A German company acquires an American. Their core strength is engineering. Executive management wants rapid integration of the two engineering organizations.
The respective leaders – Karl in Germany, Roger in the U.S. – agree on the steps to be taken. The first and most critical step is a full-week offsite workshop in the U.S. with their top ten people.
Their goal was to produce a draft roadmap. They failed. Instead it was five days of miscommunication and mistrust. And very costly.
Act 1 – An Acquisition
A German company acquired an American company. Industrial sector: complex technology, sophisticated engineering, plant construction demanding expert project management.
Some departments are to be combined as soon as possible. Other departments will be merged over time. Some will remain separate for the time being.
The core of the combined company is its technology, its knowhow, its engineering prowess. And design engineering is the core of that core. Executive management wants rapid integration of the two respective design engineering organizations.
Act 2 – Steps to an Integration Roadmap
The respective leaders of the engineering organizations – Karl in Germany, Roger in the U.S. – agree on the steps to be taken: the two of them together with the heads of their five key departments will formulate an integration roadmap.
They have given themselves six weeks to prepare for a full-week offsite workshop. It will take place in the U.S. Their job in the workshop is to produce a draft roadmap.
After that they will have two weeks to work out the details of the draft. This they will do separate from each other.
They will then come together for a second workshop. This time in Germany. Again for a full week. Their task in that second workshop is to finalize and commit to the integration roadmap.
In both workshops, each of the five departments will have an entire day. The day’s structure has three parts: the respective department heads present their recommendations on how to integrate – German proposal, American proposal; all colleagues discuss and debate; the two heads who presented then draft the roadmap for their department.
Each department should address five areas: product lines, processes & tools, organizational structure, collaboration with internal and external customers, and finances.
The two workshops are limited to twelve participants: the two heads per each of the five departments plus Roger and Karl. After this high-level roadmap has been finalized and committed to, each of the departments heads will then ask their key teams to break down the roadmap into more detailed roadmaps.
Act 3 – From the Strategic Perspective
The Germans would arrive in the U.S. on Friday afternoon, so that colleagues would have all of Saturday to socialize.
Immediately after lunch on Sunday, Roger and Karl would kick off the workshop by presenting their views on integration. Separately.
They agreed beforehand that their presentations should be of substance, from the strategic perspective, and set the tone for the process of creating the roadmap. They would be laying out their respective visions for the combined design engineering organization.
Both Karl and Roger would address the same five topic areas they asked their direct reports to address in their presentations: product lines, processes & tools, organizational structure, collaboration with internal and external customers, and finances.
Act 4 – Roger prepares
Roger thought carefully about who his audience was and how he would communicate his message. He would break down his two hours into sixty minutes of presentation and sixty for questions and answers.
Roger wanted the focus on interactivity, on an exchange of views. The colleagues in the room should get to know each other. Naturally, and to make a strong impression.
Roger prepared a lively and wide-ranging presentation, but he limited himself to ten slides per topic plus a few backups. He wanted his messages to be brief, compact, and clear, knowing that his colleagues would be taking in a lot of information over the five days.
After preparing a draft of his presenentation he asked for feedback from his direct reports. The atmosphere on both sides of the Atlantic was tense. Roger wanted to make sure that his team neither over- nor undersells itself. The Americans were particularly nervous about how the two companies would be integrated.
Only a very few colleagues were willing to discuss the fact that many departments in the company were in total disarray concerning integration. And although there were a few instances where integration was going fairly smoothly, in some areas the atmosphere was moving towards a kind of Cold War between the two cultures.
The American engineers were speculating about what the combined product portfolio would look like. They wondered (actually were worried) about what that would mean for their internal work processes, including what engineering tools they would be asked to use.
And most importantly they were preoccupied with the question who would get what resources (meaning bodies, employees) for which projects. Budgets are always a source of internal debate. The Americans were concerned about which side, or which teams, would get what financial backing.
For these reasons, Roger wanted to present the situation just as he and his team see it. His goal was to be honest, competent, and results-oriented. He believed in his people, in their ability, and in a good future. The Germans and their engineering world, however, he was not familiar with.
Act 5 – Karl prepares
Karl speaks fluent English, but is aware of his inability to decode the nuances communicated in American English. Like his colleague, Roger, he prepared his presentation carefully.
