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Mark sat in his office overlooking the bustling floor of Dynamic Research's new office building. He was exceptionally proud of the growth the company had experienced in the past few years since founding it in 2001. Under his leadership as CEO, Dynamic had become a key player in the industry of marketing research. He was also concerned. Dynamic's parent company, Atlas Group, had entered into a hostile takeover in 2009 which merged Dynamic with their largest competitor, RNS. It was Mark’s responsibility to make sure this merger went smoothly. The integration of the two companies was widely viewed as the most important strategic initiative that Dynamic had undertaken since its inception. Some aspects of the integration had gone very well, but the company had also failed to hit some of its key financial benchmarks. Atlas Group management had recently put additional pressure on Mark to hit the outlined objectives prior to the upcoming board meeting. The continued success of Dynamic’s business, as well as Mark’s career, would likely be determined by the outcome of this integration. It had been just under a year since the acquisition and Mark was due to present an update of the integration's progress at an upcoming executive board meeting. Dynamic Research Background Dynamic Research was founded in 2001 as one of the first online marketing research panel companies. Before then, if a company wanted to perform research on their customers, the most common solution was to design a survey asking the pertinent questions and mail it out to a list of names. For example, a clothing retailer could design a survey that asked customers how satisfied they were with the level of service they received. This survey would then be mailed out to their internal database of customers. This method of conducting primary research could be time consuming and very expensive. Dynamic was able to solve this problem by creating a panel, or collection of people, who would be willing to take these surveys online. In exchange for taking a survey these panelists received coupons, gift certificates or some other form of incentive (See Exhibit 1 for a sample survey). In 2008, Dynamic had just under a 15 percent share of the market. After the acquisition of RNS, Atlas Group management expected Dynamic to have a market share greater than 35percent.
Dynamic Research: The Challenge of Acquisition How Corporate Culture & Structure Impact Change Management Victor Davidson, MBA Suffolk University Jodi Detjen, Instructor of Management and Entrepreneurship Suffolk University
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In addition to its unique business model, Dynamic also had a different organizational structure than most other marketing research companies. Dynamic existed as a subsidiary of the Atlas Group, a global holding company, that also included advertising, public relations and consulting companies. Although it operated mostly as a stand-alone entity, Dynamic’s management was accountable to the executives at Atlas. Dynamic was founded as a way for Atlas Group companies to conduct primary research without needing to go through third party panel companies. Dynamic started with 20 employees based in Saddlebrook, New Jersey. Although it was part of a much larger organization, from the start Dynamic was run as a small start-up company. The primary goal of the company was to provide quality marketing research in a profitable manner. Although the company was started in the wake of the dotcom bust and ensuing recession, online research was on its way to becoming the industry standard, and after the first two years Dynamic was operating at a profit. Over the next few years, Dynamic's profit and organization continued to grow at a steady pace (Exhibit 2 has the historical pro forma income statements). An Acquisition Opportunity Starting in 2007, Atlas Group had been exploring several options for expanding into international markets and growing their product offering within the US. The option favored most by the management of Atlas Group was to acquire a competitor with a pre-existing global presence. In September 2008, an opportunity presented itself. RNS, the global leader for consulting and research services, had had several years of declining revenue and a depressed stock price. In 2003 they held a nearly one-third share of the total US market research industry. By 2008, their share had dropped to about one-fifth of the market. It was widely rumored within the industry that RNS would make for an ideal acquisition target. RNS publicly denied these rumors, but nevertheless, a race ensued among RNS’ major competitors to be the first to acquire the ailing company. Within the research industry there were only a handful of major players; whichever one managed to acquire RNS would become significantly larger than the others. Although Atlas Group was one of the smaller