March 15, 2002 03:10
`Clean Team' Prepares for HP-Compaq Merger
By Tracy Seipel, San Jose Mercury News, Calif.
Mar. 15--It's a marriage of convenience, strategy -- and maybe even survival. And like all unions, good or bad, this one might not work out.
But if Hewlett-Packard's proposed $21 billion acquisition of Compaq Computer wins shareholder approval Tuesday, both companies are counting on the past six months of intensive pre-merger planning to help them resolve the inevitable issues of duplication, miscommunication and personality that any new partnership has to negotiate.
Since October, a group of full-time employees from both companies -- now up to 900 people -- has been designated to work on the back end of the deal. They have spent 500,000 hours deciding which product lines will live and which will die, which suppliers and partners will get more business and which will be dropped, which offices will be occupied and which vacated.
Most importantly, they are making decisions that will affect which 15,000 employees will lose their jobs as the two companies integrate their combined workforce of 150,000 people.
And they are doing all of this even as the two companies continue to compete against each other in the marketplace.
"This is not just about running down to Houston and hoisting the HP flag on the front lawn," said Crawford Del Prete, senior vice president of hardware research at IDC. "HP has done everything they possibly can...doing due diligence on what happens on day 1, day 10, day 50 and day 100."
To help them achieve their integration goals, the companies hired outside business consultants that specialize in both the product- and people-side of mergers.
"Why tech mergers don't work is because they don't do the fundamental planning. They don't prepare," said Dan Plunkett, senior partner with Mercer Delta, one of the firms helping in the integration process. "The minute the bell sounds, they try to figure it out all at once."
HP and Compaq say their team, led by HP executive Webb McKinney and Compaq Chief Financial Officer Jeff Clarke, has studied why other mergers have succeeded or failed -- including looking at Compaq's own difficult acquisition of Digital Equipment Corp. in 1998.
If the deal is approved by shareholders, HP officials say the merger will be closed in early April. The new company will have four business units, and HP has named the head of each one, but the Palo Alto-based company won't release the names of the extended management teams.
In fact, HP and Compaq won't say much about what the combined company will look like. They say they can't release the names of the surviving product lines for legal reasons. They won't identify the employees who will be laid off to avoid unnecessary anxiety. And they won't identify details of where the expected $2.5 billion cost cuts will come from.
The planning team -- nicknamed "The Clean Team" because they don't mix with the rest of the employees -- have spent their days in endless meetings. And the team meetings won't end if the deal passes. Company officials said planning meetings will continue for a year or more, depending on what is needed to integrate the new company.
Decisions are being made through an "adopt and go" approach, in which teams in each area come together, quickly identify which company has the better product or way of doing business and adopt it for the new company.
"The alternative to `adopt and go' is trying to create something new in every part of the company, and that creates a lot of complexity, slows down the process, and makes it all unnecessarily difficult," McKinney said during a conference call with reporters this week.
The recommendations are reviewed and approved every Thursday by a steering committee made up of Clarke, McKinney, HP Chief Executive Officer Carly Fiorina, Compaq CEO Michael Capellas, HP Vice President of Human Resources Susan Bowick and Compaq Chief Information Officer Bob Napier.
Documents related to all decisions are stored in an "e-Room" on a secure intranet that already has about 3,000 folders and 10,000 files.
Members of the integration teams say the most obvious differences are in way the companies do business, such as the way they manage spare parts for their computer products.
But there are other, more subtle differences. HP employees operate through voice mail, while Compaq employees prefer e-mail. HP employees tend to be more analytical and thoroughly evaluate data before making a decision, while Compaq employees tend to make decisions quickly and fix problems later.
Compaq workers say their company holds individual people more accountable for their successes and failures than HP, where responsibility -- and rewards -- are more collective.
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