Discuss about the Structural Interdependence Top Management.
The case “Who Goes, Who stays” reflects the issues executives face during mergers. There is merger announcement between Biohealth Labs of US and DeWaal Pharmaceuticals of Netherlands. Both companies make and sold wide range of drugs. The merger will help in reaping the benefit of economies of scale, leveraging distribution network. But the main obstacle is bringing two different cultures together quickly and efficiently as possible. The senior managers of both companies are looking from their cultural perspectives which hamper the integration of companies (Ang & Van Dyne, 2015). Also the share price of the company is dipped. Employees are confused and there is high attrition.
The conflicting values that are at stake fairness, synergy, and shareholders’ profit maximization, goodwill, future goals, product improvement, Human capital management and decision making etc. (Bolden, 2016). Following theories explain the conflicting values at merger:
Anxiety Theory: This occurs when human resources have uncertainty about job. It has negative impact on the individuals which results in high attrition rate (Cartwright & Cooper, 2014).
Social Identity Theory: In this case study two cultures Dutch and US are integrating. This will lead to loss of old identities .So it is necessary that the employees are convinced that they will have advantages in the long run. There is sense of loss, grief, denial and refusal of change. There is conflict during interaction with other organization’s members (Rahim, 2017).
Role Conflict Theory: It states the conflicting and ambiguous roles. In this case role of both Steve and Kasper was confusing. The leading members have not properly defined the responsibilities which have led to confusion in the minds of employees. It is seen that Kasper has upper hand in the decision making which may lead to future conflicts in the organization. This may lead to low job satisfaction and low productivity.
Job Characteristic Theory: It is change in job environment post Mergers and Acquisitions. In this scenario, there are 120 people on two continents for about 65 senior level jobs. It is necessary to have efficient decision making to select top management. Poor decision has long term impact.
Organization Justice Theory: It signifies perceived fair treatment to the left employees. In this case Alison, director of BioHealth’s marketing and sales. Acquisition and mergers can transform systems, processes, structures and cultures of both companies (Harper, 2015).
Acculturation theory: There is difficulty in adjusting to different culture. One belongs to American culture and other belongs to European culture. This does not create only people issues but if limits are not defined on time than it might have negative impact on the vision and mission of merged organization (Knies & Leisink, 2014). It is necessary to foster cultural due diligence, facilitating intercultural learning, promote multiculturalism. It will help in resolving inter organizational conflict and tension.
Employees are the asset to the organizations and they should be considered before taking decisions on mergers.
Integration Process of Staff and structure
Organizations are open systems. They need appropriate management to satisfy needs and adapt to environmental circumstances. Generally management tries to achieve alignments and good fits. One of the most important variables in integrating two organizations is situations’ favorableness (Graebner & Vaara, 2017). There is significant mutual trust, confidence and respect between the subordinates and leaders. It is generally respected and accepted by followers. The tasks are clearly defined and structured. There is formal authority. There is rational decision making which means select the alternative which results in most preferred set of all the consequences. The organizations generally try to determine and specify in detail its goals, objectives, ends, means and values. The entire decision process is generally based on right information being available to right people at the right times. There must be a business process which is structured, rigorous (Melchers & Beck, 2018).
The entire integration process includes the following:
Leadership Structure: The structure of the company is defined and clearly presented. This includes selecting top management executives to be retained. There is integration timeline, unity and agreement on issues and key topics (Hoffman & Tadelis, 2018). In the current scenario, Steve is struck with determining the official heads. Moreover, CEO considers the issue is not important and mistake can be corrected later.
Cultural Discrepancies, Analysis and Solution: Extensive research is generally done to understand the cultural differences within each organization. There are cultural strengths and weaknesses of organizations. The common grounds are laid down to build the cultural differences (Moran & Moran, 2014). The social media is used to build consensus such as share point to bridge the gap. In the current scenario, employees from both ends are reluctant to cross the ocean and shift (Arslan & Simsir, 2016). Neither people from New York want to shift to Europe, nor are European employees comfortable in changing their location.
Set up communication council: During Integration, companies has key functional leaders to do the necessary communication. The talking points are made transparent, honest and motivating regarding payoffs, expectation for future and timetables. The companies engage change management professionals who help in building necessary architecture. The new behaviors/attitudes are required for successful merger to take place.
Define the new culture: It is necessary to unify both cultures in order to build a common platform for employees. There are some standard rules which are followed by all MNCs .These rules helps in reducing cultural discrepancies. Rewrite the new cultural manifesto, how it came together and leads to future success.
Vision, Mission and Values: The new culture is eliminated by determining the vision, mission and values. Seek out opinions, provide feedback and report progress at all level.
Cultural Communication plan: Senior executives are generally given this responsibility. Communication is not something to be given to low level functional authorities. A proper systematic, tactical and sequential plan is laid down to set timeline. The new technological innovations are communicated regularly and frequently.
Measurement and Benchmarking: It is necessary to understand the progress of merger or integration over time. It is necessary to evaluate the success of the organization and report the findings through regular communication at all levels in the organizations (Hambrick & Gupta, 2015).
