Focus on Bayer and Schering:

Integrating strong corporate cultures

The acquisition of Schering AG, Berlin, Germany, for approximately €17 billion significantly changed the face of the Bayer Group in the past fiscal year. The new company, Bayer Schering Pharma AG¹, Berlin, Germany, is one of the world’s leading companies in the field of pharmaceutical specialties, and as such will strengthen the HealthCare business and thus the Bayer Group as whole. The key to economic success here is a smooth fusion process and the ongoing integration of the two corporate cultures.

Dr. Johannes Rüegg-Stürm, Professor of Business Administration at the University of St. Gallen, Switzerland

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“The main priority in mergers is to ensure that the new company has the ability to make decisions and take action as well as to avoid creating a sense of insecurity among the employees.”
Dr. Johannes Rüegg-Stürm, Professor of Business Administration at the University of St. Gallen, Switzerland

Bayer quickly and vigorously embarked on the integration of Schering right from the first announcement concerning the acquisition on March 23, 2006. Bayer integration manager Lambert Courth, who had previously successfully handled the assimilation of Roche’s self-medication business, underlined the importance of deadline pressure. He and his team, composed of members of both companies, were able to transfer all key functions into the new organizational and management structure as of February 1, 2007. “We’ve been working as one company ever since,” says Courth.

The goal is joint success
Professor Johannes Rüegg-Stürm, who teaches business administration at the University of St. Gallen in Switzerland, confirms the necessity for rapid integration: “It would naturally be preferable to first learn about all resources in detail in order to make optimal use of them. But the main priority in mergers is to ensure that the new company has the ability to make decisions and take action as well as to avoid creating a sense of insecurity among the employees.” Courth is convinced that Bayer has accomplished just that: “We were able to integrate Schering into the Bayer Group quickly. Now we are well on the way to developing a cooperative, performance-oriented and clearly structured style of working.”

In order to succeed, it is crucial that everyone affected be convinced of the new company’s chances on the market and actively contribute to the integration process. Professor Rüegg-Stürm, who specializes in organizational behavior, regards the key task as convincing the involved employees of the strategic reasoning for the merger. “This reasoning is based on market demands and customer needs.” The main reasons for a takeover are usually new challenges in a changing environment, he adds.

Lambert Courth, in charge of integrating Schering into the Bayer Group

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“We were able to integrate Schering into the Bayer Group quickly.”
Lambert Courth, in charge of integrating Schering into the Bayer Group

Making the integration fair
Bayer estimates that the merger will generate approximately €700 million in synergy effects per year. In addition, the company expects to reap sustained benefits from the expanded product portfolio and well-filled research and development pipeline. Right from the start, however, Group management has pointed out that the merger will yield not only opportunities but also the need to eliminate 6,100 jobs worldwide by 2009. Since fusion processes are associated with hardships for individual employees, Professor Rüegg-Stürm always calls for the difficulties and the opportunities of corporate mergers to be spread across the entire workforce as fairly as possible. “This enables the company to lastingly secure its social capital, i.e. the voluntary loyalty and motivation of its employees.” Courth can only confirm that statement. Company management remains aware of this challenge at all times, says the Bayer expert. And the management will stand by its promise to make sure that personnel adjustments are socially compatible and as balanced as possible.

1,500 of the jobs to be eliminated are in Germany. In March 2007, the Board of Management of the new Bayer Schering Pharma AG signed a company agreement with the Works Council. The agreement is initially valid until late 2009 and outlines the key points in the socially compatible elimination of jobs at the Berlin headquarters. It envisages part-time work plans for older employees and early retirements, severance agreements with compensation payments as well as part-time offers and an internal job center. Added to this are offers to transfer to new positions within the Bayer Group. The Group has assured the employees at Berlin headquarters that there will be no dismissals for operational reasons before mid-2008. Nor is there a “winning” or a “losing” side in the selection of managers for the new Bayer Schering Pharma AG, according to the integration specialist. “53 percent come from Schering, 47 percent from Bayer,” says Courth. “I think that is a very balanced proportion.”

Corporate culture as a success factor

The creation of a sustainable, joint corporate culture will play a decisive role in the success of Bayer Schering Pharma. Professor Rüegg-Stürm also regards a strong and sustainable corporate culture, conveyed through mutual respect and joint strategic challenges and attractive future areas of activity, as an important requirement for economic success. A strong corporate culture, according to Rüegg-Stürm, is the “life form of an organization” as expressed in “self-evident factors” such as “day-to-day approaches of cooperation and management applied in dealing with customer requests, suggestions for improvement and criticism.”

The fact that both companies have developed similar “self-evident factors” is significantly simplifying the integration process, says Courth. These self-evident factors include basic management and behavioral principles such as those outlined in the Bayer Group’s Mission Statement and Sustainability Policy as well as management systems for environmental protection and work safety. Courth is therefore convinced that a new “Bayer Schering Pharma culture” will develop, “uniting the strengths of both companies. It will be future oriented, committed to business success and inspire motivation to reach ambitious goals.”

Uniting past tradition and future perspectives

Another goal of the Schering integration is to take people on both sides “into the new future.” It is important to honor tradition while at the same time “taking leave of some things,” underscores Rüegg-Stürm. The St. Gallen Professor adds: “Economic success depends just as much on employees’ identification with the company as it does on their ability to accept new developments.” During an integration process, it is therefore of great importance to shift focus onto the resources and strengths of both partners and to emphasize new possibilities and perspectives. Courth underscores this point as well: “Discovering common ground is just as important as a goal-oriented alignment. This is why we quickly initiated internal projects, e.g. on Bayer Schering Pharma corporate culture, in which employees from both companies are working together, applying their respective methods in an effort to reach the targets set.”

The names “Bayer Schering Pharma” or “Schering” as used in this publication always refer to Bayer Schering Pharma AG, Berlin, Germany, or its predecessor, Schering AG, Berlin, Germany, respectively. The reference to Bayer Schering Pharma AG or Schering AG also includes business conducted by affiliated entities in countries outside Germany. Bayer Schering Pharma AG and Schering-Plough Corporation, New Jersey, United States, are unaffiliated companies that have been totally independent of each other for many years.