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Overview of the Merger between Sprint and Nextel

Describe thee impact of culture on the Merger between Sprint and Nextel.

Mergers and acquisitions characterize today’s competitive business environment. However, about 80% of these mergers fail to achieve their expectations where as one-third of them fail after five years of their operation (Stahl & Mendenhall, 2005).  Existing evidence suggests that the final success of any merger and acquisition is substantially determined by how the involved organizations manage the cultural elements of their transition. Taking the case of Nextel and Sprint, their failure to manage their distinct cultures resulted in their poor financial performance in the industry. For this reason, the paper assesses the impact of culture on the merger between Sprint and Nextel and consequently provides recommendations on what the leaders of the two organizations could have done to unify their distinct cultures.

Sprint in 2005 acquired its principal rival Nextel for a sum of $ 35 billion with the primary objective of keeping pace with the leading players in the industry including AT& T and Verizon (Hart, 2007). The company by 2008 had written down Nextel value of 80% confirming that the merger had been a total failure.  The failure according to Hart (2007) was attributable to a clash between the two organization’s cultures. Nextel was known for its entrepreneurial, Khaki culture whereas Sprint was acknowledged for its buttoned-down formality culture.  The culture differences between the two organizations greatly affected their advertising strategies. Likewise, the culture difference triggered a sense of mistrust between the two companies. For instance, some Nextel staff complained that their entrepreneurial and aggressive culture that triggered their growth was being overshadowed by the bureaucratic approach executed by Sprint (Hart, 2007). On the other hand, Sprint felt deceived by the deteriorating network of Nextel arguing that it was the main reason for losing customers.

According to Ferris, Jayaraman & Sabherwal (2013), a majority of organizations during mergers and acquisitions primarily focus on maintaining their reputations and credibility without taking into consideration the impact of their cultural differences in their financial performance. The author notes that both employees and managers comprehend that culture is crucial in enhancing the success of an organization compared to their operating model or strategy. Regardless the significance of culture, manager sand C-Suite executives does not give it a priority when implementing change programs as in the case of the merger between Sprint and Nextel.  Additionally, in Kotter’s formula, culture comes last after everything has been addressed by an organization. Therefore, organizations such as Sprint and Nextel should have given priority to their distinct corporate structures if they wanted to succeed in the telecommunications industry. Integrating two distinct corporate cultures entail understanding the cultural norms of each company before commencing any operation.  However, the leaders of the two companies failed to acknowledge the fact that culture influences the manner in which individuals behave and comprehend their actions.

Importance of Taking into Consideration Culture during Mergers and Acquisitions

To enhance their competitiveness following the merger, it was essential for both Sprint and Nextel organization leaders to design a rigorous program that would address issues related to cultural integration.  It is so unfortunate that the leaders treated culture as a soft and wooly topic. However, the organization leaders could have done the following to create a unified and vigorous culture for the resulting organization following the merger.

Culture refers to the shared behaviors, beliefs, and values that highlight how individuals accomplish various responsibilities in the organization (Teerikangas & Irrmann, 2016). Therefore, to integrate two different cultures, it was necessary for the two companies to define their cultural objective in wider terms.  Likewise, it was important for the two company’s top management to set a cultural agenda by outlining the type of culture they wished to implement following their merger. In this context, it was upon the company leaders to blend the two cultures or determine the type of culture that would enhance the value of the merger. Since the aim of the merger between Sprint and Nextel was to cross-sell products, it was paramount for their leaders to integrate their sales force culture.

There is often a considerable difference between the acquired and the acquirer’s culture. Through analysis of their cultures, it becomes easier to measure and identify the differences among units, people, functions, and geographical regions. Besides, analyzing cultural differences would have helped the two organizational leaders identify the loopholes that needed to be closed to enhance the success of the merger. To identify the gaps, Nextel and Sprint managers could have used a variety of tools including management interviews, accountability mapping and decision x-rays, audio and video recordings, customer interviews and employee surveys (Antoine & Kleiner, 2011; Fischbacher-Smith & Fischbacher-Smith, 2014). The aim of management interviews is to reveal managerial priorities and styles of the two companies whereas audio and video recordings would enable the two companies to get a glimpse of how employees in the two companies work. Customer interviews would have helped in identifying the perceptions of the external stakeholders regarding the two organizations whereas employee surveys would have provided significant insights regarding accepted priorities, attitudes, and behaviors.

 The process of decision-making is determined by the culture of an organization. For this reason, leaders of the merged companies are often subjected to a situation that requires decisions to be made quickly. However, different companies exhibit different decision-making styles depending on their culture. To address this issue, Nextel and Sprint company leaders would have taken the necessary step and identified individuals who would be involved in the decision- making process following the integration. Besides, it was essential for them to comprehend their different decision-making styles including the structures, processes, and assumptions that support it (Weber & Fried, 2011). Additionally, it would be crucial to communicate their expectations to individuals involved in the decision-making process including their deadlines.  The need for speedy decisions would have transformed the manner in which decisions were made regarding their operations (Davenport & Barrow, 2009).

