Mergers are often criticised for their potential to create both losers and winners. Merging two universities is a process that many leaders and stakeholders disagree on due to the uncertainties regarding the outcome. One culture outweighs another; one employee unseats another, thus leading to power struggles. Since organisational decisions are restructured, the organisation may find itself in limbo and gradually be disengaged from its objective. Since change is inevitable, leaders who are ready to grow to try new options. When done in an organised manner, mergers have proven as key strategies for promoting innovation and market share (Chrusciel & Field 2006). However, this report seeks to show how the American University of Al Ain and the British University of Al Ain can consolidate to form a single entity referred to as the University of Al Ain. The merging of the two universities can occur through the determination of the leaders who realise the possible advantages of a merger. Such leaders should be ready to strive through challenges in the early stages of the merger process. This section will show that the benefits of a bigger, more diverse organisation with a common vision can outweigh the challenges of resistance and combining two diverse cultures.
Literature review
Most studies on change model concentrate on providing a better understanding of change regarding institutions. This review will look into various change and transition methods, which many institutions select from as they pursue their specific institutional change. Many institutions do not favour change since it is seen to bring forth unpredictable consequences leading to loss and sometimes closure of the institution (Holten & Brenner 2015). Since change is inevitable, institutions have to adapt to new ways of doing things or encounter the possibility of losing relevance due to competition. However, it is the responsibility of the leaders to bring awareness of the need for change. Such awareness ignites the whole change process (Burnes, 2003). A prior assessment of the current condition is crucial when applying any form of change in an institution. Some of the factors to consider while seeking the right model to implement change should factor in issues such as what events lighted the need for change. This event helps identify the transition model that fits the current needs of the institution.
A second consideration regarding the transition models is the people involved in the parties seeking to merge. In this case, it is upon the human resource personnel to come together and initiate the change models since they have a better understanding of the institutions’ culture and the employees (Thomas 2009). Such familiarity with the culture is important in a change process. Even though it is difficult to predict the consequences of the change process, working together as a team driven by a vision is a sure way towards success (Simoes & Esposito 2014).
Implementing change
Merging these two institutions is a complex activity that needs absolute care and professionalism (Daly, Teague, & Kitchen 2003). In today’s environment, as institutions seek to form a merger, there has to be a formula for a successful transformational process. Therefore, to optimise the possibility of success, it is necessary for the action plan to commence with a genuine understanding of transition and the essence for the universities to face it. The capability to adapt to a new environment is gradual in nature; thus, it is essential to conduct thorough planning and consultation before commencement. Besides, there has to be a concrete plan rooted in learning and change theory. This plan can be seen as the roadmap for change by which all the parties gain from the process.
The players involved should admit that transformation is not easy and cannot be achieved overnight but rather a complex learning and training demanding concentration. Learning and training should help create a common understanding so that those involved can see the entire picture of integration (Mayfield 2014). This systems thinking provides the basis for shared vision and reflection of future impediments. The university leadership should encourage decisions that are empirical but not merely based on individual opinions. Since the leaders serve as the role models, they should lead a culture that prioritises working as a team and often address areas that seem to drag integration.
According to Brisson-Banks (2010), there are two types of change, planned and imposed. In the case of the two universities, it is categorised as an imposed change since the government drives it. Consequently, the management of the two institutions is compelled to work under pressure to implement change effectively. Since change can be risky and is costly, a positive mindset is needed to facilitate the process. Managers should first understand that most individuals resist change, but because change is inevitable; people will adjust given time and with the right individuals in leadership.
Impacts of the change process
Merging these two universities means that two sets of management, staff, cultures and facilities will have to be consolidated to form a common unit. Workers will unseat others, and one culture may come out strong and outdo the other. Besides, one of the institution’s presidents will have to settle for another position or even risk losing the job. Although the merged unit is expected to be larger, some of the staff may not be required anymore to avoid surplus workforce. Most mergers concentrate on the financial aspects of integration, which is functionally very crucial and the predictor to forming the grounds for success. Consequently, the minimal concern is given to human factors. This ignorance makes the transition process a mess since many employees leave the organisation or lose track of the change process. Worker disengagement and resistance are major signs of post-merger complications (Whitaker, 2012). Therefore, to avoid this aspect, the senior leadership should ensure that workers values are tolerated, and justice encouraged in all aspects.
In many scenarios, institutional culture happens to be unique to a certain entity (Edmonds 2011). For instance, the American University and the British University of Al Ain have diverse traditions and beliefs. Therefore, an integration of the two leads to the condensation of two institutions’ cultures to one. This interweaving of cultures is a fragile endeavour that affects all players of the merger. Despite the variances, managers should let their staff realise that justice will prevail since all are encountered with similar experiences.
Managing the impacts of change
According to Aula and Tienari (2011), the workers’ attitudes and behaviour regarding an institutional transition manifest the most fundamental forecaster of its victory. Within any institution seeking to merge, different humanistic factors need to be addressed. At the top is fairness to all parties involved. Fairness hugely determines the outcome of the transformational process. Apart from helping develop the organisational goals, fairness also promotes individual development. This aspect motivates individuals to embrace the change process. As a result, it becomes easy for the workers to let go of their current positions and roles. This acceptance of the current situation makes it easy for the merged management to allocate new roles to employees concerning the newly developed structure. The favourable attitude towards change process is the commitment to change so the leadership should issue incentives such as rewards to ensure workers are dedicated to working. Good transformational leadership qualities are a key way to impact on workers and other stakeholders (Whitaker 2012).
To transform the entire learning environment of the universities to fit the objective of the merger, leaders need to factor in various strategies that include engagement, alignment, and governance. Engagement involves issuing all the main players with the sustainability plan and ensuring their interests are covered to attract support. This plan should ensure that the profits of engagement outweigh the costs (Weber & Tarba 2012). On the other hand, alignment is the means to ensure that the mergers’ structure, objectives, resources and main performance predictors are in line with the vision and purpose of the merger. Besides, the structure should align staff enrolment and role placement with the mergers’ sustainability goals. Governance forms the backbone upon which sustainability leadership of the merged university is anchored (Edmonds 2011).
Who should lead the change?
The two top managements of the universities should appoint one of the university presidents to act as a senior leader responsible for overall planning and decision-making. The senior leader should oversee a senior leadership team and coordination team to enhance collaboration and communication across departments. The leader should purposely steer a culture of collaboration in which team members assist each other rather than reporting. The leader should be able to come up with a manageable number of desirable priorities for action and ensure that the teams mandated to apply these changes are in consensus upfront (Appelbaum et al. 2007).
The leader should not expect every stakeholder to fit the integration plans. Resistance to change is common in any institution due to the unpredictable nature of transformation. Resistance is brought about by anxiety and tensions associated with that particular change. The anxiety often differs depending on the magnitude of change and its influence on the norm. To eliminate such resistance, the senior leader should ensure learning becomes mandatory to enable the employees to adapt to alterations in their work setting. Learning helps the workforce to cope with challenges as they arise and ensures that workers benefit from the experience of the solution-finding process.
The change model
These institutions can adopt various models for a successful change process. However, in this case, three phases of transition can be used to bring the two universities together. The steps include unfreezing, moving and refreezing. According to Abrell-Vogel and Rowold (2014), from these stages, the management can assess the possible benefits of a transition to the institution. Unfreezing involves recognising the potential benefits that are coupled with the expected change (Mader, Scott, & Razak 2013). In this stage, the managers have to create awareness of the whole change process. All the stakeholders should be sensitised to avoid resistance to change in later stages. In essence, the main goal at this level is to ensure that all involved parties have shared the vision and avoid negations by conservative members.
The moving phase comes in when the involved parties agree to pursue the intended change. This stage entails the actual development and exchange of ideas. Since change is costly, time-consuming and unpredictable, technical teams are needed to control the process. Organisational training is also necessary at this stage to eradicate potential tensions, resistance, and emotional disengagement (Appelbaum et al. 2015). At this stage, the top management with close consultation with all stakeholders should consider means to accommodate new factors that include flexible curriculum, institutional culture and worker enrolment, among other factors. The merged institution should put to consideration that the two universities have a different curriculum, and thus both parties should be fully involved when designing the way forward.
Refreezing is the last phase that entails supporting and anchoring the change as a perfect fit within the institution. At this level, those individuals with conservative ideas recognise the change since the process alters their basic assumptions and help them subscribe to the version of the change agents. However, sustaining the change is the real puzzle since the merged institution is faced with the need for an organisational culture that everyone can appreciate (Kitchen & Daly 2002). The organisational cultures should be combined in a way that addresses majority values and expectations to optimise the rate of success.
Change sustainability
Change management is crucial because institutions work in changing environments. Given the current state of competition and tensions in racial diversity, within learning institutions, there is the need to create relationships. When change is achieved, people get in the way and disrupt operations. The result is instability and losses. Therefore, the staff members in the merged institutions need to learn how to cope and thrive in the new environment. Moreover, it is critical for any integrating institution to learn stakeholder engagement. When there is a clear understanding of cutting across all players, it becomes easy to sustain the established change (Lind & Stevens 2004). The president of the merged institution should be one to lead, direct or encourage people, but not to manage them.
Teamwork, as well as interpersonal relationships across the departments, has to be embraced. Good communication is also needed to enhance the clarity of goals and direction (Goldberg 2011). Communication needs to be handled in a way that avoids confusion at all levels of integration. To ensure smooth integration between the two universities, roles and responsibilities should be defined clearly to increase personal accountability. However, team leaders in this integration process should allow some autonomy for the team members to make consultative changes to the plan when the need arises. Team leaders should also reward and motivate the staffs who get on board well (Abraham, Fisher, & Crawford 1997). These rewards inspire commitment making it easy to integrate and sustain the institution.
Conclusion
The framework mentioned earlier provides valuable guidelines for leaders of the merging universities to figure out the key issues to consider during the integration process. The framework emphasises transformational leadership in achieving integration by mentioning the essence of leaders’ interpersonal skills when influencing the stakeholders. Upfront consultations, working as a team, and organisational learning have been viewed as predictors of significant benefit towards merging. Ultimately, research has identified human capital as the precursor to effective mergers and their sustainability.
Reference List
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Abrell-Vogel, C & Rowold, J 2014, ‘Leaders’ commitment to change and their effectiveness in change – a multilevel investigation’, Journal of Organisational Change Management, vol.27, no.6, pp.900-921.
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Appelbaum, S, Lefrancois, F, Tonna, R & Shapiro, B 2007, ‘Mergers 101: training managers for culture, stress, and change challenges’, Industrial and Commercial Training, vol.39, no.4, pp.191-200.
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Burnes, B 2003, ‘Managing change and changing managers from ABC to XYZ’, Journal of Management Development, vol.22, no.7, pp.627-642.
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Daly, F, Teague, P & Kitchen, P 2003, ‘Exploring the role of internal communication during organisational change’, Corporate Communications, vol.8, no.3, pp.153-162.
Goldberg, R 2011, Mergers & acquisitions 2011, Practising Law Institute, New York.
Holten, A & Brenner, S 2015, ‘Leadership style and the process of organisational change’, Leadership & Organisation Development Journal, vol.36, no.1, pp.2-16.
Kitchen, P & Daly, F 2002, ‘Internal communication during change management’, Corporate Communications, vol.7, no.1, pp.46-53.
Lind, B & Stevens, J 2004, ‘Match your merger integration strategy and leadership style to your merger type’, Strategy & Leadership, vol.32, no.4, pp.10-16.
Mader, C, Scott, G & Razak, D 2013, ‘Effective change management, governance and policy for sustainability transformation in higher education’, Sustainability Accounting, Management and Policy Journal, vol.4, no.3, pp.264-284.
Mayfield, P 2014, ‘Engaging with stakeholders is critical when leading change’, Industrial and Commercial Training, vol.46, no.2, pp.68-72.
Simoes, P & Esposito, M 2014, ‘Improving change management: how communication nature influences resistance to change’, Journal of Management Development, vol.33. no.4, pp.324-341.
Thomas, M 2009, Mergers and acquisitions, Thorogood Publishers, London.
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Whitaker, S 2012, Mergers & acquisitions integration handbook, Wiley, Hoboken.
When in 1987 the Detroit Free Press and Detroit Daily News merged under a special exemption from the antitrust laws, both companies expected to have successful cooperation that could provide more benefits. As it was an important measure of surviving both news-papers, the merger allowed companies to consolidate their resources. In total, according to Savage, the Detroit Free Press had lost $81 million between 1979 and 1986 (1989). Both newspapers were losing about $10 million per year and needed the special forecasts that could improve the situation. The forecasts for the merged firms’ profits are the use of financial resources to implement the latest technologies, develop a new structure of papers, and provide new creative ideas.
After the merger, the papers began to publish joint Saturday and Sunday numbers. Changing the structure, the papers were able to remain separate within the common edition. As both companies had millions of readers, such a measure provided the possibility to retain the whole audience.
Today, trying to provide the new structural ideas, the company does not afraid to lose the interest of people. Thus, Carmichael cites the words of Rich Harshbarger, vice president for consumer marketing at the Detroit Media Partnership which operates the joint agreement between the Free Press and the News, “our readers have come along with us in this model” (Carmichael, 2010). Therefore, it is possible to notice that, changing the structure and providing the new editions, the merged firms can expect more profits.
If the permanent audience is retained, the companies can think about creative ideas that can help to attract new readers. For instance, companies could print additional editions dedicated to special events. Such an idea can find new readers and, besides, open more places for the advertisement. Creative ideas are the key aspect of the successful policy of every corporation. As it was announced after the merger, the companies expected “to convert what had been annual losses of $10 million a year for both papers into an estimated $100-million-a-year profit to be shared by the two companies” (Savage, 1989). However, today, the merged companies cannot say that papers are profitable (“The Detroit Free Press and Detroit News are Michigan’s largest daily newspapers”, n.d.). Therefore, it is necessary to provide new ideas, attracting new readers and, thereby, getting the profits.
Achievement of a profitable economic scale is impossible without the use of the latest technologies that can make the process less expensive and more effective. Although, after the merger, both companies got an opportunity to reduce the outgoings related to the publication of two separate editions, it is necessary to change the technical arsenal, proving the most effective high-tech facilities. Joining financial resources, companies have more economical capacity to buy such technologies.
Concluding, it is possible to notice that the merged companies should pay more attention to the facilities as the technological basement of the newspaper. Since companies joint their financial resources, they can spend more money to use high-tech. Besides, it is always necessary to develop new creative ideas that can attract new audiences and providers of the advertisement. Such recommendations can help merged companies to get more profits. The example of the Detroit Free Press and Detroit Daily News merger demonstrates that it is possible to save the original face of each newspaper and its readers, however, it is more important to elaborate on the new ideas and find the perspectives of development.
Reference List
Carmichael, K. (2010). Not So Daily. American Journalism Review. Web.
Managing change is one of the most important management activities when two firms merge to form a single entity. According to Franklin (2014), when there is a merger between two large firms, the management must restructure various operational activities and management roles to create an environment that will be conducive to all the stakeholders. Al Bawadi Islamic Bank has been operational for the last 16 years and has over 10,000 employees working in its 55 local branches and 12 overseas branches. This is an indication that it has managed to overcome environmental challenges to achieve such a level of success.
This firm has achieved success through its traditional approach to Islamic banking. On the other hand, Al Shurooq Bank is a relatively smaller bank with about 2000 employees working in seven local branches and it currently has no overseas branches. The firm has taken the online banking strategy that is increasingly becoming popular in the modern society. These two banks have taken two different approaches that make them strong in different ways. Merging these two banks will ensure that they bring together their strengths in order to sustain the emerging forces in the environment. In this paper, the researcher will critically analyze the approach that the merge should take, and give appropriate recommendations to ensure that the new entity becomes successful.
Name the new Bank
According to Suchy (2004), when two entities are merging to form a single business unit, one of the very first factors that they should take into consideration is the name that will be appropriate. I strongly suggest that the name should have a reflection of the current names of the two banks. Al Bawadi Islamic Bank is indeed the dominant partner that is popularly known, with a larger customer base and a strong market brand.
However, Al Shurooq Bank has also made an effort to acquire a customer base over the years, and it should not be considered an underdog when coming up with the name. Customers of the two banks and the employees will be brought to the new entity hence they should feel some sense of belonging in the new name that is developed. The proposed name should be Al Bawadi-Shurooq Islamic Bank. This name will reflect that the new entity brings together two previously independent firms.
Possible Impacts of the Change on the Stakeholders and How to Deal With Them
When the complex task of coming up with an acceptable name has been done, the next phase is to understand the forces of change and the impact that it will have on various stakeholders. As Franklin (2014) says, change is often present in various contexts of a firm’s operation, but when there is a merger, it becomes more pronounced and sometimes very disruptive. The merger is expected to result in serious restructuring and rightsizing to avoid cases of duplication of work in the new entity. The new firm will indeed have more operational activities, but some positions cannot be held by two people. These are some of the areas that will need to be reviewed when coming up with the new structure. The following are some of the specific stakeholders who will be affected by the new structuring of the firm that is expected.
Impact on the shareholders
The shareholders of these two firms will be affected by the merger. They will indeed have a larger firm under their ownership, but their number shall also be increased. One of the main areas of change that will affect the shareholders is how they will receive their dividends. Each of these banks has its own ways of giving their shareholders dividends. When they merge to form a single entity, they will have to redefine a new formula of sharing the dividends.
Another impact on the shareholders is that their level of control in the new business will be significantly reduced because of the increase in their number. For instance, if one shareholder at Al Shurooq Bank had a 50% control of the firm, it meant that nothing could be done without his approval. However, when the two firms merge, his shares in the new firm may be reduced to as little as 10% or less. It means that his decisions will be of significant effect on the final decision taken by the shareholders. Another effect will be in the decision making.
According to Suchy (2004), it is easier to make decisions when dealing with just a few people than when one has to deal with a large number of employees. Under the new entity, the shareholders will now have to contend with a huge number of decision-makers who must be taken seriously when coming up with decisions. It is expected that the impact on the stakeholders will be positive because the new firm will be bigger, more profitable, and better placed to overcome market challenges such as stiff competition in the banking sector.
How to deal with the impact
To deal with the expected impact on the shareholders, it will be necessary to inform them of the new dynamics that will be experienced under the new organization. I strongly suggest that before the merger, the shareholders of the two companies should have more than one meeting to iron out issues that may affect their relationship in the future. This will help avoid any disagreements or a feeling of betrayal in the future.
Impact on the customers
Customers will also be affected by the expected restructuring after the merger of the two firms. As Levasseur (2010) says, customers are often the biggest beneficiaries when two firms offering two products in different approaches merge to form a single entity. Al Bawadi Islamic Bank is operating under traditional banking based on the Islamic banking system while Al Shurooq has embraced the internet banking system.
When the two banks merge, customers will be offered an opportunity to have access to both forms of baking. They will not have to seek for banking services in two different institutions because their needs will be adequately be met in this new single entity. This will reduce the service fee they are charged if they were to operate two different banks. It is important to note that they will have to embrace the new rates that will be adopted by the new firm. I highly recommend that the new management should avoid hiking banking charges under the new system. This may drive away a section of the customers who may not be willing to pay more for the banking services offered to them.
How to deal with the impact
The policy of ‘customer is the king’ must be embraced in the newly structured entity to avoid negative experiences that customers may have under the new system. The new marketing team must ensure that clients from both firms feel that their interests are adequately taken care of in the new firm. The cost of operating their accounts should not in any way be higher than it was previously.
Impact on government
The government may be affected by the planned merger of the two banks. According to MacLeod (2015), mergers are often counterproductive to the development of an industry because it kills competition. When these two banks come together, they might have a strong competitive power that can enable it to frustrate other banks within this economy. It may force other smaller firms to either relocate to other markets or fold-up their operations.
If that happens, the government will be affected in terms of reduced revenues because there will be few firms within this banking industry. Some executives may lose their jobs based on the restructuring and downsizing that is expected when streamlining the operations of the new firm. It will hurt the government in terms of reduced revenues from pay-as-you-earn taxes. It will also increase unemployment, something that the government is keen on combating.
How to deal with the impact
It is always in the interest of the government that mergers should help struggling firms not to fold up instead of giving strong firms an unfair advantage in the market over their competitors. It should create more jobs and increase government revenues, not vice versa. For that reason, it will be important for the government agencies to take an active role in this merger process. The United Arab Emirates Ministry of Economy must ensure that the merger will not affect market competition and that it will not be counterproductive to the government’s effort to create more employment.
Impact on the top managers
According to MacLeod (2015), mergers often affect top management unit the most because there are always positions that have to be merged. There is often the fear that top managers such as the chief executive officer, chief financial officer, marketing director, human resource manager, and chief operations manager may lose their jobs. Indeed this is true because these are offices that must only be held by one office-bearer. The fear may affect the morale of the top managers, and this may affect the entire firm’s operation. Some top managers may have to be redeployed to other positions that may seem junior to the positions they previously held in their respective firms. Others may have to be laid off if they cannot fit in the newly structured management unit.
How to deal with the impact
The new firm must come up with effective ways of dealing with this problem because it may affect the firm’s operations and profitability in the market. All the top managers must be prepared psychologically that under the new system, some of them may be redeployed to positions that may seem junior to the position they previously held. They should be, therefore, prepared for such eventuality. When selecting the top managers from among the current top managers in the two firms, emphasis should be placed on the skills, experience, and productivity of the executives based on their past records. Fairness should also be seen in terms of selecting the managers from the different firms.
Impact on the junior managers
The junior managers, supervisors, and employees in non-managerial jobs may not be affected much by the expected structure that is to be created. According to Levasseu (2010), in most of the cases, these employees may continue working in their respective positions as long as branches, where they were previously working before the merger, is not affected. Even the junior managers and supervisors such as branch managers may not be significantly affected by the merger. However, they should expect minor changes such as being transferred from one branch to the other to integrate the workforce.
This integration is important to ensure that the employees can share their experiences and knowledge gained while working in different firms. They should also be ready to deal with the new organizational culture that is likely to be developed after the merger.
How to deal with the impact
The top management unit will have to find ways of dealing with the problem of culture shock. It is expected that the new organizational culture may be strange to some employees who were used to a given culture. The top manager should prepare these junior managers and employees psychologically and make them ready to deal with new systems and structures that will be developed at the new organization.
Leading the Change
According to Harrington (2006), managing change is not an easy task, especially in a system where a section of the stakeholders feel that their position will be affected. However, the new firm (Al Bawadi-Shurooq Islamic Bank) will have no choice but to embrace change in various departments and areas of operation. Leaders of change will be the top managers of this firm. The newly constituted board of directors will initiate the change by appointing the new chief executive officer and top managers who will work with him or her in steering the firm in the right direction. After initiating the change, the newly constituted team of executive leaders will take over the role of leading change within the organization.
They will come up with an organizational culture that is fit for the employees from both firms, determine how the workforce will be integrated without making any of them feel intimidated, and redesign operational activities that will be suitable for both online and traditional customers of the newly constituted bank. As the top managers lead the change process, they should not ignore the role of the junior managers and non-management employees. Everyone should be allowed to participate in defining the new path that this company should take after the merger. According to Suchy (2004), embracing an open-door policy may be specifically important in ensuring that employees can participate in the policy formulation.
Type of leadership style required
When leading change in this newly created firm, various types of leadership will be required to ensure that success is achieved. The first type of leadership that will be required is Participative leadership, also known as democratic leadership. According to MacLeod (2015, p. 220), “participative leadership values the input of team members and peers, but the responsibility of making the final decision rests with the participative leader.”
The newly appointed chief executive officer and other top executives should embrace this form of leadership. They must understand that although the final decision must come from them, they are in a better position to come up with good decisions if they allow the rest of the team some room to share their views. It is under this leadership style that open-door policy will be applied.
When coming up with policies that may have a significant impact on a given department or the entire organization, all the relevant stakeholders should be involved. This leadership strategy will help promote cohesive organization as the stakeholders get to learn from one another. The new leadership style that the top managers must embrace is transformational. Levasseur (2010, p. 160) says that the “transformational leadership style depends on high levels of communication from management to meet goals.” Communication is critical given that the managers and employees were previously working at two different entities, but now have to work as a team.
Maintaining proper communication will eliminate possible cases of disagreements, misunderstandings, and suspicion among the stakeholders. It may be necessary for the top management unit to constitute a team that will be specifically responsible for ensuring that there is integration at all levels within the firm. This special committee will be responsible for addressing issues that may arise within the newly constituted firm within the first two years of operations.
Culture to Accept the Change
Change is a force that many stakeholders will try to avoid specifically because of its disruptive nature. Suchy (2004) says that whenever stakeholders are forced with a situation where they have to embrace change, they often develop the fear of the unknown. The fear of the unknown may be so strong in them that they may make every effort to ensure that they reject the proposed changes. However, under this context change will be unavoidable. The team will need to develop a culture that will accept change as it occurs.
The culture of change will have to be inculcated by ensuring that employees and other stakeholders are actively involved in the change management process irrespective of their position within the firm. In this culture, employees will become agents of change instead of being its recipient. They will be allowed to detect the need for change in their respective areas of work and make a proposal to their supervisors. This way, they will always be in control of the new environmental forces. A culture of flexibility will also need to be embraced by the top management unit. The top managers must be ready to embrace change when it is necessary.