competitors, it had a strong balance sheet and was able to pull together financing faster than any of the other companies. With its financing secure, Atlas Group entered into a transaction to buy RNS. The acquisition was expected to add value to both Atlas Group as a whole, and to Dynamic. It would allow Atlas Group to offer significantly more consulting services across several business units, and in part would complement Dynamic's panel operations. In addition to providing additional panel participants in the US, a merger with RNS would allow Dynamic to offer services in several new international markets. However, the RNS management was not at all enthusiastic about being purchased by a smaller competitor. They suspected that an acquisition would bring layoffs in upper management, and were unwilling to admit that they needed help to restart the growth of their company. This led the RNS management team to strongly oppose any acquisition attempts, and required Atlas to acquire the company through a hostile takeover. Competitive Advantage At Dynamic
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Primary research in the form of online surveys made up the vast majority of Dynamic's business. The process by which Dynamic executed these surveys was a key component of its strategy, and an ongoing point of differentiation from competitors. In 2009, Dynamic had 20 project managers on staff. Each of these project managers would oversee a project from survey design through the results phase. The business was designed this way to allow for maximum flexibility and process speed. Dynamic’s primary objective was to be profitable and keep clients happy while doing it. There were several other options for potential clients aside from an online panel: phone interviews, in person interviews and mail surveys to name a few. A big point of differentiation for Dynamic was the speed at which they could field a survey and return the results. In order to compete with larger, more established companies Dynamic had to ensure they were faster than the other options. Broadly speaking, all marketing research projects, including online surveys, consisted of five steps: project sale, survey design, sampling, fielding and results. Most companies in the research industry used all, or a combination of, these five steps. Average Process Time Per Project: this chart describes the average amount of time each step of
the panel operations process takes for each project. Panel Operations Process Dynamic Research RNS Survey Design 3 hours 4 hours Sampling 5 hours 8 hours Fielding 4 hours 7 hours (fielding and results) Results 2 hours Total 14 hours 19 hours Source: Dynamic Research Company Document Dynamic saved these five hours across their business process: 1. Sale of the project - this part of the process was driven by either a Dynamic business
development associate or by a client. Business development was a separate division within Dynamic Research which was responsible for bringing in new business. Most of the interaction between the business development group and the panel operations group occurred in this step.
2. Survey design - After a client signed a formal proposal with the business development group, the business development person would pass the project on to a project manager to set up a kickoff call to discuss the client's objectives and to design a survey that would meet those objectives. This was a very important step. If the project manager didn't fully understand the client's objectives, the survey would not provide the necessary insights. An additional part of this step was to pass the survey on to the programming department who would set up the survey on a website and design the email invitation.
3. Sampling - In this step, the project manager would use Dynamic's proprietary software to create a list of the panelists who would be sent the survey invitation. Careful consideration needed to be made so the survey was sent to the right type of panelists. For example, a survey
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may be designed for only people under the age of 25. In this case, it was the project manager's job to make sure this restriction was enforced.
4. Fielding - This step involved sending the invitations out to the appropriate panelists and monitoring the results as they came in. Most studies were designed so the client paid for a specific number of completed survey results. The project manager was responsible for sending out enough invitations to get the right number of completed responses.
5. Results - The final step in the process was to gather the survey results and deliver them to the client. Depending on the client's preference the project manager might also be required to present the survey findings and insights to the client. For many of Dynamic's project managers, this was the most exciting step. It allowed them to analyze the data and show the value of Dynamic to the client.
