Case Study Addressing Cultural Differences

Loctite Corp. was founded in the mid-1950s by the Kriegle family. Thirty years later, the Hartford, Connecticut-based adhesive-making company became publicly traded. The Kriegles held 40 percent, and began selling shares to the Henkel family in Germany. For 10 years, the Henkel Co. acquired shares from the Kriegles, and the two families maintained a comfortable relationship. Then, the Henkels decided Loctite could give them a global presence. By January 1997, the Henkels owned the company.

“That changed our lives,” says Bruce A. Vakiener, executive vice president of Loctite Corp. and the person responsible for global HR. “We have gone from a billion-dollar, very entrepreneurial, innovative company with a flat management structure to part of a $14 billion German conglomerate. The philosophies of the companies are different. The cultures of the companies are different. And the [cultural differences] between a German organization and a U.S. organization are very significant,” he says.

Loctite faced tremendous HR challenges. For one, Loctite is organized on a regional basis. Henkel is organized in country units. When the Henkels tried to pull some of the business units together, they faced individual country managers who refused to relinquish control to a regional manager.

Another factor affecting unification has been the German desire for knowing lots of details before moving forward on a project. This is especially difficult when American managers are unclear about which decisions the Germans need to approve.

To help with these dilemmas, Loctite uses Chicago-based IOR, an intercultural and global relocation firm. “The No. 1 issue that needs to be addressed is people’s sense of anxiety about loss of control,” says Peter Burgi, a consultant with IOR. “Best practices in merger situations [include doing] as much of the immediate changing as you’re going to be able to do as quickly as possible. Failure to do this will allow political power issues to go underground and resurface as cultural differences.”

Loctite created cross-border teams for people to get to know each other. The company developed a cultural-sensitivity program, and senior managers also take German language lessons. “I think we’re on the road to being successful,” Vakiener says. “However, we weren’t able to reach increased sales figures on the original time frame because we spent much more time focusing on acquisition issues, as opposed to growing the business. We blurred our focus for the last 18 months.

Global Workforce, September 1998, Vol. 3, No. 5, p. 16.