Change model to follow
To develop a culture of change, it will be necessary to develop a model that will guide the stakeholders in managing change in this new firm. I strongly propose the use of Kurt Lewin’s Change Model that follows three steps. The following figure shows the steps that should be followed when using this model of change.
Figure 1: Kurt Lewin’s Change Model.
The first step is to unfreeze. It involves informing the relevant stakeholders about the need to change from one system to another early enough so that they can be prepared for what is to come. To unfreeze in this context means to let go of the policies and practices that were in use before, and be ready to use new approaches based on the emerging trends. The next step is to employ the change itself. After involving everyone and preparing them for change, the actual changes can then be made because they will be fully prepared for it. The final stage of refreezing involves making the stakeholders accustomed to the new systems and processes introduced. This model will be very useful in this new firm.
How to achieve each phase of the model
This model is simple to use and can be applied in this new firm without facing challenges. To achieve the first face, all the team members will need to be informed of the impending change and their views taken into consideration. The management will ensure that everyone within the organization is ready for the impending change. In the second phase, the actual change will be introduced. If it is a new culture, the entire team will be introduced to it so that they can live the experience. As Marwah (2011) states, this is often the challenging face is the team members were not adequately prepared. The last stage of refreezing is where everyone will be expected to master the new systems and structures.
Maintaining Change to Achieve Sustainability
As a firm expands in size, one of the primary areas of concern is always the need to achieve sustainability. The growth of Al Bawadi-Shurooq Islamic Bank should be sustainable for it to have a bright future. However, Harrington (2006) argues that a firm that is incapable of managing change cannot achieve sustainability.
For this bank, change management will have to be maintained even after the merger. The three pillars of sustainability (natural environment, social environment, and economic environment) will define the approach that this firm will need to take when managing change. Change may occur in any of the three environments that may demand a significant change in the firm’s operations. When that happens, the management should be ready to adjust its strategies in order to streamline itself with the environmental changes. The above model and the proposed change culture will help in ensuring that employees are always ready to embrace change.
Conclusion and Recommendations
The merger between Al Bawadi Islamic Bank and Al Shurooq Bank will create a new firm that will be appealing to clients interested in the traditional banking system and those who want the emerging online banking products. The new firm (Al Bawadi-Shurooq Islamic Bank) will have a greater competitive edge over its rivals in the market. However, the discussion above indicates that there are a number of challenges that this new entity will need to deal with. Integrating the two firms into a single entity will be very challenging because it will involve restructuring, rightsizing, and a change in organizational culture. As a consultant, I propose that the new firm should consider the following recommendations.
The board of directors of the two firms should meet and form a new board that will run the new firm.
The new board should then select the top management unit for this firm from the existing executives at the two firms based on their skills, experiences, and records.
The new management unit should involve all the stakeholders in creating a new culture at the new organization.
A committee should be set up to guide in the integration of employees in the newly created firm.
Reference List
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The study entails an analysis of cultural differences on the success or failure of mergers and acquisitions. In conducting the study, a case study involving one firm that has succeeded and one that had failed in its merger and acquisition process was evaluated. The two firms considered in the study included Cisco Systems Incorporation and Bay Networks. A comprehensive review of literature related to success or failure of mergers and acquisitions is conducted. The review considered the elements which result into emergence of cultural differences within the organization. The effects of cultural differences on communication in a merged entity ware reviewed.
The study also detailed the key cultural differences which result into either success or failure of mergers and acquisitions. Cultural assessment, cultural selection and cultural integration analysis and their contribution towards the success of mergers and acquisitions are also conducted with specific reference to the two firms considered in the study. The methodology used in undertaking the study was also evaluated.
This includes the research design and approaches used in conducting the study. The findings from the study were interpreted to ensure that entrepreneurs understand the importance of addressing cultural differences in the process of forming mergers and acquisitions. Finally, a conclusion and a set of recommendations were made to enable entrepreneurs improve their merger and acquisition process. The future research section entails areas which practitioners and scholars should considered conducting research.
Introduction
This chapter will first present the background information of the study with particular interest on the success or failure of mergers and failures. The statement of the problem which identifies a gap in mergers and acquisition with regard to existence of cultural differences between the merging organizations will be presented followed by the research objectives which will act as a guideline for the study. Moreover, the research question that delves on the cultural factors that influence the success and failures of the mergers will be presented. Finally, the chapter will present the scope and limitations of the study while giving the summary of the entire chapter.
This chapter is organized in a number of subsections. Sub section 1.2 presents a statement of the problem which identifies a gap in mergers and acquisition with regard to existence of cultural differences which is justified in subsection 1.3. The research objectives which act as a guideline for the study are outlined in subsection 1.4. This is followed by corresponding research questions in subsection 1.4. The significance of the study to the various stakeholders is outlined in subsection 1.6. The scope and limitation of the study are evaluated in subsection 1. 7. Finally, a summary of the entire chapter is given in subsection 1.8.
Background information
Over the past two decades, there has been a rampant change within Networking and Communication Devices Industry. This has been instigated by a number of factors such as increment in the intensity of competition. In addition, both individual and organizational customers are incorporating electronic commerce in executing their duties. Firms operating in this industry are increasingly formulating strategies on how to attain a high competitive advantage through acquisition of a large market share and increment in their profit levels (Sherman & Hart, 2006, p. 36). One of the strategies that they have incorporated includes formation of mergers and acquisition.
Merger entails integration of two or more firms whereby the selling firm’s assets and liabilities are absorbed into the purchasing entity. Despite a new entity being established, the purchasing firm mainly retains its original name. Alternatively, mergers can be defined as joining of two firms.
This mainly occurs via exchanging the shares. On the other hand, acquisition refers to purchasing another firm’s asset or the entire firm. As an operational strategy, firms in different economic sectors have been able to develop their financial stability. Due to the effectiveness of merger and acquisition strategy, both large and medium enterprises are integrating this concept in their strategic management processes (Sherman & Hart, 2006, p. 36).
According to Brodkin (2009, para. 1), numerous mergers and acquisitions were conducted in networking industry during 2009. Some of the companies that were involved in mergers and acquisition include Oracle, Dell Hewlett- Packard, International Business Machines and Cisco. Integration of e-commerce presents a potential of growth in mergers and acquisition. In conducting mergers and acquisition, understanding the existing organizational culture of the two parties is paramount (Alvesson, 2002, p.1). This arises from the fact that organizational culture plays a significant role towards the success or failure of mergers and acquisition.
According to Dwivedi (1995, p.9), organizational culture is defined as a system consisting of shared meaning amongst members of a given firm which distinguishes it from other organizations. A number of factors define organizational culture. These include values, norms, attitudes and beliefs. Despite operating in the same industry, there are differences that exist in relation to organizational culture. As a result, the success of mergers and acquisition is dependent on the effectiveness with which the existing cultural differences are managed.
This chapter is organized in a number of subsections. Sub section 1.2 presents a statement of the problem, which identifies a gap in mergers and acquisition with regard to existence of cultural differences, which is justified in subsection 1.3. The research objectives, which act as a guideline for the study, are outlined in subsection 1.4. This is followed by corresponding research questions in subsection 1.4. The significance of the study to the various stakeholders is outlined in subsection 1.6. The scope and limitation of the study are evaluated in subsection 1. 7. Finally, a summary of the entire chapter is given in subsection 1.8.
Problem statement
History has become somewhat of a critical arbitrator of the strategies used by companies to gain faster growth through mergers and acquisitions. The 1960s and 70s witnessed a style of management whereby organization were managed in the form of a conglomeration. Many companies assumed that the commercial and other business sectors could easily come together even when the two companies were totally unrelated and find success. Even in the absence of synergy between companies being acquired or those intending to form a merger nevertheless, there was still a lot of enthusiasm amongst companies to come together.
Empirical results however indicated that many firms in unrelated fields easily failed to gain momentum and work to greater success while a few managed to do so. For that reason, the problem statement ‘How dos organizational culture affects mergers and acquisitions In the UK Networking and Communication Devices Industry’
The reason why this paper focuses on one industry in one country is because of the fact that in 1990s, merger and acquisition trends shifted towards companies of related industries. Since unrelated companies needed different management and organization skills to run them. The strategic alliances will be investigated in this paper so that the current activities in the UK communication industry are used as evidence to explain why these strategies do not always succeed in achieving the goals hoped.
Justification
Formation of mergers and acquisition is aimed at increasing shareholders value. According to Chatterjee, Lubatkin, Schweiger and Wember (1990, p.1), numerous literature have been advanced in relation to the importance of mergers and acquisitions. Most of these literatures assert that attainment of the intended shareholder value is dependent on the compatibility of cultures between the two firms.
According to Stahl (2005, para. 1), cultural differences are considered as an obstacle towards the success of mergers and acquisition. Stahl further concurs with findings of studies conducted on mergers and acquisition which reveal that a considerable number of firms have failed to attain the intended integration benefits of mergers and acquisition due to existence of cultural differences. On the other hand, firms that have considered cultural factors in implementing mergers and acquisitions have been successful in attaining a high competitive advantage. Recklies (2001, p.1) opines that developing and sustaining a shared culture is vital in the success of mergers and acquisition.
Research Objectives
In conducting the study, a number of research objectives have been considered as:
To identify the key cultural factors which lead to the success or failure of mergers and acquisition in Cisco System Incorporation and Bay Networks.
To describe the nature of the cultural factors in which influenced mergers and acquisition performance of Cisco System Incorporation and Bay Networks.
To explain the nature of the relationship between the cultural factors which improve mergers and acquisition success in Cisco System Inc and Bay Networks.
To make practical recommendations on how to successfully implement key cultural factors on Cisco System Incorporation and Bay Networks. In order to improve future mergers and acquisition success.
Research Question
How did cultural factors affect success of incorporation of mergers and acquisition in Cisco Incorporation?
Significance of the study
Through the study, management teams of firms intending to integrate mergers and acquisition in their strategic management will be able to develop sufficient knowledge of the importance of developing competency with regard to cultural differences. Developing an understanding of the existing cultural differences between organizations can result into effective management of mergers and acquisition. Gaining knowledge on the existing cultural differences will contribute towards efficiency in managing ambiguous and confusing issues relating to organizational culture that arises on daily operation of the firm. The resultant effect is that the firm will be able to attain the intended synergy.
The study will also aid management teams in appreciating the importance of values in analyzing organizational culture during formation of mergers and acquisitions. According to Roger (2000, p.3), some of the elements to be considered include the firm’s mission statement and its goals.
Addressing cultural differences can contribute towards the firm attaining a high competitive advantage. This arises from increased productivity since there will be harmony amongst the firm’s employees. By only considering firms which have a cultural fit in the process of implementing mergers and acquisitions, it will be possible form the merger to succeed. Higgs (n.d, para. 2) asserts that human capital is paramount in developing sustainable competitive advantage.
Evaluation of cultural differences in mergers will help in evaluating the extent to which firms can manage existing cultural differences. For example, it will be possible to determine the extent to which the employee can tolerate to either ambiguity or uncertainty. Appreciating the contribution of cultural differences towards the success or failure of mergers and acquisitions will contribute towards effective decision-making on whether to continue with the merger and acquisition deal or terminate it. If cultural fit exists, there is a high probability of the merger succeeding. According to Gertsen, Soderberg and Torp (1998, p.77), culture difference in organization can be classified as low, medium or high.
Through this classification, it the management is able to determine whether it is possible to manage the existing cultural differences by analyzing the associated degree. For example, if the percentage difference is less than 33%, it is considered as manageable. On the other hand, if it is 66%, it is considered being high. The study will also aid firms that have incorporated mergers and acquisition in their strategic management to develop programs aimed at conducting cultural integration upon completion of merger deal. One of the ways through which this can be achieved is incorporation of pre and post-merger intercultural training program.
In addition, it will be possible for the management team to deal with intercultural differences that arise in the course of operation. This will arise from formulation of a mutually accepted intercultural framework. According to Kwintessential (2010, para. 7) intercultural framework acts as a guideline for ensuring that post-merger synergy is attained. In addition, effects of cultural differences can be minimized by integration of cultural due diligence which entails a step by step process of conducting cultural assessment between the acquiring firm and the target (Thomas, 2000, p. 29).
Scope and Limitations
The analysis of this paper is aimed at investigating the impact of cultural differences in the success or failure of mergers and acquisitions in the Networking and Communication Devices Industry. This will be conducted by analyzing firms in the industry with specific reference to Cisco Systems and Bay Networks. Due to time and resource constraints, the research will be conducted on only a small group of respondents.
Summary
This chapter introduces the reader to the subject of study by offering succinct background information concerning the current activities in the business sector concerning mergers and acquisitions. The study is specifically about the UK communication industry. The statement of the problem gives the declaration on which the investigation would revolve around. Using research objectives, a researcher is able to design his/her research questions in such a manner as to realize the aim of the study.
The study is indicated to be significant to the managers and other this is because the success of mergers or their failure is determined by how they well or bad the management can deal with the cultural differences that exist between the two merging firms or engaged acquisitions. The next chapter entails a review of relevant literature.
Literature review
This chapter will first present literature on the general knowledge surrounding all aspects of mergers and acquisitions in modern business environment with emphasis on the role of corporate level strategy and the various level of culture. An analysis of the cultural differences in the organizations in combination with the cultural factors affecting mergers and acquisitions will also be discussed. In addition, the chapter will present the effects of cultural differences on communication in the resultant outfit and an evaluation of the linkage between organizational culture and acquisition. In tandem with the research objectives, a review of the cultural factors affecting mergers will be presented. More importantly, two case studies describing real life situations of failure and success on the effect of cultural differences on mergers will be presented. Finally, a summary of the chapter will be presented at the latter stages of this chapter.
The purpose of this chapter is to conduct a comprehensive review of relevant literature. This will enable the researcher to gain a comprehensive understanding of the various aspects related cultural differences in mergers and acquisition. The chapter is organized into a number of subsections. Subsection 2.1 entails an analysis of cultural differences in organization. The cultural factors affecting mergers and acquisitions are evaluated in subsection 2.2. Subsection 2.3 gives the effects of cultural differences on communication in the merged entity. The link between organization culture and acquisition is evaluated in subsection 2.4.
The various key cultural factors affecting success of merger and acquisition are evaluated in subsection 2.5. Hofstede theory is discussed on section 2.5.4. In order to illustrate the effect of cultural differences on the success of mergers and acquisition in real life situation, a case study of a success and failure is included in subsection 2.6.
Incorporating an effective corporate level strategy has become a priority among firms in different economic sectors due to increment in the intensity of competition. One of the corporate level strategies being considered by firms entails formation of mergers and acquisition. Over the past two decades, management of firms in different economic sectors have realized that incorporation of Mergers and Acquisition (M&A) in their strategic management processes is one of the ways through which they can be able to respond to the dynamic business environment (Bruner, 2004,p. 3). Stahl and Mendenhall (2005, p.3) assert that M&A are becoming popular in a firm’s effort to attain diversification and corporate growth. As a result, mergers and acquisition have become a competitive business activity. Bruner (2004, p.3) asserts that the concept of M& A is currently being characterized as aggressive change agents within the economy.
For mergers and acquisition to be successful, it is paramount for the management teams involved to consider integrating three main dimensions related to business strategy. These include process, context and content. These dimensions should be used in evaluating cultural differences existing amongst the firms. The ultimate effect will be success of the merger and acquisition (Saee, 2007, p. 8).
According to Vaara (2000, p. 81), there are three main levels of culture in relation to an organization. One of the levels entails artifacts, which includes the visible, audible and tangible results. The second level relates to values, which consist of the goals, philosophies, and standards, which are considered to be of intrinsic value to the organization. In the third level, this is where we have the study assumptions. These concepts result into emergence of differences in organizational culture.
Vaara (2000, p. 82) asserts that numerous failures in mergers and acquisitions over the past decade are because of cultural differences. Findings of studies conducted on mergers and acquisitions reveal that approximately 80% of all mergers and acquisitions formed do not attain their intended objective. On the other hand, approximately 50% of firms, which incorporate this concept, fail (Mohibullah, n.d, p. 2). One of the reasons associated to cause these failures relate to lack of cultural fit. According to Recklies (2001, p.1), failure of mergers may either occur during the pre-merger negotiation phase or post merger integration.
The purpose of this chapter is to conduct a comprehensive review of relevant literature. This will enable the researcher to gain a comprehensive understanding of the various aspects related cultural differences in mergers and acquisition. The chapter is organized into a number of subsections. Subsection 2.1 entails an analysis of cultural differences in organization. The cultural factors affecting mergers and acquisitions are evaluated in subsection 2.2. Subsection 2.3 gives the effects of cultural differences on communication in the merged entity. The link between organization culture and acquisition is evaluated in subsection 2.4.The various key cultural factors affecting success of merger and acquisition are evaluated in subsection 2.5. In order to illustrate the effect of cultural differences on the success of mergers and acquisition in real life situation, a case study of a success and failure is included in subsection 2.6.
Cultural differences
Cultural differences are one of the core issues that should be considered when considering integration of mergers and acquisition strategy. According to Mohibullah, cultural clash is one of the major factors that result into a failure of mergers and acquisitions. Findings of a study conducted by KPMG revealed that existence of cultural differences amongst firms is a key contributor towards failure of mergers (Gitelson et al, 2004, p. 1).
There is a strong direct correlation between how an organization deals with intercultural challenges in relation to mergers and acquisition and its performance. This mostly occurs in post-merger phase. This further affects the firms’ long-term failure or success (Kwintessential Limited, 2010, para. 5). However, the strength of the correlation with regard to cultural differences varies from one organization to another and from industry to industry.
In the process of conducting mergers and acquisition, it is important for the management team of the firm to evaluate the key cultural differences existing between the two organizations. This will aid in determining the probability of the merger succeeding. The initial stage of the strategy process entails identification of potential firm to consider in forming the mergers and acquisition. Effective evaluation of cultural differences among potential firms will ensure that only firms in which minimal cultural difference exist are considered.
In order to attain this effectively, the firm’s management team must consider the context of the potential firm by identifying the industry in which both firms operate (Saee, 2007, p. 8). To minimize the existing cultural differences, management team should consider firms operating within the same industry.
Identification of cultural differences will enable the firm to identify the content of the cultural differences. The ultimate effect is that the firm’s management team will be able to formulate the most effective strategy to deal with the differences. For example, if the existing cultural differences are minimal, the management team may consider integrating a harmonization strategy.
Cultural factors affecting mergers and acquisitions
According to Gitelson et al (2004, p. 1), culture clash translates into in-fighting and internal confusion. As a result, the firms involved experience inefficiencies and loss of time. Consideration of cultural differences in mergers and acquisition is vital in determining how a firm’s employees respond to the new firm formed. Culture clash is defined as the conflict, which arises from existence of differences with regard to company values, missions, styles, norms, attitudes, beliefs and philosophies.
Culture clash in a merger is made evident by a number of issues that include what is valued, treatment of employees, decision-making process, how to communicate and what is to be measured. It may also result from difference in opinion with regard to opinions and arguments related to the process to be undertaken in implementing new business strategy (Gitelson et al, 2004, p. 1). Mergers and acquisitions can also result into a change in orientation, character and nature of either merger partners.
Most of the researches conducted on merger and acquisition have failed to highlight the importance of harmonizing the cultural differences existing between organizations. However, harmonization of these issues presents a challenge to firms and may take a considerable number of years before the employees feel incorporated into the new entity. Effective harmonization of culture between firms plays a significant role in ensuring the success of the merger. Considering the intensity of cultural differences existing between the two partners, employees experience numerous challenges in the process of adjusting to post merger periods. A large proportion of the firm’s employees are concerned with loss of job and the consequent financial debt.
Gitelson et al (2004, p. 1) asserts that news of eminent merger affects the productivity of employees. This arises from the fact that employees will be preoccupied with how such a change will affect him or her. Such an organization change result into both the managers and line employees reducing their productivity with a margin of 15%. This arises from misinformation, rumors and worry. In addition, the merger may mean that the employees will be under a new management team that is quite distressing. Gitelson et al (2004, p. 6) postulates that formation of mergers and acquisitions results into the existing teams becoming ineffective. By establishing a merger and acquisition, the existing teams are disintegrated.
Coming under a new management coupled with new team members may hamper the freedom that existed in raising sensitive issues due to lack of trust in the new team. Mohibullah (n.d, p. 4), asserts that mergers and acquisition may result into loss of cooperation that existed in the individual firms prior to the merger. In addition, cultural differences may result into difficulty in attaining the intended synergy.
According to Kelly, Cook and Spitzer (2009, p. 9), synergies are paramount in the process of mergers and acquisition succeeding. A large number of firm’s management teams involved in mergers and acquisitions have realized that it is difficult for them to succeed in business without the necessary synergy (McGarvey, 1997, p. 6). However, if the management team does not deal with cultural differences, it will be difficult for the firm to attain the intended synergy. In addition, it will also be difficult to resolve conflicts that arise in the firm’s course of operation.
The degree of complexity in relation to mergers and acquisition is relatively high if the parties entering into a merger and acquisition relationship are from different countries or geographically separated due to existence of cross-cultural differences. Despite the firms involved in mergers and acquisition operating in the same industry, its employees may react to similar circumstances in a totally different manner. Therefore, it is paramount for firms involved in mergers and acquisition on a local or international scale to considerer the existence of these differences during the pre-merger and post-merger integration phase.
Effect of cultural differences on communication in a merged entity
Upon formation of a merger and acquisition, there is a high probability of existence of ambiguity in terms of communication. Ambiguity in an organization arises if there is no clear definition of a number of events. In addition, ambiguity may occur in the entire firm or amongst individuals. It also depends on cultural knowledge amongst the employees. Existence of ambiguity in a merged entity is directly associated with insufficient communication within the firm. Ambiguity can also be defined as lack of consistent information. Upon merging of two firms, the employees who were working independently are required to adapt to a new working environment.
This is emphasized by Gitelson et al (2004, p. 2) who asserts creation of a critical mass in relation to operational change is one of the contributors towards the success of mergers. Significant changes will be incurred in relation due to differences in work environment. On the firm becoming organized, there is a high probability that the expectations of the employees will be totally different.
Fost and Sullivan (2010, para. 3) are of the opinion that incorporation of an effective communication can result into minimization of the challenges associated with ambiguity. One of the ways through which management teams of firms can enhance success of mergers and acquisitions is by acknowledging the existence of the cultural differences and developing strategies on how to harmonize them. Communication is vital in minimizing resistance amongst the employees. Effective communication should be enhanced from top to the lower levels. It should be ensured that there is continuous communication during the entire transformation period. Young and Post are of the opinion that effective communication is the most important tool in managing change especially during establishment of mergers and acquisition.
Link between organization culture and acquisition
For mergers and acquisitions to be successful, it is important for there to be established a fit in the culture of the firms involved. One of the ways through which this can be attained is by ensuring that there are similarities in relation to the management style incorporated and the corporate culture adapted. This means that the firms involved must work towards integration so as to establish a homogeneous corporate culture. According to Gitelson et al (2004, p. 1), corporate culture is one of the key drivers which can result into the firm attaining superior performance. This arises from the fact that organization culture has an effect on issues related to customer satisfaction, innovation, organization flexibility, teamwork and quality of products and services that the firm deals with.
Key cultural factors that lead to the success or failure of M&A
In the process of integrating mergers and acquisition in the operation of a firm, management teams of firms pay more emphasis on issues related to legal, business factors and financial issues. Minimal consideration is given to cultural issues. The resultant effect is that the new entity experiences difficulties later in the future. With regard to existence of cultural differences, there are a number of factors that management teams of firms should consider in an effort to ensure successful cultural integration. These processes include cultural selection, cultural integration analysis and cultural assessment.
Cultural assessment
This is usually undertaken during the process of conducting the merger and acquisition due diligence process. Due diligence refers to paying more attention to employees’ or workforce priorities. According to Hewitt (2009, p. 2), due diligence should be considered in evaluating human capital issues. Employees of a firm intending to undertake a merger and acquisition are more concerned on the cultural fit (Albe, 2007, p. 6).
As a result, a considerable amount of time should be devoted to ensure that a comprehensive assessment of organization structure and human capital. While undertaking the cultural assessment of an organization, there is the need to take into account the products, values and the beliefs of the organization in question. This occurs approximately 30 days prior to finalization of the merger. For cultural assessment to be successful, the management team of the firm undertaking acquisition must consider a number of issues related to individual firms separately. Some of the issues to be assessed include the firm’s mission and vision statement, core values, goal and objectives, strategic intent and direction, integration policies, customer focus, employee empowerment, ability to respond to cope with new environment and cope with change.
Cultural integration analysis
Formation of mergers and acquisitions result into in-depth and extensive combination of strategies and structures between the firms involved. As a result, employees become uncertain with regard to corporate culture culminating into loss of trust amongst the employees. This means that there is a high probability of the intended value being destroyed. In order to prevent this, it is important for the management team of the firms involved to conduct a cultural integration analysis.
According to Mercer (2006, p. 1365), cultural integration is aimed at shaping a new culture through mutual absorbing and strengthening of the various cultural trait via effective communication. Alternatively, cultural integration is defined as the process of eliminating contradictions that arise from conflicts after formation of mergers and acquisition.
