Pixar and Disney Animation Business - Term Paper Example

Running Head: case study Pixar Disney case study- Change Management of the of the of the Introduction Disney’s decline in its animation business compelled it to acquire Pixar animation studio in the year 2006 for a staggering amount of $7.4 billion to rejuvenate its earnings and market leadership (BBC 2006). While Disney evaluated many other options, merger seemed to be the best fit under those circumstances. However, this move was also not free from concerns. While Disney had an authoritarian leadership and closely bound culture, Pixar’s corporate culture rested on the pillars of creativity and idea sharing. Thus, effective change management became the first and the foremost priority. This paper seeks to address the issues confronted by the two merging partners in their change management initiative and what factors work while imparting a touch of success in such areas where failure is more frequent. Overview of the case The case commences with the acquisition of Pixar animation studios by Walt Disney Company in the year 2006 (Catmull 2006). Walt Disney operates in four business segments: Media networks- broadcasting, Internet and publishing Parks and resorts- theme parks and Disney Cruise Lines Studio Entertainment Consumer products- food, toys, apparel, etc. In this agreement, Pixar was supposed to be the partner supplying animation technology and creativity aspects to movie business while Disney will be the marketer and distributor owing to its brand image and popularity. Though the merger seems fruitful by commercial sense, yet the senior level managers have raised their brows on the acquisition of Pixar. For them, decline in sales is just a fad of the season and acquiring Pixar makes no sense in this regard. They are proud of their culture and success stories which can be replicated by Disney’s managers itself without the need of any external partner. While the market impulse is shifting towards new ways of story telling, Disney’s employees and managers want to embark upon the same ‘family’ concept. This has also aroused the need of incorporating innovation and creativity in the corporate culture of Disney. In this initiative, the CEO of Disney- Robert Iger is allied by the Technology Director and the Human Resource Director but he is facing opposition from the Finance Director which is concerning for the successful completion of merger between the two. Situational analysis The case depicts a timeline in which the charge of Disney Company had shifted from the hands of Michael Eisner to the hands of Robert Iger (Iger 2006). Both of them had different styles of leadership and management practices which differed on their philosophies (Figure 1). Michael Eisner Robert Iger Centralized approach Non-Centralized approach Authoritarian leadership Collaborative leadership Orders flowing from top management Employee empowerment Figure 1 Thus we see that leadership in Michael Eisner’s control was based on Fayol’s Principles of management while in the case of Robert Iger, it was behavioral management which characterized his management practices. This shows a clear picture of managers and employees shooting opposition to Robert Iger’s proposition of change management as they are accustomed of taking orders with no creativity and innovation. Corporate Culture at Disney Disney’s mammoth workforce size of 100,000 employees makes it a large bureaucracy with a hierarchical structure and control and decision making authority in the hands of top management (Disney 2007). Employees are habitual of order fulfillment with no contribution of ideas and creativity from their own side. Communication gap between different levels of management demonstrate distant relationships. The company works of profitability motto and not on quality which is reflected in its authoritative kind of leadership. Case facts clearly depict that employee personal and professional development concerns are negligible which has marred the creative instinct and risk appetite of employees. As such, they feel uncomfortable in embarking on new and unknown ventures. Corporate culture at Pixar Pixar’s corporate culture is completely opposite to that of Disney’s. Its foundation is based on three guiding principles (Catmull 2002): Open and transparent communication between all levels of management and employees Freedom to share ideas with each other Innovation building through academic closeness. These principles have fostered an egalitarian and collaborative culture at Pixar which is marked by free-spirited creativity. Its employee empowerment philosophy is depicted in the freedom which is given to its employee to maintain their cubicles and close interactions between the technical and creative teams which bring out the innovation on board. The Human Resource practices have also contributed a lot in making employees feel the Pixar office as their second home. They offer job security, stock options, leaves and holidays, breaks and leisure time and rewards and incentives which work squarely for motivating them and extracting the best out of them without putting any stress. Pixar’s philosophy is ingrained in perfectionism due to which they stick to an idea and get it right, no matter it is simple or complex. As opposed to other animation studios in the industry, Pixar culture rests on long term bonding between employees and talent sharing which delivers the maximum output. People are rewarded equally for success which established equity and leaves no scope for suspicions. Recruitment of talented people is at the heart of human resources practiced by Pixar (Catmull 2008). All such factors culminate to make the Pixar culture a supportive and development oriented one where needs and requirements of all the individuals are properly addressed and its employees are regarded as assets and major contributors of its success. This has led to dramatic increase in the risk appetite, creativity and innovation delivered by Pixar technicians, artists and employees. Thus, while Pixar culture is marked by artists striving to create something new and unique every time, Disney’s workforce resembles soldiers who are battling new changes and continuing with their old and traditional methods of doing business. Options evaluated by Disney Disney could have gone for internal development also by adding on technology and investing fiercely on 3D and animation. It could also have partnered with other studios but it had been working with Pixar since 1990s and collaboration and developing synergies seemed favorable with a known partner than an unknown one. Also, Pixar was an unspoken leader in animated movie technology at that time which furthered the need of Disney to create an alliance with it. Before arriving at final agreement with Pixar, Disney evaluated alternatives also but capabilities of Pixar matched with that of Disney’s requirements in terms of cost, time and expertise which finally led to the merger of these two (Figure 2). Company Dimension Walt Disney Pixar Employee skills Lack of skills Both technical and creativity skills Software technology No use of any software Legacy software with 10 years of success Animation technology Stereotype 2D technology 3D with leading animation technology Cost of operation High costs due to large size of staff, budget and time Much lower due to small size of staff and time responsiveness Channels of distribution Movies, television and DVDs No channels Culture Top down with managerial decision making