Managing People and Organizations in Mergers and Demergers - Assignment Example

Running head: MANAGING PEOPLE AND ORGANIZATIONS IN MERGERS AND DEMERGERS Managing People and Organizations In Mergers And Demergers [writer’s name] [ institution’s name] Managing People and Organizations In Mergers And Demergers Introduction A lot of organizations think about mergers and demergers, so that they enjoy a strategic alliance with an equally successful company. A lot of cases show that the main reason behind a merger is that it usually ensures long-term sustained success in terms of profit for the business. As the entire business world has become highly competitive, the companies need to keep up with the fast moving diversified international market. The only alternative left for businesses today is to merger with another company, so that it can have an edge over the market A merger is the combining of two or more companies into a single corporation (Merger Definition 2010). This can only be done if one business acquires the assets of another business. The outcome of this act is the creation of one single organizational structure. This new organizational structure maintains its old identity in the market According to Paton (2007) statistics state that every nine out of ten mergers and demergers are unsuccessful in fulfilling the expectations which are made at the beginning of the merger. The reasons as to why such failures take place are not fulfilling the objectives, low profits, and assimilation of technology with the culture and management of the company. This paper will highlight the management as the sole reason of failure of mergers. As after the merger takes place the most important person is the manager, he controls the employees and the important processes of the comply being merged. Analysis Mergers or Acquisitions are complex challenges for the management. There are major challenges most importantly employee related issues. Need for competent management is paramount with focus on the human resource audit as whatever, the merits of an acquisition on financial and business criteria, it is people who make it all happen. The employees need to be motivated and well informed about their future within the company Successful mergers can be differentiated from unsuccessful ones by analysis a number of dimensions. These dimensions are mostly based on pre- merger faults and post merger faults, regarding faulty integration management. Recent years the primary reason for failure has been sited at the inability of managers to mesh cultures and company strategy (Kole &Kenneth 2000). Fundamentally this means management put a lot of time and efforts into crunching the numbers of what could be if they joined forces, but they do not spend nearly enough time hashing out how they will integrate what they are really buying, which are the people who make each organization run and make money in what is possibly two completely different organization styles. Cartright and Cooper [1995] carried out a study on forty companies. Each and every one of these companies carried out a thorough financial and legal assessment of the company they planned to merger with, but, not even one of the above mentioned companies tried to carry out an assessment of the company's human resources and culture to evaluate the hardships they could face while integrating the company they were merging with organization they were acquiring (Warrilow 2009). The contradiction dealing with management styles could lead to a downfall of the merger. The most employees are used to a hierarchal or authoritative leadership style. They usually have no say in business ventures or project input. They are told what to do, how to do it and when it should be done. On the other hand, there a lot of organizations which at the time of merger have a more of a people-oriented culture (Cartwright & Cooper 1996)? These employees can provide their own input in project decisions, and will have difficulties adjusting to the new leadership (Ashkenas & Suzanne 2000). They may even have a good reward and recognition system in place that may disappear with the merger. This could cause distension among the remaining employees; in turn morale will be low. The different internal cultures of the two companies are usually a major obstacle to overcome during a merger. The before mentioned managerial style could lead to an ultimate downfall of the merger. If employees of such an organization are merged with a people oriented organization, then there is a feeling of inferiority which leads to an ultimate failure. If the managers do not indulge in information sharing, the turnover rate of the employees of the before mentioned organization will more massive, and the project could fail (Larsson &Sydney 1999). This clearly shows that the managers have to also change their management style at the time of a merger, and if they do not then ultimately the merger will fail. According to Curtis and Chanmugam (2006), there are two things that must be done in an business merger. The first is to make sure that top line management and management sit at the same decision-making table, understand and agree upon the same business objectives, and are working toward the same integration outcomes. As failed mergers are the result of bad a managers inability to manage the integration process Secondly, managers which do not accept the powerful role that cultural integration has, fail to attain the best possible results which business can get during merger integration. Mangers which proactively evaluate, plan and carry out detailed cultural integration activities during the entire pre- and post-merger process are the ones who are successful, as those who tend to ignore such assessment for the sake of instant profit making. Resistance to change will be a major obstacle in the culture of the two companies. According to Yukl (2006) there area lot of reasons why people resist change, it is the reasonability of managers to control this. Some of these are; lack of trust, thinking that change is needless, thinking that the ongoing change is not practical, financial threats, comparatively high cost, fear of failing , loss of position and authority, danger to ethics and ideas and dislike of intrusion. If this force is used optimistically rather than considered as an hindrance to overcome it could help managers in making the merger successful. If the management does not take into account the cultural, structural, and marketing differences, the new company could face ultimate failure. The employees form the merging company might feel that they have more power over the other company. Managers who can not handle their workforce’s complexes as well as their own tend to make the merger unsuccessful. The managers have to keep a people orientated