Through culture integration analysis, the acquiring firm is able to identify the existing cultural gaps and also opportunities presented for improvement. Culture integration is also referred to as cultural acculturation. A number of studies conducted on mergers and acquisitions have revealed that lack of congruence amongst organizational culture increases stress thus reducing their satisfaction and hence productivity. In addition, organizational cultural differences may also culminate into symbolic conflict. This entails where one group formed as a result of the merger breaches core team values.
This arises from the fact that organizations groups socialize in a given pattern. The resultant effect is that the employees are accustomed to specific values, ideas and practices. Mercer (2006, p. 1365) asserts that cultural differences may result into a strenuous relationship within the organization (Sarala, 2004, p. 147). This may limit transfer of knowledge within the organizations through the teams formed.
Mercer (2006, p. 1365) further asserts that there are four main modes of acculturation which can be integrated in mergers and acquisitions. These include assimilation, integration, separation and deculturation. Assimilation entails the culture of the merging firm totally replacing the culture of the merged firm. This means that the merged firm is totally absorbed by the merging enterprise. On the other hand, integration entail development of a hybrid culture that consists of the major related to the two firms. Culture integration is aimed at developing a strong culture by merging the two cultures (Dwivedi, 1995, p.9).
Separation involves keeping the culture of the two firms involved in the merger and acquisition distinct. In most cases, this mode of acculturation is incorporated if the employees of the firms involved (merged) refuse to accept culture of the other firm (merging). This mode is aimed at avoiding intense conflict amongst the parties involved. Deculturation often arises if employees of the emerging firms do not intend leave organizational values that they are conversant with. In addition, deculturation may also result if employees of the merged firm refuse to identify the culture of merging firms. The resultant effect is that psychological and the cultural bridge that is expected to be established amongst the different employees is broken. This culminates into organizational values and behaviors becoming chaotic.
There is a high probability of the firms involved in mergers and acquisition to have adopted different communication structure. This may result into cultural conflict within the new entity. Effective communication plays a significant role in ensuring that there is effective cultural integration. According to Mohibullah (n.d, p. 5), lack of effective communication in relation to merging firms is a problem since it may result into uncertainty, reduction in employee loyalty and reduction in trust. It is universally acknowledged that development of a high degree of trust in an organization results from incorporation of superior managerial beliefs, actions and philosophies. This serves in reducing transaction costs.
Cultural selection
This entails conducting a discussion with the management team of potential acquisition. Cultural selection entails identification of top performing employees. This enables the firm to make a decision on the employees to retain based on defined cultural criteria. The discussion enables the acquiring firm to identify potential leaders from the firm being acquired and their cultural matches. Lack of communicating to the top performing employees in time may result into their exit (Dwivedi (1995, p. 8).
The Hofstede theory
Hofstede did a great job studying culture and he developed dimensions that define the work related values in the context of national culture. These factors have been integrated into organizational culture since many companies that are successful have gone global (Hofstede, 2001, p. 12).
They use merger and acquisition as a strategy to expand into other countries. These factor include, power distance, individualism, masculinity, long term achievement and avoidance of uncertainty. From this, the Values Survey Model was devised and it’s a very useful model for use in the study of cultural difference in organizations and their impact. According to Hofstede, Culture is something that is collective yet in most cases intangible. It’s nonetheless, the concept that differentiates one particular group of people, an organization or a country from another (Hofstede, 2001, p. 12).
Hofstede asserts that culture is made up of two main elements, the internal and invisible aspects very the external elements that are very visible and in most cases described as practices. Latter Practices include things like courtesy in greeting, character of employees, and communication. Values on the other hand are virtues like honesty, responsibility, accountability and dedication.
Dimensions of Culture:
Power distance: this in areas like UK where there is low power distance, there is minimal inequalities among the people. Organizations are decentralized in their operations and activities. The subordinates expect that the mangers would consult them and there are very little privilege and status symbols. Conversely, high power distance will be a description of a society that relies on few superiors who are very powerful. Organization is likely to b centralized and the subordinates are separated from the management by great margin in terms of salary, privileges and powers (Hofstede, 2001, p. 17).
Individualism: the ties among people are loose and every individual is expected to take care of him/herself and his/her family. The UK organizations show that individualism is more important and they place very little emphasis on loyalty and protection. In the collectivist culture, employees would tend to expect a lot from the employers. Individualism, however, individual effort is more important to the success of the organization(Hofstede, 2001, p. 22).
Masculinity: masculine organization like the UK communication industry, there is nothing like division of labour in that the more assertive roles are allocated to men. The success of the organizations is based on the academic prowess, competence and career achievement (Hofstede, 2001, p. 22). France on the other hand is conserved a feminine country and the organizations success is thought to stem from relationships, life skill and cooperation.
Uncertainty avoidance: weak uncertainty in UK means that it does not perceive things that are not familiar to be dangerous as those with strong uncertainty. Such organizations seek to reduce the risk by rules to enhance order and coherence.
Long-term goals: this deals with the virtues that are set to support future rewards. This is where personal adaptability is emphasised (Hofstede, 2001, p. 22). The investments include real estate investment and savings. The time for leisure is not very critical and soothing being bad or good depends on the circumstance.
With increasing need to expand globally, many people find themselves working with or in the management positions of organisations from different cultures. Hofstede is enthusiastic to stress on the fact that ‘dimensions’ are not a strict prescription or strategy to work out success but rather a mere concept. Their role is to equip the manager and workers with tools to analyse and help in understanding intercultural differences, For instance, when multinational companies build international teams to do a research.
Managing cultural differences in mergers and acquisitions
Case study 1: A case of success; Cisco System Incorporation
Cisco Systems was established in 1984 within information technology industry. The firm has been successful over the two decades it has been in operation. Due to effective management, the firm has incorporated the concept of internationalization enable it to become a global firm. This has also resulted from the high rate of industry growth. The expansion of the firm resulted into the firm expanding its product lines to include products such as network management software, diverse networking solutions, IP telephony, switching, wireless technology and routing, optical networking and website management tools. Growth of Cisco System into an international firm is associated with formulation and implementation of effective business strategy.
One of the operational strategies incorporated by the firm entails formation of mergers and acquisition. Through this strategy, the firm has been able to access new technologies. Adoption of the concept of formation of mergers and acquisitions by the firms was perceived as a major weakness by other firms in the high technology industry. Cisco’s System management team considered integration of merger and acquisition to be the most effective and efficient way of attaining competitive advantage (Cisco System Incorporation, 2004, p.3). One of the firm’s recent mergers entails Cisco System and Starent Networks at cost of $ 2.9 billion.
Incorporation of this strategy arises from consideration of forming mergers and acquisitions as the firm’s key growth strategy. Through this strategy, it is possible for the firm to attain a high level of customer satisfaction through innovation of next generation products. In line with this, the firm’s management team has developed an acquisition philosophy that entails consideration of acquisition as the key strategy in accessing scarce intellectual assets (Cisco System Incorporation, 2004, p. 4). In addition, formation of mergers and acquisition is considered by the firm’s management team as a key force in the process of identifying driving market transitions.
In conducting mergers and acquisition, the management team of Cisco System Incorporation is guided by three key objectives. These include employee retention, return on investment and new product development. The firm’s management team is committed at ensuring that it retains a large percentage of employees from the firm it acquires. This results from realization of the fact that unsatisfied employees will definitely leave the firm or if retained in the new firm they may result into inefficient performance of the firm. In order to eliminate occurrence of this, the firm’s management team has integrated a criterion with regard to cultural compatibility for all the firms it considers having a potential of being acquired (Paulson, 2001, p. 103).
The firm’s management team has developed this strategy upon realizing that it is a challenging task to make incompatible cultures cooperate to the extent that the all the employees of the acquired firms will be satisfied. In conducting its acquisition process, the firm ensures that it only considers firms that have similar cultures. The firm has often walked out of a merger and acquisition deal as a result of lack of cultural fit despite the financial terms being appealing (Jeffery, 2008, p. 8). According to the firm’s Chief Executive Officer (CEO), Cisco does not prefer acquiring other firms if it is sure that it will lay off all the acquired firm’s employees due to cultural differences.
Incorporation of employee retention objective has enabled Cisco System Incorporation to successfully manage cultural differences in the firms that it acquires. In order to minimize cultural differences, the firm’s management team ensures that one third of the top management positions in the new firm established after completion of merger and acquisition are set aside for employees from the acquired organization.
The firm’s employee retention as a strategy to eliminate cultural differences is also undertaken through incorporation of employee benefits (Pfeffer & Sutton, 2001, p. 8). One of the ways through which this is attained is by provision of stock options. Upon completing a merger and acquisition process, the firm’s management team ensures that it concerts the stock options of the acquired firm into its own stock. This provides a high potential of the acquired stock options appreciating. The resultant effect is that the firm’s employees execute their duties more seriously since they consider it as an opportunity for acquired stock options appreciating. In relation to employee retention, the firm’s management team has formulated a strategy that entails key employees of the acquired firm signing a non-compete whose duration is two years.
This is the time limit before these employees can leave the firm. In addition, this time is sufficient for the firm to develop another product. By limiting the employees from earning income from another firm in their industry, the firm is able to incorporate a sufficient culture amongst the employees. This results from the fact that a strong incentive amongst the employees to stay in the firm is developed. Through effective management of cultural differences that occur in mergers and acquisition, the firm’s Chief Executive Officer (CEO) asserts that the firm has been successful in retaining personnel. For example, Chambers, Cisco System CEO asserts that the firm witnessed minimal voluntary employee attrition in relation to the employee of the acquired firms at a rate of 6% in 1999 compared to the previous two years.
In its cultural integration process, Cisco System Incorporation management team ensures that in invests substantially in acquisition of integration resources in all its functional and corporate levels. Some of the issues considered by the firm’s management team in its cultural integration process include reward system, decision-making process and the organization structure.
Cisco System Incorporation has developed a comprehensive cultural integration process. The first step involves developing a lucid understanding of the mergers and acquisition rationale by all the parties involved. The management team also ensures that all parties understand the intended outcomes. Clarification of specific behaviors necessary for effective operation of the new entity is undertaken. The key drivers that are necessary for the success of the behavioral change are evaluated. In order to ensure that cultural differences are sufficiently dealt with, the firm’s management team ensures that change management is conducted.
In selecting a firm with which to enter into merger and acquisition, Cisco System Incorporation ensures that only firms with shared technological and business vision are considered. In addition, compatibility with regard to core values is also considered in an effort to ensure that culture differences are eliminated. This serves in developing an environment conducive for the success of the merged entity. The firm’s management team also conducts a comprehensive discussion with the top management team of the firm it intends to acquire. The objective of this discussion is to receive feedback related to the top performing employees. This enables the firm to formulate effective organizational culture strategies thus enhancing its capacity to retain employees of the acquired firm.
Case study 2: Case of failure; Bay Networks
In 1994, Synoptic Communications and Wellfleet Communications that were operating within the networking industry merged resulting into formation of Bay Networks. The objective of the merger was to form a strong player within the industry (Markoff, 1994, para. 1). Bay Networks have experienced a series of problems since its inception. One of the major challenges faced by the firm includes lag in developing and introducing new products.
This has greatly cost the firm’s competitive advantage. For example, despite the firm venturing into production of Automated Teller Machine switches, it was overtaken by Cisco Systems Incorporation. Bay Networks was also overtaken by Fore System that ventured into this market at the same time with Bay Networks. Due to effective product development, Fore System managed to become the market leader. In addition, Cisco Systems attained a market share of 17% compared to Bay Networks that had a market share of 6% in 1995 as illustrated below.
Pie chart illustrating Bay Networks and Cisco Systems ATM switch Market share.
The firm has not been able to market its products effectively. This results from difficulties in managing its sales force. According to Cnet (1996, p. 1), Bay Network’s management team was not able to integrate its sales force since the formation of the merger. According to Cnet (1996, p. 2), there were cultural differences between Synoptic and Wellfleet Communications in relation to motivation and management styles. This had a strong negative impact on the entire Bay Networks’ sales force. The firm experienced challenges in integrating direct and indirect distribution channels of the two firms. The resultant effect was the competition between the firm’s direct sales force and resellers.
The idea of establishing Bay Networks by merging Synoptic Communications and Wellfleet Communication was appealing on paper. However, the success of the new entity was limited by existence of differences in corporate cultures between the two firms. Wellfleet Communication’s management team was doubtful of the mergers’ success after considering the vast difference in corporate cultures.
In addition, the two firms had a large geographical divide in relation to location of their headquarters. Synoptic Communication was based in Santa Clara in California while Wellfleet Communication was based in Boston. According to Sadri & Lees (2001, p. 1), geographical separation culminates into a difference in corporate cultures amongst organizations. This results from the fact that employees develop different values forcing the organization to align its organizational culture in accordance with its immediate environment. Existence of geographical distance resulted into poor performance of Bay Networks.
On the other hand, Cisco System Incorporation minimizes cultural distance with regard to cultural differences that result from geographical distance. In order to undertake this, the firm’s management team gives priority to firms operating in networking industry that are located in Silicon Valley or those located close to its remote sites (Cisco System Incorporation, 2004, p. 5). In 1998, Bay Networks was acquired by Nortel at a cost of $ 9.1 billion (Weston & Heskett, 1998, para.2). Poor management of cultural differences is one of the factors that contributed towards failure of Bay Networks. Currently, Cisco Systems Incorporation continues to dominate the market.
Summary
From this chapter, the investigator gives the readers the literature that addresses concepts that are related to the merger and acquisition process in business. There is an extensive coverage of what the various aspects of business, organization culture and company management interacts to bring about the success or failure of a company. They include theories of culture, management factors and case studies of Cisco and bay networks. These are real companies in real business across the United Kingdom. They helped to give then background information of the business industry as it is today and the way mergers and acquisition have been impacted upon by organizational culture. The methodology chapter develops from this in a unique manner because it where the raw information will be collected. The chapter will help explain how data will be gathered for analysis.
Research Methodology
This chapter will present the research design utilized in conducting the study. In addition, the data collection techniques with emphasis on data coding will also be presented. The sampling techniques, sample size and selection of respondents are then presented before a justification of the sample population is offered. Moreover, the qualitative and quantitative methods of data analysis and ethical considerations will be presented in the latter stages of the chapter. Finally, presentation of the limitations encountered during the study followed by a brief summary of the study will be presented
The objective of this study was to conduct an in-depth analysis of the cultural factors that cause failures in mergers and acquisitions with specific reference to the Networking and Communication Devices Industry. The study was instigated by an increase in the number of mergers and acquisitions, which fail during pre or post merger phase. One of the major reasons, which contribute, to these failures is existence of cultural differences. In order to attain this, a number of objectives were formulated.
These include identification of the cultural factors, which contribute towards success of mergers and acquisition. In addition, the nature of the relationship between key cultural factors aimed at improving mergers and acquisitions in the Networking and Communication Devices Industry was determined. Through the analysis, it will be possible to make recommendations on how to implement cultural factors in the industry.
This chapter is structured in various subsections. Subsection 3.1 entails identification of the research design used in conducting the study. The method used in collecting data from the field is analyzed in subsection 3.2. In order to condense the raw data collected, the concept of data coding is evaluated in subsection 3.3. Due to the large size of the population, sampling technique is incorporated in selecting the respondents. Sampling, sample size and selection of respondents are considered in subsection 3.4 while justification of sample selection is illustrated in subsection 3.5. The method of data analysis and ethical consideration are outlined in subsections 3.6 and 3.7 respectively. The limitations of the research methodology are discussed in subsection 3.8. Finally, a summary of the chapter is given in subsection 3.9.
Research design
In order for a research study to attain the stipulated objectives, a well-defined research design should be incorporated (Saunders et al, 2009, p. 23). The research design acts as a framework, which guides the study. The resultant effect of incorporating research design is that the study becomes logical. According to Creswell (2003, p. 203), research can either be explanatory or descriptive. Explanatory research mainly deals with answering ‘why’ questions. This means that a well-defined causal relationship have to be established. Considering the nature of the research question of the study, this study is characterized as being explanatory. This is because it is aimed at evaluating why and how cultural differences have an effect on the success or failure of mergers and acquisition.
Consideration of a research design enables the study to be logical thus resulting into appropriate findings. Selection of the research design should ensure that it results into a high degree of accuracy in relation to the findings. The design adopted should be reflexive of the entire research process. According to Maxwell (2005, p. 2), a good research design is characterized as one in which all the components work harmoniously in promoting the findings of the study. On the other hand, a flawed research design results into failure. The research design adopted is dependent on whether the research questions considered is explanatory or descriptive.
There are two main research design incorporated by researchers in conducting a study. These include qualitative and quantitative research designs. Qualitative research design is also considered as being detailed which enables it to provide in-depth assessment of the issue under consideration. This arises from the fact that there is no definite procedure of conducting the study by utilizing this research design.
According to Thomas (2003, p.1), qualitative research design is defined as a multi-method of research which is interpretive in nature. In addition, qualitative research design is naturalistic in nature. This means that the researchers conduct a study on the subject matter by considering their natural setting. Qualitative research design gives the researcher capacity to utilize a wide range of empirical materials such as interviews, observation, personal experience and case study in collecting data. Maxwell (2005, p.3) postulates that qualitative research design entails a back and forth process of in relation to the various research design components.
This enables the researcher to effectively assess the objectives, research questions and methods. The research design selected must not only have a fit with its use but should also consider its environment.
In an effort to improve ease of interpretation of the research findings, the researcher integrated quantitative research design. According to Thomas (2003, p. 3) quantitative research design incorporates a number of statistical methods. This is made possible by use of numbers specific to the phenomenon under investigation. By interpreting the data, the researcher is able to make effective. Linking qualitative and quantitative research designs enabled the researcher to incorporate the concept of triangulation. Flick (2009, p. 26) opines that triangulation enables the researcher to effectively focus on the issue under consideration.
Data collection
According to Morse and Field (1995, p. 54) data collection is the process of obtaining useful information related to the phenomenon under investigation. In order to improve reliability of the data, it is important for the research to collect the most relevant data. Reliability in a study ensures that the results of the research are repeatable (Bryman & Bell, 2007, p. 40). The quality of data collected contributes towards an improving the decision making process by only focusing on relevant information. To ensure that the data collection process was organized; the researcher developed a data collection plan.
This resulted into elimination of subjective elements by clearly defining operational parameters for the study. The data collection plan was developed during the Plan-Do-Check-Act cycle. According to Morse and Field (1995, p. 53), PDCA provides a comprehensive framework for the researcher to develop a concrete understanding of the data collection and interpretation process culminating into improvement of the real process. Despite data collection planning process being time consuming, it is vital since it acts as guidance towards obtaining the correct data. In conducting the study, the researcher considered the field as the key source of data.
This enabled the researcher to obtain relevant data. Considering the fact that the study was aimed at analyzing how cultural factors affect mergers and acquisition in relation to firms within the Networking and Communication Devices Industry, data was collected from employees of Cisco Systems and Bay Networks. Prior to the actual data collection, the researcher conducted a reconnaissance to familiarize with how the firms operate. Through the preliminary research, the researcher is able to understand various issues such as language, practices, norms and social issues (Miller & Salkind, 2002, p. 45).
In order to improve reliability of the study, various methods of data collection were considered. According to Pearce and Axinn (2006, p. 28), incorporation of mixed methods of data collection culminates into production of high quality results. Both primary and secondary methods of data collection were utilized. Primary methods involved conduction of interviews and use of questionnaires.
The researcher made a decision to use semi-structured questionnaires to give the respondents a certain degree of freedom in answering the questions. According to Morse and Field (1995, p. 94), use of semi-structured questionnaires culminates into the researcher acquisition of all the required information. This means that the error of omission is eliminated to a certain degree. In addition, use of self-administered questionnaires enables the researcher to ask leading questions which easily help in getting the required answers from the respondents (Lancaster, 2005, p. 130). It was ensured that open and closed ended questionnaires were used.
The resultant effect is that the findings obtained were intense. In addition, close-ended questions based on yes or no were also incorporated. Use of yes and no questions were integrated where the researcher wanted to obtain specific information. Before administering the questionnaires to the respondents, the questions were reviewed to ensure that there is clarity and that any form of ambiguity is eliminated. By ensuring clarity, it was easy for the respondents to respond to the questions.
With regard to interviews, the researcher incorporated both face to face and telephone interviews. These were used in collecting data from those in the firm’s management level and the other lower level employees. Telephone interviews were considered to minimize the cost involved. An electronic voice recorder was used in collecting data obtained through telephone interview. An interview guide was also developed to ensure that the interview was well organized. Creswell (2003, p. 195), asserts that interview guide enables the researcher to emphasize on the topic under consideration during the actual process of conducting the interview. According to Longnecker (2008, p. 31), interviewing enables the researcher to understand the underlying reasons in relation to a certain individuals or a groups attitude or behavior.
Data coding
The data collected was assigned codes based on the responses. Data coding was considered to increase the ease of the data analysis process. Through data coding, the researcher was able to incorporate various statistical data analysis tools such as the Statistical Package for Social Sciences (SPSS) and Microsoft Excel (MS Excel). Incorporation of these data analysis tools arise from the fact that qualitative data is transformed into variables, which are easy for the two data analysis, tools to understand. To ensure effectiveness in the utilization of the SPSS, the various codes were developed into a matrix by considering the various responses.
This made it possible for the researcher to incorporate the Likert Scale. As a result, it was possible for the researcher to identify the attitudes of the respondents with regard cultural differences in mergers and acquisitions. Data coding also contributed towards significant reduction in the volume of data collected from the field. According to Longnecker (2008, p. 56) data reduction culminates into the data becoming sharp and focused through elimination of data which is not relevant.
Sampling, sample size and selection of respondents
Sampling and selection entails identification, choosing relevant data sources, which will be used in generating information (Bryman & Bell, 2007, p. 185). In order to integrate the concept of sampling, a target population was identified. This included all Cisco Systems and Bay Networks Incorporation employees. Sampling technique was incorporated from realization of the fact that it is not possible to collected data from all the employees.
The resultant effect is that the researcher was able to overcome time and cost constraints. Sampling technique enabled the researcher to select a sample population from the target population. Through sampling, all the parties in the sample population had the same probability of being selected hence eliminating bias. A sample population is defined as the total number of objects in a study, which have the same, and independent potential of being selected as the actual sample. From the sample population, a sample, which is the finite part of the statistical population, is selected.
According to Kent (2007, p. 23), the respondents should have common characteristic to ensure that the feedback is related. The sample consisted of employees in the management level and other ordinary employees working in Cisco Systems and Bay Networks. This was attained through use of simple random sampling which made it is possible for the researcher to eliminate sampling bias. The selected sample is considered representative of the entire population.
The sample consisted of 60 respondents. Twenty-four of the respondents were selected from the management team. Twelve respondent managers were selected from each company. These respondents were from different management levels. Six of them were top managers while the other half was from the lower management levels. Thirty-six of the respondents were ordinary employees belonging to different department of the two firms. Eighteen of these respondents were selected from each company.
Justification of the sample selection
Consideration of both ordinary employees and those in management level as respondents was considered to gain understanding of their perception on how cultural differences affect their operation. In addition, those in management have the capacity of knowing how cultural differences affect performance of mergers and acquisitions. This is because they are charged with the responsibility of managing the new entity formed. On the other hand, ordinary level employees have concrete understanding on how cultural differences affect them in the process of executing their duties.
Data analysis
Grounded theory was integrated in analyzing the data collected. Grounded theory involves a research method in which the data collected is used in developing the theory relating to the phenomenon under study (Schwab, 2005, p. 83). According to Lincoln and Denzin (2003, p. 249), grounded theory is qualitative in nature and utilizes systematic procedures in an effort to develop theories related to a given phenomenon. This means that grounded theory enables the researcher to expand the on a given phenomenon by identifying various elements related to the subject under study.
In addition, grounded theory was important in conducting a research if the researcher intends to generate or explain a given situation. Through grounded theory, it will be possible for management teams to gain knowledge on how to conduct cultural fit analysis before implementing merger and acquisition decisions.
Ethical consideration
Consideration of ethics is an integral part of the research process no matter the nature of research (McBurney & White, 2009, p. 49). According to Gravetter & Forzano (2008, p. 97,) there are two main elements which should be considered when dealing with ethics. One of them entails responsibility to various individuals involved in the research (human and non-human). The second element involves being responsible to discipline of science.
This means that the researcher has to integrate honesty and accuracy in the reporting process. In conducting the research, the researcher ensured that voluntary consent in relation to the parties involved in the research was ensured. This was achieved by ensuring that the respondents had a legal capacity to give their consent on whether to participate in the research or not. There was no any element of force, duress, deceit, fraud, over-reaching, any form of intervention or ulterior for of coercion or constraint. As a result, the respondents had the capacity to pull out of the study as desired without any form of loss in relation to the benefits he or she was entitled. There was no any form of penalty associated with pulling out of the study.
It was also ensured that the respondents selected had comprehension and sufficient knowledge with regard to the subject matter of the research. This consideration ensured that the respondents had a capacity to fully participate in the research.
