DeBuono and her colleagues at Nellcor were concerned about the cultural mismatch even before the deal was signed. They retained
an outside consultant to address the issue, but his recommendations went nowhere. In the end, most of the Nellcor executives
were let go, and the merged company became top heavy with Mallinckrodt "suits." Then, the compensation system was changed.
"Bonuses and options were cut back, and Nellcor employees weren't motivated by Mallinckrodt perks," DeBuono says. "Before
long, disillusioned Nellcor employees began leaving. The merged company began to miss its numbers, and the business went sideways."
David Brinkley, Theravance
Mention the word culture to anyone involved in an international deal, and you will likely see visible pain and suffering.
But some companies do it right. At J&J, an alliance with a Japanese partner was at that delicate decision point that typically
causes most executives to lose sleep at night. After several months of painstaking analysis, J&J concluded that the product
would not be a commercial success in the United States. Wills' alliance team members had to convince their partner that it
would be best to cut its losses. That meant taking their Japanese counterparts through the decision process, but, "In Japan,
decision making can be much slower and more deliberate than it is in the US," Wills says. "A decision of this magnitude needs
to be made by senior management, but middle-management teams can be reluctant to escalate the issue, especially if it isn't
Normally, at J&J a decision to abort would be made in six weeks. In this case, it took six months. But Wills believes it was
worth it. "We had to ensure that their team could take this news forward through their organization in a way that it would
be accepted, even if it was disappointing. At the same time, we were very interested in retaining a positive future relationship
with that company. By exhibiting patience and demonstrating an understanding of their process, we achieved both goals."
Old-fashioned, face-to-face communication remains one of the best ways to avoid misunderstandings. Wills believes that one
of the major reasons J&J and Millennium have been able to avert major conflicts within the alliance for Velcade, an oncology
treatment, is the close personal relationship that has been forged between executives at both companies. "Because they communicated
so often and have so much trust in one another," he says, "all it takes is one phone call to get the alliance realigned."
5 If It Ain't Broke, Nurture It
Time and time again, m&as fail because the larger partner just can't resist tinkering. Too often, no sooner does the dominant partner acquire the creative genius
of a scientific team than it moves immediately to make changes in that "zone of excellence." Frequently, in a cost-cutting
move, the R&D function of the smaller entity is absorbed by the larger one. But economies of scale often lead to deficiencies
in creative output. It's better to look for cost-cutting opportunities in other areas of the company. Shared services is a
logical place to begin, especially when one partner is substantially larger than the other and has well-established functions