Case 08: The Place to Be
Three years ago, Biotex Inc., a chemical engineering firm, was taken over by The Best Group, an industry conglomerate of some 30 firms. Best Group had vertically integrated itself from raw material to finished product and Biotex was a link in the chain that they badly needed: a research and development capability founded on 15 years of hard work and careful nurturing of the highest calibre chemical research scientists in the country.
Now, there was a rumour afoot that the conglomerate was dissatisfied with the performance of Biotex over the past 18 months and was planning to dump the company on the open market.
At the Biotex site, morale was running at an all time low. Prior to the take-over, Biotex had been a proud company with its roots firmly planted in the community. The small town of Esker Falls was virtually all made up of the scientists, technicians, support staff and their families. They had close-knit social ties, and appreciated deeply the quality of their community life built up over the 15 years it took for the Company to reach its prominence.
The “Biotex way” was one of the reasons the Company became so attractive to outside purchase. The model that Biotex used for keeping itself fresh was simple: the scientific cadre was allowed one month a year to perform research they considered personally interesting. Moreover, scientists were encouraged to attend a number of carefully selected conferences and seminars. On their return, they were expected to prepare training and development workshops for their peers, technicians and support staff. It was said by detractors that people at Biotex were only two thirds productive: the rest of the time, they were on the training and development band-wagon.
This is certainly the way the Best Group management felt when they purchased the company. They felt that productivity could be dramatically increased by judicious pruning of training and development activities. And so, they made justification of training and development so difficult administratively that most employees felt it just wasn’t worth the effort to apply. Transfer of knowledge and skills between scientists and their technicians was actively discouraged in favour of what was felt as a more effective spirit of competition. At the same time, the Best Group management gave everyone an immediate 10% sign-on bonus at take-over time. This did nothing to stem the gradual deterioration of morale at Biotex. And now, a most alarming phenomenon was beginning to happen for the first time: people were starting to leave Biotex.
Disrespect of an organization’s culture and thus, of the people in it, is one of the prime causes for the failures in mergers and acquisitions. The Best Group needs to:
- Re-examine their reasons for acquiring Biotex, and align their rationale with their actions;
- Assuming that their initial reasoning was correct, i.e. that Biotex was attractive because of its culture, they need to decide if they wish for the company to return to profit and behave accordingly, i.e. plan how to manage the firm while respecting its essential cultural identity.
- This will mean starting from scratch with a new Business Plan that involves Biotex people in a meaningful way.
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