In addition, Dynamic’s process was responsive to rapid change requests. By having a single person, the project manager, oversee a project from start to finish, Dynamic was able to make quick changes in the survey or sampling plan in mid-project. It was often the case that a client would design a survey and have it fielded by Dynamic, but then would want to add a question to the survey or increase the number of respondents from a certain demographic group. Because the project managers were familiar with all steps in the process, they could make these changes quickly. This client centric approach quickly earned Dynamic a reputation for delivering "rapid, reliable results." One other area of competitive advantage for Dynamic’s business was the panel care group. This was a small, but crucial, group within Dynamic and consisted of five employees. The purpose of the group was to ensure that the Dynamic panelists were receiving their incentives in a timely manner and to answer any questions that a panelist might have. Although the process of delivering incentives was mostly automated, there were some instances where a panelist believed they deserved more money or an additional gift certificate for taking a survey. It was the panel care group’s responsibility to resolve these issues and make sure the panelists had a pleasant experience completing surveys for Dynamic. Also, in cases where a panelist was taking a survey and got disconnected from the Internet, or had issues accessing a specific survey, the panel care team would help them figure out what was wrong. The effective administration of these duties was a key component in panelist retention, which in turn affected the company’s profitability. The Integration Plan From Atlas Group’s perspective, the panel integration was only a small piece of the overall acquisition. In addition to acquiring RNS' panel business, Atlas Group was also adding RNS’ consulting services, marketing agencies and a global infrastructure. Each of these additions would make Atlas Group more competitive in the global markets. All of the communications that Mark had received from Atlas Group management suggested that the Dynamic and RNS integration should be the easiest and most readily profitable component of the overall acquisition. In light of this, the goals that were set for Mark in terms of timing were very aggressive. Mark had asked at several meetings if the one-year deadline was fixed, and was told yes, and that the deadlines had been thoroughly considered and agreed upon by higher management.
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Because the acquisition was a hostile takeover, and not approved by the RNS management, Dynamic had to rely mostly on intuition with regard to how the panels were organized and how they actually operated. Although Mark had a good sense of the general operations of the RNS business, he didn't have any information other than what was publicly available. This made it especially hard to develop a meaningful integration plan. As they would later find out, the corporate structures of the two organizations were radically different. As Mark put it, "when it came to designing an integration plan, we were totally in the dark. Many of our plans amounted to assumptions and informed guesses." Mark began by creating a formal plan for the integration with a timeline and goals for everyone involved. However, this proved particularly difficult without prior access to RNS’ management or operations staff. In the end, he decided to approach the integration from two perspectives: operations and human resources. He put Greg Burnell, the Senior Vice President of project managers at Dynamic in charge of integrating the two companies operationally and tasked Kelly Whalen, the Senior Human Resources (HR) manager with handling the HR related issues (See Exhibit 3 for complete bios of the key players involved). The lack of information was compounded by the tight timeline in which Atlas Group expected the integration to take place. They knew beforehand that RNS' panel operations were run as a cost center. This meant that the panel group did not deal with clients directly and was concerned with minimizing costs rather than generating revenue. The general assumption of Atlas Group management was that moving RNS' panel under Dynamic would almost immediately provide the resources to generate additional revenue. After all, Dynamic would have access to all of RNS' US panelists and international panels. In theory, Dynamic would be able to double the number of projects it could perform overnight. The increased size of the panel would also enable surveying smaller segments of the population like the Hispanic market or young professionals which are more difficult to get responses from. For example, the Hispanic population traditionally has low panel participation rates. Having access to a larger percentage of Hispanics would provide Dynamic with a larger sample resulting in more rigorous research among this population. Given the perceived ease with which Atlas Group expected Dynamic to be able to integrate the two panel companies, a deadline for a complete merger was set for the end of 2010. Despite Greg’s ten years of experience, he had never overseen a merger, let alone one of this scale, before. In one of their first meetings, Greg presented some of his concerns to Mark. “Mark, I know this is a big priority for us, but I’m uncomfortable with the deadline. I’ve reviewed the information we have regarding RNS’ business, but there’s no description of how their actual business process works. We know their panel group conducts surveys just like ours does, but we have no idea what software they use and if it’s compatible with ours.” “I agree”, Mark conceded, “but there’s no way to change the integration timing. Atlas management has been very clear with me. We have to get this done within a year. Let’s focus on setting up a training manual for RNS employees so they have a sense of how we operate, and just plan to have them adopt our software and process. They run their panel business as a cost center so my guess is that their process will be less efficient and profit driven than ours.” As both Greg and Mark were senior management, a sizeable part of their compensation was paid in bonuses, and the progress of the integration would have a direct impact on this.
