2. We Can’t Do This the Traditional Way—IBM’s Acquisition of PricewaterhouseCoopers Consulting
Chapter Contents
Overview
This chapter briefly describes IBM’s purchase of Pricewaterhouse-Coopers Consulting (PwCC). Given the size and complexity of the deal, volumes could be written on the integration effort. This chapter focuses on the cultural integration. We discuss key steps in the “people” work-streams, and provide a candid description of our challenges and learning, and how they led to Tangible Culture.
The Acquisition
In mid 2002, IBM announced its intent to purchase PwCC. It was an interesting time. The dot-com bust was greatly impacting the economy—and especially the consulting and services industry. PwCC had announced its intent to go public under the name Monday.
At the time, IBM was well recognized for technology expertise. PwCC had high brand awareness for industry and business expertise. The combined value proposition would put IBM Global Services (IGS) in a dominating position from consulting to delivery to outsourcing, from strategy to business operations to technology. And it would enable IBM’s clients to simplify their decisions and implementations.
Now IBM just needed to realize this potential by effectively integrating PwCC into IGS.
PwCC was a partnership of 30,000 partners and consultants globally. IBM had its own consulting organization—Business Innovation Services (BIS)—which had 30,000 executives and employees globally.[1]
Several key decisions were made early:
The two groups would be merged into one organization of 60,000 people globally.
The new business unit—Business Consulting Services (BCS)—would leverage the best aspects of both and not simply adopt one or the other.
The deal would close in 60 days, on October 1, 2002, yet the two organizations would operate somewhat separately until January 1, 2003.
IBM wanted BCS to be more than a collection of previous capabilities. It truly wanted transformed consulting—a tight, two-way integration of deep business insights with well-established technical capabilities that could carry client value to a whole new level. And this would require change for everyone. Figure 2-1 shows some fundamental decisions made to guide the integration effort.
Figure 2-1. Integration decisions.
Among these key decisions, a new culture was targeted—one combining the best of both yet capitalizing on the opportunity to do something new in the marketplace.
Getting Started
“Yes, I want to help. How quickly can we get started?”
“Let’s meet in Cambridge on Monday and put some thoughts together. We’ll be meeting up with the PwCC ‘people’ team on Tuesday in Greenwich.”
In August of 2002, an integration team of experienced merger and acquisition consultants and subject matter experts from BIS and PwCC assembled to begin the task of merging the two organizations. Table 2-1 shows the workstreams for this effort.
Table 2-1. Integration Workstreams
The Communications and Change Management team started with a few basic beliefs:
Two cultures are never the same.
Merging two cultures, or creating a new one, is painful whatever actions are taken.
Communications are vital to success.
Change is always personal.
From the outset, the “people” team pondered how to handle the issues:
Different business models: IBM’s corporate, public structure compared to PwCC’s private partnership structure.
Need to leverage the best of both, using the chosen “adopt and go” strategy.
“Adopt and go” meant that both companies’ current approaches would be evaluated, and the best would be adopted.
“Merger of equals” (both had 30,000 employees)—a tougher proposition.
Need to integrate and operate globally—and quickly.
On the ride into Greenwich, two members of BIS, Mike Armano and Sara Moulton Reger, chatted about the approach that would be needed.
“We can’t do the culture work the traditional way. Behavior definitions just won’t do it. Neither will values or principles. We need a new way to address the culture. It’s just going to be too easy for people not to get it—but think that they do get it.”
“I agree. Nothing would be worse than a bunch of platitudes communicated via e-mail. We’ve got to make sure it’s clear how things will change—for everybody.”
“Do you think we could use stories to communicate the new expectations—vignettes or something like that?”
“Yes. Stories are a good idea—vignettes or scenarios—anything to explain how we want people to act in this new organization.”
The seeds for Tangible Culture were born during that conversation.
And PwCC members, Anthony Harris and Michael Lueck, also on their way to Greenwich, expressed similar concerns. “These two cultures are really different. We’re going to need something we’ve never tried before.”
In Greenwich, the leaders for the Communications and Change Management workstream designed a work plan—and, eventually an analogy for the challenge. “We have an ‘arranged’ marriage between people who both have children. They don’t really know each other, let alone love each other. And their children, well, let’s admit that they have mixed feelings about this ‘blended family’ thing.” The Change and Culture team needed to help make this a family—and a happy, effective one at that!
During the first few days of planning, a decision was made to separate the “people” work into two workstreams: (1) Communications and (2) Change and Culture. The reasons were as follows:
Communications are urgent and immediate, and could cause neglect of the longer-term Change and Culture work if combined together.
Change and Culture needed to adopt a longer-term view and focus on different elements of the integration effort.
“With the PwCC integration, communication was a foundation for success, and a way to help overcome uncertainty and confusion. We needed to tell people what was happening, or risk that they’d fill in the blanks on their own—usually incorrectly. Frequent and frank contact with those most affected helped to provide the information needed to understand the mission, goals, objectives, and impacts of the acquisition.”
