Risks Assessment of Storey&Co for the US Expansion and Ethical Dilemmas of HR Manager Graham Jackson - Assignment Example

?International Human Resource Management Case Question Introduction: Organizations often adopt inorganic strategies such as Mergers and Acquisitions to achieve faster growth and to attain a global footprint. However, research indicates that almost 70-80% of mergers and acquisitions fail to achieve their planned synergies and improved performance due to people and cultural issues (Gallagher, 2012). Therefore, it is important for Graham to effectively evaluate the people management strategy of acquiring Gittins and Edwards. Since Gittins and Edwards is a US firm, with a reactively high number of employees and a different work culture, an assessment of the following risks will allow Storey & Co. to plan their US expansion. Human Resources risks facing Storey & Co. in undertaking US expansion: Mergers & Acquisitions fiascos are frequently due to issues and challenges in integrating the different cultures and workforces of the related organizations (Stahl et al., 2004) (Marks & Mirvis, 2010). Social and work-culture integration of different organizations in different geographies, HR systems, leadership and managers’ vision, can often leader to sharp inter-organizational conflicts. The Human Resources risks facing Storey & Co. in undertaking US expansion can be categorized into Pre-Merger risks, Short-term post merger risks and Long-term post merger risks. The risks under each category or stage of the M&A activity are listed below: Pre-Merger Risks: Pre-merger risks are issues related to the merger that can be evaluated and analyzed prior to the decision making of the M&A activity. If these risks are neglected during the due diligence phase, amplified problems and challenges can erupt during the post-merger integration. Following are the pre-merger risks for Storey & Co.: 1. Union/Employee Litigation Issues within the company: It is important for Storey to conduct due diligence on the legal aspects of human resource operations to check if there are any pending employee related litigations, union lock outs that exist within Gittins and Edwards. Unions and employee litigations or lawsuits can affect Storey’s image as well as add liabilities to the work processes. 2. Existing leadership – styles and company stakes: Further due diligence needs to be done on the leadership style and stakes of the owners of the company, John Gittins and Terry Edwards. The case mentions that they have an informal working style, however it needs the human resources team needs to be clear about the personal agendas of Gittins and Edwards, their leadership styles, shares in the company, their expectations of the merger and how it would affect them as leaders, if they would like to work in a decentralized way or let go of their stakes in the company. Due diligence on leadership will help manage expectations on both sides. Short-term post merger risks: The global HR team needs to be prepared of the immediate post merger risks as they form the foundation of long-term stability and sustainable growth of the combined entity organization. In many M&A cases, poor integration leads to fall in productivity, leadership attrition, drop in employee satisfaction, less than expected growth and chaos in the work environment (SCHULER & JACKSON, 2001). 1. Attrition of key talent: The main risk for Graham in the US acquisition is attrition of key talent. Since, “people” or human capital are the biggest assets for consulting firms, loss of key talent would imply major devaluation of company’s strengths and loss for Storey. Uncertainty about the future organizational direction drives key talent to look for other opportunities. 2. Communications: Upon merger, mismanaged communications is a high risk and challenge for Storey. Ambiguity and uncertainty prevail at all levels of the merging parties and can trigger fear, rumours and frustration amongst employees (Mohibullah, 2009). Inconsistent and untimely communications to different stakeholders can lead to disruption of synergies and depreciate the chances of successful integration. 3. Attrition of key managers: Another risk that Storey & Co. is exposed in Gittins & Edwards deals is the risk of attrition of key managers. Since, Storey has limited experience working in US, they are depended on the managers of the acquiring company to continue with their growth and daily operations. In many M&A deals, key managers are deal breakers and can have specific demands such as position promised, pay increases, locations etc. 4. Integration of corporate cultures: “The people and cultural components are wholly interlinked, simply because it is people that create, maintain and ultimately change a company’s culture.” (McKay et al., 2006) The integration of corporate cultures hence becomes the biggest risk for the merging