Before the actual study, the researcher ensured that the respondents were conversant with the nature, purpose and duration of the research. This was considered to increase the degree of confidence amongst the respondents. The respondents were made aware of the benefits associated with participating in the study as one of the outcomes. Additionally, any foreseeable discomfort and risks were made known to the respondents well in advance.
In order to increase freedom of respondents’ participation, the researcher ensured that a high degree of confidentiality was ensured. The need to protect confidentiality arises from the realization of the fact that qualitative research is conversational in nature and hence it is important for the researchers to maintain a well-defined boundary of what they tell the participants and what they are told. In addition, the researcher ensured that the concept of beneficence is incorporated. This contributed towards development of an environment conducive between the researcher and the respondents. The resultant effect of this is to make the interviewing session interactive (Johannison, 2006, p. 34).
In addition, creating an informed consent greatly contributes towards ensuring that there is a high level of respect during the process of conducting the research. Individual consent was presented to the researcher in understandable language. In conducting the research, the researcher obtained consent from the local authorities. This will be attained by approaching the management teams of the selected companies and explaining the objective of conducting the research.
Limitations
The study was limited in a number of ways. For instance, it was not possible for the study to consider all the employees as respondents due to resource scarcity in relation to time and financial constraints. This prompted the researcher to use sampling technique. It was assumed that the results obtained from the selected sample were representative of the cultural differences experienced in mergers and acquisitions. The study was also limited in that some of the respondents were not exhaustive in replying to the questions asked. This made the study challenging to the researcher.
Summary
The chapter gives the step through which the researcher when through to collect the data that was used in this study. The chapter covers all the aspects of data collection from the way the study was designed, data collected and the presented for analysis. As indicated, the qualitative and quantitative studies were both used in the study to enable extensive collection of data. The methods were also justified so that the conclusion could validate the study or be considered reliable. However, the chapter also highlights the limitations of the study process so that the reader can be able to understand that there could be errors and the reasons why. Ethical consideration paved the ways for study to process without damaging the people and business environment. Having collected all relevant information, the data was taken to nest chapter for analysis
Data Presentation and Analysis
This chapter will first present the demographic description of the respondents in the study with emphasis on their gender, management level and their respective age. Next, an analysis of the research questions and the factors leading to the success and failure of the organizations will be presented. An analysis of the cultural factors with regard to due diligence, communication style and nature of the cultural factors, which influence performance of mergers and acquisitions, will also be presented. Finally, an analysis of Individualistic versus collectivist culture of the entities and the summary of the chapter will be presented in the latter stages of the chapter.
There has been an increment in the rate at which firms are scanning the environment in order to identify potential partners to enter into merger and acquisitions with. Despite the increased integration of mergers and acquisition, their success is not guaranteed. However, success of mergers and acquisition depends on the effectiveness of its management. Some mergers, which have been formed, have been disappointing. On the other hand, some mergers such as those undertaken by firms such as British Petroleum, Cisco and General Electric have been successful.
According to Gertsen, Torp and Soderberg (2004, p. 76), mergers and acquisition result into a significant degree of disruption and transformational change within the organization. One of the issues of great concern relates to cultural differences. Culture is a key factor, which determines whether the merger will fail or succeed. Therefore, it is paramount for the management team to determine the most effective way of managing culture.
This chapter is organized into a number of sub- sections. Sub-section 4.1 entails a descriptive characteristic of the respondents. Some of the key characteristics considered include gender, age and employee rank and organization department. Sub-section 4.2 entails an analysis of the research questions used in conducting the study. The research questions are analyzed by identifying the various components. In sub-section 4.3, the various factors leading to success or failure of mergers and acquisition are analyzed. This is attained via identification of various factors. A summary of the chapter is given in subsection 4.4.
Primary and Secondary Data Presentation
In conducting the study, the researcher considered Cisco System Incorporation and Bay Networks employees. Diverse demographic data was evaluated in conducting the research. Demographic data was also utilized in conducting the study. This was attained by considering a number of demographic variables that included gender, management level and their respective age.
Employee rank. Both employees in the management level and ordinary employees were considered. Selection of these respondents was considered because they experience cultural different issues related to cultural differences. The study took into consideration t the top, middle and lower level managers. Decision to consider different management levels arose from realization of the fact that their roles are different. As a result, a difference existed in relation to the effect of culture on their operation.
Organization department. The study considered the different departments that exist within the two firms. The core objective was to determine how cultural differences affected performance of employees in various organizational departments.
Age. The study took into consideration the age differences that exist amongst the respondents. Decision to incorporate age arose from need to determine the efficiency with which the employees can cope with the change, which results due to formation of mergers and acquisitions.
Gender. Sixty percent of the respondents considered in the study were male employees while the rest forty percent were female. The table below gives an illustration of the demographic data considered in the research.
Questionnaire on the general demographic data
Table 1: The Questionnaire Results.
Gender: Male (60%), Female (40%)
Age range
Management Level
Ordinary employees
20-30
6
5
31-35
5
5
36-40
5
6
41-45
4
7
46-50
5
4
51 and above
5
3
Rank in the department.
Management level (rank)
Top level managers
8
Middle level managers
9
Low level managers
13
Ordinary employees
30
Department of Work.
Department
Number of respondents
Purchasing and procurement
9
Marketing
10
Finance
8
human resource
13
Research and development
9
Production
11
Major Cultural Differences.
Cultural Factor
Response
Difference in Organizational Value
70%
Difference in Organizational Norms
50%
Differences in Organizational goals
60%
Difference in language
20%
Difference in Organizational Practices
60%
Difference in Organizational Beliefs
50%
Difference in Organizational Behavior
70%
Presentation of demographic data.
Primary and Secondary Data Analysis
In conducting the study, one research question was considered. This includes ‘How did cultural factors affect success of incorporation of mergers and acquisition in Cisco Incorporation and Bay Networks?’ In order to enhance the effectiveness of data analysis, a comprehensive analysis was conducted on the research question. This was achieved by breaking down the research question into a number of components. The various components considered are outlined below.
Cultural factors leading to success or failure of mergers.
Nature of the cultural factors that influence performance of mergers and acquisitions.
Nature of the relationship between key cultural factors that result into improvement of mergers and acquisitions.
Primary Analyses
Quantitative Results
When the respondents were asked to respond to the 9 question that asked which factors resulted into the success or failure of mergers and acquisitions, they gave widely varied responses. A considerable percentage of the respondents mentioned a number of sub-cultural factors that were listed on the question number six. These factors included reasons that related to organizational values, to organizational customs, beliefs, traditions, the firm’s policies, to organizational objectives and to organizational behavior. The atmosphere that is generated by these factors has an effect on the mergers and acquisitions success.
Seventy percent of the respondents were of the opinion that success of mergers and acquisition is dependent on the effectiveness with which the firm appreciates value in an organization. The core objective of entering into mergers and acquisition is to attain synergy in the firms’ course of operation culminating into attainment of a high competitive advantage. These respondents were of the opinion that firm’s management teams do not conduct an evaluation of the existing values between the two firms to determine whether the merger will succeed or not. A significant proportion of the respondents cited differences in organizational philosophies as a major factor contributing towards the success or failure of mergers.
Difference in organizational goals was also cited as a key cultural factor affecting mergers and acquisitions. This arises from the fact that the management teams of the two firms’ have adopted diverse strategies with regard to attainment of the formulated goals and objectives.
Sixty percent of the respondents were of the opinion that differences in management style have an effect on the success or failure of mergers and acquisition. The leadership skills that a firm can adopt include autocratic, democratic or laissez faire. Democratic management style involves the employees in the decision making process. For example, some respondents from Bay Network asserted that they had the discretion to take their own approach towards attainment of the stipulated goals. On the other hand, autocratic management style tends to be authoritative in nature. Laissez faire leadership entails a situation where everyone is treated as being equal. If firms with different management styles enter into a merger and acquisition the probability of the merger failing is high. The table below gives an illustration of the varied responses in relation to mergers and acquisition.
Qualitative Results
The results of qualitative investigation were deciphered from the eighth question that sought to find the relationship between the main factors of cultural inconsistencies and similarities. These factors are critical in the determination of the success or failure of the mergers and acquisitions. The connection between the different cultures is what determines the compatibility of two different companies that are coming together to begin on a new path with same goals, same management style and try to work out with same strategies.
Due diligence
Most of the respondents in the management level were of the opinion that mergers and acquisitions fail because of not conducting comprehensive due diligence. According to Galpin and Herndon (2003, p. 21), mergers and acquisition are faced with numerous chances of failure or success. Culture should be a critical issue during the integration phase. However, cultural issues have not been considered central amongst the executive level managers in the process of settling the deal. One of the reasons cited to contribute to minimal due diligence entail the existing familiarity between the executives of the firms conducting mergers and acquisitions.
The resultant effect is that there is sloppiness amongst the executives who are well aware of their partner. 65% of the respondents were of the opinion that increased familiarity between the executives culminates into numerous assumptions in the process of conducting mergers and acquisitions. This makes the deal to be less sensible of the real business environment thus reducing its probability of success. According to Galpin and Herndon (2003, p. 23), it becomes difficult for mergers and acquisition to reconcile existing cultural differences which were assumed during conduction of due diligence process after the deal is completed. The resultant effect is that these mergers and acquisitions fail upon their inception.
Communication style
Fifty percent of the respondents were of the opinion that communication style is a major factor that determines the success of mergers and acquisitions. Communication in an organization is defined as the process through which information is disclosed within an organization. When asked of the various communication styles, the respondents cited open and closed communication styles. Open communication entail free sharing of information and opinions. On the other hand, closed communication style entails a form of communication where sharing of information amongst co-workers is limited.
In addition, an organization can have either supportive or defensive communication style. Supportive communication style refers to a style of communication where the degree of honesty and openness is high. If the two firms entering into a merger and acquisition have different communication styles, there is a high probability of the merger failing. This arises from the fact that employees of the two firms cannot get along with each other smoothly since they are used to different types of communication.
Secondary Analysis
Individualistic versus collectivist culture
The respondents were of the opinion that mergers and acquisition fail due to diversity of cultures amongst the firms. In a firm with individualistic culture, the employees are usually concerned with their personal interests.
This attained by giving the employees a given degree of freedom enabling them to attain their personal goals. When asked why diversity in culture in terms of individualistic and collectivist culture result into failure of mergers and acquisitions, the respondents asserted that the decision making process during the merger is inconvenienced by the individualistic culture. On the other hand, collectivist culture tends to work in groups. In this culture, there is a high degree of loyalty amongst the employees. In a collectivist culture, employees hold that the firm’s welfare is as important as their own. There is a high probability of a merger and acquisition entailing firms with different cultures failing. This arises from the fact that the employees have a different mindset.
Nature of the cultural factors which influence performance of mergers and acquisitions
Divergences in cultural factors result into cultural clash within the organization. There are two main cultural contexts identified in conducting the study. These include high and low context culture. Polychromic and monochromic concepts also tend to impact on the issue of mergers and acquisitions. Monochronic employees tend to undertake a particular task at a given time. This makes them to concentrate on their work while considering the set deadlines.
On the other hand, polychronic employees have the capacity to multitask. Despite their multitasking characteristic, these employees are not able to successfully complete their tasks at the end of the day. Monochronic employees require a lot of information for them to be effective in conducting their duties. Polychronic employees already have the necessary information to execute their duties. A merger entailing a firm with a large number of monochronic employees with another having polychronic employees tend to fall since the employees cannot work along each other well.
Hofstede Dimensions
Doing business in the UK entails creating relationships. It’s been not that the British only work favourably with the people they are familiar will and trust. Sometimes they do this at the expense of very lucrative deals. It’s imperative that good working relationships are established on any prospective partner. Forming a merger or acquiring another company is the fashionable way of expanding the operations of business on the international scene as it makes organization penetrate markets faster and establish bigger statuses in a short time (Hofstede, 2001, p. 17). This should take place on the level of the organizations, that is to demonstrate strong business acumen and also at an individual level. This enhances how partners would relate and exhibit the positive traits of trust and respect. The following are the Hofstede’s cultural dimensions discussed in relation to UK.
Individualism. Past researchers have found that UK has very high individualistic attitude in relation to other countries in Europe though this is changing very fast (Brown & Humphreys 1995, p. 7). The loose bonds with others are transforming. People are more self reliant and they look up to themselves for everything or for their families. Privacy is a cultural norm and distance has to be maintained here. This means that any attempt to bring personal; ingratiation is easily rebuffed.
Power Distance. Hofstede introduced this concept as the degree to which an organization is able to anticipate and acknowledge unequal power distribution. When there is high power distance ratting, then this means that the inequalities in power and riches have been accepted in the organization (Hofstede, 2001, p. 17). An organisation characterised by low power distance would normally support equal opportunity for all. Power rating for UK is slightly low and it’s a show of the relatively high equality of power in the society which is likely to translate to the business sector (Brown & Humphreys 1995, p. 17).
Masculinity. This concept of culture is described by Hofstede as the distribution of the duties of men and those of women in a cultural organization. Past researchers on culture have shown that the values that men and women hold are very different. Men are considered to have very assertive values that are also very competitive from country to country and organization to organization. Women on the other hand have been found to be modest and caring (Hofstede, 2001, p. 17). These aspects are very similar across nations and organizations. The assertive characteristic of culture is described as masculine and the humble and caring feature is called feminine. Masculine organizations are where the men are tough and leaders while women are expected to be modest. Feminine organization culture requires that both men and women be modest, gentle and concerned. Masculine organization are therefore aggressive and money oriented like capitalist economists while feminine ones are people oriented will little interest in personal recognition. UK communication firms have a balance of the assertiveness and modesty (Brown & Humphreys 1995, p. 12).
Uncertainty avoidance. This is the culture dimension that addresses the level to which people are able to tolerate ambiguity or uncertainty in an organization. These are situation that are unstructured. A situation of high uncertainty avoidance shows that the organization cannot tolerate uncertainty. This therefore led the organization into creation of rules, controls and laws to assists in reducing uncertainty. Otherwise perception means that the organization has allowance for a variety of opinions since it is not scared of the uncertainty prevailing. The organization in such case would be less rule-oriented but rather accepts liberal thoughts and changes. UK scores low and therefore the communication sector are likely to cope up well as they would welcome new ideas and thoughts (Brown & Humphreys 1995, p. 17).
Long-Term Orientation. This the aspect of culture that Hofstede tries to use for incorporating the eastern attitudes as founded by the Confucian theory. UK has a moderately high ranking of long term goals. This score indicates that the culture is persistent, thrifty and stingy. The Britons have a sense of shame and this is common among people and their relationships are described by order of status (Hofstede, 2001, p. 12). An UK business organization expected to plan further out in the expansion of the business plan because of the long terms goals. When the Britons travel outside UK, they settle faster wherever they go and work even harder for long-term benefits (Brown & Humphreys 1995, p. 17). In order to succeed there needs to be business strategy, the readiness to adapt to changes and proper organizational competencies.
Questionnaire on Cultural Factors (Five scale likert-questions)
Do you think is Ok to arrive at a meeting a little late (1,2,3,4,5)
Do you think a promotion is an motivation to work harder (1,2,3,4,5)
When situations get out of control, then there is no way to contain them (1,2,3,4,5)
Maintaining a good relationship with colleagues at work is important part of job (1,2,3,4,5)
It’s not a well-mannered thing to refuse others their request directly (1,2,3,4,5)
It’s a good practice to invest company money for the future (1,2,3,4,5)
Do you think men do a better job than women on most aspects (1,2,3,4,5)
Its proper to have adequate training before getting into a job (1,2,3,4,5)
Would you do whatever the boss says even if its contrary to organizational policies or not legally right (1,2,3,4,5)
Planning project should embrace more flexibility (1,2,3,4,5)
you prefer working in a group than alone (1,2,3,4,5)
the work of women is to take care of children and their families and not in corporate work (1,2,3,4,5)
it is absolutely necessary to hang-out with work mates after day’s work (1,2,3,4,5)
people need to be treated nicely respected and get rich (1,2,3,4,5)
you prefer making long term plans rather than the short term ones (1,2,3,4,5)
women should always respect men (1,2,3,4,5)
things usually happen according to fate (1,2,3,4,5)
people are never equal, as seen from the way they live (1,2,3,4,5)
in order to succeed, planning needs to be done (1,2,3,4,5)
women should not take leadership position is business (1,2,3,4,5)
Uncertainty avoidance is highlighted in questions 1,3,10, and 17. The answers that give 1 and 2 have not tolerance for uncertainty
Power distance is brought out in questions 2,9,14 and 18. Answering 1 and 2 shows that inequalities of power are allowed in the organization
Individualism is assessed in questions 4,5,11 and 13. Answering strongly agree means that there is low individualism. The organizations will be well integrated
Long Term Orientation perception is answered in questions 6,8,15 and 19. Answers 1 and 2 show that there is high indicates that one organization culture is perseverant and parsimonious
Masculinity is addressed in questions 7, 12, 16 and 20. Answering 1 and 2 means that the organization is more masculine meaning that the policies are tough, patriarchal and assertive.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Respondent 1
2
1
2
1
2
2
1
2
2
3
1
2
2
2
3
1
1
1
1
3
Respondent 2
2
1
1
2
1
3
2
2
1
2
2
2
2
1
2
1
2
1
1
2
Respondent 3
3
3
1
3
2
3
1
1
2
3
2
2
1
4
2
2
3
2
2
3
Average
2.3
1.7
1.3
2.0
1.7
2.7
1.3
1.7
1.7
2.7
1.7
2.0
1.7
2.3
2.3
1.3
2.0
1.3
1.3
2.7
Responses to the Questionnaire on Cultural Factors
Dimension
Weighted average
Rating
Uncertainty avoidance
2.1
High
Power distance
1.8
High
Individualism
1.8
Low
Long Term Orientation
2.0
High
Masculinity
1.8
Low
The differences in the five major dimensions were observed to vary across the lines of age and gender. The power distance, masculinity and individualism showed the most significant variations.
Summary of the Chapter
This chapter helps in presenting the data collected to the reader in a manner that they can easily understand and be to connect the outcomes to the questions that were asked in the interview. Every question is strategically answered and presented in this chapter. The reasons answers are also assessed and presented in tables that are concise for this information. The researcher is on the other hand able to make the analyses from the data presentation and clearly link research question to data presentation and eventually to the analyses. The variables considered include employees rank, organization department, age and gender.
This chapter offers simpler data that will be used in the next chapter for interpretation and eventually discussion. From the discussion, the conclusions will be drawn. The trends in then data presentation also guide the recommendation because interpretation helps in understanding. The theories of culture, individualist and collectivist are used in analyses to assist is explaining the reasons that hinder success during mergers.
Discussion and Interpretation
This chapter will present the discussion and interpretation of the research findings based on various relationships espoused by the findings. To start with an analysis of cultural fit in determining the success or failure of mergers and acquisition will be discussed. Next, an evaluation of the relationship of cultural factors in mergers and acquisition will be presented while relating it with aspects of organizational culture in Bay Networks and Cisco Systems Incorporation. Finally, the relationship between communication and leadership as one of the cultural differences in mergers and acquisitions and the summary of the chapter will be presented.
In the 21st century, the global economy has witnessed rampant transformation. Some of the changes that have been witnessed relate to increased incorporation of mergers and acquisition. One of the reasons, which have made entrepreneurs to incorporate this strategy, is the need to access new markets thus enhancing the probability of attaining their profit maximization objective. According to a study conducted on mergers and acquisitions, approximately 10, 000 and 11,000 mergers and acquisitions were conducted in the United States and Europe in 2004 respectively (Marmenout, 2008, p. 3).
During the 1980s when the concept of mergers and acquisition was being incorporated in businesses, entrepreneurs realized that the mergers and acquisition did not result into the intended synergy. However, there are numerous challenges, which are facing the success of mergers and acquisitions. Some of these challenges arise due to existence of differences amongst the firms involved in the merger and acquisition (Accenture, 2009, p. 7).
Increased failure of mergers and acquisition formed prompted scholars and entrepreneurs to shift their focus to the ‘human side’ (Marmenout, 2008, p. 3). With regard to the ‘human side’, mergers and acquisitions present a challenge to entrepreneurs.
This arises from the fact that there are numerous complex issues that the entrepreneurs have to deal with to ensure that the strategy succeeds. One of the issues, which present a challenge to mergers and acquisition, is the existence of cultural differences among potential mergers. According to Uliin, Duysters and Meijer (2010, p.1), the past decade has witnessed a significant growth in mergers and acquisitions and strategic alliances. Despite their proliferation, a significant proportion of studies, which have been conducted on mergers and acquisition, assert that their rate of failure is alarming.
Ulijin eta al (2010, p. 1) is of the opinion that the failure rate is because of cultural differences. Considering the challenges facing mergers and acquisition as a result of existence of cultural differences, it was the objective of this study to conduct a comprehensive analysis of the success and failure of mergers and acquisitions as a result of cultural differences. This chapter entails a discussion and interpretation of the research findings.
The chapter is organized into three subsections. Subsection 1 entails an analysis of cultural fit in determining the success or failure of mergers and acquisition. Subsection 2 entails an evaluation of the relationship of cultural factors in mergers and acquisition. The section also details some of the findings that were revealed from the study in relation to Bay Networks and Cisco Systems Incorporation. Subsection 3 details the relationship between communication and leadership as one of the cultural differences in mergers and acquisitions.
Cultural fit in mergers and acquisition
Cultural fit has been considered as a critical element in the formation of mergers and acquisitions. In the operation of every firm, cultural fit between the firm and its employees is very important. This arises from the fact that there is a direct relationship between cultural fit and the firm’s profitability hence its success. An organization, culture is formed because of the existence of employees’ experiences and individual personalities.
In addition, it also entails the team orientation, management style and the working methods employed. In the initial stages of establishing mergers and acquisitions, it is important for the partners being involved to determine the existing cultural fit between the two organizations to determine the existence of cultural fit. Hackett (n.d, p. 104) defines cultural fit as the existence of compatibility the attitudes, values and behaviors formed within an organization and the employees. Lack of cultural fit in mergers and acquisitions is one of the factors which contribute towards the failure of mergers and acquisitions.
Before implementing the concept of merger and acquisition in its operation, Cisco Systems Incorporation management team incorporated the concept of cultural fit. When asked why the management team paid more emphasis on cultural fit, the respondents said that it was because of realization of the fact that change occurs upon the formation of mergers and acquisition. Hackett (n.d, p. 104) asserts that despite the employees work experience, knowledge and skills, these elements may be of minimal importance upon the formation of a merger and acquisition. This is because work content and the assigned responsibilities change upon the integration of the merger.
As a result, the employees may be forced to develop new skills in order to execute their duties more efficiently. However, their attitude, values and beliefs with regard to their job may not change significantly in the short term. This makes it challenging for the firm’s management team to develop a cultural fit within the organization.
According to Marmenout (2008, p. 7), employees of a particular organization are embedded in the culture established within the organization. In addition, they do not recognize the impact that their behavior has on their organizations. During formation of mergers and acquisitions, existence of cultural collisions makes them to appreciate this influence.
In the process of undertaking its merger and acquisition, the respondents from Cisco System Incorporation management team said that the firm conducts a comprehensive cultural assessment. The assessment considers the positions which will be adversely affected by the formation of merger and acquisition. As a result, it is able to identify and develop an understanding of the culture formed by employees of the potential partner. Cultural assessment entails comparison of the existing organization culture of the firm with that of its acquisition target’s culture. Some of the issues which have to be considered during cultural assessment include values, products, and location and company beliefs amongst others.
Seventy five percent of the respondents selected from Cisco System Incorporation management team said that the firm conducts an on-the-job observation of its potential partner. This is undertaken prior to Cisco System Incorporation entering into negations regarding the merger and acquisition with its potential partner. As a result, the firm is able to identify the culture established amongst the employees in the course of executing their duties.
Some of the observations made relate to the interaction amongst the employees and with the management. In addition, the respondents said that the management team observes how the employees solve conflicts amongst themselves and how they express their emotions. In order to determine the most effective strategy that will minimize occurrence of failure, Cisco System Incorporation management team asks the employees which areas should be changed in order to improve their productivity.
Relationship of cultural factors with mergers and acquisition
According to Sarala (2004, p. 147), cultural factors are a key determinant in the success or failure of a firm. Considering the fact that different organizations have adopted different ideologies and values a difference exists between these firms. An organization culture can interpreted as an umbrella which encompasses the various subcultures existing in the organization. This means that organization culture aids in establishment of organizational cohesiveness. This is attained through establishment of a link between an organization’s procedures, strategies and policies.
Sixty five percent of the respondents considered in the study from Cisco Systems Incorporation said that in implementing its merger and acquisition strategy, the firm conducts an analysis of its potential partner procedures, strategies and policies. This enables the firm to determine the degree of congruency between the two firms. One the other hand, in the formation of Bay Networks which entailed a merger between Synoptic Communications and Wellfleet Communication would be a success.
The decision was based on the assumption that the two firms were operating within the same domestic context and hence organizational culture would not have been a major hindrance in the operation of the firm. However, Sarala (2004, p. 147) asserts that there is a high probability of diversity between the culture of the two firms involved in the merger and acquisition despite them operating within the same domestic context.