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RNS: Welcome to Dynamic In June of 2009 the Atlas Group/RNS deal was officially completed. The first step Mark took after the acquisition was to fly to the RNS office in Buffalo, NY to meet with the management team. Two of the key players on the RNS side were Kevin Lacy, SVP of Sampling and Evan Malley, VP of Panel Care. Mark communicated to the management team that based on their preliminary analysis the integration should be entirely constructive, that is, they didn't expect to downsize the Buffalo office. Additionally, Mark met with the full Buffalo group of 100 employees and provided his initial outline for the timing and process of integrating the two companies. He also spent some time talking with individual employees, answering questions and educating the RNS staff on Dynamic’s history and processes. In his initial management meetings, Mark's main focus was to learn more about the business operations and processes of RNS. He also communicated the end goal of having the integration completed within a year. He outlined three broad phases of the integration: information gathering, transition and completion. The first phase would allow the managers of both groups to share necessary information about their operations, the second phase would incorporate the best practices of each organization, and the final phase would be the implementation of the combined best practices. Other than the final deadline of one year, it wasn't clear how long each of the three phases would take. In his one-on-one meetings, Mark asked about the background and education of the RNS staff, and offered to answer any questions they had about Dynamic (See Exhibit 3 for detailed bios). In an August 2009 meeting with Kevin, dramatic differences in structure became apparent (See Exhibit 4 for a comparison of the organizational charts). The very flat, but centralized structure of Dynamic had always contributed to fast information dissemination and allowed Mark and his management team to make changes that were quickly implemented across Dynamic. RNS on the other hand was very decentralized. Each of their international and industry-specific panels was run independently, and in practice used different methods. This made multi-national projects a painful process. The US operations, which were by far the largest, were run out of the Buffalo office. In contrast to the Dynamic model, RNS had several layers of management due to the way in which the panel process was designed. Unlike Dynamic, whose project managers handled the entire process, RNS was set up in a more task oriented fashion. For each of the major steps in the operations process, RNS had a task leader who managed a group of specialists. This task leader reported to a more generalist manager who reported to a VP. The VP then reported to a regional SVP and the SVP reported to the CEO. The differences in the structure of the two groups forced Mark to add several extra steps to his integration plan. The most important of these steps was to require RNS employees to adopt the Dynamic Research business process. Mark had communicated in meetings that in order to keep the flexibility and profitability that were core elements of Dynamic’s strategy, the RNS staff was going to have to adjust. As part of the process by which RNS would adopt Dynamic’s business process, Mark decided to set up a meeting with Kevin in September of 2009. The goal of this meeting was to talk openly with Kevin and determine the areas where RNS employees would be most likely to object.
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As Kevin explained it to Mark, RNS employees were proud of their panel approach. They placed a great deal of importance on managing the panel in the most efficient and high-quality way. Some of their practices were in direct conflict with those at Dynamic. For example, each panel company had to set a limit on the number of times each month that they would invite their panelists to take a survey. Invite a panelist too often and they became overwhelmed with spam email - invite them infrequently and they forgot about the panel and became inactive. RNS' target for invitations per panelist was five per month. Dynamic's target was closer to 15. At RNS they would regularly tell a client that they were unable to perform a study because their panelists were being overused. The concept of turning a client away was something that Dynamic had rarely even considered. From RNS' perspective, it was better to turn a project away than to compromise the integrity of the panel. Either the client could wait a month to run the study or they could take their business elsewhere and face questionable results. In order to best manage the transition from RNS’ task oriented operations to Dynamic’s project based operations model, Mark and Kevin decided to hold a two-week intensive training session for all RNS staff. This would be a basic intro to all aspects of the project manager responsibilities. They also set up a formal mentoring program which would allow RNS employees to shadow their Dynamic Research counterparts, and have a specific person to go to with any questions or concerns that came up along the way. Kevin decided it would be best to transition only a few of the more senior RNS people at a time so they