Oil and Wasser

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England's Royal Biscuit Company and Gernnany's Edeling GmbH are in the final stages of a merger. Will a global culture clash cause the deal to crumble?

Oil and Wasser
by Byron Reimus

M'

,iCHAEL BRIGHTON felt as if he'd been slapped. His back stiffened into the cold leather chair as Sir John Callaghan, the temperamental chairman of the London-based Royal Biscuit Company, angrily brandished the memo. "There is no evidence the two of you collaborated on this leadership development plan!" he hollered, glaring at Brighton while his German counterpart, Dieter Wallach, stared stonefaced at the conference table. "This is a disgrace," Callaghan said. "You've had over three months to put together a coherent program, not a mishmash of features culled from warmedover HR presentations!" He slammed the memo on the table. The conference room's glass doors rattled slightly. Anthony Miles, Royal Biscuit's head of marketing, overheard the commotion as he passed in the hallway. He raised his eyebrows and quickened his step.

Callaghan, a self-made billionaire who did not suffer fools gladly, was famous for his displays of temper. But Brighton had never been on the receiving end of his boss's fury, despite serving as Callaghan's head of HR for overfiveyears. Brighton was inclined to place the blame on his German counterpart, from onetime competitor and now merger partner Edeling GmbH, for the lack of progress. Still, he kept his mouth shut. "If Dieter weren't such a stickler for process, we would have been a lot further along," he thought grimly. To some outside observers, Callaghan's tantrum would have seemed like the inevitable result of an overly ambitious marriage of two proud firms. On January 30, accompanied by Edeling CEO Heinz Burkhardt, Callaghan had stepped proudly before packed conference rooms in London and Frankfurt to announce the merger. On one side of the deal was Royal Biscuit, an

HBR's cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts. MAY 200^1

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H B R CASE S T U D Y • Oil and Wasser

entrepreneurial powerhouse that had single-handedly transformed the British snack food business in ten short years. On the other was Munich-based Edeling, a family-owned, 120-year-old model employer and beloved German brand. The new company. Royal Edeling, would amicably blend the British and German organizations, creating the world's second-largest consumer foods business. It would be a "merger of equals,"the top executives proclaimed, and a great example of European togetherness. Callaghan would serve as the CEO of the new firm, headquartered in London, with Burkhardt becoming nonexecutive chairman of the supervisory board. Shares of the company would be listed for trading in both London and Frankfurt. Under German law, the new organization would be governed by a management board that kept an eye on operations and by a supervisory board that oversaw management and represented all the stakeholders. On paper, at least, the deal made perfect sense. But the merger was proving more difficult than the leaders of either company had imagined, and it was already May. Integration planning was dreadfully behind schedule, and stockholders had been promised the details of the new organizational structure, including a precise timetable, by June i. As far as Callaghan was concerned, the difficulty Brighton and Wallach were having merging the two firms' leadership development programs bordered on the ridiculous. He had biggerfishto fry. The press was being neither cooperative nor patient. The British and German governments had yet to sign off on the merger. And the final verdict of investors was anything but certain. The last thing he wanted to contend with was bickering between two HR lieutenants.

ing excellent managers, you are leading "We have a proverb in Germany," Walan effort that has tremendous symbolic lach interrupted."'What's the use of runimportance. Our...
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