Honeymoon the time of big change for GlobalCo

By PHILIPPA STEVENSON agricultural editor

The three-way dairy industry merger is in its most critical phase but new chief executive Craig Norgate says outward signs of change will be few and far between.

Six days into his new role, Mr Norgate acknowledges the intense interest in the $12 billion GlobalCo but predicts "a heck of a lot of activity but not much visibility."

The merger of the Kiwi and New Zealand dairy companies with their Dairy Board marketing arm will create the country's biggest company when it is officially launched in October.

Business consultants agree that the first six months after a merger or acquisition is sealed are critical for getting the hoped-for value from the deal.

"They represent the honeymoon period, during which people are highly receptive to major change," said Graham Cobley of PA Consulting.

In its key insights on post-merger management, McKinsey consultants says: "Eighty per cent of the value creation in a merger is determined by the quality of the integration process launched within the first 30 days of the initial announcement."

Mr Norgate, aged 36, seems well aware of the magnitude of the challenge.

"We've got a lot of work to do and it's head down. We got a great mandate from farmers and we've got to repay that in spades."

The first step was to put in place a human resource team to begin the integration of the three organisations - starting with the crucial detail of who would report to him as chief executive, he said.

"That is absolutely critical, and we can get on with that now."

McKinsey advises that the first of four key steps to designing and launching a new organisation is to "resolve the top roles as soon as possible, and reassure the top 10 to 20 per cent of high-performing employees that they have an important role in the new company."

In GlobalCo's case that would include the unsuccessful candidates for the top GlobalCo position, respected Dairy Board executives Chris Moller and David Pilkington. They head the board's strategic business units, respectively, NZMP and New Zealand Milk.

Neither man was available for comment but Mr Norgate was keen to keep them in the company.

"I'd love to have them. They are two of the best people in the dairy industry internationally and there's nothing I'd like more than to have them stay on in the business."

And the move from Wellington to Auckland of Dairy Board staff, in what will be the company's marketing arm, may not be the certainty suggested by earlier GlobalCo statements.

Mr Norgate said GlobalCo's Auckland office would be a small corporate centre focused on strategy and the overall performance of the group.

"So we are not talking about a wholesale move of people to Auckland."

The detail of who would be required where would be worked on in coming weeks but Mr Norgate said it was vital not to disrupt the company's overseas trade.

"We've got to make sure that our customers and shareholders don't notice anything in terms of a fall in service standards, if anything [they should see] a lift.

"Business as usual is still a focus for the vast majority of staff in the industry while we work through the change process as quickly as we can."

Though the merger had created rifts in the industry he was confident they were closing.

"I think the farmer vote has been the catalyst for people focusing firmly forward. There is real excitement among staff for what we've got in the legacy of the three organisations, and the opportunity to drive it forward with the best people in the industry all playing on the same team," said Mr Norgate.

The international dairy trade, in which GlobalCo hopes to eclipse the record of the Dairy Board, would see a more focused organisation with better customer performance, more rapid innovation, and more decisive execution of strategy, Mr Norgate said.

"A bigger beast and one in better shape to take on the world."

That was likely to mean a better focus on the industry growth strategy from mergers and acquisitions of overseas companies.