could learn what the biggest areas of difficulty were, and how to improve the training and transition process. They initially took three people, one from each team in the RNS process so they would be able to tell which RNS teams would have the easiest and most difficult process of transitioning. Kevin had always had a great relationship with Sharon Kaplan the head of RNS’ sampling team and asked her to be one of the first to transition. Managing The New Organization After the acquisition, Mark set up monthly check-in meetings with Kevin, Evan and Greg. This way, he could get feedback on the integration from both the RNS side as well as from someone originally at Dynamic. Some of the first issues that came up in these meetings were demographic in nature. The RNS employees were, on average, ten years older than their Dynamic counterparts. In part, this was driven by RNS' history. RNS had been in the survey business for over 20 years. Many of the employees had been conducting surveys when the only option was either in-person or mail versions. These employees had stayed with RNS as it grew and changed. Within each specific task group, the employees worked very closely together which resulted in a strong sense of camaraderie and trust. On average, once an employee joined the RNS panel group, they stayed with that group for seven years. There were a handful of current managers who had started as entry level employees when the panel group was founded, and had worked their way up the corporate ladder. However, the task based structure meant that people rarely worked with employees from another group, so each task group had a unique sub-culture and way of doing things. Dynamic on the other hand had only been around since 2001. Many of its employees were recent college grads who saw the Internet and online methodologies as the only way of conducting
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business. In keeping with its flat organization structure, Dynamic was an up or out type organization. Project managers typically stayed in that role for two to three years and then either got promoted or left the company for another position, many times within the Atlas Group. Dynamic’s offices were also run in a more casual manner. There was a very loose dress code, nearly all employees worked in open cubicles and the offices typically closed early on Fridays during the summer. People decorated their cubicles in unique ways and there was a lot of post- work socializing. Work hours were also a point of contention. Dynamic had always been run with a strong client- oriented approach; which sometimes required employees to work longer than a 40 hour work week. It wasn't rare for a handful of project managers to be working past seven at night in order to get a survey programmed or to finalize a presentation for a client that was due on a tight timeline. The RNS office was used to a traditional nine to five work schedule and employees were paid overtime for working over a 40 hour work week. At Dynamic most employees, including the project managers, were salaried which meant that overtime wasn’t available. For many of the RNS staff, the switch from hourly to salaried meant an increase in pay, but also an increase in hours. For example, an RNS sampling employee might have earned $15 an hour ($31,200 annually) before the acquisition, but earn $20 per hour afterward ($41,600 annually). Dynamic also offered performance based bonuses for employees that really went above and beyond. Although the RNS employees stood to make a fair deal more under Dynamic, they no longer had as much freedom with their schedule as they used to have. A Confrontation In January 2010, six months after the acquisition, Kevin was conducting a routine check-in meeting with Greg and Sharon to see how the transition process was coming along.
“My people are being overworked and considerably more stressed out than they should be,” Sharon complained. “They’re being forced to take on new responsibilities, work longer hours, and we’re not getting the type of support we need from the Dynamic group. No one wants to have to work late just because a client says they need something.” “Hold on a minute”, Greg countered, “my people have made themselves available to your team. It’s not our fault your team doesn’t want to work hard.” “We don’t mind working hard, but your people would rather rush through a job to meet an arbitrary client deadline than take the time to properly check the data we’re working with. Most of my team has been working with survey data for over ten years. We know what it takes to do the job right. You guys on the other hand, some of you have only been doing this for two years! Even in the short time I’ve been working with you, I’ve noticed project managers leaving the company and new ones being hired. Your group
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doesn’t show us the respect we deserve or even acknowledge that there are some areas where we know more than they do.” “Well I respect the fact that your people have more experience in some areas but that doesn’t give them the right to talk down to my people.” “Hold on, hold on” Kevin said, “This is getting us nowhere, let’s try to come up with a list of the top three issues that you’re both experiencing and we’ll see what we can do about them.”
