Feature

Minimising merger pains

When GrandMet and Guinness merged in 1997 to form Diageo, they had similar IT systems and processes. The challenge lay in managing people and formulating a unified strategy. Annie Gurton reports.

There is huge potential for all kinds of chaos when companies merge. Incompatible IT systems and business processes, different corporate cultures and philosophies, or a clash of objectives and strategies are typical. However, when the giant brands GrandMet and Guinness joined forces to form Diageo in December 1997 none of those were enormous problems.

Adrian Bagg, information systems director of United Distillers and Vintners, which is part of the Diageo group, says the two companies' IT systems, staffing levels and corporate culture were fairly similar. But still, the process of combining the IT departments and evolving a cohesive strategy was not easy, and some metaphorical blood had to be spilt.

"We had to ruthlessly focus on share value and there are always some hard decisions. I'm sure not everyone thinks that the IT team is wonderful. There are always problems and user complaints but we work to minimise them and really try to make sure that everyone is satisfied," says Bagg.

"Merging companies is all about managing people," explains Bagg, who was also involved in the merger that created Mercury One2One. "If you can manage the people properly, it is almost true to say that the business changes fall into place." The key to this is communication. "It has to be a two-way process, with the senior management listening to their managers as much as the managers at all levels listening to what is going on around them, " he says.

To achieve this Bagg implemented a shared e-mail system between the two companies as soon as the merger was mooted. "We had an awkward period of about nine months between the time when the companies announced the proposed merger and when the merger was officially completed at the end of 1997. During that time any contact between the two companies was strictly controlled and limited, but it was obviously also the time that we had to evaluate what both companies had, how each worked, what employees there were, what systems were in place and what they had planned for the future.

"We had to work out how we would blend the companies if the merger was given the green light. But during that time we were also still, strictly speaking, competitors, and it was critical that no sensitive information was inadvertently passed between the companies." Bagg says that, like other senior managers, his office was "raided" and all documents pertaining to the proposed merger were seized, examined and returned, to ensure that no information which would affect the trading of each company was inadvertently being disclosed.

"It was important to start planning what we would do as early as we could in the merger process. It was a critical time for planning when we could work out how we should proceed once the merger was given the green light," he says.

Both companies were already using Lotus Notes, so it was not too challenging to merge the e-mail systems without treading on the lawyers' toes. "At that stage we were able to assess the IT situation in both companies and understand what resources and people we would have if the merger went ahead. We could devise a plan for the route forward," he says.

0 Other "givens" were two mixed Unix, AS/400 and Microsoft environments, and systems from JBA, SSA and SunAccounts. "The last thing we could possibly contemplate was large-scale radical changes. We knew that we had to work with what we had, without rocking the boats too much," says Bagg. It was a time to plan to combine forces in the most convenient way, without allowing any compromises, which they would live to regret.

When the green light eventually came in December 1997, after due diligence had been completed, Bagg and his team had only seven months to present a cohesive, single face to customers and suppliers and have an efficient internal IT system serving the entire Diageo organisation. "Our objective was to fully leverage the investments that had been made in IT by the previous IT teams, and deliver the necessary IT tools and environments to all the divisions and groups around the world," he says.

However, Bagg's way of achieving this was unusual. "I see the role of the IT department as an enabler, giving all the managers and departments within the organisation the technology tools need to do their job as best they can," he explains. Rather than ongoing spoonfeeding of each department or product group, the IT team enables and empowers, and encourages independence.

Ill-feeling

When two IT teams of similar size are merged, some jobs inevitably have to go. "We were very fortunate, because it meant that we were able to pick the best from two teams to create one super team. Luckily, we were able to manage it so that there was very little ill-feeling or resentment." says Bagg.

The key to Bagg's successful management of this phase was to ensure that every employee was given an aspirational consultation before any decisions were made. "First we decided what sort of organisation we wanted the IT department to be and what roles there were within that ideal. Then we communicated that to the staff, but with some very proactive HR management, so that people only applied for jobs for which they were suitable.

