the Oral-B toothbrushes of recently acquired Gillette. In her article (“Merger Challenge: Unite Toothbrush, Toothpaste”), Ellen Byron describes some of the cultural differences that Gillette people experienced as the business was absorbed into P&G. In one example, language was a distinguishing characteristic of the two cultures:
P&G employees are known for loading their communications with acronyms like CIB (“consumer is boss”), FMOT (“first moment of truth,” or the moment when consumers notice a product in a store) and SMOT (the “second moment of truth,” when they use it). Outside board members use glossaries at meetings, and Ms. Stacy (head of Gillette’s sales to dental professionals and now for P&G) says she needs one, too. “I have it in my briefcase at all times,” she says, pointing to her attaché’s front pocket.
Apparently there were also differences in decision-making approaches:
Mr. Cleverly, (Gillette’s oral-care president and initial head of the merged oral care divisions) used to working under former Gillette CEO James Kilts, also faced adjustments. He balked at what he saw as laborious processes and slow decision making at P&G, say former Gillette employees familiar with the matter. “The cultural differences were real,” Mr. Cleverly says.
These differences may seem somewhat minor, but the problem is that they can start to distract employees from the really important efforts needed to make sure the company achieves the intended benefits of the acquisition. In this case, P&G is very keen on displacing Colgate from its top position in the oral care market and sees the combined Crest and Oral-B product offerings as the key piece to this strategy. It’s human nature for people from both companies to see differences more than similarities in the early months of integration. But if this emphasis on differences is left unaddressed, this mindset can start to take root and becomes increasingly difficult to change as time goes on.
So I wish P&G well in its business integration efforts in its oral care division. But should the process begin to slow down, Mr. Lafley (A.J. Lafley, CEO of P&G), here’s my recommendation on how to integrate the cultures to create a high performance culture that drives business results.
I don’t know of a better tool and process to use than the Denison Organizational Culture Survey. I recently got around to attending a Denison workshop to learn more about these instruments and I came away very impressed and excited by the ways companies, in a variety of situations, could benefit from Denison’s research and surveys. Of course I went into the workshop a bit skeptical – how could someone capture something as intangible as culture? Well, Dan Denison and his colleagues took a different approach over twenty years ago. Rather than trying to capture culture, they instead focused on identifying organizational factors that drive organizational performance, as measured by bottom-line results. Their research confirmed that the following four culture traits and twelve corresponding organizational capabilities have a direct impact on organizational performance:
Mission
• Strategic Direction and Intent
• Goals and Objectives
• Vision
Adaptability
• Creating Change
• Customer Focus
• Organizational Learning
Consistency
• Coordination and Integration
• Agreement
• Core Values
Involvement
• Capability Development
• Team Orientation
• Empowerment
I particularly like the comprehensive of this cultural model (it covers both an external and internal focus, as well as flexible and stable infrastructures) and that Denison has statistically proven that its correlates with bottom-line business performance.
So how could this have benefited P&G when they first started this integration effort with Gillette? It could have shown Mr. Lafley and his management team how the P&G and Gillette cultures stacked up against 10,000 other companies in terms of organizational strengths and deficiencies. Comparing the two companies in this way, we could then identify which company’s culture was stronger in certain organizational capabilities so we could pinpoint the specific areas where culture merging would have the greatest bottom-line pay off. It may not have prevented but it would have blunted the typical “we bought you so you have to be like us” integration mindset often seen in acquisitions.
There’s lots more to talk about here, but for now it’s exciting to know that just as toothpaste and tooth brushes can be made compatible for greater value so too can organizational cultures.
