Cemex SA de CV, the global cement and ready-mix concrete producer, has plants and customers all over the world. Nowadays many of those customers can pull their trucks up to the local Cemex depot, punch a button and load up with cement. The system saves time for customers, who no longer need to wait for factories to open, and money for Cemex, which no longer incurs excess labor costs trying to meet the erratic schedules of heavy construction projects. Did this unattended loading process - no small technical feat - come from Cemex's corporate headquarters in Monterrey? Yes and no. Yes, because it's part of a system of standardized business practices; no, because the practice actually originated in Spain at a company Cemex acquired in 1992.

Called the "Cemex Way," this business-process standardization system is an important tactical tool developed by Cemex in the course of meeting a major strategic challenge. Today, Cemex is an industry leader with $7.3 billion in 2003 revenue. In the early 1990s, however, it was a much smaller company, with the bulk of its sales in its home market in Mexico. Anticipating rapid global consolidation in the cement manufacturing and distribution industry, Cemex decided to help lead the process. From 1995 through 2001, the company completed more than 25 acquisitions around the world, moving quickly to claim a presence in developing countries in Asia and Latin America, as well as in developed markets in the United States and Europe.

The successful integration of these new subsidiaries was, obviously, a crucial part of the process. But the speed and global scale of Cemex's acquisition program made integration especially challenging. Cultural and regulatory differences, always a factor in cross-border deals, loomed especially large. In the cement industry, environmental regulations, local unions, governments and powerful national customers make a lapse in cultural sensitivity a potentially huge source of deal-value destruction.

The problem for Cemex was how to speedily capture value in its purchases without crushing what it had bought. The solution, developed over the course of multiple deals, turned out to be more than a means of smoothing integration - more, even, than a method for preserving valuable, locally appropriate variations in the way business is done. The Cemex Way is a method of systematically mapping, cataloging and disseminating acquired business processes across the global enterprise. Now, over half of Cemex's standardized business processes - ranging from accounting and cost management, to compensation and recruiting to customer relationship management - come from acquired companies.

As part of a broader study of deal management and post-merger integration practices, the Corporate Strategy Board worked with Cemex to document the Cemex Way - which, while just one approach to integration management, is one that companies facing similar challenges may find instructive.

Cemex established a series of teams to oversee the identification and collection of business processes across nine functional areas of the business. The teams are known within the company as E-groups, stemming from the Spanish word "estandardización," or standardization.

Each of the nine standardization groups consists of a business-process expert with 10-plus years of experience in a specific functional area (say, finance, operations or planning); a group leader; plus information technology and human resources support. Standardization groups are overseen by an executive at the vice president level or above, with some senior executives taking responsibility for more than one. So, for instance, the finance, controllership and planning standardization groups are overseen by a vice president in finance; the VP of procurement oversees the procurement E-group; and so forth.

The mission of each group is to work closely with teams from the acquired company to compare their processes with those encoded in the Cemex Way - an undertaking the company refers to as business process gap analysis. The goal is to identify areas where Cemex Way processes should be adopted by the local company to speed integration and boost economies of scale, while also figuring out which practices should be left in place to meet local cultural, market or regulatory demands. About 20% of an acquired company's practices are typically retained.

That leaves about 80% of local practices replaced by Cemex Way standards. This might be expected to create plenty of ruffled feathers among local management teams - but here's where the Cemex Way differs from standard integration practice. Instead of simply scrapping 80% of local practices to ensure rapid standardization, the standardization groups catalog those practices and store them in a centralized database. Next, those processes are benchmarked against internal and external practices. Some - like unattended loading of trucks - turn out to be a better way of accomplishing the task in question.

These superior processes are refined into enterprisewide standards, adding to Cemex's future arsenal of cost-saving and revenue-enhancing process improvements. Once adapted to the Cemex Way, and certified as best in class, they can be rolled out across the enterprise in as little as three months.

The benefits are considerable - not just for the profitability of the global enterprise, but also for morale and motivation at the newly acquired company. Imagine spending years improving a particular cost accounting system only to be told by an acquirer that you'll be forced to use a clearly inferior approach simply for the sake of rapid integration. Now consider the message Cemex can give: "We are overriding your business processes to get you quickly on board, but within the year we are likely to take some part of your process, adapt it to the Cemex system and roll it out across operations in more than 30 countries." The prospect of such recognition can be a major means of retaining critical local talent.

Each standardization group, on average, identifies two to three practices per acquisition, meaning that Cemex typically identifies 15 to 30 new practices with every deal. The business process experts work year-round identifying and refining corporate practices and establishing benchmarks for future practice. Standardization groups work with companies in different industries to develop best practices in each of the nine functional areas, and regularly contribute to the due diligence process for acquisition candidates. Standardization groups are responsible for the global rollout of newly developed processes, and for their maintenance as well.

How are the standardization groups themselves judged? Performance metrics are based on both the number of new practices identified, but also on the quality of the practices as determined by whether they are adopted into the Cemex Way canon. Incentive bonuses are based on reaching business process innovation targets established at the outset of each year.

Cemex has clearly found a way to get acquisitions on board quickly. For example, the integration of Houston-based Southdown Inc. in 2000 (its largest deal to date at $2.8 billion) took only four months. Equally clearly, Cemex can identify best practices and build a library of them. But how does Cemex get its businesses around the world to actually adopt the Cemex Way processes?

The solution lies in the budgeting process. Business unit leaders are required to build their budgets around the productivity or revenue enhancements that can be anticipated from adoption of the various new practices. With best-practice efficiencies baked into the business unit budgets, it becomes remarkably difficult for business unit leaders to just ignore the new practices unless they have some other way of generating the same or greater cost efficiencies. Not surprisingly, most opt for the Cemex Way.

The value created by the standardization groups can be gauged by the length of time they have operated and also by the impact they have had on the Cemex organization more broadly. Over half of Cemex's current business practices - ranging from finance to operations - comes from the steady stream of acquisitions the company has made in the past 15 years. This has had a profound effect on the company's overall profitability. According to one study completed by Stanford Graduate School of Business in the late 1990s, Cemex was generating about 12.5% of its gross annual profit as a direct result of the process improvement - and the Cemex Way has been producing $150 million in cost savings every year since 2000.

Cemex is continually looking for ways to improve its business processes and capture the benefits of its global position. Not surprisingly, the Cemex Way continues to be one of the most valuable processes of all. - Marc Austin

Marc Austin is a research director at the Corporate Strategy Board, part of the Corporate Executive Board, a Washington-based membership organization serving more than 2,000 of the world's leading organizations with best-practices research, support tools and executive education. This article was based on research from Corporate Strategy Board's study, "Acquiring Growth Accelerators," which profiled a variety of M&A best practices and was prepared with the cooperation of Cemex.

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