companies, more so, in global M&A deals. The US firm Gittins & Edwards is led by two ex-Silicon Valley employees with a laid back and informal manner of operations. Storey, on the other hand, is a UK-based IT consultancy firm whose leaders have more formal structure in their operations. Merging the two cultures is anticipated to be difficult, and it is essential to conserve the two cultures for future growth. Supremacy issues with one culture over the other can lead to disruption of synergies. Mitigation measures by International HR manager before and after the deal Risk Mitigation Measures Timing & Responsibility Union/Employee Litigation Issues within the company Due diligence regarding personnel and union issues needs to be done at the partner searching stage itself. Request more information on employment laws and regulations in the country and financial impact of mass layoffs. Pre-merger, partner search stage during due diligence process. Responsibility of Legal teams and International HR Manager. Existing leadership – styles and company stakes Detailed interviews should be done with leadership and key managers to assess the current leadership styles, way of working and their vision for the future. Understanding of target’s management structure (e.g. Decentralized vs. centralized operations). Done in pre-merger stage. Key Responsibility: HR Director, International HR Manager Attrition of key talent Develop key talent retention plan and strategy in collaboration with HR counterparts at Gittins and Edwards. Assess their needs and professional objectives and prepare plans for their development and future positions. It is also important to keep succession plans in place for back up. Timing: Pre-merger planning. Key responsibility: Integration manager, International HR Manager, Target company HR manager Communications Create communications plans that includes communication process and strategies to trickle information across the organization, develop explicit, interactive feedback mechanisms through work groups, task forces so that there is limited space for rumours and anxiety within employee force. American Bank BB&T best practice in M&A communications is to start with sending target company’s employees with deal details and basic information on what it means for them and post merger integration process. They use clear and timely messages that are part of their communication campaign involving emailing, meetings, and town hall sessions to minimize ambiguity, anxiety and disorganization throughout the integration process (Schuler, 2003). Planning in pre-merger phase, implementation immediately after merger. Responsibility: Integration manager, International HR Manager, HR teams, Change management workforce Attrition of key managers Prepare talent management plan and mapping of new positions with key managers. Keep them engaged in the planning and post-merger integration process. Planning in pre-merger phase, implementation immediately after merger. Responsibility: Integration manager, International HR Manager Integration of corporate cultures Since a successful cultural integration is the nucleus of all M&A activity, it is important that key decision needs to be made on the modes of integration that are Assimilation, Integration, Separation and Deculturation (Hairui & Qun, 2009). J&J and GE Capital are two organizations that successfully manage cultural integration. They do not disassemble the local culture unless they have a better approach to run operations. In case of Storey and Gittins & Edwards, it is important to keep their respective cultures separate if the integration risks in disruption of business and organization values. Planning in pre-merger phase, implementation immediately after merger. Responsibility: Integration manager, International HR Manager References Gallagher, F., 2012. Who Do You Keep After A Merger? Staffing strategies for smarter acquisitions. [Online] Available at: HYPERLINK "http://184.168.222.161/uploads/newwp.pdf" http://184.168.222.161/uploads/newwp.pdf [Accessed April 2012]. Hairui, Z. & Qun, L., 2009. The Researches on Corporate Cultural Integration of M&A SMB. [Online] Available at: HYPERLINK "http://www.seiofbluemountain.com/upload/product/200911/2006zxqyhy14a13.pdf" http://www.seiofbluemountain.com/upload/product/200911/2006zxqyhy14a13.pdf [Accessed April 2012]. Marks, M.L. & Mirvis, P.H., 2010. Joining Forces: Making One Plus One Equal Three in Mergers, Acquisitions, and Alliances. 