Karl wanted to get right the sequence of topics and their structure. And he focused on striking the right balance between depth and breadth. Karl aimed at ninety minutes of presentation and thirty of Q&A on clarification questions.
Like Roger, Karl asked his direct reports for input on their areas of specialty: product management, process harmonization, personnel, the marketing-manufacturing interface, and sales. In addition he spoke to a colleague in finance.
Karl’s intention was to provide a detailed and comprehensive picture of the facts and their correlations. Twenty slides per topic should be enough. Wanting to cover as much territory as possible, he saw no need in preparing all too many backup slides. After reviews from colleagues, as well as from his next-level manager, his presentation was good to go.
On the German side of the organization there was also much apprehension. Whose product line would get the lead? Which set of standards would be chosen? Would German engineers have to work for an American boss? And what about quality? How would that be maintained? And the R&D budgets?
The rumor mill on the German side also spoke of mixed results of the integration thusfar. Some merger initiatives were progressing positively. Most of the others not so well.
Not a small amount of Germans thought the merger was unnecessary, a pipe dream thought up by their managing board and their over-priced strategy consultants. The term synergy made them particularly nervous, which for them signaled headcount reduction.
Act 6 – Roger presents
As he did before every important presentation, Roger prepared himself mentally. His key messages were clear in his mind. He then imagined how his German colleagues might react to them.
He imagined the key critical questions they might raise and how he would respond to them in the Q&A session. Most importantly he practiced his closing arguments, those messages which simply had to come across clearly.
None of his efforts were much help, unfortunately. It all went rather strangely. Except for a few clarifying questions he was not asked one single question during his sixty-minute presentation.
All he could see were emotionless faces staring at him. At first he was just thrown off balance. Then he became nervous and tense. No feedback during the entire presentation!
He didn’t have a clue as to whether the Germans were even listening, much less if they understood him, agreed or disagreed or were neutral about his statements. The entire time he had to maintain his composure, yet try to draw out some kind of response from his German listeners. His mind was racing during the entire presentation. It was exhausting for him.
The moment Roger finished his presentation it was if the Germans had suddenly awakened from a deep sleep. They fired from all their guns at once. One critical and penetrating question after the other. And at no instance did they hint that what Roger had presented was in any way positive.
Most of the questions communicated clearly that the Germans were very skeptical. When American colleagues tried to come to Roger’s rescue the discussion (at least from the American perspective) turned into a open verbal fight. The German colleagues continued to pick apart Roger’s presentation.
Then it was time for a break. You could cut the tension in the air with a knife. The teams went in groups, separate of each other. The Americans were in agreement: the Germans were unfriendly, uncooperative, Q&A was like an interrogation. Roger was contradicted time and again, and in an almost insulting way. Very disrespectful.
But the German colleagues were no less irritated. They found Roger‘s presentation totally superficial. Too little information. Everything far too positive. Could it all be true? “Is this guy a spinmeister?” That’s why they listened politely and held their questions for the discussion part.
And they found the Americans to be overly sensitive, quickly insulted, losing their composure. They were poorly prepared to answer basic questions. The backup slides were also weak in content.
At the end of Roger’s presentation both sides were disappointed and aggravated. When they all returned to the conference room the tension was still high. Karl, Roger’s German counterpart, got up to present.
Act 7 – Karl presents
Karl’s presentation started out well. He had no problem responding convincingly to the handful of questions the Americans asked. Every now and then his American listeners nodded (seemingly) in approval, commenting: “very comprehensive”, “data-rich slides”, “serious theory”, “well, that’s certainly crystal clear.”
Halfway into his presentation, though, Karl had noticed something about their body language. The Americans seemed a bit fidgety, uneasy. A few had glanced at their watches. Several held their smartphones under the table. Were they texting to each other? Were they even paying attention?
Questions were asked about substance he had already addressed. Some slides he had to explain two or three times. And they repeatedly interrupted his presentation with their questions instead of demonstrating a minimum of courtesy and patience by holding them for the Q&A part.
When they did get to Q&A, however, Karl felt rather confident about his presentation. The American asked very few questions. None of them posed a problem for him. For Karl and his colleagues these were clear signals that all had gone quite well.
