The David Orton PLC - Assignment Example

?The David Orton PLC Case I. Introduction The David Orton PLC case may be seen as a situation that is anchored on the attitudes of people to demotivators as well as their behaviour in the lack of motivators. The motivators and demotivators are situations that exist, whether spontaneously or by design, which either spur an individual to act in the interest of the company, or against its interest, or to take no action (i.e., be indifferent) in either direction. In this case, the dilemma centers on the feelings, attitudes and behaviour of workers employed by a company that had recently been acquired by another company. The acquired company, Costwise, is a retail store operating in several areas which the acquiring company, Orton, does not. The purchase of Costwise by Orton therefore presents possibilities for synergy in that Costwise stores presently existing, and the strong turnover figures it has been registering, would provide an added capacity for Orton and shall extend its reach to markets it does not currently serve. While the two companies cater to the retail merchandising industry, they have markedly different strategic thrusts. Orton caters to a homogeneous market, Costwise caters to varied markets in different locations. The management styles were also different, a matter which is to be expected because of the different markets they cater to. Orton’s management style is centralized and more-or-less autocratic, because all decisions and plans emanate from the center, including matters involving pricing, product offerings, salaries, new hires, promotions, and so forth. On the other hand, Costwise, when it was operating as an independent concern, devolved many managerial decision-making functions to the stores. The stores were therefore able to establish store practices and devise market strategies that were particularly effective in the localities they operated in. This accounted for the loyal patronage and strong turnovers generated by this store from the local communities the individual stores operated in. While Costwise employees had a running quarrel with management about the When the acquisition pulled through, Orton, as the dominant entity, imposed its own methods, processes and policies on Costwise. Aside from the organizational structure and culture, management style, and market strategy, the employees were aware of a general sense of being ignored and disregarded by management, and therefore no longer performed at the same level they used to, which was reflected in the noticeable drop in revenues. This, coupled with higher costs related to the merger activities and the change in image of the emergent firm, has resulted in a drop in profit or even potential losses if the trend continues. II. The likely motivational state of Costwise employees When speaking of motivation, it is best to view the Orton case through the framework of Herzberg’s Motivation-Hygiene Theory. According to this theory, there are two factors that influence the attitude and behaviour of individuals towards their work – the hygiene or maintenance factors, and the motivators (Mukherjee, 2009, p. 152). The two types of factors both work to influence the behaviour and attitudes of workers, but in different ways. 1. The hygiene factors The maintenance or hygiene factors are those factors which, if absent, cause dissatisfaction, but even if present, do not necessarily create a positive attitude towards work. Thus, hygiene factors must be present to prevent dissatisfaction. They are mostly related to the environmental or extrinsic factors, rather than the context of the job (Davies & Hertig, 2007, p. 81). In the David Orton case, one might say that the hygiene factors that were determinative of the attitudes of the Costwise employees are their pay, the need to be informed about matters that bear upon their working conditions, and security at their jobs. In this case, the employees had been expecting a ‘levelling up’ of their salaries, a natural expectation in light of the higher salaries enjoyed by their counterparts in Orton. Therefore, the ‘levelling down’ which later occurred had become a denial of an expected hygiene factor, which is a source of dissatisfaction not only for Costwise employees, but also (and probably more so) those employees or Orton who used to earn a higher level of pay but was forced to be levelled down. Also, employees expect as a matter of courtesy that they are informed about developments affecting their working conditions before these take place, and to have some measure of control or influence over them, otherwise a rational explanation must be given. These were denied employees of Costwise, who no longer felt secure in their jobs due to the retention of only 200 employees out of the former Costwise headquarters’ 1,800. As a result of the lack of candor of Orton and their failure to communicate, the employees have gained a sense of dissatisfaction in their work. 2. The motivators On the other hand, motivators are factors the absence of which does not affect a person’s behaviour or attitude towards his work. However, if motivators are present, they would tend to spur workers to perform better and strive harder than mere satisfactory level (Robertson, 2009, p. 149). One such motivator is that management shows to employees the proper measure of attention and respect that would make them feel valued. An alignment of personal goals and aspirations with those of the company mission and goals is another motivator. By allowing the employee to feel a sense of fulfilment at his