thinking along with a level head. Managers who can not achieve this during the merger may cause chaos (Weston etal 1990) .Use of information sharing, goal setting, motivational methods, staff creativity and staff initiative are keys to ensuring that this merger will follow a positive path and succeed with the present task and future tasks. The why failed mergers are usually the fault of managers as the manager has an essential task to design leadership plan whilst paying attention to the human elements that take place due to mergers. However most managers fail to fulfill this responsibility, they fail to set a balanced equilibrium. The managers do not pay attention to the transition strategies of organizational behavior. Thus, in turn they are unsuccessful in keeping both the vision and objectives of the company while keeping in mind the human elements. According to Arkin, (2003) human resource managers play the most important role in a successful merger, as they assist the workforce in adjusting to the new environment and culture. In fact the managers of change need to be extremely proficient and should realize that profit making is not only the objective of a merger (Kitching 1967). Kitching in fact highlight the fact that after the merger it is the responsible of managers to manage the change as well as the workforce, managers that fail to do so become the sole reason behind the failure of a merger. A lot of research regarding mergers is not only based on control-based value design, but also on a combination of methods by which benefits regarding production can be analyzed. Thus the production is directly proportional to successful managers (Hitt, Harrison, & Ireland, 2001). Gadiesh, et al (2002) identified a range of leadership characteristics that might be associated with successful Merger outcomes. These characteristics are decisiveness (closing the deal), serving as a symbol and creating momentum (crusading for the new entity), fostering a sense of focus (establishing and communicating the strategic vision) motivating organizational members (cheering on the troops), and providing key cultural and operational guidance (captaining change through integration). Managerial capability has to be based on a non-specialized proclivity, and the managers of the merging company have to people with better managerial abilities then the company they are being merged with. In the context of mergers and acquisitions, managers create "accountable others" (Galpin and Herndon 2000) as Clemente & Greenspan, (1998) write, "These leaders make concrete "the mutual responsibility of all employees, but alert and bind them to everyone else's responsibility . . .this will create a social conscience. A difficulty that presents itself is the apparent inability of the two managers to work together. The senior management mentoring support for a particular company combined with reassurance of the manager’s abilities for another manager is expected to help the pair significantly. However who do not turn to this method usually fail at times when the organization is undergoing change Managers on high position also have to look into the work of the lower rank managers as well. Some training for managers on how to give good, robust feedback on both performance and consequences of behavior may be desirable. This has been established to be an essential part of the motivation process during the time of merger. The key skill for managers during the merger process should be to carry out this task in a positive, constructive manner. Avoiding at all costs the potential for conflict and misunderstanding. As when mergers and demergers take place a lot of misunderstands and conflicts arise, these mi understanding and conflicts lead to failure of the organizations (Leroy,& Bernard 1997) . Both low rank as well as high rank managers have to be able to have enough skill to manage the people in such a time when change may be at it’s peak. It will be important for the organization to adequately prepare for this considerable change and staff turnover over the coming years. At minimum change management should be the responsibility of the managers . Managers have dual responsibility on their shoulders when it comes to mergers. They need to manage the staff while making sure that the entire staff is ready for the change. Change is something which a lot of people take negatively thus if the managers do not handle is properly then the merger will defiantly fail (Marks& Philip 1995). The departmental manager is responsible for managing department’s performance measures and is also responsible for successfully handling the human related situations which occur in a corporate merger. Some human elements in a condition like this have to be impartially studied by the departmental manager. Only managers which carryout an analysis of the same situations which took place in other companies, and ask questions to explore the issue can make the merger successful. Research ahs proved that if mangers of the human resource department are apart of the merger right from the start it may help in the merger (Arkin, 2003). The most important and complex organizational behavior problems such as employee related communication. Incentive along with talent management and assimilation of the new culture are vital from the management point of view regarding mergers. These cultural matters may have an adverse effect on employee satisfaction; however no attention is paid to them. For instance, the place of the head office may result in the transfer of employees of the company which is to under go merger. According to Arkin (2003) if proper management is not carried at such a crucial time then employee’s performance will be negatively effected, which in turn will result in a failed merger. The success of the entire merger relies on the efficient strategic analysis along with effectual management both cultural as well as organizational issues. Thus to resolve such issues is the responsibility of the manger. The management tasks and critical success factors are proper knowledge, cultural compatibility, effectual communication, looking in to the issues of important employees, as well as the financial cost of the entire merger procedure (Putnam & Michael 1983). Some employees might be insecure as they will have to face new management of an entirely different company. Some may even be doubtful regarding their opportunity for promotion. This might result in slow emigration of important staff out of the new company; a few of them may join organizations which are the competitors of their previous employers. This issue has to be handled properly, before the merger by good communication; the doubts of the employees have to be cleared. It is extremely vital for the management to fulfill this task (Putnam and Michael 