Leadership strategies for managing cultural resistance in the Aventis merger

Leadership and Organizational Change: Aventis CEO Leadership & Merger Strategy

Executive Summary There are several critical elements to the merger strategy that need to be determined. Aventis is facing significant resistance from all quarters of the company. For the most part, this resistance is related to the fear, uncertainty and doubt that many within the company are feeling – about their roles in the company, vision, and pathway forward.
To alleviate these issues, the company needs to determine its new CEO as soon as possible, develop and communicate a clear vision, and start building a culture. The best elements of each part of the company need to be built into this culture, and it made clear what each side is contributing to the combined entity. The organizational structure should be by product category on the R&D side, and by geography on sales and marketing, so as to eliminate the formal barriers that presently exist between the two constituent companies. A clear vision, strong communication about how each unit is going to contribute to achieving that vision and, ultimately, rational decision-making and a high level of transparency in order to build trust among all the stakeholders, is the pathway forward for Aventis. Flowing from this, all tactical decisions such as where the US headquarters is to be located, should relate back to rational decision-making in support of the vision. Analysis of Aventis' Vision One of the major challenges with this merger is that there appears to be a lack of vision for the merger. The question of why these two companies are merging has not really been answered, let alone the question of what the combined entity is to become. If these visions were in place, a lot of the operational and tactical decisions might be a bit more obvious, both internally and to KPC. As it stands, the merger is going to run into substantial opposition. The executive leadership team must develop a vision for the combined entity – or if they already have one that led to the merger, then they must do a better job of communicating it.

Aventis' Culture Each organization within Aventis is coming into the merger with its own culture, and in addition there are strong national cultures involved as well. Some of the cultural issues are manifesting as national pride, while others are manifesting as defensiveness. The idea that the choice of the US headquarters is indicative of a “winner” and a “loser” represents this problem acutely. For Aventis to succeed, it needs to define a new culture for the company as a whole, rather than continue as a patchwork of different cultures, each vying for its own supremacy. It is recommended that the two main strengths of French and German cultures be retained and leveraged, using the American culture to tie them together. The American way of doing things could benefit from more structured strategic thinking and implementation, but the American belief in the power of possibility can benefit both European cultures, which are highly skeptical of the merger.

Aventis' Organizational Structure If there are to be synergies that come out of this merger, Aventis will need to combine the best qualities of each company, and bring about alignment between them. This likely means that the combined culture should reflect the strengths that each culture brings to the table – the strategic sense of the French side, the organizational sense of the German side, and the American pragmatism. The organizational structure should be developed around product categories on the R&D side, and around geographies on the marketing and sales side. First, this matrix makes sense for multinational companies in general, and second this structure will break down some of the barriers between the companies. If the structure allows the former constituent companies to maintain their structures, there were always be rivalry and defensiveness between them. Functional and geographic structures will force the sides to work together towards a common objective (which presumably by this point will have been elaborated).

Aventis' Strategy Without a clear vision, Aventis lacks a clear strategy. The executives need to determine what they want to accomplish, and build out their corporate strategy along those lines. If the corporate strategy is clear to the various internal stakeholders, then it will be much easier for the executive leadership to implement. A CEO needs to be chosen – the Board needs to drive this forward, and select the person who is most visionary, and most capable of bringing the various stakeholders together around the vision. The US decision will likely be based on pragmatic considerations – if Aventis is to grow, it cannot headquarter in Kansas City, and will not be able to start a new facility greenfield. This doesn’t mean shuttering Kansas City, but does mean setting up the headquarters elsewhere.

Aventis Solutions and Action Plan Aventis needs to define a vision, and that most likely starts with selecting the most visionary senior leader to be the new CEO. Right now there is little for anybody in the company to rally behind, and this is resulting in turf-defending, resistance and hostility. With a leader and a vision, the new company can start to take shape. Communication of the new vision is going to be essential. It has to start at the top, but be brought to group or unit levels through their leadership. Thus, there has to be buy-in and any leader not willing to buy in should be jettisoned. The company has a rally around competition with its rivals, not internecine competition. The vision should rally around product goals, national market share goals, and other objectives that individual units can come together around.
The new CEO must make clear what each side is going to bring to the table, in terms of the culture. This has to be sold as a merger of equals, where each side is contributing something valuable – the specific synergies need to be made clear to all the stakeholders, in order to facilitate buy-in for any higher vision or purpose. Such an approach gives everybody at least one reason to feel good – something that nobody seems to be feeling right now.
The American decision has to be made on a pragmatic basis – this is the nature of doing business in the US. Plus, doing so gives a proper, rational basis for the decision. It might be that Aventis ends up with a CEO from one company and a US headquarters from the other. There should not be the impression of winners and losers, but rather a goal-focused decision, such as “we can’t grow the way we plan to with a headquarters in KC, but we’re not cutting jobs there. We just can’t grow there like we can on the East Coast.” If someone is determined to be take that the wrong way, so be it.
The root causes of a lot of these issues are fairly typical of mergers and acquisitions – fear, uncertainty and doubt. Fear of job loss, or loss of status. Give everybody a reason to think that they still have some role to play going forward. Make clear decisions, based on a vision, a strategy that aligns with that vision, and make each decision strictly on a rational basis, without regard for the politics. Playing to politics seems like the safe choice, but ultimately it will not erase the cultural issues, and certainly not the uncertainty that different units are feeling. If everybody trusts that leadership is committed to creating a combined entity that captures the best of both companies, then they will be more willing to buy into that as a vision. So clear explanations for major decisions, a detailed level of communication, unprecedented levels of transparency, and clarity of roles for every part of the company will go a long way to alleviating a lot of the uncertainty and doubt that typically occur with mergers and acquisitions.

References Margolis, J. & Knoop, C. (no date). Aventis SA: Planning for a merger. Case study, in possession of the author.