2nd ed. John Wiley & Sons. McKay, J., Worldwide, W.W. & Huldin, E., 2006. Managing people and cultural problems in mergers. Harvard Business Review, January. Mohibullah, 2009. Impact of Culture On Mergers and Acquisitions: A Theoretical Framework. International Review of Business Research Papers , 5(1), pp.255-64. Schuler, A.J., 2003. You Bought It, So Don’t Break It: Five Best Practices in Post Acquisition Integration. [Online] Available at: HYPERLINK "http://www.schulersolutions.com/html/post_acquisition_integration.html" http://www.schulersolutions.com/html/post_acquisition_integration.html [Accessed April 2012]. SCHULER, R. & JACKSON, S., 2001. HR Issues and Activities in Mergers and Acquisitions. European Management Journal, 19(3), pp.239-53. Stahl, G.K., Pucik, V., Evans, P. & Mendenhal, M.E., 2004. Human resource management in cross-border mergers and acquisitions. In A.-W.H. Joris & V. Ruysseveldt, eds. International Human Resource Management. London: SAGE Publications. pp.89-95. Case 2, Question 4 Introduction: The pressures of a globalization and knowledge-driven economies have expanded the footprint of organizations across their world. On one hand, internationalization helps in faster growth for companies; on the other hand it creates unique situations and dilemmas for global managers in terms of ethics in multi-cultural business environment (Greewood, 2002). Globalization, interlinked networks embody intensification of ethical conflicts. As companies expand their operations on foreign soils, they try to integrate their corporate cultures with local conditions. In their perspective, this is the logical step for global organizations, however, at times local organizations sees it differently as foreign cultures and operational processes are thrust upon them, E.g. the reception of American oil companies in Middle East (Gergen, 2010). The case highlights some ethical dilemmas experienced by International HR manager Graham Jackson. The UK based consulting firm, Storey & Co., has expanded its operations in developed nations as US, Germany, France as well as developing economies like India and China. The Eurozone crisis of 2011-12 and global recession of 2015 has forced Storey & Co. to restructure its operations in expensive environments such as US and Germany. Downsizing US and German operations on one hand and exporting them to cheaper economy will save money for the company; it has some cultural implications such as insecurity and culture disruption in US/German offices. Employees at US and German offices are threatened by outsourced jobs and are taking measures to counter company’s efforts. Graham is now in the middle of ethical dilemma, whether to look at the organization objectives from a global or local standpoint. Issues and Dilemmas by Global managers: Similar to Graham Johnson, managers all over the world, experience complex ethical dilemmas in their day-to-day and strategic decision-making (Winstanley & Woodall, 1996) (Goodstein, 2000). 1. Globalization of labour markets (McDonaldization) that questions profits vs. social rights, operating costs vs. employee benefits etc. 2. Progressive changes in technology and its applications, creating new opportunities, but also producing ethical dilemmas such as over-surveillance, data security and privacy laws etc. 3. Internationalization on one hand increases rate of innovation and offers paradigm shifts, it also results in obsolescence of manufacturing plants and skills amongst certain employees. 4. More job insecurity with “flexible” work patterns, temporary contract based employment, constant fear of job loss due to outsourcing and off-shoring policies of multi-nationals, widening the chasm between management and employees. 5. Developing work-life balance while optimizing productivity and efficiency amongst employees 6. The ethical issues concerning human rights in emerging markets such as China, India and Latin American markets. Reasons behind issues and dilemmas Rise of knowledge-based economies, ease of human capital mobility, rise in innovative communication technologies has led to a paradigm shift in the way global business environment works. This has led business managers to rethink new approaches to carry out their operations. Adding to this, there are external environment forces such as financial crisis, deregulations in foreign direct investments, changing demographics and a push towards employee diversity. These factors drive corporate cultures to be more and more heterogeneous and more competitive. This global business environment induces challenges that are more and more complex, intricately connected and interdependent (Mirwoba, 2009). 1. Centralized global operations by multi-national organizations: As multi-national organizations expand their operations in other countries, managers have additional responsibilities to look out for their countries, regions and the world. It is evident that there are bound to be conflict of interests between business interests of countries or regions. For example, through outsourcing, although US and German offices have a negative impact on work culture or employee’s minds, it still benefits financially for the company as a whole. Global managers who have to make trade-offs between international regions and countries are hence caught up between such inter-country or inter-region dilemmas. 