This is further enhanced by studies conducted by Ulijn (2010, p. 99) who opines that there should be no generalization regarding cultural aspects. This means that the formation of merger and acquisition in Bay Networks was based on the fallacy of assuming the existence of familiarity of culture between the two firms since they had a similar national culture. Studies conducted by Sarala (2004, p. 148) on mergers and acquisition reveal that national differences are more prominent in domestic context compared with international acquisitions.
Existence of extensive cultural differences within an organization is one the restraining factors which limit success of post-acquisition integration. Sixty percent of the respondents in the management level were of the opinion that cultural differences have a negative impact on the performance of those in the top management level. When asked why, these respondents said that cultural differences between the two firms involved result into tension and high stress levels. The resultant effect is that their decision making capacity is negatively influenced and hence the performance of the firm. According to Finkelstein (2009, p. 60), extreme stress is one of the factors which contributes towards a high turnover amongst those in the management team in mergers and acquisitions.
The success of a merger and acquisition is directly related with the extent of cooperation established between the employees. Forty percent of the respondents interviewed who were selected from Bay Networks said that lack of trust between employees of the two firms was one of the factors which contributed to a decline in their productivity. When asked why, these respondents said that teamwork within the organization was adversely affected and hence the performance of the firm. Finkelstein (2009, p. 60) asserts that cultural differences lead into formation of cultural conflicts in an organization. This scholar further asserts that cultural conflicts have the effect of diminishing commitment in addition to creating a negative with regard to employee cooperation.
Seventy percent of the respondents interviewed said that the resultant effect of the differences in culture between the two firms makes them to develop a feeling that they are alienated from the new entity formed. This is in line with findings of a research study conducted by Finkelstein and Cooper (p. 21) which reveal that employee’s identification with an organization can be threatened by implementation of the merger. The resultant effect is that their loyalty, cooperation and dedication to the success of the intended merger and acquisition. In addition, the employees said that cultural differences affect the performance of mergers and acquisitions due to existence of ambiguity with regard to employee’s roles.
In assessing existence of cultural fit between the firm and its potential partner, it is paramount for the management team to develop an understanding of the firm’s value. According to Frensch (2007, p. 60) an organization value is composed of those values which are explicitly stated in addition to those which are implicitly held. In the process of implementing its merger and acquisition, Cisco Systems Incorporation ensures that a comprehensive examination of both types of cultures is conducted and intimately understood. In order to attain this, the firm evaluates the mission statement of the firm to be acquired.
This enables the firm to gain an understanding of the firm’s goals. By analyzing a firm’s mission statement, Cisco Systems Incorporation is able to gain knowledge on what the potential partner’s organizational culture emphasizes. Seventy percent of the respondents interviewed were of the opinion that an organization values and beliefs underpin how an enterprise should treat its employees and other stakeholders.
For a merger and acquisition to be successful, it is vital for the management teams of the firm’s involved to conduct a comprehensive evaluation of the organizational value existing between the two firms. This enables the firm to determine the most effective culture which will suit the two organizations. In its merger and acquisition process, the management team of Cisco System Incorporation evaluates the relationship developed between its potential partner and its customers. Lack of proper analysis of the relationship, which exists between the firm and its customers, is one of the reasons, which have contributed towards failure of Bay Networks.
According to Network World (1997, p. 55), lack of establishing the culture existing between Bay Network and its customers has limited the firm’s ability to convince customers to purchase its products. On the other hand, Cisco Systems Incorporation has managed to be effective
In addition, the firm’s management team also evaluates whether all the employees operations are geared towards developing attaining customer satisfaction. Through cultural analysis, Cisco System Incorporation is able to determine the possible hindrances, which may result from existence of cultural differences (Cisco System Incorporation, 2004, p.3). Analysis of cultural differences enables the firm to determine which values will be retained in the firm and those, which need to be changed. Frenshch (2007, p. 65) opines that there is a high probability of the powerful partner imposing its organizational culture on its partner.
This mainly occurs if there is no optimal evaluation of the culture between the two firms. Cultural analysis helps to determine the most appropriate culture to be integrated within the new origination. In addition, cultural analysis minimizes the chance of organizational value being destroyed. As a result, the firm is able to attain the intended synergy. Such an evaluation increases the probability of cultural integration taking place at a faster rate. According to Ulijin (2010, p. 97), the success of mergers and acquisition as going concern entity is not only dependent on the existence of organizational and strategic fit between the two firms but also on cultural fit.
Communication and leadership
Despite the importance of effective leadership in the operation of mergers and acquisition, a number of firms which have incorporated this strategy have not addressed this concept. One of the reasons which have promoted this is lack of clarity on the impact of effective leadership in mergers (Frensch, 2007, p. 68 Considering the rate of dynamism within the business environment, it is vital for effective leadership to be incorporated within an organization. As a result, it will be possible for the organization to incorporate the changes which occur in the external environment.
There are various leadership styles which an organization can incorporate. However, the most appropriate leadership style should be incorporated within the organization (Frensch, 2007, p. 68). Considering the fact that mergers and acquisition result into the organization having different types of employees with regard to their behavior and beliefs, it is important for the management team to consider some elements. Some of elements which determine the type of leadership style to be adopted relate to the nature of subordinates and organization size (Gadiesh, Buchanan, Daniell & Charles, 2005, p. 13).
Mergers and acquisition can result into increase in the organization size. Therefore, leadership should be distributed within the entire organization. In such a case, democratic leadership style is the most appropriate. Lack of effective leadership is one of the reasons which made Bay Networks merger not to succeed compared to that of Cisco Systems Incorporation.
Summary
This chapter discusses the key research finding as obtained from the preceded chapter following analyses. An interpretation is the process of translating the information on the paper as numbers and verbatim into reasonable statements and theories that have valid explanations. Discussion puts reason to the numbers obtained from the data analysis chapter. This chapter also helped linking the qualitative and quantitative data together so that they translate into one conclusion.
This is chapter is also where various factors were connected or linked to each other to bring out the best way possible that the interaction can be described. Cultural factors in on organization are evaluated in connection to mergers and the management strategies are also studied in relation to culture and different companies’ objectives. These interactions of all these aspects need connection of the different pieces of information into a specific basis. This is why they are set to the next chapter for that reason.
Conclusion and Recommendations
This chapter will first present the conclusion of the entire study in relation to the research objectives. In addition, the chapter outlines a number of recommendations that entrepreneurs should consider with regard to culture in the process of incorporating mergers and acquisitions in their strategic management process. Finally, areas that may require future research will be analyzed by identifying the gaps which exist with regard to how management teams of firms integrate the concept of merger and acquisition.
Mergers and acquisitions is one of the methods which are increasingly being favored by management teams in the attaining organizations growth targets. As a result, the firms are able to attain wealth maximization objective of the stakeholders (McDonald, Coulthard & Lange, 2005, p. 1). This is attained via increasing the value of stakeholders. The core objective of the study was to analyze the impact of cultural differences on the success or failure of mergers and acquisitions.
A number of research specific objectives were formulated in order to guide the study.This was undertaken by considering a number of issues which include cultural factors which lead to the success of mergers and acquisition. The nature of the relationship which exists between the key cultural factors which affect the probability of success or failure of mergers and acquisition were evaluated. In order to gain a better understanding of the impact of cultural differences in mergers and acquisitions, a case study involving a success and failure was considered. The two firms considered in the study include Bay Networks and Cisco Systems Incorporation which operates within the Networking and Communication Devices Industry. A comprehensive review of literature regarding the merger of the two firms was conducted. This enabled the researcher to identify various issues related with organizational culture.
This chapter entails a conclusion of the entire study. This is attained by considering the research objectives and corresponding research questions. In addition, the chapter outlines a number of recommendations that entrepreneurs should consider with regard to culture in the process of incorporating mergers and acquisitions in their strategic management process. Finally, a future research is analyzed. This is undertaken through identification of gaps which exist with regard to how management teams of firms integrate the concept of merger and acquisition.
Conclusion
The concept of mergers and acquisitions has increasingly been incorporated in organizations strategic management process. Decision to consider mergers and acquisitions results from the benefits associated with the concept. According to Pablo and Javidan (2004, p. 55), effective implementation of mergers and acquisitions presents an opportunity for firms to attain their profit maximization objective as going concern entity.
This is enhanced by the fact that mergers and acquisitions result into the two firms complementing each other. In addition, mergers and acquisitions enable entrepreneurs to venture into new markets. However, mergers and acquisitions are faced with numerous challenges which threaten their success. This means that it is important for both for those involved in the merger to determine the most effective way of ensuring that integration difficulties are effectively addressed (Straub, 2007, p. 78).
One of these challenges relate to existence of cultural differences between the two firms. The effectiveness with which a firm’s management team analyzes the cultural differences existing between the firm and its potential partner determines whether the new resulting from merger and acquisition will succeed or fail. From the case study conducted, Cisco Systems Incorporation has been successful in its merger and integration process. On the other hand, the merger involving Synoptic Communications and Wellfleet Communications which resulted into formation of Bay Networks did not succeed. This arises from the fact that the team involved in implementing the merger did not conduct a comprehensive evaluation of cultural issues between the two firms.
In their operation, organizations have different corporate culture despite them operating within the same industry or country. Cultural differences arise from diversity of held by an organization’s employees in relation to values, norms, attitude and beliefs. Harmonization of cultural differences between mergers and acquisitions presents a challenge to firms. However, the associated benefits contribute towards the success of the firm in the long term. This can be attained through conduction of cultural analysis. Cultural analysis in mergers and acquisition enables the management team of the acquiring firm to determine whether there is a fit between the two firms. This serves in minimizing occurrence of cultural clash during the post integration phase which may lead to the failure of the new firm established.
Through cultural analysis, the acquiring firm is able to identify important values in the firm being acquired which should incorporated in the new firm. As a result, the firm is able to attain its goals as a going concern entity. Studies conducted by various scholars reveal that there is a high probability of the culture of the firm being acquired to be suppressed. This may limit attainment of the intended synergy.
Employees are very important in the success or failure of mergers and acquisitions. In order to address their needs and requirements, the management team should conduct a comprehensive cultural assessment. This is undertaken by considering the concept of due diligence which entails pay attention to employees or workforce priorities. Due diligence enables the management team to put into consideration issues related with human capital.
As a result, a considerable amount of time should be devoted to ensure that a comprehensive assessment of organization structure and human capital. Cultural assessment entails comparison of the existing organization culture of the firm with that of its acquisition target’s culture. Some of the issues which have to be considered during cultural assessment include values, products, and location and company beliefs amongst others.
Cultural integration analysis is also vital in the success of mergers and acquisitions. This arises from the fact that it results into an in-depth and extensive combination of strategies and structures between the firms involved. Mergers and acquisitions may result into employees become uncertain with regard to corporate culture culminating into loss of trust amongst the employees. This affects the performance of the organization. For example, lack of trust affects cooperation amongst employees and hence teamwork which is a key element in the success of mergers and acquisitions. The resultant effect is that the productivity of the organization is adversely affected.
Cultural integration aids in shaping a new culture within the organization which is attained via mutual absorbing and strengthening of the various cultural traits existing between the two firms. In addition, culture integration analysis enables the acquiring firm is able to identify the existing cultural gaps and also opportunities presented for improvement. This means that the acquiring firm is able to determine the most effective way to develop culture within the new firm.
Effective communication also plays also plays a significant role in the success of mergers and acquisitions. Lack of effective communication in relation to merging firms is a challenge in the success of mergers and acquisition.
This arises from the fact that it may result into uncertainty, reduction in employee loyalty and reduction in trust. Development of a high degree of trust in an organization results from incorporation of superior managerial beliefs, actions and philosophies which compose an organization culture. Creation of an effective communication amongst the employees of the new firm is one of the ways through which employees can understand these components. In order to attain this, the management team should consider cultural selection. This entails identification of the top performing employees which enables the management team to determine which employees to retain. Cultural selection should be based on the cultural match existing between the two firms. Lack of communicating to the top performing employees in time may result into their exit.
From the study, a number of sub-cultural factors were identified to result into either success or failure of Cisco Systems Incorporation and Bay Networks These related to values, customs, beliefs, traditions and the firm’s policies. The respondents were also of the opinion that management teams do not conduct a comprehensive evaluation of the values between the two firms prior to formation of mergers and acquisitions. Differences in organizational philosophies and goals were also cited as some of the cultural factors which determine the success or failure of mergers and acquisitions.
Existence of differences with regard management style is also a factor which was cited to limit success of mergers and acquisitions. During the pre-merger phase, it is important for the management team to evaluate whether there is a similarity between the two firms with regard to management style. There are various management styles which can be incorporated by a firm. These include democratic and authoritarian management style. If the two firms being involved in a merger and acquisition have adopted different management styles, the probability of the merger succeeding are slim due to cultural clash. In summation, managers must have an understanding of the cultural differences existing between firms despite them operating in the same industry.
Considering the fact that existence of cultural differences is one of the factors which contribute towards failure of mergers and acquisitions, it is important for management teams of firms intending to integrate mergers and acquisitions to conduct a comprehensive cultural analysis. This will help in identification of potential cultural differences existing between the two firms. As a result, the firm’s management team will determine the most appropriate strategy to adopt. Some of the strategies which should be considered include assimilation, integration, separation and deculturation. These strategies should be based on the extent of cultural difference existing between the two firms. A comprehensive cultural assessment should also be conducted to address human priorities between the two firms. This will contribute towards establishment of cultural fit between the two firms.
Existence of cultural fit is directly related with employees productivity and hence the performance of firms. In order to ensure effective integration of cultural fit between the two firms involved, an integration team should be formed. The team should not assume homogeneity of culture between the two firms. In addition, various components which affect culture in organizations should be evaluated. These include organizational norms, beliefs, values and behavior.
Future Research
Considering the benefits associated with mergers and acquisitions such as attainment of competitive advantage, a large number of entrepreneurs are considering integrating this concept in their operation. Over the past few years, mergers and acquisitions have received numerous attentions by both scholars and practitioners. Some of the issues mostly addressed relate to financial matters. However, the human side of mergers and acquisitions is ignored.
There are a number of challenges which face mergers and acquisitions. Some of these relate to cultural differences. More research should be conducted to analyze the effect of cultural differences in mergers and acquisitions. One of the issues which should be addressed is the effect of cultural differences during the pre-merger phase and how they affect attainment of the intended synergy after the merger and acquisition deal is sealed. In addition, future research should also entail the most appropriate way of identifying potential targets to acquire. In relation to post-merger integration, more research should be conducted to determine the most effective way through which acculturation should be implemented in the organization. In addition, a research should be conducted to develop a criterion which would enable management teams to identify a number of issues such as the most appropriate structure to adopt in the new firm and critical human capital to be retained.
A research should also be conducted to determine the importance of developing trust amongst employees during the post-merger integration process. The effectiveness with which teamwork is integrated in the organization is dependent on the degree of trust existing amongst the employees. Research should also be conducted on the most effective way through which communication will be undertaken within the organization. This arises from the fact ambiguity may occur to an individual an also within the entire organization in relation to the cultural knowledge held. This means that different employees within the organization may experience ambiguity due to ineffective communication at different intervals.
Summary
The paper has show that organizational culture matter a lot in management especially during the process and after acquisition and merger. The cultural factors determine whether the companies will succeed or fail. Compatibility or sticking together to is a very difficult undertaking. Culture is the main challenge are viewed from two distinct entities that are coming together for business but with different backgrounds in terms of age, types of employees, management style, technology and assets. It is important to note that, however, that culture is something that can change with time. When the result is failed performance or poor return in financial investment, the solution could be to revert back to less participative culture.
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Normally, culture arises when individuals unite and interact depending on the foundation of their skills, expectations, and their personal opinions. Additionally, it also happens on the foundation of other people’s social backgrounds and shared values. The organizational culture can be categorized into six levels over which it is able to operate. The first one is societal culture. This deals with the consciousness of cultural functional forces and patterns of nationality (Larsen & Lubkin 2009, p. 278). This level is generally applicable in situations where there is a new product in the market. Besides, it is appropriate in the international outsourcing relationships. Organizational culture put more emphasis on the knowledge of the cultural dynamics in a company (Miller 2009, p. 92). Additionally, this is majorly applicable in some of the international organizations or those people who always take part in the Management and Administration (Needle 2004, p. 145).Identity group culture refers to the culture of responsible for evaluating the expansion of various communities by their sex, their place of origin, background, their religion and some other communal groups.Moreover, it is majorly being applied in areas whereby workers would want to improve in their workforce and talents. Functional culture involves the effectiveness of different cultures working in a given business environment. Besides, it majorly puts more focus on the functional cultures and effectively controls the differences cautiously (Ferrante-Wallace 2008, p. 189). Consequently, this will bring together the different cultures in different departments to meet the entire goal of the organization in this context.
Team culture is identified when the whole workforce is able to adopt a single and unique culture. To achieve this goal, organizations are always required to understand how to bring together complicated and dynamic situations. Additionally, the situations must be well understood by all the working staff.Individual culture is the stage at which all the aspects of culture exist in an individual regardless of gender and working experience (Shaw 2010, p. 175). Having enough information concerning this level quite vital since it will assist an individual in discussing the anxieties at each of levels discussed above. Barclays PLC organization is one of the organizations that have been greatly affected by the existence of different cultures within the working force.
Background of the businesses involved
Barclays PLC is an international organization responsible for providing financial services to various people and companies across the world. In addition, the company has approximately 30,000 workers who are actively involved in retail and profitable banking. Additionally, the organization is also involved in the sale of credit cards, asset banking, control of wealth, and asset management services. Barclays PLC is also functions within the six business sections. The organization was able to expand its banking business activities in the United States by when it attained the American business of Lehman Brothers. Actually, this happened in the year 2008. Since its acquisition, the company has been gradually improving the image of Lehman Brothers business in the United States.
In addition, the acquisition was to make the company become an international bank. The asset banking trade, Barclay’s investment and the business involved in managing the capital, business capital and the Barclays international investors are controlled by Bob Diamond. He is responsible for ensuring that all the organization’s events run smoothly. Moreover, he is also responsible for the prosperity of the organization.
The challenges faced by Barclays PLC after the acquisition of Lehman Brothers
Although Barclays PLC has been fairing on well since it acquired Lehman Brothers, it has also been faced with a number of challenges (Davidoff 2009, p. 253). Additionally, the issues have greatly affected the effective implementation of the organization’s goals and objectives. One of the biggest challenges was the incorporation of the American Lehman Brothers into the main business to actively come together in terms of management. This operation had to be done within the shortest time possible to avoid interfering with the business activities and to make the transfer of workers from one bank to the other easy (Sandretto 2011, p. 321). Consequently, this was a great challenge since the time span was not enough for the managers to execute all the duties and ensure that the objectives of the company are met.
The other challenge is that the workers of the American Lehman were not quick to adapt to the quick changes that were being made in the organization (Ferrell, Fraedrich, & Ferrell 2010, p. 401). Consequently, this resulted into some of the workers shifting to other organizations since they were not able to quickly adapt to the new changes in the organization. The external environment did also not favor the advancements that were supposed to be made but created more problems in the financial market (Vlad, Ciupa & Nicu 2009, p. 80).Moreover, there were some doubts to the changes that were being made to the organization. The management of both organizations had greatly played an important part towards ensuring that the two companies come together but they both started experiencing challenges since both did not have similar ideas and development culture (Aalto, Harle,&Moisio2012, p. 110).
Since the two organizations did not have similar culture, the working staff did not have similar ideas. Consequently, this resulted into the slow integration of the two organizations. The accomplishment of the incorporation would be determined by the number of workers who remained in the new formed organization (Hall 2005, p. 195). Since some were able to leave, it was difficult for the organization to fully integrate within the stipulated time. Additionally, some of the workers from Lehman claimed that they had left the company since they were not included in the implementation of some vital rules that would guide the operation of the newly formed company (Kirkegaard, Véron & Wolff 2012, p. 107).
Another issue that created a lot of controversies was the motivation of the workers of Lehman Brothers. The working staffs were not only obstructed by the inability of the bank to integrate their culture with that of Lehman but also incorporation of the Lehman workers also created some uncertainty in the whole working staff (Penman 2009, p. 414). Statistics indicate that many workers had left the new company fifty days after its formation. Additionally, the workers who had remained behind did not find it easy since they were not fully incorporated into the operation of various roles that existed in the new organization. The incorporation of the two organizations also affected Lehman workers in that it had affected their personal and professional life (Stowell & Stowell 2013, p. 469). The incorporation the two organizations mainly affected the Lehman businesses and workers.
The above information was attained from some of the workers who had left the organization after the integration hence is considered to be first-hand information. Consequently, the ideas presented above are the real factors that contributed to the slow integration Barclays PLC and Lehman businesses (Green, Pentecost, & Weyman-Jones 2011, p. 21). Motivation of workers is an important factor in the working environment as it is directly connected to their work satisfaction. Consequently, the issue of motivation should be handled with a lot of activeness, appropriately and effectively. For instance, an employee who reports late to work should be held responsible hence it would be vital to recognize the reasons for the lateness. Additionally, the management should then clarify to the worker the importance of coming to work on time.
Recommendations on how the management of the newly formed organization can effectively move forward without losing key management staff, intellectual property and knowledge created at Lehman Brothers while they were still operational
To avoid losing some of the important people in the management staff, intellectual property and knowledge created at Lehman Brothers while they were still functional, the newly formed organization should take a number of factors into considerations (Hardina 2007, p. 417). Additionally, the leadership in Barclays and the resulting company should ensure that the workers of Lehman are loyal for the Barclays Company. Consequently, the method of management and commitment of the company will have to play an important role towards ensuring that all the workers, regardless of the company they had come from, are stress free. This will also ensure that the incorporation of the businesses has a constructive effect (ACHR 2008, p. 382). Additionally, the style of management and commitment of the newly formed company will also play an important role towards changing the emotions of workers.
Emotion is an important factor to be considered in an organization since it is the major factor showing whether workers are able to easily cope with the new changes that have been introduced into the newly formed organization. Arguably, stress on the workers will majorly have a significant effect on how workers from Lehman businesses will respond to the integration process. The management style in Barclays will be considered to be an important factor in ensuring that there is adequate leadership. Moreover, it will ensure that the performance of the newly formed organization is able to gradually improve (Madura 2007, p. 306).The management should show to the employees that they are important to the organization through their contributions. Additionally, the needs of employees should also be taken into consideration by organizing some healthcare programs and other uncommon policies that would ensure that they are adequately protected (Booth, Colomb & Williams 2003).
Furthermore, the management will be required to carry out massive education on the importance of embracing different cultures in an organization (Warner, & Witzel 2004, p. 58). This will eventually ensure that all the workers from both organizations are able to incorporate their different ideas to bring important changes to the organization.The management of the newly formed organization can effectively move forward without losing key management staff, intellectual property and knowledge created at Lehman Brothers while they were still operational by ensuring that the organization’s goals and objectives are linked with the employee’s reward system. This will be achieved by making clear prospects on how to reward the workers who are able to perform (Aamodt & Aamodt 2010, p. 210). The newly formed organization should also look for the workers who had left and find out the reasons why they had to live. Consequently, the reasons obtained can be used to make vital changes to the working staff to avoid reoccurrences of such mistakes.
To avoid making the workers feel that work is not in line with their profession, the management should ensure that they make the workers feel part of the system by training them on how to adapt to the newly created operational system. Through offering reasonable salaries to the employees, the newly formed organization will be able to retain its workers, intellectual property and knowledge created at Lehman Brothers while they were still operational hence move forward without any challenges. Another vital recommendation is mentoring of the workers (Sastry, & Pandey 2000, p. 101). This will ensure that there is a strong relationship between employees and the company. Additionally, workers will not be willing to move to another company since the mentoring program is in line with their personal and professional goals.
The newly formed organization should also create cultural values like honesty, respect and cooperation as part of their working system. Subsequently, an organization that has embraced the right culture will be able to attract and maintain their workers. They should also apply the use of effective communication to create some trustworthiness within the working environment. The organization should create some system which will ensure that workers opinions reach the top management on time. This will ensure that the workers are served according to their demands and on time hence they are able to remain in the company (Kirst-Ashman & Hull 2012, p. 170). One of the most important recommendations on how the management of the newly formed organization can effectively move forward without losing key management staff, intellectual property and knowledge created at Lehman Brothers while they were still operational is the provision of growth opportunities (Kew & Stredwick 2010).
For instance, the company should be able to make available some workshops and software. This will assist the workers who are willing to improve their careers and objective-setting efforts. Some job challenges should be made available to the workers so that they will be able to develop their understanding in various field of work.When there is an adequate management in the newly formed organization, the workers will be entirely engaged in performing their duties hence the company is also able to heavily invest in them and their career advancement.
