This model created by Philippe Haspeslagh and David Jemison (1990) helps to provide insight on the best approach to take when integrating one organization into another. In the past, the old way of thinking was to absorb the company and make them absorb your company’s culture. Simple criteria were used to choose the proper approach for integration, such as the size and quality of the firm being acquired. Jemison and Haspeslagh suggested considering two additional criteria when planning on integrating a firm into another:
The Need for Strategic Independence
The Need for Organizational Autonomy
What is the Need for Strategic Independence?
The goal of any merger or acquisition is to create value when the two organizations are integrated. There are four types of value creation:
Resource Sharing – Value is created by the firms integrating at the operational level
General Management Skills Transfer – Value is created by improved coordination, control and insight.
Functional Skills Transfer – Value is created by moving certain people or teams for improved sharing of know-how and knowledge
Combination Benefits – Value is created by an increase in market power, purchasing power, borrowing capacity and cash resources.
What is Organizational Autonomy?
Jemison and Haspeslagh cautioned that management must not lose sight of the main purpose of the acquisition is to create value. Although, people are important and should be treated fairly, you must not grant autonomy to the acquired asset too quickly. You must first assess the need for autonomy, and they developed three questions that should be asked when determining where and how much autonomy to grant the acquisition:
Is autonomy essential to preserving the strategic capability we have bought?
If the answer to the first question is yes, then, how much autonomy should be allowed?
In which specific areas is autonomy important?
The Preferred Acquisitions Integration Model?
Utilize the graph and the scores on the sections above (The Need for Strategic Independence and The Need for Organizational Autonomy) to determine which approach is preferred:
Absorption – Management should be aggressive in ensuring that the vision for the acquisition is carried out as planned.
Preservation – Management should focus on keeping the source of the acquired benefits intact and provide a nurturing environment.
Symbiosis – Management must ensure a dual boundries, boundary preservation and boundary permeability, as the two firms integrate over time.
Holding – There is no intention of integrating the firm, the value is created by the capabilities of general management, the sharing of risk and financial transfers.
Haspeslagh, P. C., & Jemison, D. B. (1986). Acquisitions: Myths and Reality. Insead.
Haspeslagh, P. C., & Jemison, D. B. (1991). Managing Acquisitions: Creating Value Through Corporate Renewal (Vol. 416). New York: Free Press.