The Americans saw things much differently. Karl came across as pedantic, long-winded, condescending. Much of what he presented confirmed their opinions about German engineering: overly complex, too expensive, not customer-driven. They feared that the German side would not be open to their engineering solutions, to their fundamental approach to engineering.
The group broke for dinner. Again separately. The tension had not subsided. The Germans thought the Americans looked a bit depressed. They spoke very quietly, avoided eye contact with their German colleagues, kept their heads down.
The Americans, including Roger, were not sure what the Germans were thinking, much less how to interact with them. They were very guarded around them. At the forefront of their mind was the reality that their company had been acquired, that the Germans were their new bosses.
Act 8 – Five Days of Tension
The two presentations and their respective Q&A discussions did, indeed, set the tone. An unintentional tone. With a few exceptions, the atmosphere on that Sunday persisted during the entire week. It was an atmosphere of apprehension, tension, even mistrust.
It was clear to everyone that there was significant disagreement in two foundational areas: in product philosophy, what defines a great technical solution; and in processes and tools, how great engineers fundamentally do their work.
Their intense, at times very emotional, debates in these two areas left too little time to discuss the other three topic areas: possible organizational structures, collaboration with internal and external customers, and finances.
Their attempt to formulate a draft integration roadmap had failed.
Act 9 – The Cost of Cultural Misunderstanding
Let’s estimate what the failure of this first workshop cost to the company. For the sake of simplicity, all numbers are in U.S. dollars and in Euros.
Failed First Attempt
They gave themselves six weeks for preparation.Each of the twelve participants invested 120 hours (20 hrs. per week). The hourly rate for Karl and Roger 150. The hourly rate for the department heads 100.
Karl and Roger: 36,000. Their department heads: 120,000. Total: 156,000
Five full days in the workshop: 40 hours each. Karl and Roger: 12,000. Their department heads: 40,000. Total: 52,000
Six participants fly business class across the Atlantic: 24,000 (6 x 4,000). Offsite-workshop in a hotel for twelve people: 12,000 (12 x 5 x 200). An administrative assistant supports the workshop: 3,000. Total: 39,000
Preparation: 156,000. Workshop: 52,000. Expenses: 39,000. Total: 247,000
Second Attempt or New Approach
The first workshop did not produce a draft integration roadmap. They will need to either meet for a second time or to rethink their overall approach.
The costs of the first first workshop was 251,000. Would the costs for a second workshop be the same as the first, less or more? Let’s assume that the second workshop succeeds without any need for preparation. The expenses alone would be 95,000.
What if Karl and Roger decide that they need to come up with an alternative approach. What would be the cost of that internal decision making process? What would the execution of the new approach cost? What are the chances that it will succeed? What will be the costs if the new approach fails?
We assume that all participants are both capable and willing to integrate their organizations. Yet, they “departed in an atmosphere of apprehension, tension, even mistrust.”
The cultural factors which led to the failure of this first workshop will also be at play when the integration roadmap is passed down to the individual cross-Atlantic teams for implementation.
In other words, whatever approach leads to an integration roadmap, the cultural factors involved will also be at play when German and American colleagues at the lower levels are asked to implement that roadmap. For it will be their job to work out the details of integration at their working level.
At a minimum each of the five key departments will have to formulate and then implement their own integration roadmaps. What additional costs will be incurred if those five teams struggle with cultural differences? 5 Teams x 50,000 per team = 250,000.
We assume that, one way or another, the two organizations will be integrated. But, what impact will cultural differences have on productivity? In other words, will these engineers work just as effectively across cultures as they do within their respective native culture?
Integration on paper is one thing. Collaborating day in and day out is a wholly different thing. It’s the difference between a wedding and a honeymoon, and then actually living together. Month in, month out. Year in, year out.
Let’s assume that post-integration productivity decreases by 5%. What will that cost the company?
5% decrease in productivity x 250 (only 25% of the engineers collaborates cross-Atlantic) x 150,000 average yearly salary per engineer = 1,875,000.
Design Engineering Work Results
If cultural differences influence how the two organizations work together, what will be the impact of these differences on work results, on the engineering designs they produce? In other words, if their work is often over budget, or over schedule, or in suboptimal quality.
Let’s assume a negative impact of 5%. What would that cost the company? 5% decrease in quality of work results x $1,000,000,000 annual budget = 50,000,000