Concurrently, the management can also enhance the prominence of the company through viable practices ranging cultural diversity management and viable HRM practices. Workplace diversity is a critical provision in numerous organizations. Evidently, various companies have implemented varying strategies to effectively address the challenges and opportunities of this phenomenon. While referring to the best practices (used by Barclays PLC), numerous strategies emerge. The first strategy is to recognize and appreciate all forms of distinctiveness within the workforce (Morgan & Vardy, 2006). This will help in addressing the challenges and opportunities of workplace diversity with effectiveness. Such distinctiveness can be harnessed to promote prosperity and expansion of the company. In this context, diversity acts as an opportunity, which an organization can utilize to prosper tremendously. Additionally, challenges faced in operations, market trends, business prosperity, and future growth can be handled effectively. This is only possible when diverse, qualitative, and novel opinions among employees are utilized profitably. It is feasible to have numerous options for handling various challenges within an organization. Hence, a focused organization should appreciate and enhance diversity within its premises as evident in the Emirate Airlines’ case. This will help in handling challenges and opportunities within an organization.
Another evident strategy is the eradication of discriminative acts within an organization. Discrimination leads to demoralization of employees with a consequent reduction in productivity, job satisfaction, and organization’s output. Treating every employee fairly is important in enhancing efficiency and job commitment (Groschi, 2011). Additionally, it is crucial to train employees on the importance of diversity within the workforce and how it can be harnessed for the betterment of the company. Evidently, employees need each other in order to grow, attain their objectives, and propel the company into prosperity. Training employees to realize this provision is an important phenomenon. It makes them think differently and start valuing each other for mutual benefits.
Concurrently, prosperous organizations have employed equality and fair remuneration in their operations in order to enhance impartiality and eliminate prejudicial acts within the company. Providing the Barclays PLC employees with equal treatments regardless of their racial, cultural, age, religious, and sexual orientations is critical and considerable (Shakhray, 2009). Paying equal salaries to employees in similar portfolios regardless of their distinctiveness has been important in various contexts. Previously, women were paid less than men even if their job specifications were similar. This is no longer the case in companies, which embrace diversity. This has helped in motivating employees hence using this provision as an opportunity to prosper. Motivated employees are quite productive as indicated earlier. It is important to pay employees based on their qualifications, job specifications, and roles assumed rather their cultures, races, sexes, and other prejudicial provisions. This has helped in addressing the challenges and opportunities of workplace diversity with value.
Another evident strategy is the fair recruitment and staffing of employees. This helps in getting the best and qualified staff regardless of their discriminative status within the Barclays PLC’s workforce. Most local and globalized organizations execute their recruitments and staffing activities transparently to avoid mishaps and undue favors (Groschi, 2011). This has allowed potential women to attain lucrative jobs and positions in numerous organizations based on their merits, capabilities, and qualifications. This occurs regardless of age, race, and physical disabilities. Additionally, promotions are also handled fairly and only deserving candidates are promoted. The supremacy and effect of businesses and corporations is great in the present society than ever before. There are evidences that suggest that some members of the public are against this kind of advancement. Business ethics, as a subject, helps in the analysis of this situation. Businesses and corporations has an enormous potential of making a contribution to the society, in relation to creating the goods and services required, offering employment opportunities, paying taxes, and spearheading economic growth of a country amongst many others (Adamantios & Schlegelmilch 2000). How, or actually to what extent, this contribution is made nurtures substantial ethical subjects that gets to the focus of the social role in commerce in the modern society. Business abuses to the ethical and moral obligations have the capacity to inflict great harm to individuals, societies and on the environment.
Critical evaluation of the prominent theories and models on the topic and linking this to the business in question with the view of making effective recommendations to the team
There are a number of important theories that have been used to the problems that are being faced by the organization in this context. Social influence theory states that the behavior of an individual is either deliberately or unintentionally influenced by other people (Friedkin, &Johnsen 2011, p. 128). Consequently, the theory will play an important role towards ensuring that there is mutual trust between the worker and management.Workers will be able to easily share their ideas with their managers hence the organization will be able to quickly improve in its performance. Organizational behavior theories are always applied to the management of employees. Additionally, they are majorly applied by the human resource managers when they want to maximize the general output from the workers (Borkowski 2009, p. 189).
With reference to the organizational behavior theory, the major task will be to build the company’s commitment of Lehman employees and ensure that the management of senior leaders in the Barclays is real. The organization will also use various ideas provided by the workers to improve their performance. Consequently, this will improve its image hence employees will not be willing to leave as they will be part of the achievements (Borkowski2009, p. 213).For the newly formed organization to affectively achieve itsgoals and objectives there should be a strong and viable constant communication between senior managers from the two organizations.In addition, there should be enough backingfrom the Lehman high-ranking supervisors who are shifting to Barclays (Anderson 2004).
Organizational behavior theory will play an important role towards ensuring that the possible conflict between the workers and the company does not exist. Subsequently, eradication of the conflicts will improve the rate at which the companies would integrate. Additionally, they should also ensure that senior managers from Lehman are given promotion and given some important responsibilities in the organization (French 2010). According to bystander theory, the Barclays Company should not take any action to the workers of Lehman Company who are willing to leave. Conversely, this will not assist in building a strong company. The organization will not be able to effectively manage their workers and other risks that might be involved. To efficiently encounter this bystander theory, the organization should be able to improve their employee’s trust.
Some key management actions that can be taken to address the issues highlighted in above question, which will ensure the business is able to leverage the acquisition effectively in order to gain competitive advantages for the business
The managers from both organizations should work together to serve as an example to other workers. Consequently, employees will also copy their senior managers and work together thereby ensuring smooth operation of the company. Since Barclay’s culture is more dominant than the other organization, they should be responsible for ensuring that conflicts are controlled by giving rewards and resources. Both the managers and other workers of Barclays should ensure that employees of Lehman are motivated (Blazey 2009, p. 9). Lehman’s commitment to Barclays should also be improved. Human resource management from both sides should ensure that they provide equal working opportunities to their workers to avoid incidences of biasness.
It is apparent that viable operational concepts can support decision-makers within the organization. Apart from aiding the decision making procedure, it also allows prompt problem solution and it may also be applicable in designing multistep processes within the organization. The procedure may also aid establishment of frameworks, planning and predicting stages, and measurement of definite results. It may be applicable within the non-manager levels. Additionally, the clientele may also extensively benefit from improved and rationalized decision-making procedures. The concept can be easily applied in production systems within business environments (Panneerselvam 2005, p. 19). Large and small scale enterprises as well as organizations normally encounter challenges whose solutions demand specific expertise drawn from applied optimization and applied statistics. For instance, an organization might require designing a sampling scheme so as to attain particular quality control aims (Hall 2005).
Recommendations
In order to tackle certain issues that always accompany incorporation of two or more organizations, there are some vital recommendations Barclays should adapt. The company should encourage the managers and workers from Lehman to embrace stability in the incorporation and reduce the number of workers from Lehman leaving the company (ACHR 2008). Additionally, the organization should make some regular communication to the employees of Lehman to reduce instances of doubts. Barclays Company should engage its employees in the positive management of Lehman workers in the amalgamation process (Alvesson 2000). Therefore, this will improve organizational commitment and motivation. Through application of the above actions, Barclays Company will ensure that there is a smooth transition of the Lehman’s working staff into their newly formed organization. Consequently, workers will be able to acquire new skills from each other and improve their knowledge.
It is recommendable also to consider the aspects of ethics within the business. According to Ahner (2007), business ethics is described as the set of behaviors that a business observes while conducting its daily operations. The ethics of a certain business could be varied. Ethics takes into consideration how Barclays interacts with the whole world as well as their interaction with each and every client. Business ethics do not only concern companies and other businesses but also government institutions, non-profit making organizations, charities, pressure groups and other organizations. Even though there is a considerable overlap between business ethics and business law, the two terms are dissimilar. Business law is described as institutionalization or codification of business ethics into precise societal rules, regulations as well as interdictions (Jeurissen & Rijst, 2007). Laws can also be defined as the least tolerable standards of behavior. In contrary, the organization should embrace morality in the context of norms, values, and beliefs entrenched in societal procedures. These can be to identify a right or wrong for a person, business or a community as a whole. There are deliberations that business ethics involves the study of morality and making use of reasoning to clarify certain rules and principles that identify right or wrong for any business situation. In this research paper, how business ethics and morality intersects is discussed with respect to already established works (Booth, Colomb & Williams 2003).
Conclusion
Conclusively, there are numerous challenges that are being faced by Barclays PLC. Additionally, it was the responsibility of the company to ensure that they are able to effectively incorporate Lehman workers into their system. Workers always find it difficult to cope with the new rules that come with integration. Arguably, this often leads to some quitting their jobs to look for better opportunities that suit their careers. With the above recommendations, Barclays will effectively integrate with Lehman without any challenges.
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MRA Associates Inc is a renowned company that started its operations with a core mission to provide quality and tailor-made engineering services to individuals globally. It has been able to achieve this mission through the adoption of systematic approaches that are technologically driven. The approaches have ensured effective coordination of activities, resource allocation, and advancement in technology. The approaches have also facilitated the purchase of various operating equipment, such as electronic data devices that have been instrumental in the provision of modern engineering solutions to customers. Indeed, the company has been focusing its potentials in providing quality consultancy services that are innovative. The services have been vital in addressing environmental complications that various companies and other entities such as government agencies face, especially in the current environment.
The services have also ensured proper management of activities and support centers where key solutions are provided. As noted, the company has made tremendous growth since its inception. The growth is attributable to effective planning, management of activities, information flow, effective communication, and the use of modern equipment of operation. Consequently, its success is attributable to excellent coordination of activities, distribution of resources, and adoption of a lean administrative structure that has ensured efficiency in service delivery. These elements have enabled the company to provide quality, timely and sustainable remedies to groundwater contamination, biohazard clean up, and industrial wastewater treatment solutions.
Despite its noble performance over the years, the company is currently facing some complications that may jeopardize its effective operations. The complications include a lack of proper cleanup and water treatment machines, technical personnel, and capital for expansion. The constraints have been limiting the scope of the company in terms of service provision since the available resources have not been able to ensure the holistic satisfaction of its customer needs. This has made the company’s management to embark on an initiative to help in mobilizing resources for the company’s sustainability and growth. In particular, the management sought to look for a strategic partner or purchase another company with complementary services to boost its resource base. This saw them identify Xecodynamics Company that they plan to buy.
The company is a US-based firm that designs and manufactures clean up operation components that are widely used in providing environmental solutions. The components that it produces include groundwater level monitors, remote chemical sensors, and electronic data storage devices. This makes the company a strong strategic partner to MRAs since it provides services that are pertinent to those of MRA. As noted, the purchase of Xecodynamics will enable the company to redesign its service portfolios to promote quality service delivery. It will ensure that the company receives more resources that include technical personnel that it has been lacking and capital. Variably, the purchase will enable MRA Company to enhance its competitiveness in the engineering industry. It will also enable the company to provide unmatched solutions to the environmental complications that threaten to jeopardize social and economic integration in most settings.
Description of MRAs organizational structure and its phase in the organizational life cycle
MRA Company operates under a divisional hierarchical organizational structure that steers its activities. The structure provides it with effective incentives that facilitate proper coordination of activities through a systematic flow of information. As noted, the structure is majorly used in large companies that operate in wide geographical locations (Daft, 2006). It is also used in large corporations that have a wider scope of operation and support centers. This explains why institutions with strong aspirations to recording exemplary performance should adopt the use of the structure.
Indeed, the company’s structure is based on hierarchical set up where information flows from the top level of management to junior employees at the lowest level. The structure promotes the effective flow of information between various departments and operating units since it adopts the concept of a straight line communication. It has been instrumental in driving performance in the institution that has over 18 offices and several business units. It also has more than 200 employees whose contribution is important in the production chain. The structure has enabled smooth coordination and execution of activities in various departments through proper employee engagement. This is evident since it creates effective avenues through which information is flowing to respective recipients.
For instance, the structure has aided communication between top managers, divisional chiefs, business unit coordinators, and employees in the company. This has ensured that every stakeholder performs his duty effectively by the laid down procedures. It has also ensured that customer needs or expectations of product quality are conveyed adequately to the stakeholders for action. Consequently, the structure has been facilitating policy formulation, innovation, and teamwork that are key ingredients to exemplary performance (Daft, 2006). It is proper to note that companies that seek to compete effectively in the engineering industry are under obligation to adopt a flexible organization structure that creates a viable link between departments. The structure should easily allow and support the remission of information and receiving feedback from various stakeholders. This is essential in ensuring that the needs of customers and other stakeholders are addressed with minimal complications (Jones, 1998). It is also vital in facilitating the adoption of cost-effective mechanisms of problem solutions, especially on hostile environmental issues that MRA focuses its potentials on. In short, MRAs organizational structure is a four-level hierarchical set up where managers are at the top, followed by divisional managers, business unit managers, and functional support employees. Information flows in a clear manner between the departments that are mandated to provide quality services.
Advantages and disadvantages of the company’s current organizational structure
Managers in MRA Company asserted that they adopted the current organizational structure due to its relevance and viability in ensuring the effective flow of information between various departments. It facilitates flexibility and efficiency in the coordination of services that are provided to customers (Jones, 1998). It also ensures the proper allocation of resources that requires the holistic engagement of stakeholders. Further, the structure is ideal since it promotes effective communication and sharing of information between stakeholders in institutions that include managers, employees, and suppliers. It has made MRA company officials have constructive engagements on issues of the growth and formulation of performance strategies. The structure has also been instrumental in ensuring effective conveyance of the organization’s mission and objectives that are set to be attained (Barrar & Huston, 2009).
As reviewed, the company’s structure is at the growth stage in the organizational life cycle. This is evident since the company has not attained its full prospects and is still on the verge of growth. It still has ambitious expansion plans that it seeks to achieve. Consequently, the company has not met its objective of becoming a multinational organization with a global presence. Therefore, the company operates under a structure that suits its current status, and that can be sustainable with the available resources. The structure is in the growth stage since it allows or creates room for structural adjustments.
How are authority and control dispersed and managed and how specialization and coordination is handled
Under the structure, authority is decentralized and well managed since there are strong control protocols that must be observed. The decentralization of authority has enabled managers to execute their functions without undue influence or dictation. This has ensured the adoption of an autocratic approach of management where policies are formulated and implemented appropriately in a systematic manner (Barrar & Huston, 2009). The initiative has resulted in the realization of significant gains in the company in terms of performance since it promotes efficiency in service delivery. That is, it has been vital in eliminating bureaucratic procedures that have always been staling performance in most settings. Bureaucracy is a major bottleneck that institutions must decisively deal with to ensure effective operations.
The institutions must ensure that it is holistically eliminated by embracing lean organizational structures. It is imperative to note that coordination and specialization of activities that the company offers, such as remediation of groundwater contamination, are professionally handled (Barrar & Huston, 2009). The activities are handled with highly qualified professionals with immense knowledge of industrial wastewater treatment solutions. They provide unmatched services that are consumer-oriented to improve the lifestyle of individuals.
Evident conditions under which matrix structural set up can be deemed suitable to aid MRA operations
Matrix organizational structure is currently being preferred by most managers due to its effectiveness and flexibility. The structure encourages teamwork and stakeholder participation at various levels of operation. This promotes innovation through the formulation of conventional strategies of operation that is economically viable and socially relevant (Harrison & Lock, 2004). Scholars assert the need for the integration of the structure as a performance measure in institutions. They cite that it remains a major aspect that facilitates the proper flow of information. It also has a proven record of ensuring effective communication of information between departments. Indeed, the structure is appropriate for multinational institutions that have many offices, including business units and a large scope of customers that requires quality services.
The structure is also appropriate since it presents hybrid support incentives that are drawn from organizational and divisional operating structures. This explains why the structure best suits MRA Associates Company that seeks to expand its operations. The structure will enable the company to manage its business units efficiently to provide quality services to consumers (Harrison & Lock, 2004). It will also facilitate the coordination of activities within the production chain of the company. This is vital since key stakeholders in the company will be able to receive prompt information on quality issues and operating guidelines with much ease.
Evaluation of how a change in structural setups can affect output levels of staff members and their incentives
As indicated, the holistic adoption of matrix structure in MRA Company would lead to a lot of changes. Firstly, it would revolutionize how activities are executed in the organization by creating a systematic order of information flow. It would also transform the management structure by facilitating the elimination of some managerial positions. This is evident since the structure promotes synchronization of some departments, especially in organizations that have many departments as a cost reduction measure. Merging of departments is a concept that is based on the structure’s core mission of ensuring that institutions operate under leaner systems of administration that limits duplication of work (Harrison & Lock, 2004).
Therefore, the structure would lead to the declaration of some employees redundant since some departments within the management hierarchy would be abolished. For instance, this would see general mangers of key regions take up the roles of account managers who have been working in collaboration with them to enhance efficiency in the provision of water treatment solutions. The accounts managers will, therefore, lose their jobs if the structure is adopted once the purchase of Xecodynamics Company is actualized.
The description on the levels of technical complexity, task variability, and analyzability, and task interdependence of MRA Associates with reference various structural development theories
As noted, in the theories of Joan Woodward and Charles Perrow, technical complexities emanate in most settings due to poor management of resources and coordination of activities. They define the complexities as key constraints that impede performance in most settings stating that they are higher in some tasks. They also stated that they are detrimental to both internal and external stakeholders in various institutions (Jones, 1998). Consequently, the scholars noted that institutions must take a keen interest in establishing major task variability, analyzability, and task independence to foster meaningful expansion. This explains why MRA Company must make viable modalities to mitigate possible task complexities that it may face. The company’s management should also identify major interdependent variables that influence performance in the environment that they operate in to facilitate the provision of quality solutions to environmental complications that affect various individuals globally.
As noted, key technical complexities that the company is bound to face during and after the acquisition process include the integration of anew management structure of the organization and allocation of resources. Managing the new business unit that was being operated under separate guidelines also form key technical task that the company must address amicably (Jones, 1998). Key elements that the company’s management must analyze to promote its performance include working conditions of employees, quality protocols, cultural dynamics, and employee deployment processes. These are fundamental elements that define success in institutions since they contribute to ensuring effective stakeholder satisfaction.
Ways managers at MRA Associates can encourage innovation and creativity within the company and how modifications to its organizational design and structure would facilitate the innovation process
Innovation and creativity are fundamental aspects that contribute effectively to ensuring delivery of services that meet the modern expectations of consumers. They are noble elements that facilitate the quality improvement of products through product reengineering processes (Horibe, 2001). These processes that include new product development, repackaging, functionality improvement, and quantity are vital in attracting customers. They are the key pillars that define how well a company can achieve its objectives since they influence sales of services. They also define the level of competitiveness that a company can have in a setting. Indeed, MRA associate managers should develop viable modalities to encourage innovation and creativity. This is essential in facilitating the establishment of conventional ways of providing credible solutions to the evident complications that affect industrial wastewater treatment.
Innovations would enable the company to establish viable ways of grounding water contamination and biohazard clean up services. Consequently, innovative ideas would foster the development of economically viable approaches to designing and implementing effective breakthrough solutions through the use of cutting edge technologies (Horibe, 2001). It is also recognized the innovative and creative ideas will go along way in enabling the effective purchase of the new company that is set to boost MRAs resource base to aid the provision of quality service delivery.
As noted, innovation and creativity can only be achieved under a favorable environment and structural system of operation. Achievement of the fundamentals requires immense determination of stakeholders in an institution. This is evident since innovation and creativity cannot be achieved in isolation; they require a collective approach or participation by the stakeholders. Their achievement also requires the adoption of an effective organizational structure that promotes the proper flow of information between stakeholders (Horibe, 2001). This explains why structural set up that an institution is operating under is central in achieving innovative ideas. It also explains why the modification process of organizational structure that MRA Company is embarking on is vital for its sustainability. This is evident since the modification or the new structure is bound to promote teamwork, effective transfer of information, and encourage stakeholder participation in decision making (Petrick & Quinn, 1997). This leads to the achievement of various ideas that, if combined, results in the development of unique techniques or production systems that are conventional.
Description of the organizational structure of Xecodynamics
Xecodynamics Company is a small firm that has its headquarters in Sandiego, California. The company was started by two renowned environmentalists to help in providing credible solutions to the increasing environmental challenges that locals are faced within the current society. It has been able to record significant growth in its asset base and general performance over the years due to its effective management. In particular, the company designs and manufactures essential components that are instrumental in cleaning up environmentally contaminated sites (Standish & Standish, 2000). These components include groundwater level monitors, remote chemical sensors, and data storage devices. The company is operated under a functional organizational structure that supports small institutions. The structure has been essential in driving its operations since its inception, where it has recorded major developments in terms of growth. The structure was adopted by the management since it provides viable incentives that are relevant to establishing companies. It also presents fewer operating sections that eliminate bureaucracy and the high cost of management. Ideally, the structure fosters cost reduction initiatives since it focuses on a lean administration system where information centers are limited.
The structure’s key advantages, disadvantages, and signals that indicate the need for structural change
Indeed, the adopted structure enabled the company to coordinate its activities effectively. This was possible since it contributed to eliminating many hierarchies within the management set up that threatened to compromise service delivery in the company (Standish & Standish, 2000). It also ensured the effective flow of information between stakeholders and departments. Consequently, it facilitated the effective participation of all stakeholders in decision making that contributed to the development of innovative ideas that boost operations in its key departments. It also assisted in reducing the cost of operations since it ensures that fewer levels of administration are created. Despite its nobleness, the structural set up also has some disadvantages that managers must note with immense care. Firstly, the structure cannot allow for effective multitasking since it limits managers in executing their activities.
It also fails to recognize the decentralization of authority since it gives immense powers to managers. This has been promoting an autocratic leadership style that is not sustainable, especially in the current society. The management style is not viable since it creates disagreements and feelings of superiority that affect an employee’s esteem. Thirdly, it leads to leadership struggles among employees that contribute to low performance. This aspect was a major impediment to the growth of Xecodynamic Company (Standish & Standish, 2000). These elements explain why the company should change its organizational structure if it remains in operation. They form the key signals that show the need for the adoption of a new organizational structure to steer the company to its growth prospects. For instance, the company should consider adopting a divisional structure that holds the capacity to eliminate the evident wrangles that have characterized its leadership hierarchy.
Complications that the administration team of MRA will face when executing the restructuring process to accommodate Xecodynamics staff and operations
The purchase of Xecodynamics Company would be of great significance to MRA Corporation. This is because MRA Company would benefit from the large pool of resources that the company has, such as skilled labor and assets. However, there are several challenges that MRA Company will have to deal with amicably in ensuring that the purchase of Xecodynamics enhances its flexibility in service delivery. The challenges that the company seeks to face ranges from monetary, social, cultural, and structural complications (DePamphilis, 2011). These challenges must be administered effectively to ensure the proper delivery of services and smooth execution of various activities. This is essential since these challenges hold the capacity of impeding the integration process that the company must execute in terms of personnel redeployment and allocation of physical incentives.
In particular, the company will have difficulty in ensuring effective coordination of activities at the new business unit. It will also face difficulty in managing the evident leadership wrangles that have been occasioned by a lack of understanding among top employees. The leadership wrangles must be mitigated through the adoption of viable strategies that are ethically relevant (Tittle, 2000). Secondly, the company is likely to face difficulty in facilitating the training of its employees for them to be of the same professional standard as their Xecodynamics counterparts. This is important in ensuring harmonious relations between employees in both business centers.
It is also essential because the professionalism of employees in the two companies is different. Employees of MRA Company are inferior compared to employees of Xecodynamic Company who are highly specialized. Thirdly, the company is bound to face financial challenges during and after the purchase of the company. The financial challenge is based on the fact that the acquisition of new corporations and restructuring process is always demanding. The activities are cost-intensive due to their vigorous nature and the need for professional input in their execution.
Kinds of resistance to change that are likely to be encountered as Xecodynamics is incorporated into MRA Associates
As noted, resistance to change is a normal aspect in any environment, especially when new ways of operations are being introduced. It also occurs when modern technologies are being integrated into institutions. This is evident due to fear of the unknown that most individuals have, especially employees in terms of their job security. When Xecodynamics is incorporated in the MRA company, employees in both institutions will strive to resist any move for restructuring (Tittle, 2000). They are bound to resist any move that gears towards rendering some of them jobless. Some of the stakeholders may also resist the restructuring of organizational structure, especially employees of Xecodynamic, who are used to operating under a less complex structure of administration. They would resist since they may find it difficult to cope effectively with the requirements of the system of operation that is used in MRA (Tittle, 2000)
Cultural implications that can be expected as a result of the merger of the two companies
Cultural complications are challenges that arise due to policy and structural differences that organizations have. The differences are always evident because most companies operate under their own set of traditions or norms. For instance, the merger between the Companies would present serious cultural complications since the Companies operated under different policy frameworks and environments (DePamphilis, 2011). The Companies also operates in different locations that have distinct HR policies that guide the hiring of employees and the distribution of resources. Key cultural implications that can be expected if the merger takes place successfully include the harmonization of the operation structure of the organizations and hiring procedures of employees. Others include management of the quality of services and different social expectations that various stakeholders of the two companies have with respect to their contribution to the development of the companies (Petrick & Quinn, 1997). These cultural issues must be addressed by the management of MRA Company adequately and professionally to guarantee the smooth flow of operations in all the company’s business centers, including the new service unit that is of great significance to its growth.