Larry Hupka
Retired Partner
IBM Business Consulting Services
Change and Culture Workstream
The first phase of Change and Culture work began in August 2002 and was completed by the end of September. Later phases, which consisted of periodical evaluations, carried through the rest of 2002 and into 2003. The initial focus was on effective transition, with building the desired BCS culture increasingly important as time went on.
Some of the key actions undertaken were as follows:
Risk assessment
Stakeholder assessment
As-is culture assessment
High-level to-be culture dimensions
Vision and operating principles
To-be culture blueprint and transition approach
Geography and workstream interlocks
Climate checks
We briefly describe each of them and emphasize the connection to the culture work in the following subsections.
Risk Assessment
The Change and Culture team knew it was important to focus on the most significant “people” risks. A risk assessment was conducted and communicated to other members of the integration effort. Of the top five risks surfaced, one indicated the two cultures were not the same and would not integrate quickly or easily.
Stakeholder Assessment
With an organization of 60,000 people in 160 countries, understanding who would be impacted by what was a big task. We needed to understand the stakeholders for communications and for designing change strategies for regional deployment. We also needed to select a cross-section of the stakeholders for the as-is culture assessment.
As-Is Culture Assessment
To get broad-based involvement, information was collected about the existing cultures. Interviews were conducted with approximately 100 senior leaders, and facilitated discussions were conducted with more than 1,000 participants globally.
Information was collected for both culture and change management purposes. A quantitative survey was administered to measure the distance between BIS and PwCC on certain cultural aspects. Qualitative questions were discussed to gather depth and to provide quotes to validate the findings and communicate what people were thinking.
The two companies were assessed separately so that the participants could speak freely and ask questions relevant to them. The facilitated discussions were held around the globe, enabling broad participation. A senior leader attended each session to answer questions.
The data was compiled by country, region, geography (that is, Americas, Europe/Middle East/Africa, Asia Pacific), and globally. It validated the risk assessment: We indeed had cultural differences to address—and also some important similarities to build on—as shown in Table 2-2.
Table 2-2. As-Is Culture Assessment
This was important information to understand the challenge, yet not enough to begin work. To move forward, we needed to define key aspects of the to-be culture.
High-Level To-Be Culture Dimensions
In parallel with the as-is culture assessment, work on a high-level definition of the to-be culture attributes began. It started with an informal list of differences between the two companies on aspects such as decision making, leadership style, approaches to professional development, and communication styles.
The list was socialized across the integration team and refined. Eventually, the attributes shown in Figure 2-2 became part of the BCS to-be culture.
Figure 2-2. BCS to-be culture.
Vision and Operating Principles
In parallel, the Management Committee was deciding priorities for BCS. These top leaders were Ginni Rometty (IBM legacy), the Global Managing Partner for BCS, and her direct reports, Mike Collins, David Dockray and Hideki Kurashige, the Managing Partners for Americas, Europe/Middle East/Africa, and Asia Pacific (PwCC legacy). These leaders crafted a vision and series of operating principles to guide BCS as shown in Table 2-3.
Table 2-3. BCS Vision and Operating Principles
These priorities became important foundation for the to-be culture.
To-Be Culture Blueprint and Transition Approach
The input on the to-be culture was helpful, yet admittedly confusing and difficult, especially with the compressed timelines. It was five weeks into the integration work and the team was being pressed to identify the to-be culture, and more important, the gaps that needed to be bridged. The to-be culture needed to take into account the operating principles, the high-level to-be dimensions, and the as-is culture assessment gaps.
The team was familiar with the traditional approaches for culture integration and knew these approaches would fall short. So, the team developed a new one—which became the foundation for the Business Practices Alignment method covered in Chapter 7, “Putting It All Together—The Business Practices Alignment Method”
Several steps were used for the culture blueprint and transition approach:
1. For each to-be culture dimension, the desired end state was defined. The key question: Should BCS be more like BIS or PwCC in this area? A combination was eventually crafted—along with some areas where both needed to change.
2. The high-level gaps were identified for each dimension:
The magnitude of change for BIS
The magnitude of change for PwCC
The current gap between BIS and PwCC
3. Each of the to-be culture dimensions was further clarified by a series of design principles in the form of continuum choices. For instance:
For decision processes, should decisions be more centralized or decentralized? Rule-based or judgment-based?
4. The results of the design principles were used to craft summary statements for each to-be culture dimension, as shown in Figure 2-3.
5. The implications of implementing the actions and behaviors identified for each dimension were then identified for BIS and PwCC:
What specifically needed to change?
What new mindsets would be needed?
What new capabilities were necessary?
6. A series of structured stories were developed to bring these decisions to life by identifying likely problems and desired outcomes, along with the changes necessary to enable BCS to function that way.