After taking a few minutes to cool down, Greg and Sharon were able to summarize their joint concerns as follows:
Meeting Notes From Mark’s Discussion With Greg & Sharon
Greg’s List Sharon’s List Lack of Client Skills. The RNS employees were uncomfortable working directly with clients. Some of the project managers had pushed back too forcefully on clients with regard to timelines. The ability to quickly turn around a project was one of the reasons clients chose to work with us.
Too Client Driven. Clients don’t always understand that good research takes time. We didn’t want to sacrifice the quality of our data just to hit an arbitrary client deadline. In our experience, clients would rather wait an additional week for a request, and have it done right, than have sub-par data delivered quickly.
The salespeople complained that RNS project managers didn’t have the “can-do” approach to completing projects. Dynamic project managers and salespeople often worked together to outline the details of a project so that human resources were distributed in a way that meets all client needs. The RNS project managers often struggled with this collaborative approach.
The Dynamic salespeople were too pushy. Our project managers have been working in this industry a lot longer, and they know how to execute a successful project. The salespeople don’t need to babysit them.
Slow response time. The RNS employees took longer to complete many of the general process items like expense reports, timesheets and invoices. Both the accounting and HR departments have complained.
Lack of understanding of the Dynamic processes. The few days of training that were provided were not sufficient. Actually incorporating this training into our daily routine takes time. We also didn’t have the same tools, like our old expense report system, in place. Tasks that used to take us only a few minutes might now take several hours.
Kevin took note of each of these concerns and brought them to Mark. Mark had already set up several training sessions with the RNS employees so they would have all the knowledge they
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needed to perform their responsibilities. He had also set up a mentoring system in which each new RNS project manager was matched with a Dynamic project manager so they could ask questions and get suggestions. Mark tried to see what Greg thought of the situation. “Greg, I don’t understand why the integration isn’t going better. We don’t have the luxury of time for this to be taking so long. We’re on a deadline and we need people to work together to get this done. We need to find a better way of engaging the new RNS project managers. I’d like you to set up mandatory check-ins between the Dynamic and RNS staff. Since you’ve said that only a couple of the RNS people have actually taken advantage of the optional mentoring system, I’d like you to make it a requirement for anyone who can’t do it.” In addition to the issues Kevin had raised, Mark also had to provide a solution for the combined panel care group. Evan had recently brought to Mark’s attention that there were significant redundancies between the Dynamic and RNS panel care groups. In keeping with his general commitment of zero layoffs, Mark had expected that they would keep both the Dynamic and RNS panel care divisions. However, as Evan explained, the RNS panel care group was run in a more efficient manner, and it was significantly less expensive to hire call center workers in Buffalo than in New Jersey.
Panel Care Comparison
Dynamic Research RNS Number of Employees Five Seven Incoming Calls/Emails per Day 800 850 Completed Calls/Emails per Day 738 850 Hours of Operation (less one hour for lunch) Eight am – Five pm Ten am – Five pm Source: Dynamic Research Company Document Evan suggested eliminating the Dynamic panel service group in an effort to cut costs.
“Mark, after spending a few weeks comparing the two panel care groups it’s clear that RNS’ group works better. They handle more calls per day, cost less and have similar satisfaction scores. We’d have the capacity to handle the combined RNS and Dynamic call volume by hiring a few more people, and it would certainly save the company a significant amount of money.” “This is some very compelling data, but I’m still not sure I want to go down the path of layoffs. I know the Dynamic people work really hard, and I’ve already committed to not laying anyone off. Especially given that these are people I’ve worked with for a while, I’m just afraid it will affect the office morale. People seem to be on edge as it is. That said, I trust your opinion; why don’t you make the decision.”
