Updated: 3 days ago
Leadership changes at HP soon after the merger resulted in friction affecting employees in both companies. HP’s decentralized management style conflicted with the hands on approach Autonomy’s CEO Michael Lynch used. Autonomy’s entrepreneurial management method clashed with the HP’s entrenched hierarchical structure.
Leadership Turnover. Leadership turnover, or the act of changing CEOs during the acquisition or integration phases, is quite common for HP: it has a history of replacing its own CEOs soon after it acquires another firm.1 At the time of the acquisition of Autonomy, Léo Apotheker was CEO of HP. Apotheker’s vision for HP included entering the software industry while trying to exit the PC business.2 He moved his vision forward by purchasing Autonomy, but his time at HP was cut short when the board at HP fired him shortly after announcing the acquisition.3 In hindsight, firing Apotheker was probably not the best course of action; Michael Lynch and Apotheker had a working relationship built on a mutual background in computer hardware and through cooperating on the Autonomy acquisition. Lynch responded to Apotheker’s dismissal saying, “Autonomy was left to try to integrate into HP without the very people who had conceived of the acquisition and who were uniquely positioned to execute that integration.”4 The problems with changing management became obvious: the new leaders were not as invested in integrating the purchased company, and there was no longer an established relationship between new and old CEOs.
In addition to changing its own CEO, HP struggled to retain Autonomy’s management. One commenter highlights HP’s inability to maintain the management of its acquired companies saying, “HP has had similar problems hanging on to the bosses of other hi-tech firms it has acquired.”5 The change in leadership from Apotheker to Whitman left many of the top executives at Autonomy frustrated and disenfranchised, and subsequently the President, CFO, CTO, CMO, COO, and the head of Aurasma (a division in Autonomy which created an augmented reality technology) left the company shortly after Meg Whitman became CEO of HP.6 Lynch didn’t last much longer, departing just eight months after Autonomy was acquired.7 HP failed to recognize and learn that maintaining top management at its target company will give employees an example of how to act in the process of merging cultures. This change in management negatively impacted the operations of the combined company.
While HP wanted Autonomy’s culture, technology, and people, it did not realize that “acquiring a firm with a valuable knowledge-based resource…does not ensure that the knowledge is successfully transferred to or combined with the resources of the acquirer during acquisition integration.”8 The failure to retain the talent and knowledge is exemplified by the “estimated 25 per cent of Autonomy’s staff” which left within seven months of the merger closing. In failing in the early stages to effectively communicate and integrate, many of Autonomy’s employees felt alienated and left – dealing a severe blow to an already tenuous union. Four years after the acquisition (in 2015) one employee said, “Management is in constant flux due to frequent organizational changes, and will generally only communicate with engineers to ensure critical issues are getting immediate attention.”9 Thus, HP and Autonomy illustrate the fact that the effects of management turnover can be pervasive, long-term, and debilitating.
Large Power Distance vs. Small Power Distance. One sign of an emerging problem in mergers stems from the difference in organizational structure of the merging companies. According to Meyer and Hofstede, the U.S. is typically more egalitarian while the U.K. is more hierarchical.10 Even though the U.S. is relatively more egalitarian than the U.K., HP and Autonomy exhibit the opposite cultural norm—yet again. HP is an established company with many layers of management, whereas Autonomy was small and run mainly by its founder and CEO, Mike Lynch. HP is formed in a hierarchical structure which is necessary because of the size of its operations. In contrast, Autonomy had an egalitarian structure which links back to the roots of the organization: Lynch was still in charge and highly involved in every operation of the company. An article in Business Insider notes, “He ran this company like a small private company, he was involved in all facets of the company, he was extremely hands on.”11 The level of involvement Lynch had at Autonomy is surely impossible in a corporation as large as HP, and this difference caused tension between the two companies; “It is a classic case of entrepreneurial spirit curdled by the culture of big business.”12
Though national cultures differ with regard to individual attitudes toward preferred organizational structure, neither country exhibits a strong inclination towards highly uneven power distributions.13 Moreover, the UK scores a 35 on the power distance index (PDI) which “sits in the lower rankings of PDI – i.e. a society that believes that inequalities amongst people should be minimized.”14 As aforementioned, Autonomy operated with a relatively low amount of power distance prior to combining with HP. Initial communication from HP suggests that “HP made promises to leave Autonomy’s culture alone. ‘The lioness not rolling over her cub’ was how it was expressed by some HP executives. But over several months HP began to exert more control, leaving employees increasingly disgruntled.” Had HP respected Autonomy employees’ discomfort with uneven distributions of power, many of the “culture clashes” could have been avoided. This isn’t to say that employees from all nations exhibit strong intolerance toward uneven distributions of power. For example, Chinese employees tend to exhibit little discomfort with large levels of uneven power distribution – as evidenced by their score of an 80 on the PDI.15 The culture clashes exhibit the importance of tailoring the integration style in cross-border M&A. In this case, Autonomy employees saw a relatively egalitarian structure become increasingly more hierarchical, which made them feel alienated in the new organizational environment.
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