job, management engages the employee and makes him feel an integral part of the firm, as the firm becomes a part of him. This creates motivation, a personal sense of challenge towards one’s work that is followed by a sense of personal achievement at having accomplished it with excellence. This is something Orton had NOT done for its former Costwise employees, and as a result they feel indifferent towards the company. Coupled with the dissatisfaction of not earning the proper pay or being assured of job security, the Costwise employees are truly and profoundly demotivated. III. The perceptions of the staff and their attitudes towards their work and co-workers In the case, it was stated that ex-Costwise employees felt that they are little more than second-class citizens in the merged company. They already received lower pay than Orton employees, however they are also aware that there will be a levelling down of pay (implying that Orton employees’ pay will be levelled down to the Costwise levels). The perception of oppression would have been worse if there had been no levelling down, if the pay had been maintained as is, which is unequal. There is also the perception that the management has poor communication systems. This perception of management is due to their repeated failure to inform, whether directly or through a system of information dissemination, on matters vital for employees to assess the circumstances of their employment. The employees were in a constant state of uncertainty – for instance, as to whether or not the new Orton group will take over Woolworth’s as reported in the press – demotivates employees by introducing stressors among them (Oughton, 2007, p. 458). The fear concerning the possibility that the company will have to separate more employees from their jobs is a sufficient enough source of stress to occupy the mind of an endangered worker and cause him to slow down or commit mistakes at his work. It is uncertain whether or not, from the case facts, Costwise employees harboured ill feelings against their co-workers who had been original Orton employees from the start. It is possible that at the beginning, Costwise employees may have envied Orton employees because of their higher pay; however, since the management was contemplating a ‘levelling down’ then it is doubtful whether the differences in pay would be the source of resentment. If anything, it is the Orton employees who should be demotivated by the ‘levelling down’ because they would be receiving less pay for more work. The case does not also state whether Orton employees were made to replace the 1,600 dismissed Costwise employees. It appears that these positions were just declared redundant by management and needed no replacement. It is possible, however, that Costwise employees may have resented that they had no job security unlike their Orton counterparts, but this is hardly the fault of the latter, and Costwise employees are sure to see that. So it is likely that Costwise employees, despite feeling that they were treated as ‘second-class citizens’ in comparison with Orton employees, probably did not resent or blame them for their circumstances. It is more logical to assume that, as the case study states, Costwise employees blamed and resented the management of Orton for their lack of foresight and their indifference towards their new employees, and the former management of Costwise for their unfulfilled promise of a retention bonus which they should have ensured Orton management would make good, and generally for putting them in such a vulnerable position. IV. Main problems facing senior managers and their causes 1. The internal power struggle among the Orton hierarchy There has been a weakness in the power structure of Orton, evidenced by the easing out of the former Chairman, Mr. Orton, by a small group of powerful investors. Mr. Orton championed the Costwise takeover and therefore was made scapegoat when the takeover appeared to be working out poorly. While it may be true that the takeover was poorly planned, its use as an excuse to remove Mr. Orton was just the opening the investors needed. In any case, because of the sudden changes the whole company is undergoing a stage of uncertainty, not just Costwise employees. 2. The problem of unforeseen costs as a result of the acquisition It is apparent that little planning and no due diligence attended the decision to take over Costwise. Management was therefore unaware of the added costs they were to shoulder in terms of (1) paying for the actual value of Costwise, which they under-estimated; (2) refurbishing the stores in deciding to re-image; (3) the loss of turnover while the stores were being refurbished, and afterwards due to the change in the attitude of Costwise’s regular customers towards the re-imaged stores; and (4) the promotional efforts and discounts to entice buyers. 3. The poor turnover and dwindling customers due to re-imaged Orton stores Other than the wider geographical presence Orton would have gained from the takeover, there was little thought given to synergies it would like to foster or create from Costwise. Cultural and strategic synergies should have been assessed prior to takeover (Deloitte, 2009, p.3). After all, operating on its own Costwise stores were generating double the turnover that Orton was. This should have been the focus of Orton management, in which case it would have seen that Costwise’s competitive advantage was its strong attraction to local customers because it understood and provided what they needed. This would have prompted Orton to address Costwise operations with the least disruption, even opting to keep their former image instead of re-imaging them into something that local customers generally rejected. 