How the move to outsource core manufacturing processes to Mexico would change the culture of the organization
Outsourcing is a viable cost-reduction strategy that most organizations undertake to maximize their profits. The strategy has been instrumental in transforming performance in key institutions globally with managers of MRA company affirms its relevance, especially in the current competitive environment. They noted that the move to outsource the new business unit is to facilitate the effective management of resources. They expect that the move will ensure optimal utilization of resources that will, in turn, lead to high productivity (Petrick & Quinn, 1997). In particular, they want the business unit to provide the company with key components that it uses in addressing environmental complications that it strives to eradicate. The project to double the production of groundwater remote sensors and electronic data management devices to enhance the delivery of services to customers (Maguire, 2003).
This is essential since the components are the key drivers of operations in the company. Their absence leads to low productivity and performance in general since they define the quality of services that are delivered. As noted, MRA Company is set to outsource the Xecodynamics branch to Mexico due to various reasons that are credible and economically viable (Petrick & Quinn, 1997). However, the move or initiative must be driven with caution and strategic planning to ensure that the institution’s cultural practices are not eroded. The venture should also be undertaken systematically to eliminate possible resistance from some stakeholders. That is, every stakeholder should be engaged in the process to make them own the initiative and embrace it as a performance and not a victimization process (Jones, 1998).
Firstly, the initiative will enable the company to record a drastic reduction in its cost of operation that has remained high for a long period. This is evident since the cost of doing business in Mexico is relatively low] compared to the US. The nation also has a vast amount of resources that will guarantee the continuous production of the much need components such as chemical sensors. Consequently, the nation is rich in human capital that is trained in various fields of operation that promotes effective execution of activities. The availability of the human resource in the nation is significant to the MRA company since it leads to the low wage bill. Therefore, the company will spend less on the wage bill if it relocates the business unit to Mexico than in the US (Maguire, 2003).
As noted, the move to outsource the company will present several cultural connotations that may affect the operations of the company. The cultural complications are bound to arise due to environmental and policy differences that exist in these nations. This is evident since business activities in Mexico and the US are operated under fairly inconsistent standards. The nations have their set policies that guide business operations (Petrick & Quinn, 1997). The policies must be adhered to in ensuring effective operations as the authorities demand. Key policy differences that range from HR hiring policies, acquisition of raw materials, and transfer of goods are essential elements that are bound to influence the Companies norms. In particular, the company’s deep-rooted culture of hiring qualified employees with immense experience may change. This is because the hiring of employees in Mexico is based on minimum qualifications and must be based on fairness. The process is driven by company owners and government officials to ensure fairness, unlike in the US, where hiring is solely done under set guidelines of a company (DePamphilis, 2011).
The difference in human resource hiring will create a major shift culturally in the company since its deeply rooted recruitment norms may be eroded. The HR policies may also affect the company’s norms in terms of employee treatment and terms of work that have to change due to diverse vitiating factors that the two distinct environments present. Further, the move to outsource Xecodynamics Company would contribute to changing the company’s production culture. That is, the employees who will be hired to manage or execute operations in the Mexican business unit may not be conversant with quality procedures or production guidelines that the Companies native employees are following. They may start executing various activities in their way and according to their professional understanding without due regard to laid down procedures. This aspect may compromise employee integration, especially the ones who may be exported from the US to steer operations there and the citizens of Mexico who would be employed (DePamphilis, 2011).
This is eminent since staff members who are conversant with the company’s operating guidelines may expect that the tradition of operations continues. At the same time, Mexican employees may prefer their way of operation. This may lead to intense disagreements that may compromise the achievement of laid down objectives by the company. This aspect may lead to the erosion of some of the cultural production practices that are applied in the US, especially in the Mexican unit. Thirdly, environmental, and policy differences may also affect the company’s restructuring processes. The restructuring process may change, especially in the Mexican business unit, since it is bound to adopt a new style of leadership, who must employ a management strategy that holds the capacity of promoting performance in the region.
Ethical considerations that would come into play in making an outsourcing decision
Petrick & Quinn (1997) indicated that outsourcing decisions are crucial performance initiatives that must be well thought. He stated that managers must execute a proper evaluation of the environment and asses the impact of the policy guidelines that drive business operations in the settings to avoid making nonviable outsourcing decisions. They must ethically analyze all the underlying factors to ensure that their decisions yield the needed benefits. This is vital since outsource is a complex venture that should be able to facilitate cost reduction (Tittle, 2000). It should foster optimal resource utilization, effective supervision, and production of quality items that meet the expectations of consumers. This explains why the MRA manager is under obligation to adopt ethical considerations when deciding to avoid possible cultural complications that may arise. The company’s managers must consider the quality of services, working environment, security, and cultural differences.
Firstly, the company must consider the kind of services and their quality nature that remains a fundamental ethical obligation. This is important since institutions have an ethical obligation to provide quality, standardized, and satisfying services to customers. The ethical obligation must be met as required under the law to guarantee an effective operation that is not marred with legal issues. Secondly, the manager of the company must consider the work environment before deciding to outsource the Xecodynamic unit to Mexico. This is essential since the initiative should be executed in a favorable environment that has limited business bottlenecks that may impede performance. That is, there must be favorable HR policies and quality working guidelines in the location (Petrick & Quinn, 1997).
It is also an ethical requirement for the manager to consider security as an ethical issue. Security is significant since no business can operate in an area whose security is at below par. It is said that security defines the level of prosperity that affirms can record in a setting. Therefore, security is a critical element that the manager must consider when making the outsourcing decision. Indeed, these are essential elements that managers in various institutions should consider before making any development decision since they influence performance in a significant way(Petrick & Quinn,1997).
How structural and cultural changes in the merged company will affect the relative power of both the existing managers in MRA Associates and the new managers who come from Xecodynamics and how power struggle may affect employees
The purchase of Xecodynamic Company by MRA associates will create a new battlefront for positions. Top managers in both companies will strive to assume the top management positions to safeguard the interest of their stakeholders. Indeed, the merger process and appointment of the new management should be made by credible procedures to avert possible complications that may jeopardize performance. This is critical to ensure the smooth running of activities to provide quality services to customers (Standish & Standish, 2000). Concerns about leadership issues are common in most institutions, including Xecodynamics, where leadership wrangling led to low performance. The leadership issues that were evident in a company are one of the key reasons that led to the need for its acquisition since it was not recording good results.
This vice started affecting the company at the time when some employees, whose interest was not in seeing the company progress, were hired (Coyle, 2000). Intense lobbying for top positions started after their hiring because they had ill motives of cash misappropriations. This kind of trend is bound to spill over to the merged company that holds a lot of resources if appropriate measures are not undertaken. It is imperative to note that the structural and cultural dynamics that will be present after the merger will greatly affect the privileges that authorities enjoy through the decentralization of power (Standish & Standish, 2000). This is evident since the new structure of operation that is bound to be adopted provides an effective system of administration that is transparent. It is set to promote stakeholder participation in decision making to eradicate the spread of leadership wrangles witnessed in Xecodynamics Company.
The structural and cultural changes will ensure that the appointed leaders are held accountable and that they execute their duties diligently. They will be expected to follow laid down procedures when designing policies to enhance efficiency in addressing environmental challenges that affect various individuals. The changes will also ensure that leaders or managers of the company are appointed based on merit. The process of appointing them is to be competitive as the new structure stipulates. This is stipulated to enable the company to get nonpartisan managers who hold the capacity of steering the merged company as a unit to greater heights. As noted by Standish & Standish (2000), a power struggle is not noble for any institution that aspires to record excellent performance. It compromises the execution of key activities that can transform the institution financially.
It also jeopardizes the formulation of favorable policies, coordination of activities, and management of employees. This is evident since it creates a deeply rooted confusion whereby stakeholders such as employees may not know the person to report to or provide them with aligned operating guidelines. Leadership wrangles may make the two merged companies to perform dismally even though new structures are being put in place. This is because continuous leadership wrangles hold the capacity of affecting the output levels of employees who expect good guidance under credible management. Employees are individuals whose performance levels are dependent on how cohesive stakeholders are in an institution. Their performance is also dependent on how well their social, cultural dynamics, and monetary aspects are addressed (Standish & Standish, 2000).
Conclusion
Indeed, the purchase of Xecodynamics will be instrumental in enabling the MRA Company to enhance its competitiveness in the engineering industry. It will also enable the company to provide unmatched solutions to the environmental complications that threaten to jeopardize social and economic integration in most settings. This is evident since it will use the potentials that Xecodynamics Company is set to facilitate the manufacturing of its equipment and support incentives.
References
Barrar, W. & Huston, J. (2009). Leadership Roles and Management Functions in Nursing: Theory and Application. Philadelphia: Wolters Kluwer Health/Lippincott Williams & Wilkins.
DePamphilis, D. (2011). Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions. Burlington: Elsevier Science.
Daft, L. (2006). Organization Theory and Design. Mason, OH: Thompson-South Western.
Harrison, F. & Lock, D. (2004). Advanced Project Management: A structured Approach. Aldershot, England: Gower.
Jones, R. (1998). Organizational Theory: Text and Cases. Reading, Mass. [u.a.: Addison-Wesley.
Maguire, R. (2003). Organizational Structure in American Police Agencies: Context, Complexity, and Control. Albany: State University of New York Press.
Petrick, A. & Quinn, F. (1997). Management Ethics: Integrity at work. Thousand Oaks [u.a.: Sage.
Standish, D, & Standish, R. (2000). Organizational Structure and Apostasy. Rapidan, VA: Hartland Publications.
Tittle, P. (2000). Ethical Issues in Business: Inquiries, Cases, and Readings. Peterborough, Ont: Broadview Press.
Horibe, F. D. E. (2001). Creating the Innovation Culture: Leveraging Visionaries, Dissenters and Other Useful Troublemakers in your Organization. Toronto: J. Wiley & Sons.
Synergon Capital, a large financial-services American company, successfully makes acquisitions in a quite aggressive manner. However, after the acquisition of Beauchamp, a British financial-services company, the situation is challenging. The companies do not get on well: Synergon follows its way and imposes changes while Beauchamp continues to resist them.
A. The Beauchamp acquisition is challenging because of the cultural differences. While companies’ authorities and employees normally do culture training, they rarely focus on the locals and pay more attention to those who relocate to different cultures (Minguet et al. 4). Synergon is the company with a typically American approach: they demonstrate inclemency, vigour, and decisiveness. Every detail proves they perceive their work as war: bowie knives, “war rooms”, calling the diligence teams “commando squads”, and the “take no prisoners” approach that is reflected in firing most of the acquired company’s management staff within a year (Cliffe par. 5).
In comparison, Beauchamp policy differs in terms of power distribution: the company’s managing director, Julian Mansfield, is similar to an old-fashioned patriarch (Cliffe par. 19). As the leader, he plays a significant role for the whole company as well as the external organizations that know him for his charity. The British tend to be more reserved, formal, and stiff; they value traditions and have a specific sense of humour (Meyer 45). The use of language may be different: while the Americans are usually direct and speak up, their British colleagues are inclined to be less straightforward. As a result, the communication failure is present.
Despite the problems, it is possible to cope with them by giving Beauchamp more freedom. Synergon usually deals with acquisitions when one company is purchased by the other, but no new company is formed; however, a merger, a combination of two companies that forms a new one, might be more advantageous (Whitaker 101). Even if Synergon decides not to merge, it should allow Beauchamp to voice its opinion and carry out its policy to a greater extent.
B. First and foremost, I would thoroughly investigate the cultural peculiarities of the unknown British business culture. I would probably find some materials that pertain to the interaction between American and British partners. Later on, I would make a request and obtain the documents that can shed light on Beauchamp’s inner culture and Mr Mansfield’s leadership style. Taking into account that Synergon acquired some documents, I would look through them and select those that might help understand the way the company was run, for example, how the employees were motivated or how teams were put together.
Apart from my efforts, I would also try to make use of the previously acquired companies’ human resources. Although the majority of their staff was fired, some of them probably retained powers. In this case, I would contact them and investigate if they had the experience of international business communication with British partners. It is also possible to address Synergon’s branches that are close to the United Kingdom geographically because they could do business with their neighbour.
If time permits, it is desirable to take steps in both of these areas. In case there is a shortage of time, I would choose to concentrate on the recent information about the company and work actively to leverage my knowledge of the British business culture because the present situation is more urgent than the issues of the distant past.
C. Judging by the present case, one may conclude that acquisition of a well-known company with substantial profits and a faithful client base of wealthy persons cannot be made without appropriate adjustments. The blind implementation of the standard approach does not encourage the company management of the acquired company to collaborate.
Each case is individual. Dealing with a strong company from other countries, such as Beauchamp, requires improvements in the context of cooperation. Beauchamp’s team was well-organized and effectively acting; moreover, their leader significantly contributed to the company’s success. Under such circumstances, one should not only rely on the accustomed mechanisms but also take into consideration the traditions and methods of the acquired company.
Another lesson that can be drawn from the case concerns the importance of cultural peculiarities in business interaction. Although both companies belong to the English-speaking cultures, their traditions, attitudes, and procedures are dissimilar. Cultural features influence the way partners to address each other and their businesses. Lack of cultural knowledge and skills leads to misunderstanding and complicates partnership.
Meyer, Erin. The Culture Map: Breaking Through the Invisible Boundaries of Global Business. New York: Public Affairs, 2014. Print.
Minguet, Luc, Eduardo Caride, Takeo Yamaguchi, and Shane Tedjarati. “Voices from the Front Lines.” Harvard Business Review, 2014.
Whitaker, Scott C. Mergers & Acquisitions Integration Handbook: Helping Companies Realize the Full Value of Acquisitions. Hoboken: John Wiley & Sons, 2012. Print.
In the modern world of business, a variety of factors might drive companies to merge; nevertheless, it ultimately comes down to the goal of making (more) profit. However, the process of merging is difficult and often may lead to undesirable consequences. This report provides recommendations for two hypothetical travel agencies, Holiday Seekers and Small World, on how to successfully merge into a single organization, Zephyr Travels. The issues of stakeholders, leading the change, organizational culture, and maintaining the change are discussed.
Effects of Change on Stakeholders, and Ways to Deal with These Effects
It is clear that the merger of the two organizations will have a major impact on all the stakeholders of both companies. Therefore, it is important to assess these effects and take steps allowing for decreasing the likelihood of the situation in which these effects lead to negative consequences for the new organization. To do this, the impact on all the stakeholders and the respective measures to minimize the negative influences will be considered separately.
Owners (Stockholders) of the Organization
On the whole, it is usually expected that a merger will have a positive impact on the price of the stocks of an organization in the long term. In fact, the decision of two firms to merge is usually made on the basis of the desire of major shareholders to make additional profit. It is, however, stressed that a merger can result in the volatility of the prices of stocks of a business (Jain & Sunderman 2014). In order to ensure that this volatility does not adversely affect the resulting incomes of shareholders, it is important to efficaciously run the new organization so that it brings steady profits, thus also making the stocks stable again, and increasing the long-term profits of the stockholders (Jain & Sunderman 2014).
Managers of the Organization
Because most branches of Holiday Seekers will be closed, it is clear that a large proportion of its managers also will have to be made redundant. The remaining administrators will have to adapt to the new conditions, learn the peculiarities of the new business, and provide guidance for the employees of the new company (Conway & Monks 2011). The remaining top managers will have the most significant degree of responsibility. In particular, the remaining CEO will be forced to manage a whole new part of a business which will differ from their old business considerably and will need to orchestrate (together with a change team) the process of uniting of two companies so that the new people can all work together in one organization (Tanner n.d.).
Managers will wish to keep their position and their salary and will experience stress due to the additional workload (Miles 2013). It will also be within their responsibility to teach the employees new skills (Conway & Monks 2011). Therefore, the CEO should create a plan which will include guidelines for merging all the aspects of the two organizations, including the ways to integrate the management. The new mission and vision will need to be shared with managers, and their commitment to them will have to be ensured (Palmer 2004), which, again, can be done via communication. Additional change managers can be used to reduce the workload on the managers who are part of the staff.
The Top Management
One of the CEO of the merging companies will have to quit. It might be offered that the CEO of Holiday Seekers leaves and the CEO of Small World remains with the firm. Even though the part of Holiday Seekers that will remain in Zephyr Travels will consist of a greater number of people than there are in Small World, in which no layoffs are planned, the 65 employees of Small World all work in one location (Dubai), whereas the workers of Holiday Seekers are dispersed among numerous locations. Therefore, it is likely that the CEO of Small World has much more contact with their employees than the CEO of Holiday Seekers has with theirs; and thus, the employees of Small World will feel abandoned by their CEO if that CEO leaves, whereas for the remaining ≈120 employees (40% of the 301 initial workers, because only 20 physical branches, or 40%, remain) of Holiday Seekers, the change of CEO might simply appear to be an event which is distant from them.
In addition, because a part of Holiday Seekers will be closed, it might feel more natural for all the employees that the CEO of Holiday Seekers also leaves; besides, it might be possible that some of the workers of the remaining branches will leave, or new employees will be hired to help to deal with the online branch of Zephyr Travels. The remaining CEO will have to establish and maintain constant contact with the physical branches (Palmer 2004), which can be done via online methods such as video conferences, or even via e-mail when more personal contact is not crucial.
The CEO, therefore, will have to carry out an extensive amount of communication with the managers. Training will also need to be organized for these administrators so that they could teach the employees the necessary skills (Conway & Monks 2011), for knowledge plays a critical role in the success of any organization (Monroe & Pagliari 2008). It is also recommended that managers of the two branches of Zephyr Travels communicate extensively, via online methods (e.g. video conferences) when live communication is not possible, and exchange their experience in managing the workers.
It should be noted that it is useful to take into account the performance of CEOs before choosing which one of them has to leave, but in this case, such data is not available.
Employees
The employees (and low-level managers of the enterprises which merge) will perhaps suffer the most from the merger, for a large proportion of them will have to be laid off, whereas the rest may experience distress due to the fear of being made redundant, as well as because of the need to adapt to the new situations and new routines. Therefore, it is possible to make the merger as painless as possible for the remaining employees by changing their routines in a minimal way (as far as this allows for the effective functioning of the new company). In addition, the workers should also be extensively communicated with by the management of the organization, and taught the necessary skills to do their new jobs; if left on their own in the issues of training, the employees may not reach the minimum required level of skills and knowledge (Conway & Monks 2011), and also will feel abandoned by the management of the new business, possibly leaving their jobs.
The change in the workers’ routine can be minimized by leaving most own them in their old positions where possible. This can be done because out of the 50 branches of Holiday Seekers, 30 will be closed completely, but 20 will remain in their old locations and will not have to change considerably, apart from adapting to the online branch of Zephyr Travels (e.g., they will need to learn to communicate with their clients using online methods). The Small World will also not need to change considerably, apart from adapting to the collaboration with the physical branches.
Therefore, the workers of the two branches of Zephyr Travels will need to be taught to collaborate with one another, and to get used to the fact that the company now also has a physical/an online branch. As in the case with the managers, the employees will also need to be communicated extensively and to be helped to develop enthusiasm and commitment to the new organization (Palmer 2004).
Customers
It is most likely that the clients of Small World will not suffer at all, for the online branch will be preserved in the new company. The old customers will still be able to use the services of the new enterprise. However, these old clients (especially those who were loyal to Small World) should be reached by utilizing the electronic means of communication, and informed that Small World now becomes a part of Zephyr Travels, so that they know to which company the old brand belongs (McLelland, Goldsmith & McMahon 2014); to keep them, a discount might be offered to them if they use the services of the new travel agency.
On the contrary, the customers of those physical branches of Holiday Seekers which will be closed will be unable to use the services of the company anymore, at least in the same way as they did in the past. The clients of the closed branches of Holiday Seekers (especially the loyal ones) will also need to be contacted and informed that the firm will no longer operate in their location due to the merger, but that the new company will still be happy to provide them with services by utilizing the online means, and might offer discounts.
Suppliers
The regular suppliers of travel agencies are mainly comprised of transport companies and hotels. For the suppliers, the firms which they supply are customers. Therefore, due to the merger, the suppliers might lose their client or a part of the volume of products/services this client purchases. However, this should not have a considerable impact on Zephyr Travels.
Nevertheless, it might be advised to continue using the services of the old suppliers of both Holiday Seekers and Small World, especially the services of hotels and similar organizations, for it is possible that the list of destinations to which Zephyr Travels will send their customers will consist of the destinations to which the old travel agencies sent their clients. However, it might be needed to re-negotiate some old contracts if there were any. On the other hand, it might be better to limit the use of the services of the transport companies operating in places in which the physical branches of Holiday Seekers will be closed. Switching live communication with suppliers to the online relationship might lead to a decrease in the trust of the suppliers (Andreu et al. 2010); furthermore, it is likely that Zephyr Travels will lose a part of the clients living in places where the old branches were situated. And still, the news organizations should not stop using the services of these suppliers altogether, for it might be possible that the company will retain some of the customers from those locations by offering online services to them; also, new clients might still be found in those places via online means.
The Community
It might be possible that the community of the locations in which the offices of the organizations are situated will not have a major impact on the future of Zephyr Travels. The communities in which the branches of Holiday Seekers that are to be closed are located will, in fact, stop being an influence at all (Murphy & Murphy 2004). The communities in which the offices of Zephyr Travels will be located will also not be an influential factor. It is recommended, however, to announce the change in the organization to the local communities so that their members would know the new company as the successor of the old one, and possibly use its services as clients.
Leading the Change, and the Type of Leadership Style Required
In most cases, the top executives of an organization and senior managers engage in leading the change in companies; the assistance of project managers and change managers might also be used (Higgs & Rowland 2010; Pollack & Algeo 2016). Change management could also be consulted because the “regular” managers are likely to be overloaded by work due to the new conditions (Miles 2013).
It might be recommended that the CEO of Zephyr Travels takes the responsibility of managing change in the new organization. These administrative measures will include such issues as the communication with and between the employees of the enterprise, sharing the new vision and mission of the organization and making the workers committed to it in order to engage them and minimize the resistance, overseeing the necessary training for the employees who require it, and so on (Ford, Ford & D’Amelio 2008). The CEO will also be the main controller of the whole process of implementing the elements of change in the organization (Palmer 2004).
The CEO will have to utilize the help of the managers of all levels, especially the senior managers. The assistance of change managers may also be useful (Crawford & Nahmias 2010). It will be needed to create a program of training for the workers of the former Holiday Seekers in order to help them adapt to the new online branch of the organization and to be able to utilize if efficaciously. It is recommended that managers deliver such training programs; the delivery should begin from the top managers of the company and stream down to the “local” team or project managers. In the case of physical branches, the managers of each of the separate branches will need to be contacted and trained, and then they will need to deliver training to their subordinates (Conway & Monks 2011).
The leadership style that might be recommended for this occasion is the transformational leadership (Akther 2015), for this style is best for creating a new vision in an organization and for inspiring the workers so as to allow them to implement the change effectively. Such a leader will be able to motivate the workers and help them to keep their morale on a high level, which is of paramount importance in a situation when a merger has occurred, many employees were laid off, and the remaining workers have to strive to adapt to the new situation at their job (Jóhannsdóttir, Ólafsson & Davidsdottir 2015).
Preparing the Culture for Accepting the Change
According to Marks and Mirvis (2011), there are a number of ways in which the cultures of two organizations can be managed to prepare them for the merger. However, before considering the ways to prepare these cultures, it is needed to decide what the final step of the cultural integrations should be.
Marks and Mirvis (2011) offer four main frameworks for integrating cultures after a merger; these are assimilation (one of the cultures absorbs the other one), integration (two cultures are blended together), pluralism (the two different cultures coexist), and transformation (both merging companies adopt new elements of culture). It should also be stressed that, according to Donnely (2011), it is not recommended to attempt to completely change both cultures after the merger; on the contrary, the two cultures may have common features, and they should be preserved, especially if they are beneficent.
In this case, it even appears reasonable to choose the way close to that of the pluralism of cultures, also labeled by Marks and Mirvis (2011, p. 866) as preservation; however, the culture of Holiday Seekers might still be partially transformed to match that of Small World. This is because both the local branches of Zephyr Travels and its central office in Dubai (where Small World was previously located) will mainly keep doing the same type of business (with local and online clients, respectively). However, it will still be needed to integrate the two companies, and it will be easier to adjust the culture of the small collectives of the local branches (consisting of approximately six people each) than that of the large workforce of the office in Dubai.
To prepare the cultures for mergers, it will be needed to communicate with employees and instill a sense of urgency of the need for change (Marks & Mirvis 2011; Palmer 2004). This can be done by demonstrating to the employees that their companies could perform much better, and that, consequently, they would also gain from it, also explaining the adverse consequences of not merging. The same reasons which drove the two companies to a merger may be used, but carefully, so that the staff does not become aware of the planned merger before they are ready. This will allow for a more painless integration of the two companies.
The managers will have to understand the culture of both Holiday Seekers and Small World, thus performing cultural learning, and then drive both cultures towards the established goal (Marks & Mirvis 2011). There should not be many cultural conflicts between the physical and online branch of Zephyr Travels, because each of the offices will mainly keep operating in their domain. However, the elements of the new culture can be promoted in the local offices, for example, while providing the training that was discussed above for the members of physical branches, or while maintaining communication.