1983). The majority mergers are successful because of poor human resource management involvement at the beginning of the merger. Management during a merger has to actively implement changes, as employees usually feel a lot of stress regarding their job security in addition to personal career plans (Marks and Philip 1991). It is almost impractical to do a thorough human resources audit prior to the merger. So in order for the merger to be successful the manager has to move quickly to spot and allocate internal leaders and important contributors who can fulfill important responsibilities after the organization is merged. The major challenge is to create an environment where people want to compete for a role, without making promises or causing defections (Caliper 2010.). The process of selecting the final management team focuses on assessing each senior manager's strengths and weaknesses. There are bound to be fears and conflicts throughout this volatile period. Ultimately, what will be remembered long afterward are the tone and the manner of the managers, in which such conflicts were resolved and solutions offered. Other changes are not as obvious in approach, thus requiring a deeper understanding in the context of the transitional environment. As part of this assessment process, individual performance standards need to be established to reflect the goals of this new organization (Larsson &Sydney 1999). These standards, if communicated effectively and monitored regularly, can convey the organization's desire to work cooperatively with employees during and after the difficult transition period. It is through this system that the new organization's emerging culture starts to become the shared experience of those who work within it A Common reason for failure of new corporate initiatives is lack of or inconsistent of support by top management. Insufficient allocation of resources leaves employees frustrated and incapable of effectively implementing the program (Hogan etal 1994). It also sends the message that the effort is not important to top management; rather it is simply another management "buzz-word". Diversion of top management's attention from an initiative can also occur as a natural response to troubles in the business environment. There is strong evidence to support this in Honeywell's case, following its failed merger attempts with GE and the September 11 terrorist attacks (Jay 2007). This led to financial difficulties, which consequently redirected management attention from the SSP program The success of a merger relies how effectively the management manages it’s staff during and after the merger. The HR department of an organization acts as a strategic partner. So formulating strategies while ignoring the employees can be critical for the organization. A proper communication strategy at the beginning of the Merger plays a vital part in reducing the employee anxiety and ends the rumors which are usually spreading in throughout the company at a time like this (Schweiger & Angelo 1991). Research shows that in order for a merger to be successful senior managers of the merged companies have to have a good communication strategy. They need to involve those personnel who the staff trusts (Schweiger & Angelo 1991). The managers who do not have a good communication strategy usually do not know what is worrying the employees, thus they even a fail to provide assurance to employees regarding the new management. At times managers may even make the mistake of carting like they are the best , and that no other manager can care for them like he does (Stata1989). This mistakes leads to major mistrust in the new management and eventually leads to a failed merger. Thus if the mergers are to be successful then the human resource managers should take the communication aspect under consideration, they need to inform and give confidence to their employees. The human resource department should realize that faulty communication may be the reason behind their failed merger. Providing accurate information to the workforce can really help reduce the tension and rumors in the organization. It is only natural that when someone faces a new management their will be fears regarding job security and progress (Fombrun 1994). Only the present management can reduce this stress. This stress in turn at times even leads to a high turnover rate and low production Managers are an important part of the entire merger system, at time some manager s themselves fear the loss of their job or position so they tend to spread rumors themselves. At times they even try to collect the sympathy of the employees. These managers basically are playing a negative role and eventually become the result of the failed merger (Holland 1995). Mangers at time think that the entire merger process is the reasonability of the top most management like the CEO ect. They do not realize that the people trust them more then they do they top management. They start to be careless and thus this carelessness leads to a major loss for the merger. Conclusion Mergers are an important process in today’s competitive global market. Most organization have a hard time in competing on their own, so they merger with an other organization of the same nature. However not all mergers are successful, it is not as easy as it seems. There are many factors which may lead to the failure of mergers however the above analysis clearly shows that the main reason is the lack of people management of the mangers. Managers play an important role in the entire merger process; they need to have the ability the control the thoughts and help the employees adjust to the new management and environment. Managers of an organization need to realize their responsibility during the merger process right from the start till the end. Thus, to conclude it would only be fair to say that a failed merger is directly proportional to the mismanagement of mangers who fail to realize that people management during this time is extremely important. References Arkin, A. (2003); Perfect Fit. People Management: 9 (19), 34. Ashkenas Ronald N. and Suzanne C. Francis (2000); “Integration Managers: Special Leaders for Special Times,” Harvard Business Review Cartwright Sue &Cooper and L. Cary (1996); Managing mergers, acquisitions and strategic alliances: Integrating people and cultures. Oxford: Butterworth-Heinemann. Clemente, M.N. and Greenspan, D.S. (1998); Winning at Mergers and Acquisitions: The Guide to Focused Planning and Integration. John Wiley & Sons: New York Curtis, G. A. and Chanmugam, R. (2005). Reconcilable differences: IT and post-merger integration. Outlook Journal, 27, 81-85 Fombrun Charles J. (1994); Taking on Strategy, 1-2-3, in Joel A. C. Baum, and Jitendra V. Singh (Eds.) 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