Figure 2-3. To-be culture dimensions.
Leadership Model
To emphasize and support the leadership of BCS, a new leadership model was developed. The design principles were one of the inputs used to craft a Leadership Competency model, along with the identified behavioral implications to those design principles. This information was woven together with IBM’s overall leadership competencies, and the resulting Leadership model was disseminated to the BCS partners to clarify expectations.
Geography and Workstream Interlock
Much of the work needed to be deployed locally. With a high-level global design complete, the work turned to clarifying expectations for people in each country. Geography teams coordinated with the global team and balanced the need to keep decisions consistent worldwide yet appropriate for local customs and requirements.
In addition, much of the Change and Culture work needed to be enacted through the other workstreams. Members of the Change and Culture team were assigned to each of the other integration workstreams to coordinate bidirectional information sharing.
Climate Checks
Early in BCS’ life, ongoing climate checks were performed every three months to evaluate progress. Each geography leader received a “visit” from the then part-time members of the Change and Culture team to discuss progress and additional actions.
The first of these climate checks occurred in December; 80 leaders and 700 employees were included in interviews and facilitated discussions, similar to the as-is culture assessment. Each geography was responsible to act on the identified issues.
Combined Work Effort
The work was completed quickly—and it needed to be. People were waiting for information they needed to perform appropriately. If we did not get it to them—or did not get it right—we risked negative impacts on many stakeholders, including our clients.
Figure 2-4 shows the activity overlap, which meant that different people performed different tasks. We coordinated efforts—and admit that we could have done better on it.
Figure 2-4. Change and Culture activities.
The Debate
Shortly after the risk assessment was completed and communicated, a pivotal debate arose. It centered on how significant the culture challenge would actually be.
There was important evidence of the previous cultures, and there was a lot of commonality between BIS and PwCC in these areas. First, the organization structures were similar, which indicated that the companies perceived the market consistently. And the stated values were also similar—an important indicator of culture. Finally, creating the operating principles had gone more smoothly than some expected. Together these factors indicated that culture was not going to be that big of a concern, right?
Well, let’s just say there were strong advocates of both views—that culture would be a challenge and that it would not be too much of a challenge.
As explained in Chapter 6, “The Unseen Hand That Propels Organizational Action—Business Practices,” we eventually understood this debate to be based on different definitions of “culture.” But until we understood it, the debate persisted.
“At first, PwCC and IBM seemed like different life forms. We couldn’t understand each other—and each tried to convince the other that its language and beliefs were correct. PwCCers wanted a professional services culture and IBMers believed in operational excellence. Through it all, we discovered the starting point for our new culture—shared dedication to clients. Focusing on it helped the rest to follow.”
George Bailey
Partner and Former BCS Integration
Executive IBM Business Consulting Services
Our Results
You are probably wondering how well this work addressed our culture challenges. As you might suspect, we did some things well, and would do others differently if given the chance. Some aspects of our assessment appear in Table 2-4.
Table 2-4. Assessment of Culture Work
The last three points told us that we had work to do.
How could we get to a common definition of culture so that we could start at the same place as we worked with a diverse, global team of leaders? Without this, we ran the risk of getting into the debate we mentioned earlier.
How could we make culture even more practical and valuable in the discussions? Without this, leaders could feel that the effort was simply “feel good stuff.”
How could we get all the business leaders to understand that culture was their responsibility—as much as, and even more than, the people who were assigned to work on it? Without this, it was too easy for leaders to expect others to perform the needed actions.
How could we really measure results while we were on the journey? Without this, it would be easy to declare success—or failure—too early.
How could we determine what actions were needed if it became clear along the journey that we had not yet reached the to-be culture? Without this, lack of clarity on what to do could frustrate people and delay energy to take action.
The last few “do-betters” were not simply an issue of improving on what we knew to do—we did not know how to do them, or at least how to do them well. So our new approach to culture integration was only okay, but we believed that the idea had merit and that we could turn it into something truly powerful with more work.
This assessment led BCS to ask IBM Research, specifically the Almaden Services Research team, to work on answering those questions and hone the approach. The results of this process, along with how we developed Tangible Culture, are included in Chapters 4 through 6 (“How to Get to the Right Place the Right Way—Outcome Narratives,” “The Good Thing That Can Cause Big Trouble—Right vs. Right,” and “The Unseen Hand That Propels Organizational Action—Business Practices,” respectively). But before we go there, let’s discuss traditional approaches to culture change.
Conclusion
Shortly after IBM announced its intent to acquire PwCC, the “people”-integration effort began. A new approach was needed to deal with the complexities of the large-scale global merger, and one was developed and used—one that included structured stories to clarify expectations. The results indicated some successes, but more work was needed—specifically on ways to make culture more tangible and workable, and to help evaluate progress toward the to-be culture.