A Change Model to be Followed, and the Ways to Achieve Each Phase of the Model
According to Appelbaum et al. (2012, p. 776), Kotter’s eight-step model for implementing change can considerably improve the likelihood of successful change, even though it does not always guarantee success. Tanner (n.d.) states that the Kotter’s model for change consists of eight distinct steps (see Fig. 1), and can also be utilized in a situation when two companies merge.
Figure 1. Kotter’s eight-step model for introducing change in an organization (Tanner n.d.).
These steps may be achieved as follows:
Establishing a sense of urgency: as has already been stressed, the employees can be shown that their companies can perform considerably better, and, as a result, they might get better working conditions or higher salaries. (Of course, if such promises are made, they will have to be kept). In addition, the convenience of having an online service might be demonstrated to the employees who work in physical branches, whereas the benefits of having physical branches may be shown to the worker of the central office.
Creating the guiding coalition: the CEO of Small World (the one who remains) will have to gather a coalition consisting of senior managers, as well as technicians (to design the way in which online and physical branches will be integrated) and financiers (to consider how to manage finances in the new Zephyr Travels company). This coalition can design the details of the future merger.
Developing a vision and strategy: these will be designed by the coalition that was discussed in item 2 of this plan.
Communicating the vision: the CEO and the senior managers will communicate with lower managers, as was discussed above; apart from providing training, they will communicate the vision to the rest of the staff.
Empowering action and removing barriers: it will be needed to carry out the processes which will later allow the members of the new company to work together as one organization successfully. This step also involves training the employees, which was mentioned above, and explaining to the workers who show resistance that their work in the new organization may bring them additional benefits.
The short-term wins might be generated when the two companies engage in collaboration. For instance, the workers of physical branches might learn to properly use the online means for communicating with their clients.
Consolidating gains, implementing further change: finally, when the critical mass of the members of the staff is ready for the merger, the complete integration of the two companies may be carried out. At this point, the already probed cultures of the two companies may also be driven to the goal which was established before (Marks & Mirvis 2011).
Anchoring the new approaches: the employees of the new company, Zephyr Travels, need to become accustomed to the new ways of doing business. In other words, standard procedures of doing work in the organization need to become routine for its workers.
Maintaining the Change in the Organization
To maintain the change in the new business, it is needed to reach the state in which most workers, or, rather, the critical mass of workers, have all the necessary skills and knowledge (Monroe & Pagliari 2008), are accustomed to the new ways of doing their job, and do not conflict with one another. In order to maintain such change, as it was already stressed, it will be needed to train and prepare the workers (Conway & Monks 2011), which can be done in the way proposed above: the top managers (perhaps with the help of the guiding coalition, change managers, and so on) create a list of competencies which are necessary for working in the new organization, and then the adequate training procedures are developed and delivered all the way from the top administrators to the local (team, project, or branch) managers, who will then help their employees learn the new aspects of their job (Conway & Monks 2011).
In order to maintain the “spirit” of the workers, managers will have to work with them; it will be necessary to respond to the problems of individual employees and help them adapt. It is paramount that the top managers (including the CEO) will also have to take into account the issues of their subordinates and spend a considerable amount of time on constructive communication. It will also be necessary to continuously assess the situation in the organization, address any deviations from the planned course of events, and take the needed action if any problems arise; for this purpose, a variety of tools for assessment of organizational progress can be used (Keenan et al. 2015).
Conclusion
Therefore, if Holiday Seekers and Small World are to merge successfully into Zephyr Travels, a number of steps require being taken. The impact of the merger on stakeholders needs to be considered, and any negative consequences should be addressed. The CEO of Small World ought to remain in the company and lead the change; a change team needs to be gathered, and managers should provide the necessary motivation, training, etc. for their employees. The culture of the organizations should be prepared for accepting the change. The Kotter’s eight-step model can be utilized for implementing the merger of the firms, and the change should be preserved by creating new routines, motivating and training workers, maintaining contact with the staff, and addressing any arising problems.
Reference List
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Andreu, L, Aldás, J, Bigné, JE, & Mattila, AS 2010, ‘An analysis of e-business adoption and its impact on relational quality in travel agency-supplier relationships’, Tourism Management, vol. 31, no. 6, pp. 777-787.
Appelbaum, SH, Habashy, S, Malo, JL, & Shafiq, H 2012, ‘Back to the future: revisiting Kotter’s 1996 change model’, Journal of Management Development, vol. 31, no. 8, pp. 764-782.
Conway, E & Monks, K 2011, ‘Change from below: the role of middle managers in mediating paradoxical change’, Human Resource Management Journal, vol. 21, no. 2, pp. 190-203.
Crawford, L & Nahmias, AH 2010, ‘Competencies for managing change’, International Journal of Project Management, vol. 28, no. 4, pp. 405-412.
Ford, JD, Ford, LW & D’Amelio, A 2008, ‘Resistance to change: the rest of the story’, Academy of Management Review, vol. 33, no. 2, pp. 362-377.
Higgs, M & Rowland, D 2010, ‘Emperors with clothes on: the role of self-awareness in developing effective change leadership’, Journal of Change Management, vol. 10, no. 4, pp. 369-385.
Jain, P & Sunderman, MA 2014, ‘Stock price movement around the merger announcements: insider trading or market anticipation?’ Managerial Finance, vol. 40, no. 8, pp. 821-843.
Jóhannsdóttir, L, Ólafsson, S & Davidsdottir, B 2015, ‘Leadership role and employee acceptance of change’, Journal of Organizational Change Management, vol. 28, no. 1, pp. 72-96.
Marks, ML & Mirvis, PH 2011, ‘A framework for the human resources role in managing culture in mergers and acquisitions’, Human Resource Management, vol. 50, no. 6, pp. 859-877.
McLelland, MA, Goldsmith, R & McMahon, D 2014, ‘Consumer reactions to the merger: understanding the role of pre-merger brands’, Journal of Brand Management, vol. 21, no. 7-8, pp. 615-634.
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Murphy, PE & Murphy, AE 2004, Strategic management for tourism communities: bridging the gaps, Cromwell Press, Trowbridge.
Palmer, B 2004, ‘Overcoming resistance to change’, Quality Progress, vol. 37, no. 4, pp. 35-39.
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The Sprint and Softbank merger was a surprise to many people. When the Japanese based mobile operator announced its intention to acquire the American company, there were debates about the feasibility of this move. Sprint Nextel is a first class internet service provider in America and it is the third longest serving internet provider in the country. It originated from the Brown Telephone Company that was founded in 1899 and the company was charged with the task of installing telephone services to the rural areas (Duncan, 2012).
The company has experienced a number of economic challenges in the past. It has also gone through a number of mergers before it adopted its current name in 1983 (Duncan, 2012). Softbank on the other hand is based in Japan and it is an internet service provider among other functions such as telecommunications (Duncan, 2012). The company mainly operates in broadband, fixed-landline telecommunications, e-Commerce, broad media, finance, marketing, and media among other functions (Duncan, 2012).
Softbank made an ambitious bid to acquire 70% of Sprint Corporation, a move that left many people amazed. The company placed its bid of $20.1 billion to purchase Sprint. The company however expects to receive $8 billion as new investment capital, which it intends to use to strengthen its 4G LTE service (Whittaker, 2013). The move has surprised many economist and business analyst who see it as a risky path to follow. The doubt is informed by the financial trend recorded by the Sprint Corporation in the last few years.
Since 2007, Sprint has been losing money and it has been underperforming compared to its competitors Verizon Wireless and AT & T. Sprint has been lagging behind in rolling out its 4G LTE (Whittaker, 2013). Generally, the company has been performing dismally and getting into bad debts of about $15 billion while losing subscribers in the market (Whittaker, 2013).
The Sprint corporation is still recovering from another merger with Nextel that was detrimental to its survival (Whittaker, 2013). Observers warn that this may not be the best move for the Softbank to make since the takeover does not seem to offer a viable financial and market advantage. The financial and market threats notwithstanding, the Softbank management sees things differently from everybody else.
The CEO Masayoshi Son is one of the few risk takers in the world and he is not afraid of taking a risk based on an idea he believes will be beneficial in the long run. The CEO is known for this considering he did the same thing in 2006 when the company invested in Vodafone and acquired the Japanese unit at a price of $15.5 billion (Whittaker, 2013). Even then, most observers had a similar opinion as they do today that the amount was not worth the risk.
Due to debts, the company was not involved in investments but the CEO says that since the debt has been reduced to manageable levels, the move is justifiable. The pursuit of the new acquisition is therefore a calculated and affordable move. The company wants to roll out the LTE services in Japan and the acquisition of the Sprint Corporation is a good starting point. The benefit of taking over the Sprint Corporation is that the Softbank company is interested in the time division Long –term Evolution, TD-LTE (Whittaker, 2013).
Apparently, Sprint is rolling out the same technology through its partner Clearwire (Whittaker, 2013). However, this may not be as easy as it sounds because of the geographical difference between Japan and the United States of America. The infrastructural settings in Japan are different from the United States. The challenge is mainly experienced in network management as well as providing differentiated services (Whittaker, 2013).
This acquisition is very similar to what happened seven years ago when the Softbank Company took over Vodafone. However, it beats logic that a company with better telecommunication infrastructure is purchasing a company that lags behind in this technology. American companies are still grappling with learning what offering high-bandwidth service is all about while on the other hand, Softbank has been doing this for a long time in Japan (Duncan, 2012). Nonetheless, the Softbank management acknowledges that the mobile phone market in Japan is almost at a standstill. The growth prospects of the market are arguably dismal compared to the United States’ market.
Population growth is partly to blame since the rate is almost at zero in Japan, hence the reduced demand (Duncan, 2012). This leaves the Japanese company with only one option if the company intends to grow which is through acquisitions. Although the company was interested in a Japanese mobile provider eAccess, the CEO sees Sprint to be more covetous than the local company does.
The future of Softbank is in the United States’ market where the demand is still not halfway exploited (Whittaker, 2013). The company knows that half of the American population does not own Smartphones, which is a great opportunity for their products. The other incentive that can be attributed to the relentless push for the acquisition of Sprint is based on the local economic situation. The interest rates in Japan are declining at a record high rate.
This makes it necessary for the company to exploit other markets to diversify its prospects. This is a great opportunity for the Japanese company to obtain a great entry into the American market since the Yen is performing well against the major world currencies g it giving the Japanese an advantage. However, just like in any other business venture, the Softbank acquisition of Sprint is faced with numerous risks. One of the greatest misgivings with regard to this particular acquisition includes Softbank’s lack of experience in the American market.
There are doubts about how well the company is prepared to develop a working strategy that conforms to the American market in order to foster growth. Most business observers feel that the company is taking more burdens than it can handle. Having just acquired eAccess, Softbank is becoming over ambitious with the Sprint acquisition and this might prove to be more than the company can control (Whittaker, 2013). Taking over the Sprint Corporation means inheriting its debts as well.
Currently, Sprint has $15 billion in outstanding debts while the Softbank has a 10million debt. In such a situation, the debt to capital ratio of the Softbank company will be greatly affected and reduced to critical levels (Duncan, 2012). Evidently, Softbank can own Sprint but it does not make economic sense to own a company that you can do very little with. This condition will be worse if the global economic situation takes the anticipated downward turn. The $8 billion will definitely be a boost to Sprint and it will help it get its operations back on track. However, the risks posed by the uncertain world economic shifts are something that can change the expected positive results in an instance.
References
Duncan, G. (2012). Softbank’s $20 bln Sprint takeover: Everything you need to know. Web.
The world of business can be regarded as one of the spheres of human activity that are constantly changing. Among other things, there is a wide range of practices that are used by companies to change their organizational structures, increase sales of products and services, and improve management processes. The merger is known as one of the operations that are widely used in politics, business, and economics. When it comes to mergers in the second field, it involves a consolidation of two or more companies into one larger business.
In fact, it is possible to single out a few types of merger transactions, and each of them has its own advantages and weaknesses for companies. The case that the given paper comments on are devoted to the fictitious company in the field of travel business (Travel Group) that has been formed after a series of merger transactions.
Organizational Structure of Travel Group
According to the case, Travel Group is a large public limited company that is headquartered in Germany; the company was formed four years ago due to a series of merger transactions. The company can be called an influential player in the world of global travel business – providing a wide range of services to more than forty million clients from different parts of the world, Travel Group is a tough competitor to other companies in the field. The total number of employees exceeds fifty-five thousand people. Travel Group provides its services with the help of a great number of travel agencies located in different countries, a few thousands of hotels, passenger cruise liners, and airlines.
When it comes to the organizational structure of the company that is discussed in the case, it is extremely important to analyze it with reference to the key concepts studied within the framework of systems theory. The systems theory regards all the existing systems as the combinations of patterns and the particular structures that can work as entities due to a range of dynamic processes. Within the frame of the open system model, an organization is often compared to a kind of a living being consisting of a few subsystems that collaborate in an effective manner and achieve the common goal.
The latter, in this case, is presented by the ability of a system to reach the balance, dealing with internal problems and mitigating external threats that exist for an organization. Open systems differ from the close ones because they do not rely only on internal resources; instead, open systems use external resources and opportunities and turn them into benefits for themselves and the external world. Travel Group discussed in the case presents the entire network of travel agencies; using external resources such as space, the organization makes efforts to apply them to create high-quality services for tourists and businesspeople. In the end, the organization gets financial benefits while clients do not have to worry about organizational issues related to their trips. Therefore, it is clear that the Travel Group is an example of an open system.
There is a number of subtypes of organizational structure; in the given case, Travel Group seems to possess a divisional organizational structure. As it follows from the information presented in the case, the structure of the organization presents a hierarchy which is rather stable. The company has a few subsidiaries, and they fulfill their functions with the help of a range of operational divisions.
For instance, when it comes to the subsidiary in the United Kingdom, it has a series of divisions (such as commercial, HR, PR, customer operations, etc.) and each of them is supposed t accomplish the clearly defined functions. More than that, it needs to be highlighted that the organizational structure of the Travel Group does not lack complexity: within each division, there is a separate hierarchy. Another sign that speaks in favor of sustainability and feasibility of organizational structure that has been established in the company is the fact that fateful decisions are made based on operational rules.
Another important question that needs to be analyzed is its future. It is widely accepted that open systems are more susceptible to unwanted external influence than the close ones that try to minimize it. Therefore, it is extremely important for the Travel Group to avoid influence (both internal and external) that can weaken the hierarchy and provide managers on different levels with an opportunity to rely on principles that run counter to general rules accepted in the company.
It is worth noting that preservation of stiff organizational structure presents a difficult task due to the fact that nowadays, a lot of companies are urged to implement democratic principles into the working process and provide employees with the freedom of choice in order to keep up with the times and be accepted in the global business community. Taking into account the significance of stiff structures for sustainability and competitive ability of companies, it is important that the senior management of the Travel Group has paid focused attention to the establishment of a clear division of responsibilities in the company.
The latter allows the management to control working processes in an effective manner and prevent the cases when subdivision managers try to conceal that mistakes were caused by the actions of their immediate subordinates. If structures of organizations are clearly defined like in the case of the company from the case, it helps managers to decrease the influence of the so-called subcultures that may appear within departments on the working process.
What is more, the same is true for the impact of the particular employees who claim to have their own vision of the best development path for an organization. As for the Travel Group, its internal structure was designed to eliminate any duplications in functions of the department. At the same time, there are still some differences between working practices and terms for employees as the latter used to be parts of different companies prior to the merger. The latter can be regarded as a potential threat to the success of the company in the future; this is why these differences have to be equalized with the lapse of time.
The Influence of External Factors on Travel Group
There is a range of external factors that may pose a threat to the business performance of Travel Group in the future. To analyze them and describe the situation for the organization in a detailed way, it is necessary to use models accepted in different countries.
PESTLE analysis helps to define factors related to different fields of activity that can have an influence on an organization (Zalengera et al. 2014). As it follows from the case, the most significant political factor influencing Travel Group is the threat of political instability and terrorism that reduces the return on sales. The case indicates that there have been a few cases when instability affected flights resorts and threatened the safety of tourists.
Among the economic factors, it is possible to single out the currency rate of exchange that is rather unstable and may provide the opportunity for speculation. At the same time, not all countries where TG services are available are experiencing upturns in economic cycles – therefore, the purchasing power of the population in different countries may vary, and some services and destinations can remain inaccessible for certain social groups.
When it comes to factors that belong to the social sphere, it is important to note that there are intercultural differences between employees in different departments that can cause conflicts in the company. More than that, increased attention must be paid to career attitudes of employees: due to the fact that employment terms for specialists still depend on the company they worked for prior to the merger, there is a threat of strikes and protests caused by inequality that exists between employees. Also, the executive management needs to consider the prevalence of age groups among employees working for the company and design practices helping to prepare young specialists for the sphere.
In terms of technological factors that may influence the business performance of Travel Group, they include improvements that need to be implemented in order to make working practices safer and less time-consuming. For instance, the use of e-ticketing systems has been introduced due to that reason. The next group of factors that may have an influence on working practices and financial outcomes for Travel Group are legal factors; in case of the company, it is clear that all practices used in departments and employment terms must align with labor law and be non-discriminatory for all groups of employees working for Travel Group.
In particular, the company has to give consideration to the salary level of employees in order to exclude gender and racial wage gaps in the organization. Otherwise, it may have a detrimental influence on the social image of the company and cause the unwillingness of young specialists belonging to minority groups to collaborate with Travel Group and their subsidiaries. At last, there is another group of factors that may have an impact on the organizational performance of any company; these factors are related to the current environmental situation.
Among factors belonging to this group that may pose a threat to the company, there are the necessity to reduce carbon emissions and the amount of waste that appears due to the activity of the organization. In addition, a wide range of environmental threats for the company exists due to unpredictable weather conditions in certain locations. At the same time, there is a threat of local contagious diseases that can be extremely dangerous for foreign tourists and even cause significant customer attrition.
According to the concept of five forces that have been developed by Porter, there are five primary factors that can have a significant influence on the organizational performance of companies (Dobbs 2014). The threat of new entrants and substitutes does not present significant risks for the company as it operates in different parts of the world and, therefore, its employees and department managers are able to keep track of the global situation.
At the same time, there is still industry rivalry with other companies in the travel industry operating on a global scale; due to that, the company needs to ensure transparency and introduce innovations to remain competitive. The influence of suppliers (or business partners) and customers is manifested in the growing power of labor unions, unstable purchasing power of customers that influence their purchase decisions, and demand for services that can change due to external problems such as wage levels, weather conditions, and political stability.
As is clear from the examples, there are various threats for different subdivisions such as the prevalence of political threats for airline or social threats for the HR department. To some extent, the PR department may face a combination of all threats considering that they are responsible for information exchange with the global community. Applying McKinsey 7S framework to the case, it can be said that the establishment of shared values of Travel Group requires improvements associated with structure and staff (problems related to employee inequality must be prevented) (Singh 2013).
Achievement of Sustainability: What Can be Improved?
According to the case, there are three measures that are not related to financial performance that will help to define whether Travel Group as a parent company does its best to improve organizational performance. The latter include customer satisfaction, employee engagement, and sustainability. As for sustainability, it is believed to be crucial for companies related to the travel industry. Corporate sustainability of companies offering services for tourists is strictly interconnected with the combination of two factors: the use of proper destinations and the ability of tour operators to provide services that do not have a detrimental influence on the environment of the planet and health of employees and clients.
In order to achieve sustainability goals, the management of the discussed organization needs to focus on improvements related to different elements of organizational structure. According to the framework proposed by Peters and Waterman, the so-called McKinsey model, the key elements that have a significant impact on organizational performance and competitive ability of a company include skills, style, systems, staff, shared values, strategy, and structures.
To develop recommendations that can have a positive impact on the organizational performance of Travel Group it is necessary to understand the role of sustainability and its accurate definition. Nowadays, it is widely accepted that a business can be called sustainable in case if it manages to minimize the negative impact that working practices have on the environment and quality of life of both employees and clients.
Therefore, companies that can be called sustainable should also use a range of methods to protect human rights. Then, it is worth noting that sustainable companies are required to ensure that the principle of sustainability is taken into consideration during decision-making processes in any department or subdivision. The principle of unity is extremely significant in the case of Travel Group – its subsidiaries operate in different parts of the world, and if cultural norms in some departments contradict the values that help to achieve sustainability, it can pose an additional threat to the organizational performance of Travel Group.
Discussing the areas for development and growth that act as predictors of success and sustainability for the given organization, it is necessary to give pride of place to the ability of upper executive management to foster innovation aimed at improving the effectiveness of employee’s work and turning the organization into the green business. In fact, according to the case, the company has already started adopting technologies that possess enough potential to reduce the negative impact of Travel Group’s working practices on the environment.
For instance, the case indicates that the company makes attempts to implement measures helping to reduce waste. Continuing on the topic, it needs to be said that a few recommendations related to the aspect of activity can be identified. First, it is known that the company provides its services with the help of numerous types of transport including cruise liners. As for the letter, it is important for the Travel Group to attract more specialists in maritime transport who will be responsible for transport inspection to reduce the risk of water pollution. At the same time, special consideration must be given to SO2 emissions caused by the use of fuel containing sulfur (Qin, Yin & Cao 2017).
Nowadays, the problem of emissions caused by the exploitation of cruise liners bothers the majority of people living in seaport cities, and this is why the unwillingness of Travel Group to solve this problem can encourage customer attrition. One of the ways to foster innovation in this field is to start using fuel that contains less sulfur. Despite the seeming obviousness of such a decision, the company will need to make a choice between more substantial financial expenses (causing increased prices for passengers) and a damaged reputation among environmentalists all over the world that will be followed by customer attrition.
Another recommendation related to the implementation of innovations encouraging achievement of sustainability includes reducing carbon emissions and resource-saving with the help of information technology. The latter include implementation of e-ticketing systems in all countries where Travel Group operates. In order to achieve two goals simultaneously (improve the reputation of the company and make a positive contribution into the development of industry), Travel Group can establish its own research facility where specialists will be creating the global data bank containing information concerning travel business in different countries, the catalog of destinations, etc.
The latter will help the company to achieve sustainability and differentiate itself among other influential players in the field of business. The use of innovation may cause certain implantation issues, and this is why executive management may need to find additional external sources of financing.
Another aspect of sustainability which is extremely important for the outcomes for Travel Group is their ability to establish a proper organizational culture that will help the company to meet the requirements that exist for companies in the industry and be included in the Dow Jones Sustainability Index (Van Stekelenburg et al. 2015). First, a sustainable organization must be based on cultural norms and values that are supported by companies on a global level.
Among other things, they include equality, diversity, safety, and accessibility of services. The listed values should be protected by the executive management of Travel Group as the case does not indicate that the company does its best to make these principles a part of the corporate culture. According to the framework proposed by Quinn that introduces a two-dimensional pattern that is used in order to analyze the current organizational culture of a company and assess its effectiveness, there are four components shaping this culture (Wiewiora et al. 2013). The components discussed by the author include hierarchy, adhocracy, clan, and market.
The first component presented by hierarchy involves the use of well-defined policies, and the Travel Group has already implemented a series of important decisions aimed at strengthening its multilayered structure by avoiding duplications of functions fulfilled by the subdivisions. Obviously, the organization does not use the principles of adhocracy that involves the establishment of structures that are extremely flexible – nowadays, the use of strong hierarchic structures seems to be a more appropriate alternative due to the specialization of employees. The market organization of the company is rather strong as it possesses a competitive ability.
As for the so-called clan organization, it is strictly interconnected with the set of values and motivational factors that exist for employees. In the case of the discussed companies, there is a lack of strong corporate culture due to the fact that the company was created due to the series of mergers. According to the case, one of the most urgent problems is related to inequality between specialists who used to work in different companies before the merger.
To achieve sustainability, ensure employee engagement and, therefore, improve financial outcomes for Travel Group, the company needs to make further organizational changes with regard to the principles of justice and equality – thus, wage policy may need to be reconsidered so that all employees are paid in accordance with the amount of work they perform and the degree to which they are responsible for actions of other specialists.
At the same time, it is almost impossible to achieve sustainability if the significance of diversity is neglected; in fact, the managers should do their best to exclude the possibility of conflicts based on intercultural differences and unequal attitude towards subordinates based on their heritage. In the end, the company must utilize the price policy improving accessibility of services for clients from different social groups.
Reference List
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Qin, Z, Yin, J & Cao, Z 2017, ‘Evaluation of effects of ship emissions control areas: case study of Shanghai Port in China’, Transportation Research Record: Journal of the Transportation Research Board, vol. 2611, pp. 50-55.
Singh, A 2013, ‘A study of role of McKinsey’s 7S framework in achieving organizational excellence’, Organization Development Journal, vol. 31, no. 3, p. 39.
Van Stekelenburg, A, Georgakopoulos, G, Sotiropoulou, V, Vasileiou, KZ & Vlachos, I 2015, ‘The relation between sustainability performance and stock market returns: an empirical analysis of the Dow Jones Sustainability Index Europe’, International Journal of Economics and Finance, vol. 7, no. 7, p. 74.
Wiewiora, A, Trigunarsyah, B, Murphy, G & Coffey, V 2013, ‘Organizational culture and willingness to share knowledge: a competing values perspective in Australian context’, International Journal of Project Management, vol. 31, no. 8, pp. 1163-1174.
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