Bottom up with egalitarianism and collaborative approach Assets Industrial knowledge and experience Creativity and innovation in story telling Figure 2: Capabilities of Pixar and Disney Evaluation The problem with the merger not going the desired way is the inherent culture at Disney. People there are not feeling the need for change and thus, behaving as active resistors in opposing the change. This occurrence is supported by the following shortcomings discovered in the corporate culture of Disney: Recognition for change Most of the mergers or acquisitions fail due to non ability to recognize the need for change. The case of AOL Time Warner clearly depicts the aftermaths of an unsuccessful merger when a ‘learning culture’ cannot be established between the merging partners. There is complete absence of shared vision and common goals which results in a blurred strategies vision for both the companies (AOL Time Warner Annual Report 2000). For Pixar and Disney, it is both a structural and a cultural change where participation of all the units is desired to eliminate redundancies. However, only some of the units recognize the need for change while some are happy with the existing culture. Perhaps, the need for change was not properly motivated or the CEO did not perform his role well in making informed communications, encouraging participative management and helping people understand the ‘why’, ‘what’ and ‘how’ of the change (Luecke 2003: 26). Resistance Disney’s employees are behaving as conservers in the merger (Fig. 3) because they are not presented with compelling reasons to drive them for change. Being a social animal, their basic needs are getting fulfilled due to which they are not ready to compromise with their ‘social routine’ (Luecke 2003: 73). This is what is resisting them from change acceptance. They are actively opposing the change because they are considering themselves losers in the process and thinking that their skills will be termed useless after the merger. Fig. 3 Recommendations for change As a body of consultants hired to advise Disney on the success of their merger, following key factors can work wonders of implemented carefully and properly: Creating organizational learning through transformational leadership When organizations merge, the most important transfer of resources is that of knowledge workers and related resources (Crossan and Vera 2004). Transformational leadership helps in recognizing the need and importance of knowledge workers in acquisitions which is sort of lacking in the Disney Pixar merger case. While Disney employees are managers are not happy partnering with a small organization, Pixar employees are threatened of getting its culture infected. Thus, no unison exists between the visions of the two. In this regard, transformational leadership can be exercised by a person having hold of both the organizations and who has certain amount of influence on employees of both. Steve Jobs is the Head of both Pixar and Disney and he can serve as the mediator who can combine the synergies of two and propagate a shared vision philosophy. Establishing common goals and strategic vision through diverse learning teams Though two teams have been formed with Pixar employees as the team leaders, yet the arrangement seems insufficient because diverse teams can handle the complexities anticipated and emerging out of mergers. One or two teams cannot tackle all the processes and operations that change during mergers. With cross-functional teams, every single process can be done by a mix of employees, thereby helping them develop shared vision and organizational learning in the dynamic and competitive environment (Tichy & Ulrich 1984). For Disney and Pixar, the former is equipped of rich experience while the latter is good at creativity and team work dynamics. Thus, creation of diverse and multi-tasking teams will allow greater unity between leadership, role and job sharing and overall team work. Developing confidence in employees about their job security, compensation and rewards The biggest hindrance in the way of employees and managers at Disney not recognizing the need for change and accepting it is the lack of clarity and motivation about their job security, welfare benefits and other professional needs. Pixar had registered commendable growth in the animation technology and it was not difficult to predict that it will lead the market impulse. Disney’s employees feel threatened of the fact that once the merger happens, Pixar employees will gain more importance and subsequently greater perks and benefits due to their creativity and software expertise. This fact is all the more bothering for Disney’s employees as they are risk averse and thus have no sort of encouragement or traits that leverage them fight the situation or contribute to the organizational success by joining hands with Pixar. Thus, resisting the change seems to be the better option for them. To overcome this hurdle, an organization wide awareness program had to be launched informing the employees about the benefits of the proposed change. Also, their queries and suspicions should be removed so that they develop positive attitude about the change. Communication especially about their job security and their importance in the organization should be made so that they feel themselves an inseparable part of the organizations. When belongingness and affection comes, doubts will vanish in the air. Conclusion Insider and outsider change agents are common in mergers and acquisitions but the major work is done by the individuals themselves. In Pixar and Disney also, it is the employees who have to change their thinking while managers assist them in coping up with the change. Anger, powerlessness and mourning will take on initially but there has to be patient leadership and encouragement because it is about changing employees who have not taken a single decision on their own. Encouraging them for friendships, interactions and re-anchoring the change drive can work as stimulus for changing the individual emotions. Managers can help people accept the change by trying to eliminate the shock element and incorporating some sort of employee empowerment. Roles and responsibilities should be changed frequently so that no one should feel comfortable with the job and accept continuous change as the culture of the organization. Acceptance of these small changes will ultimately train the employees embracing bigger changes and challenges. References AOL Time Warner. Annual Report 2000 BBC (2006) Disney buys Pixar in $4.7bn deal [online] available from [accessed November 25, 2010]. Brodtrick, O. (1992). The Learning Organization [online] available from [accessed November 25, 2010]. Catmull, E. (2002) Innovation Inc., Harvard Business Review, 80(August), 18-19. Catmull, E. (2006) Disney to acquire Pixar [online] available from [accessed November 25, 2010]. Catmull, E. (2008) How Pixar fosters collective creativity, Harvard Business Review, 86(September), 64-72 Crossan, M. and Vera, D. (2004). Strategic Leadership and Organizational Learning. The Academy of Management Review, Vol. 29: 226-227. Disney (2007) The Walt Disney Company Fact Book 2007. Iger, R. (2006) Disney to acquire Pixar [online] available from [accessed November 25, 2010]. Luecke, R (2003). Managing Change and Transition. Harvard Business Review Press. Tichy, N.M. and Ulrich, D.O. (1984). The Leadership Challenge – A Call for the Transformational Leader. 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