Creating Culture

In November 2006, 250 executives from Nokia Networks and Siemens Communications got together in a room in Munich, tasked with hashing out the details of their impending merger. Nokia and Siemens already had a good idea of what the company would look like on paper: They would create a huge global company with strengths in both wireless and wireline telecommunications, leverage a massive international sales force and achieve economies of scale unavailable to either company so long as they remained network divisions of their parent companies. But NSN also would be the merger of two distinct corporate cultures. Bastions of engineering in their own countries, Germany and Finland, each had their own deeply ingrained identities and, yes, pride. The numbers aside, how would the new NSN function?

Attending that meeting was Bosco Novak, who would become the head of human resources for the new joint venture. The president of Nokia Networks and future CEO of NSN, Simon Beresford-Wylie, had asked Novak to take over the role in July, two days before the merger agreement was publicly announced. At the time, Novak headed Nokia's global services division and supervised a huge multinational organization — and also had an inherent cultural asset: He was a German who had worked for Nokia since 2000. But Novak had not a lick of HR experience and was puzzled by his boss' choice. But Beresford-Wylie explained that his role wouldn't be that of an ordinary HR manager. Novak would be responsible for crafting and implementing an entirely new culture at NSN. Novak accepted and five months later he and 249 other executives, managers and engineers were trying to figure out what exactly that new NSN culture would be.

The group managed to find several fundamentals that the two companies had in common: They both were Western European; they both had an ingrained engineering culture; and their employees also had a deep pride in being on technology's cutting edge and a feeling of making a difference in the world. But those cram sessions also revealed some profound differences, not just in their surface organizations but in how their employees related to one another and management and in their approach to problems. Most striking of those differences was a sense of formality and structure in Siemens' culture, as opposed to a looser set of relationships and emphasis on flexibility at Nokia.

“That was an extremely important exercise,” Novak said. “It was the first time we really explored the soft issues of the merger. Of course there was a lot of enthusiasm for the merger. We would be creating one of the winners in the industry — that was all nice and dandy. But we really went deep into some of the key issues like ‘How do you make decisions?’ ‘How do you select people?’ ‘How do you behave as a leader?’ ‘How accessible are you?’ That discussion brought up quite a lot of the differences between the two companies.”

Novak soon discovered that reconciling those differences would become one of the most difficult parts of the merger process. On paper the companies fit together like two pieces of a jigsaw puzzle: Nokia's market standing in the wireless networks business and its penetration among Tier 1 operators complimented Siemens' strengths in wireline, optical, switching and the converged core, as well as its strong Tier 2 and Tier 3 customer base. Though by no means easy, the hard issues involved the consolidation of product lines and the establishment of new business processes and sales channels. But the soft issues of the merger were an entirely different problem.

Nokia has one more seat on the board of the joint venture and got to pick NSN's CEO, but the venture was intended to be a merger of equals, not an acquisition or a lopsided partnership. In fact, on Day 1 of the merger 35,000 Siemens employees joined the new company as opposed to 25,000 from Nokia. The new NSN couldn't just simply foist one company's culture on the other. Nor could it just try to cram the two cultures together and hope for the best.

“Most mergers don't work because of soft factors rather than because of hard factors,” Novak said. NSN had to create a new corporate culture, he added — one that drew heavily from the cultures of the companies that created it but had its own distinct identity.

OF FISH AND SUPERTANKERS

The roots of Nokia Networks and Siemens Communications stem, not surprisingly, from their larger corporate parents, each an industrial powerhouse in its own right. Nokia and Siemens both have histories as vast conglomerates in their home countries. Siemens Aktiengesellschaft employs nearly half a million people worldwide and builds everything from hydroelectric dams and heavy construction machinery to medical imaging equipment and Sylvania light bulbs. Siemens looms large in the industrial psyche of the world's fourth largest economy, ranking among the top 10 largest companies in Germany.

Nokia Corporation's origins lay in the paper and rubber industry, and at some point in its history has manufactured rubber galoshes, generators and even personal computers. But in the 1990s it shed most of those businesses to focus on telecommunications, and today it is, by a huge margin, the world's largest manufacturer of mobile phones. It employs 130,000 people worldwide and is the industrial titan in Finland, accounting for one-third of the market capitalization of the Helsinki Stock Exchange.

To sort out what the new culture would be, NSN first had to define the cultures of their parents, both of which were ingrained after more than 100 years of operations. To accomplish that task, NSN's new integration team hired Adrian McLean, an associate with Ashridge Consulting, part of the Ashridge School of Business in the U.K. McLean describes himself as a “professional facilitator of cultural change.” He's worked with GlaxoSmithKline on cultural integration issues during their merger in 2000 as well as advised organizations as diverse as Jaguar and the U.K.'s diplomatic mission to the United Nations.

McLean's first goal was to give the new companies a clear view of how Nokia and Siemens employees viewed their perspective organizations. After interviewing countless employees from either side, McLean and a graphic artist created a series of images that summed up each organization's culture.

“In Nokia the dominant image was of a shoal of fish,” McLean said. “What this represented was the values-driven, self-organizing capacity inside Nokia. A lot of people had a sense of having freedom, but the coordination occurs through adherence to some strongly felt and shared values.” Nokia was obviously a team culture in which networking was highly prized and managers led from amid the ranks of their employees, McLean said. Nokia's culture embraced the group effort rather than the individual hero, he said.

“In Siemens, the image that came through time and time again in our workshops was that of an oil tanker,” McLean added, “a huge oil tanker with lots of different levels and layers and floors. It provided a sense of something very large and powerful, which has extraordinary momentum but is very structured and hierarchical.” Siemens' imagery depicted a sense of history, destiny and determination tempered by its imposing structure and focus on rational deliberation. “The sense is they may not be the fastest ship, but they will accomplish things,” he said.

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