Summary

Introduction

CEMEX started life as a merger between two small Mexican cement manufacturers and grew into a publicly traded international supplier of building products by 1999. Their method of growth was centered around acquiring other complementary companies. In 2007, José Luna, the company’s CIO was faced with crossroads. He could continue to merge acquired companies into CEMEX using the traditional method coined as ‘The CEMEX way’ or use another method his team has been developing. This decision came when Luna was busy integrating a company called RMC and had just been told to integrate another company called Rinker. Integrating Rinker was important because it made CEMEX the largest building material company in the world with its extensive distribution network. The CEO, Lorenzo Zambrano, wanted the integration to happen as quickly as possible. Luna still needed to complete the RMC integration while beginning to bring on Rinker. This essay will examine the different integration options available, their impacts, and the direction Luna should take. 

Background

Acquisition growth is at the center of CEMEX’s success. After the initial merger in 1931, CEMEX operated as is until purchasing another company in the Yucatán in 1967. Growth was invigorated by tourism in the area and the success of the Mexican stock market. After Zambrano became CEO in 1985, CEMEX experienced growth throughout South America, Europe, Asia, and The United States. Their sale topped $4.83 billion with a net income of $1.03 billion by the time they went public in 1999. They became more profitable than their global competitors soon after.  

The CEMEX Way

The company used a process called ‘The CEMEX way,’ developed in 1992 and officially coined as such in 2000, to manage their acquisitions. This method focused on combining companies with a single set of processes and systems that enforced uniformity between organizational pieces. They did this with a team of expert IT and functional area professionals overseen by VP-level executives. First, they would seek to understand the new company’s processes and catalog them regardless of their utility to the conglomerate. Next, they would incorporate the best processes and align every company with them. Using experts to do this work is generally a good tactic. However, depending on the experts they send or the VP overseeing the work, there could be inconsistencies in the overall decision about which processes to keep up to 23% of the time (1). Benchmarking which parts make a process successful and creating a model to determine the optimal distributed process would be much more effective. Sending these experts to analyze new companies also meant they would be away from their day-to-day tasks, leaving a department’s goals to be met by a smaller, less experienced crew. This, coupled with the potential error, meant that CEMEX could fall short of its goal to optimize.  

RMC

This wasn’t the case when they integrated RMC, a global leader in ready-mix concrete and concrete products. Even though RMC was struggling financially at the time of acquisition, CEMEX beat savings projections by applying its post-merger integration process. This fact highlights the benefits of gestalt in systems and operations. Gestalt says that the whole is greater than the sum of its parts. This application represents how the best of each merger culminates into a process that can drastically exceed expectations for subsequent mergers. While these processes alone may have been great for individual companies, they amount to something greater than the total of their individual contributions to the pieces. This is a great example of the power behind the CEMEX way. 

Rinker and Luna’s P&IT method

With the acquisition of Rinker, Luna was faced with the problem of resources spreading too thinly. The silver lining here is that Rinker’s processes were similar to CEMEX’s, which meant that it would be easier to bring them into the fold than other companies. This was Luna’s cue to present using a new process that his team had been developing since 2004. This process would create a single team focused on change management and IT procedures, split 80/20 between the two competencies. Luna figured that this would create a more cohesive baseline for the technology platforms that supported the organization and set a precedent for continuous improvement and innovation while reducing the time it takes to merge a new company into CEMEX. These principles align with a few key points discussed in The Four Competencies Every IT Workforce Needs. The first is that an IT force needs to leverage the tools and technologies available to them to continuously progress their organization. Without them, IT teams are not as effective. Continuous improvement is also an important tactful approach to the problem because it allows employees to pursue career development opportunities, creating a more robust and effective team (2). However, implementing Luna’s method would create an imbalance in a system CEMEX has refined over decades.  

Impact

Changing a key piece of the overall company process ecosystem would make other processes less effective. If The CEMEX Way had a positive gestalt impact with RMC, fully implementing P&IT would have a negative gestalt impact; in other words, changes to this process are highly elastic within CEMEX. Keeping The CEMEX Way is effective but not agile enough. The new P&IT has the potential to be significantly better but is incredibly labor, time, and capital-intensive. 

Recommendations

The goal is to be effective and fast. Neither process does both independently, but both do this if implemented together. Luna needs to take an approach that leverages the best of both systems and ease into the new process. He can optimize without disruption by incrementally testing, monitoring, and improving the system. He should finish the RMC implementation using The CEMEX Way while beginning the Rinker integration by training their IT staff on P&IT. The CEMEX Way is grounded in choosing the best of something new and bringing it to the rest of the organization. At its core, P&IT can play the role of a new company process, and the best parts of it can be brought in. Shifting to this new model will require the company to be sensitive about their employees. The first stage of the shift should focus on emphasizing the opportunities for growth for all existing employees. 

Luna can increase how the new process can be rolled out by asking each employee to examine how their role impacts and is impacted by the P&IT (3). Some employees may already be apt enough to take a change management role, which means time for hiring and training. Rinker’s IT staff is accustomed to many of the CEMEX processes allowing them to be the catalyst for breaking down silos between organizations. This will reduce the time to adopt the new process because all sides speak a similar language. They can effectively interface their learnings with other groups while monitoring the effectiveness of P&IT. Experts who would traditionally be asked to abandon their roles to help with an integration can now leverage their expertise and help their departments transition. These experts staying in their roles would maintain team morale performance by keeping work appropriately distributed. Maintaining higher team performance will help to offset the upcoming increase in fixed costs associated with the P&IT model. This metered-adoption method also allows CEMEX to fall back on their previous processes if they find that it doesn’t work. RMC would have completed their integration with The CEMEX Way and Rinker is already closely aligned to it which reduces fallout costs in the event it doesn’t meet the intended goal. 

Conclusion

Whether or not the new process is as effective as Luna hopes, by encouraging employee involvement, sharing learnings, and incrementally testing and monitoring he can ensure the better system persists. The way CEMEX performs their acquisitions lays he groundwork for approaching internal process changes. Employees who are used to the CEMEX Way will see this as n opportunity and new employees will see this as an opportunity to grow with an ever-improving company. 

Citations 

1. Shoemaker, P., & Tetlock, P. (2017) Building a More Intelligent Enterprise 
2. Karaevli, A., Ozcan, S., & Wintermeyer, A. (2020) The Four Compentencies Every IT Workforce Needs 
3. Tabrizi, B., Lam, E., Girard, K., & Irvin, V. (2019) Digital Transformation is not About Technology