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Conclusion Despite these setbacks, Mark was pleased with some aspects of the integration. He had, after all, managed to overcome some pretty big obstacles and had so far had kept his promise not to lay off any of the RNS staff. He had met with all of the new RNS staff - in one-on-one meetings with Kevin and Evan, and in group meetings with the rest of the employees. He allowed the Buffalo office to have its own summer outing, just like the one that Dynamic had in Saddlebrook. This amounted to a free paid holiday sponsored by Dynamic. He had also ensured that the RNS staff was paid comparable wages to Dynamic staff. For many of the RNS employees this was a significant increase from what they were making at RNS. In some cases, employees received a performance based bonus where previously there had been none. He had hoped that these steps would create a sense of appreciation, or at least be seen as a positive gesture. But, the combined Dynamic/RNS company was still short of its revenue, market share and expense goals. He also still faced a general lack of motivation from the RNS employees. Evan admitted to Mark that he was surprised that many of their initiatives had met with lukewarm results: "Integrating two companies is a tough business; I'm not sure what else you could do." Mark’s meeting with Atlas Group was scheduled for next week and he was going to be held accountable for the poor financial results. Mark needed to develop a convincing plan as to how he was going to turn things around.
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Exhibit 1: Dynamic Research Holiday Survey Example 1. For this holiday season, are you spending more or less than last year? I am spending more than last year I am spending less than last year I am spending about the same 2. Are you shopping with sales and bargains in mind? Yes, I always do Yes, but it doesn’t influence my final purchase decision Sometimes, only if it is convenient No, if I want something I’ll buy it regardless of price 3. Which type of payment do you use most often? Cash Debit Credit Check Other 4. In the past 12 months has your usage of cash:
Increased a lot Increased a little Stayed about the same Decreased a little Decreased a lot 5. In the past 12 months has the number of checks that you have written: Increased a lot Increased a little Stayed about the same Decreased a little Decreased a lot 6. In the past 12 months has your usage of debit: Increased a lot Increased a little Stayed about the same Decreased a little Decreased a lot 7. In the past 12 months has your usage of credit: Increased a lot Increased a little Stayed about the same Decreased a little
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Decreased a lot 8. How do you typically make a credit card payment? I always pay the balance in full I pay the full balance whenever possible I always pay the minimum amount due I make payments whenever I can in various amounts Don’t know 9. What type of credit card rewards do you earn? (Select all that apply) [ROTATE ORDER. KEEP “I DO NOT EARN REWARDS” AT BOTTOM]
Cash Gift certificates Airline tickets (domestic flight within US) Airline tickets (international flight) Merchandise Restaurant coupon Theater tickets Other entertainment Hotel stay Car rentals Electronics Presents for family or friends Points to charity I do not earn rewards
[DO NOT ASK IF “I DO NOT EARN REWARDS’ IS SELECTED IN Q9] 10. How have you changed the way you redeem credit card rewards?
Redeem MORE often Redeem LESS often Has not changed
11. And lastly, how do you think the US economy is performing these days?
Very good Good Neither good nor poor Poor Very poor Don’t know
Source: Dynamic Research Company Document
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Exhibit 2: Historic Income Statements and 2009 Pro Forma Income Statement Post Acquisition Dynamic Research (2005-2008) Dynamic Research & RNS (2009) Consolidated Income Statement North America Financial Data 2005-2009 2005 2006 2007 2008 2009 Revenue $60,000 $83,062 $104,873 $96,608 $160,933 Gross Margin $39,757 $45,181 $49,613 $49,451 $93,070 Staff Costs $13,219 $14,230 $15,813 $16,046 $20,041 Other Costs $12,304 $17,845 $16,923 $18,056 $37,149 Operating Costs $25,522 $32,074 $32,736 $34,102 $57,190 Operating Profit 14,234 13,106 16,877 15,349 35,880
Source: Dynamic Research Company Document
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Exhibit 3: Personnel Biographies Mark Thompson, Dynamic CEO Mark started at Dynamic Research in 2001 after working for the US Navy and Honeywell. He started his career at Dynamic as a senior financial analyst, working his way up to CFO and later US CEO. Having been a founding member of Dynamic, he was incredibly proud of the progress the company had made over the past 8 years. He recognized the incredible opportunity the RNS acquisition represented to Dynamic's business and wanted to make sure the integration goes smoothly. Greg Burnell, Dynamic VP of Project Managers Greg has been with Dynamic for 5 years. He started his career in marketing research 10 years ago as a VP at Forrester Research, a technology research company. Although he and Mark