Resolve Key issues: It is necessary to understand the people issues during integrations and select the best alternative which will maximize the shareholder value and keep the spirit of company alive. There should be proper processes laid down for this.
Resolving conflicting values
The following ways can be used to resolve conflicting values:
Focus on tangibles and measurable: There should not be soft, vague and poor definition of conflicting values (Liu & Spector, 2018). Instead, executives discuss issues that are well defined, specific and supported by specific examples to achieve the business results. This should be enhanced by interventions and analysis to increase measurable collaborations. In the current scenario, it is necessary not to avoid the low morale of the employees, stock market values. There is proper Evidence Based Management to decide the future of plant and employees working over there. Steve is taking pain but he needs to make sure that results are delivered on time. The human asset is getting impacted. Make culture an important component of change management.
Consider the strengths of existing cultures and not weaknesses: It is necessary to make the “best” of each company’s culture and merge them. It means to retain separate core capabilities of both organizations. For example, employees’ assessment of both cultures can be integrated. This will help in evaluating who go and who stay. There should be relationship management between business results and cultural assumptions.
Implement a decision making process that is not hampered by value differences: The decision making process should involve defining the problem, identifying limiting factors, developing potential alternatives, analyze the alternatives, select the best alternatives, implement the decision ,establish control and evaluation system. Leaders of the related companies might face the situation where they need to take a decision quickly. There could be varying decision making styles of two different companies. So a proper decision making process should be incorporated which acts as win-win situation for both organization and their shareholders
Design new organization model: When there is business critical integration points and short time, it is necessary to focus on the flow of work (Bolman & Deal, 2017). It is necessary that information in the network should be shared effectively. The interface must be designed in a way that adds business value. If the employees personal goals are achieved than the mutual trust and respect can be built among employees who have not worked together prior.
Recommendations to work out details of integration in regard to top structure
A proper management approach is needed to work out details of integration in regard to top structure. The four managerial functions i.e. planning, organizing, leading and controlling of human and other resources to achieve the successful integration (Mahoney & Godfrey, 2014). The top level executives and HRs are responsible to supervise the decision to meet the company goals.
Planning: The executives and HRs must choose the right goals to pursue. Then it is their responsibility to effectively use the resources to achieve these goals. In the current integration, it is necessary to define the competencies of both organizations and top executives. The emphasis should be given on business success, decisiveness and communication and relationship skills. Before every meeting with the counterpart it is necessary to define certain acceptance points.
Organizing: It is necessary to come out with mechanism which evaluate the executives in a way that is transparent .There should be fair mechanism which allow each employee to present their credentials and demonstrate their competencies. All executives should be measured against the peer outside the company. External consultants can be used to get valuable insight for HR integration, in-depth interview, structured interviews and feedback. The evaluation of top executives should be considered as part of due diligence. There should be alternative jobs for employees who have to exclude from the top 65.
Leading: Executives must be notified with proper communication process. Employees who are vital for the success of the organization must be reassured. It is necessary to boost the employees who are trying to become defectors. There should be excellent communication by the top leaders
Controlling: It is necessary the top management is put in place soon and process of meeting with them should be started. It is necessary that entire team should work together on delivering the key result of merger. The benefits of merger were delivered as promised to shareholders. The entire organization must follow the defined suit to achieve desirable results. The people must come together quickly and find effective ways to run the organization better. All the crucial elements of the merger should be given proper concentration.
Importance of management and organizational theories and practices:
Strategic Planning: The theories and management practices helps to monitor the nature and changing character of forces. These help in doing strategic planning and execution which is fair and robust (Hill & Schilling, 2014). The major forces which lead to instability are technologies, regulation, culture and business needs (Green, 2016).
Defining roles and responsibilities: There is very fine line between who is responsible for what (Mullins & Schoar, 2016). So these theories and management practices defines the roles and responsibilities from low level executives to the top leaders. It is mentioned in the case study hat Steve has spent time on approvals .Instead, he should be involved in communicating with the employees and planning the methods to retain the top performers.
Organization Management: The theories help in leading the employees in the organization. Executives use mixed management theories in daily activities to manage organizations more effectively. These theories are necessary to attain the organizational goals. They are vital in the management of the organizations. Management theories are relevant for the modern management practices
Globally Accepted: The management theories are accepted globally. During mergers if these theories are followed then cultural discrepancy can be reduced. Decision making and other specific actions become easy to take. There is regularity in the system. The situations of uncertainty, ambiguity can be resolved properly. There is better alignment of technology, processes, structure and people.
Summary and conclusion
It can be concluded from the report that there could be multiple reasons for failure of integration. One of the reasons is cultural values conflict. It is necessary that every aspect of merger should be taken into account by the key leaders. In order to have fair play third party consultancy could be involved to bring the two companies at par. In order to reap Economies of scale or economies of scope proper management theories should be applied to achieve desired result. Also there should be proper structure and reason for every decision. Haphazard decision may not lead to long term results.
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