4. The failure of promotional efforts to foster consumer loyalty Orton did not understand the Costwise customers, evidenced by the statement by its former Chairman that he did not know or care what a middle class shopper is and dismissing their attitude as ‘southern snobbery’. Even when Orton was reorganized under the new chairman, there appeared to be no effort to conduct a market assessment of what customers wanted in the former Costwise that they could retain. Without this understanding, any promotional campaign to convince customers to return to the re-imaged stores would be wasted money (Pride & Ferrell, 2011, p. 158). 5. Mass demoralization among the ex-Costwise employees (The case is silent as to the original Orton employees) Most important among the problems of top management is its policy towards the ex-Costwise employees who are now their employees. It would be a waste of valuable resources to disregard the pool of talent and skill Orton acquired with its take-over, which Orton has overlooked to its disadvantage. Orton had failed to provide its new employees with the necessary opportunity to integrate with the rest of their colleagues in the merged company. Integration rests with infusing the corporate culture throughout the company’s workforce complement, in a manner that they could relate to. Culture is a dominant barrier in the integration of acquired or merged companies, and is the cause of 30% of failed integrations, most of them within the first three years (Dixon, 2005, p.1). The problem of Orton’s management now is to determine how to motivate the remaining personnel who had formerly been Costwise employees in order to attain their previous and expected productivity level. V. Recommendations to overcome the problems To the five problems mentioned, there are three fundamental recommendations that may be made. As for the first problem of the political struggle within the company, and the second which is the failure of planning and foresight, management has only itself to blame. With the new systems in place, it is deemed that sufficient foundation has been established to build a more stable and forward-looking organization on, but this must be communicated by management to its employees. Therefore management must adopt a more transparent communication policy with its employees, to minimize the uncertainties and the demotivation this brings to them. The second and third problems deal with the customers. To improve store turnover and convince customers to return, management must recapture their trust which was formerly reposed upon Costwise stores. For this, Orton already has the skills, resources and knowhow, in the person of their ex-Costwise, now Orton, employees. Management must therefore involve ex-Costwise personnel in the marketing plans for those locations where re-imaged Costwise (now Orton) stores are situated. Employees and managers who used to and continue to work these stores have years and years of familiarity and knowledge about their customers that no marketing research will surpass. Therefore, Orton management should tap this resource by employing a more participative management style. Finally, and most importantly, management must integrate and engage its ex-Costwise employees. Integrating them means absorbing them into the Orton workforce as an integral part; it includes making them feel that the company values them, and treats them in the same way they do the others. It also includes giving them the same salary rates given the others, and giving them the promised retention bonus as a sign of good faith. These are not additional costs to the company that may not be recovered by the expected higher sales the stores will make by a motivated workforce. Furthermore, the firm must engage the employees by allowing them participation in management and the exercise of a measure of discretion to perform their work well, as mentioned. There is every indication, based on the past performance of Costwise stores, that store management and employees know how to run the business profitably; Orton management should therefore not micromanage these stores, but allow in their hierarchy a means by which they may operate to address their local markets as they see fit, while maintaining a reasonable measure of financial and operational oversight. References Davies, S J & Hertig, C A 2007 Security Supervision and Management: The Theory and Practice of Asset Protection, 3rd edition. Butterworth-Heinemann, Oxford. Deloitte Development LLC 2009 Cultural Issues in Mergers and Acquisitions. Deloitte Consulting, LLC. Dixon, I 2005 “Culture Management and Mergers and Acquisitions.” Case Study. Society for Human Resources Management (SHRM), March 2005. Accessed 29 October 2011 from http://www.shrm.org/Publications/hrmagazine/EditorialContent/Documents/CMS_011564.pdf Oughton, D 2007 “Uncertainties from Multiple Stressors: Challenges in Ecological Risk Assessment.” In Multiple Stressors: A Challenge for the Future. Mothersill, C; Mosse, I; & Seymour, C., eds. Springer, Dordrecht. Pride, W M & Ferrell, O C 2012 Marketing, 16th edition. South-Western Cengage Learning, Mason, OH. Mukherjee, K 2009 Principles of Management and Organizational Behaviour, 2nd edition. Tata McGraw-Hill, New Delhi. Robertson, F 2009 “Herzberg’s Two-Factor Theory,” Gower Handbook of Internal Communication, 2nd edition. Wright, M., ed. Gower Publishing Ltd., Surrey. Read More