M&a: Culture Integration
Essay title: M&a: Culture Integration
In 2001, James M. Kilts, then newly appointed as chief executive officer of Gillette Co., replaced two-thirds of the companys senior management team and trimmed 3,700 jobs, more than 10% of the companys work force. Employees of the century-old company thought they had seen the shake-up of all shake-ups.
Just wait until they see what Procter & Gamble Co. could have in store.
In announcing the $52.4 billion takeover of Gillette, P&Gs CEO, A.G. Lafley, said he planned to “learn a lot from the people at Gillette” and talked about ways the companies could combine Cincinnati-based P&Gs knowledge of women with the shaving know-how of Boston-based Gillette and delve into the business of womens hair removal, which Mr. Lafley said was a $10 billion business.
But Mr. Lafleys organization has a tendency to teach rather than learn. P&G has such a strong corporate culture that employees develop a lingo that only other P&Gers understand. The employees, nicknamed “Proctoids,” write memos in a certain format, and use a certain brand of paper clip. Board members need a glossary to understand all the acronyms the company uses. Many P&G employees joined the company right out of business school, have never known another corporate culture and are eager to help new employees learn the ropes.
Yet Gillette employees may be difficult students. The company has its own staid culture, rooted in Gillettes flagship razor and blade business. The business model of giving away the razor and selling the blade may be the worlds most-recognized mercantile concept.
Gillettes longtime focus has been on developing better and better products to make mundane activities, such as shaving, require high-tech tools — a complex operation focused largely on high-tech research and development that P&G cannot afford to disrupt.
How well P&G and Gillette work together is crucial to the success of the takeover. In particular, P&G cannot risk alienating the core Gillette work force, which has developed products successfully for generations.
To be sure, P&G in recent years has promoted its willingness to accept ideas from the outside. Presenting the Gillette deal to analysts Friday, Mr. Lafley noted that “10 years ago, P&G was an invent-from-within company.” Over the past five years, “what weve tried to do is become a much more of a connect-and-develop company.”
Mr. Lafley alluded to P&Gs drug brands such as Actonel and Prilosec OTC, which the company markets in partnership with pharmaceutical companies. He pointed out P&Gs partnerships with Unicharm, a Japanese diaper competitor that helped develop P&Gs Swiffer mop, and a joint venture with Clorox Co. to make Glad Press n Seal. “I think its pretty clear well work with anybody,” Mr. Lafley said.
In working with Gillette, P&Gs task is complicated by the fact that Gillettes culture is already split in two. On one side are the longtime employees who form the heart of the razor business. On the other are “outsiders,” including a group of P&G alumni and a cadre of Kilts acolytes who followed him from Nabisco Holdings Corp. to Gillette.
It is the longtime Gillette employees who “are going to have the toughest time,” says Dave Hardie, a headhunter