have only worked together directly for 2 years, Greg was very impressed with all of the progress Dynamic has shown under Mark's leadership. Greg understood that there would be complications throughout the RNS integration, but was very surprised at the specialized, but limited, knowledge of most of the RNS staff. He respected that some of the employees, like Sharon, had more subject matter expertise than he did, but found it increasingly frustrating that they were so inflexible. To him, it was clear that the Dynamic business model made sense, but even after the integration many of the RNS employees were unwilling to make significant changes in how they worked. Kevin Lacy, RNS, SVP North America Kevin had worked for RNS nearly his whole career - almost 25 years. He had started in the survey design group, but had been moved around over the years to several different groups. Ten years ago he was placed in a management position for the sampling group. It was in this role that he and Sharon first worked together directly. Since then, he and Sharon have kept a very strong relationship although Kevin continued to be promoted into more senior positions. Just prior to the acquisition, Kevin was promoted to the SVP in charge of all sampling within RNS. Because of his knowledge of other areas of RNS' operations outside of sampling, Mark appointed Kevin to head up the acquired RNS group. Kevin was pleased with his new role, but knew that his career path within RNS was somewhat unique. Most of his colleagues had experience with one, maybe two, different groups within the organization and that would make the transition to the Dynamic business model very challenging. He also knew that for many RNS employees, the integrity and data quality of the panel were the primary source of job satisfaction. They were used to being the best in the industry at managing a panel, and even though the company had been having a few tough years financially, most people were still happy in their jobs because they felt they were the best there was. It was quite a change to be part of an organization that rather than prizing the way they operated, was actively trying to change it. Evan Malley, RNS, VP of Panel Care Evan was relatively new to the RNS organization having only been there for 8 years. He was hired directly into a management position at RNS and had been responsible for their panel care operations. Although he liked his role at RNS and respected the company, he was one of the few employees that were openly excited about the Dynamic acquisition. He felt that RNS needed a new direction in order to turn their business around, and although the Dynamic business model
The CASE Journal Dynamic Research: The Challenge of Acquisition
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represented a significant change, he thought it was worth a try. Over the past few years, business at RNS had fallen off, and as the company's revenue fell, so did his bonus. This was in spite of the fact that he had been able to reduce costs and increase efficiency within the panel care group. When he initially met with Mark, he was impressed with how he had managed the Dynamic business, and looked forward to having a productive relationship with him. After managing the joint Dynamic/RNS panel care group, he was sure that the RNS group was more efficient, but was concerned how Mark might react to this finding. He knew it would be tough for a CEO to lay off his own people in place of the newly acquired group. Sharon Kaplan, RNS, Director of Sampling Sharon started her career at RNS in 1986. She had spent the majority of her 20+ years working in the sampling team, and knew more than most people how to conduct a sample plan and how rigorous the process should be. Sharon has several senior sampling managers reporting directly to her and several junior employees below them. She had always been happy doing her job and slowly moving up within the organization. However, the recent events had made her very cautious. She was particularly hesitant about the long term effects of the acquisition. She knew that Dynamic offered a means of growing their panel and creating the premiere global panel company, but worried that the values and processes that RNS prized were not the same as the ones Dynamic did. Based on her experience, Sharon felt it was impossible for one person to understand how to correctly design a survey, interact with the client, draw the sample and monitor it in the field. It just wasn’t possible for one person to manage the entire process and still do a good job. These concerns made it hard for her to focus on her job. It was especially frustrating that Kevin, who she had always had a great working relationship with, seemed to be siding with Greg over her on several issues. Source: Dynamic Research Company Document
The CASE Journal Dynamic Research: The Challenge of Acquisition
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Exhibit 4: Organizational Charts RNS Organizational Chart
The CASE Journal Dynamic Research: The Challenge of Acquisition
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Combined Dynamic & RNS Organizational Chart
Source: Dynamic Research Company Document