Blending Entities: Minimizing the Discomfort

John Fees
CEO, McDermott

Almost two years ago, McDermott International planned to combine two of our entities. A global engineering and construction company, McDermott provides services to the energy and power industries, including the U.S. government, through a number of separate units. So this was not really an “acquisition,”
but a definite blending of two businesses and their cultures. Babcock & Wilcox was primarily focused on power generation, and BWXT targeted government clients.

These two entities had distinct cultures, approaches, and ways of pursuing and executing business. Our goal in combining them was to bring cost synergies and revenue synergies together, which would mean a lot of potential for expansion and growth. We anticipated benefits in using the service approach of our power business with the government business, especially with revenue synergy. Then, we added some niche acquisitions to further enhance the revenue synergy side.

At the same time, we undertook a major effort to examine our operating structure. We wanted to re-brand ourselves – not externally, but internally – to create more alignment with our new goals and objectives. We set ground rules for how we would function operationally and collaborate during the transition of cultures. This was an ongoing process, using outcomes and feedback to strengthen our approach.

Although we wanted everyone to know the reasons for merging the two entities, we knew it would be harder to blend the cultures – and we had no less than 13 functional groups to align. Management’s toughest job was to make the hard calls – that public relations would be like this; that we’d take this approach to roll up finance and accounting, etc. Of course, people were deeply rooted in some of those 13 areas, with a long history of running things with ingrained practices and ideas.

The Key: A Deliberate Process

When we first told our people about this, we heard general resistance from both entities. At first, people couldn’t sort out the pieces and see how they would work together. But we soon found that the new culture and approach started to create its own momentum.

We went through a purposeful, deliberate process to identify our approach, continually checking that everyone understood. Whenever we made decisions, we asked, “Are we all aligned on this decision?” Although we urged people to state their comments, at some point, top management had to make a call. That process helped us to avoid recycling and rework. We used a consensus-building process that was focused on the way we made decisions.

With Root Learning, we did leader alignment sessions at the senior level and a few levels down, followed by a Learning Map® module that was cascaded through all 13 functional areas. From the top leaders to the frontlines,
the rollout took us about a year.

Finding the Best of Both Entities

Now, people are not naïve. They understood that a merger was going to occur, and they were cautious. But the operations and culture changes happened much faster than we predicted. In fact, by the time leaders emerged from management alignment sessions, a lot of progress was already being made. I believe this was because our decision-making process was so thorough.

We went into this process with the intent to change some habits – not all – so we could move toward an image that we wanted to create as a company. We gave some strategic directions on how we would pursue business, and some people struggled. But others put their shoulder to the issues and became a key force in its success. We heard people say, “I think I understand why this is significant and better, and I want to be a part of the solution.” They really wanted to get behind this change, and these people have since emerged as leaders of the organization. Throughout the organization, people worked to make this happen and align to our vision. We continue to see the emergence of ongoing senior leadership.

This merger reminded me of a time in 2004 when our government operations did a system rollout of SAP, eliminating old legacy systems. For a while, people were frustrated, but once we got through the implementation phases, attitudes changed. We went from “This is hard”
to “I couldn’t have done this with the old system!” We
had similar feelings in this merger process.

Success Builds on Success

Once we aligned all 13 areas, we were able to share some great ideas. For example, when we shared the power entity’s service approach with the government entity, they gained a stronger approach toward nuclear service, and decided to do a nuclear reactor design. This happened only because we brought the two sides together; it would not have happened independently. Success builds on success, and efficiency builds on efficiency.

The biggest differentiator in the success of this project was our deliberate approach. If we hadn’t been as thorough, we might have lost some good people along the journey. Instead, this brought everyone along in a bigger block so we could optimize our direction, people, and resources in profound way.