Recommendations on What Nextel and Sprint Organizational Leaders Could Have Done To Create a Unified Strong Culture for the Organization

For effective integration of the two cultures, it was important for Nextel and Sprint leaders to choose owners to help in the cultural integration process. In most cases, the owners are Organizational Development practitioners and Senior Human Resources whose views are crucial during a takeover. Apart from owners, the views of external stakeholders are crucial in providing insights regarding the value of culture in the performance of the company (Marks & Mirvis, 2011).

Whenever two organizations merge, it is often assumed that organization leaders should take into consideration the best part of the culture of each company and integrate them.  However, in most cases, well-designed processes and structural controls of the acquirer might be difficult to integrate with the acquired company less structured ways as in the case of Sprint and Nextel. For this reason, it was important for the companies to maintain distinct core competencies to enhance their survival in the industry.  Given the fact that the companies exhibited different cultures, it was important for the leaders of the two organizations to assess the distinct aspects of their cultures and identify those which could be integrated (Bellingham, 2010). If it becomes difficult to integrate the distinct aspects of their culture, then the leaders should focus on the correlation between business results and cultural assumptions. Equally, the leaders should have focused on addressing cultural issues that were crucial to the success of the merger.

Given the fact that the primary objective of the merger was also to retain the staff, it was then important for the company leaders to reinforce staff loyalty towards the merger. In fact, it should have been the leaders’ priority to make the acquiring firm’s brand more attractive by providing employees with a sense of identity, rewards, and career advancement opportunities (Barratt-Pugh, Bahn & Gakere, 2011). As discussed earlier, Nextel staff complained that their entrepreneurial and aggressive culture that triggered their growth was being overshadowed by the bureaucratic approach executed by Sprint (Belias & Koustelios, 2014). On the other hand, Sprint felt deceived by the deteriorating network of Nextel arguing that it was the main reason for losing customers. For this reason, it was important for the two organizational leaders to address these issues by making sure that employees felt comfortable with the merger.

Conclusion

Based on the above analysis, culture plays a crucial role when integrating two companies, and if let to itself, it undermines the value of the merger as in the case of Sprint and Nextel. For this reason, addressing culture should be based on the understanding that it is implicit and powerful. In fact, employees find it difficult to transform their cultural beliefs to adopt new ones. Therefore, it was important for Sprint and Nextel to analyze their cultural differences with the aim of establishing a single culture that would enhance their operations in the telecommunications industry.

References

Antoine, B., & Kleiner, B. (2015). Cultural Considerations and Impacts on Mergers & Acquisitions. Franklin Business & Law Journal, 5(1), 84-93.

Barratt-Pugh, L., Bahn, S., & Gakere, E.(2011). Managers as Change Agents Implications for Human Resource Managers  Engaging with Culture Change. Journal of Organizational Change Management, 26(4), 748-764.

 Belias, D., & Koustelios, A.(2014). The Impact of Leadership and Change Management Strategy on Organizational Culture. European Scientific Journal, 10(7), 451-470.

Bellingham, R. (2010). Getting People and Culture Right in Mergers and Acquisitions.  London:  Amherst, Mass.

Davenport, J., & Barrow, S. (2009). Employee Communication During Mergers and Acquisitions. Farnham: Gower.

Ferris, S. P., Jayaraman, N., & Sabherwal, S. (2013). CEO Overconfidence and International Merger and Acquisition Activity. Journal Of Financial & Quantitative Analysis, 48(1), 137-164. doi:10.1017/S0022109013000069

Fischbacher-Smith, D. & Fischbacher-Smith,  M.(2014). What Lies Beneath? The Role of Informal and Hidden  Networks in the Management  of Crises. Financial Accounting & Management, 30(3), 259-279.

Hart, K.(2007). No Cultural Merger At Sprint Nextel. The Washington Post. Retrieved from, https://www.washingtonpost.com/wp-dyn/content/article/2007/11/23/AR2007112301588.html

Marks, M. L., & Mirvis, P. H. (2011). A framework for the human resources role in managing culture in mergers and acquisitions. Human Resource Management, 50(6), 859-877. doi:10.1002/hrm.20445

Stahl, G., & Mendenhall, M.E.(2005). Mergers and Acquisitions: Managing Culture and Human Resources. Stanford, Calif: Stanford Business Books.

Teerikangas, S., & Irrmann, O. (2016). Cultural change following international acquisitions: cohabiting the tension between espoused and practiced cultures. Management International Review, (2), 195. doi:10.1007/s11575-015-0276-1.

Weber, Y., & Fried, Y. (2011). Guest Editors' Note: The role of HR practices in managing culture clash during the postmerger integration process. Human Resource Management, 50(5), 565-570. doi:10.1002/hrm.20449

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