2. Challenging external environment: External environment comprises of factors such as administrative and legal (international, non-governmental policies and regulations, legislatures and legal frameworks), technology (innovations, research and development), politics (government support and political systems in the geographical region), economics (inflation, labour laws, opportunity costs, currency restrictions etc.), society and culture at local, national and regional levels and stakeholders (Harrison, 1970). There are evident examples of organizations that have been deeply impacted due to pressures of the external environment such as Kodak at the advent of disruptive innovation in digital imaging (Forbes, 2008), Lehman Brothers bankruptcy due to 2008 global financial crisis (Investopedia, 2009) etc. Globalization has transformed contemporary business environment into a knowledge-based economy that makes organizations even more vulnerable to changes and created ethical dilemmas for managers. 3. Cultural differences across geographies: One key reason behind ethical dilemmas for human resource managers and senior management is the evident structural and cultural differences across geographies. A Swiss company such as Novartis cannot function its operations the same way as it does in America, South America or China. Aligning them into the same page towards corporate language is difficult, complex and sometimes a backfiring strategy. 4. Cascaded global impacts of managerial decision-making: The financial crisis of 2008 highlighted once again two key lessons for organizations all over the world: firstly, that organization cannot operate in vacuum and is not invulnerable to what is happening in the external environment and secondly, the world is so interconnected that positive and negative effects in organizations can have ripple effects across the globe in a matter of minutes. 5. Multiple stakeholders: The concept of corporate objectives focused towards a broader and diverse set of stakeholders has sprung after eruption of corporate scandals such as Enron, WorldCom, and Tyco advocated the idea that multi-national corporations and corporate executives care little for ethics, in their pursuit of profit and wealth generation. Multi-national corporations are experiencing higher pressures to be accountable to their stakeholders and their demands as seen in the cases of BP Oil Spill (affecting environmentalists, governments, general public, NGOs and special interest groups), Facebook security regulations (affecting consumers, governments) and Apple human rights violation for working conditions (affecting governments, NGOs, consumers). Most of the multi-national corporations today are operating in a multi-stakeholder engagement model for sustainable growth. One of the key issues regarding multi-stakeholder engagement is addressing conflict of interests between the demands of various stakeholders. Endeavoring to balance multiple stakeholder interests in for-profit organizational management presents many challenges. The opinions of different stakeholders as part of a reference group, or multiple stakeholders within a particular sector, are frequently diverse conflicted and re?ect dissimilar political and organizational interests. Bibliography 1. Winstanley, D. & Woodall, J., 1996. Business ethics and human resource Management. Personnel Review, 25(6), pp.5-12. 2. Forbes, 2008. Kodak's Disruptive Bet. [Online] Available at: HYPERLINK "http://www.forbes.com/2008/03/01/kodak-hp-yahoo-lead-cz_sa_0303claytonchristensen_inl.html" http://www.forbes.com/2008/03/01/kodak-hp-yahoo-lead-cz_sa_0303claytonchristensen_inl.html [Accessed 5 April 2012]. 3. Gergen, K.J., 2010. The Ethical Challenge of Global Organization. [Online] Available at: HYPERLINK "http://www.swarthmore.edu/Documents/faculty/gergen/The_Ethical_Challenge_of_Global_Organization.pdf" http://www.swarthmore.edu/Documents/faculty/gergen/The_Ethical_Challenge_of_Global_Organization.pdf [Accessed April 2012]. 4. Goodstein, J.D., 2000. Moral compromise and personal integrity: exploring the ethical issues of deciding together in organisations’ business. Ethics Quarterly, 10(4), pp.804-19. 5. Greenwood, M.R., 2002. Ethics and HRM: a review and conceptual analysis. Journal of Business Ethics, 36(3), pp.261-78. 6. Investopedia, 2009. Case Study: The Collapse of Lehman Brothers. [Online] Available at: HYPERLINK "http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp" \l "axzz1r9fcKROg" http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp#axzz1r9fcKROg [Accessed 5 April 2012]. 7. Harrison, R., 1970. Understanding your organization's character. Harvard Business Review, pp.119-28. 8. Mirwoba, S.E., 2009. Rethinking Ethical Issues in Global Business Environment. KCA JOURNAL OF BUSINESS MANAGEMENT, 2(2), pp.16-34. Read More