"We gave everyone the opportunity to tell us what he or she wanted, both in the short term and long term, so, for example, if someone had secretly been harbouring an ambition to work in America, that could be taken into account. We then acted fast to make appointments, change people's roles and to let those for whom we could not find a place go." Some of those were delighted, says Bagg. "There are always some people who have worked within an organisation for many years who welcome the opportunity to retire early, and I can honestly say that as far as I know there was no-one who was deeply unhappy with the decisions that were made or the way that they were carried out."

Big decisions

Once the merger was formally announced to the City, Bagg had to implement his plans quickly and efficiently. "I don't think we have ever worked so hard," he says. "We had to make some big decisions and at times we had to be ruthless.

"We went through a stage of transformation and the essential thing was not to be distracted. We had to be focused and determined." The changeover and merger was successfully completed for the date when Diageo was officially trading as a stock from 17 December 1997. UDV was trading as one company in 50 of its major markets around the world from l July 1998.

With hindsight, there is little that Bagg wishes he had done differently. However, one exception is the treatment of legacy data. "I wish we had taken a longer-term view about the requirements and demands that we would put on the data in the future back at the beginning when we were merging systems. Because we didn't do that, we have had some problems in managing and getting optimum value and information out of some of the old data."

The bottom line

Today, UDV's IT team is characterised by a blurring of job definitions and boundaries and an openness about experiences and knowledge. Bagg explains, "One of the things that we work really hard on is making sure that all the IT staff are business-aware and conscious of how much their decisions affect the company's bottom line. There is, after all, only one share price and that is what we are all working towards improving."

Bagg has a sales and marketing background, and is driven by the need to develop brands as much as the UDV marketing director. This is typical of the way he sees the IT department as an integral part of the business. Bagg's objective is to have an IT team which is connected to the business, not "stuck in a dark corner". Similarly, he says that all the other managers within the organisation are expected to have at least some understanding of the benefits of IT and how it can be used. "Our focus is to get people in all departments away from the back office and into the front office, because that's where IT can create value," he says.

"We believe very strongly in partnerships and our people are judged by how well they foster working relationships with other people. One good thing about the merger was that it gave us the opportunity to select those who were best at collaborating," Bagg says.

This applies to internal partnerships as much as external ones with suppliers and customers. "An IT manager can help guide a marketing manager, for example, towards the best solution. The IT manager is not capable of devising or running the marketing strategy, but he should understand the importance of brands, for example, and the implications of a change in a product packaging. He should understand enough to work with the marketing manager to get the best solution for the whole organisation."

Once the solution is agreed, the IT manager will help deliver and implement it and then step back to let the marketing department own and run their own system. "The IT manager will know what is possible and has to be able to say no to the manager who wants to introduce a new project which does not fit into the overall IT plan," says Bagg. "The focus throughout the whole enterprise is to discover what the customer wants and make sure that we deliver it, and IT is a tool that allows us to do that."

Bagg fosters an open approach to management but is unequivocal about the need for strong controls. "We have the usual strict policies towards staff and the personal use of the organisation's IT, for example, and people can't bring in their own discs to use at work. But if someone wants to spend 10 minutes in their lunch hour looking on the Internet for a new car, we are not going to instantly fire them." Perhaps the second time, he jokes, but not the first.

The company has usage monitoring software, but its purpose is to guide the company towards the best IT system, not to breathe heavily down people's necks. "I encourage everyone to use the Internet as much as possible," says Bagg. "Otherwise, it's like having the best library in the world but telling people that they can only look at the books, not open them. We want people to be familiar and confident with the technology, and the result is that we have teams who are receptive to IT and come up with their own good ideas about how we can develop the systems further.'

Bagg's objective is to develop Diageo's IT systems to create what he calls an I-Net. "It's not my term," he admits. "It was created by a research organisation call the Working Council for CIOs and could be thought of as the pipework for e-business." I-Net is all the architectures and processes which combine to form an effective e-business environment, including the management attitudes and philosophies as well as the hardware and software. "My target is to keep getting everything right, the hosting, the data, the people, the systems - it is getting them all right together that makes the real difference."


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This was first published in February 2000

 

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