Cultural Change Analysis - Case Study Example

Change and culture case study Part ONE Introduction Organizations have been operating in an increasingly competitive environment especially after thegrowth of globalization and free trade. Mergers and acquisitions were the primary recourse that organizations took to counter this threat, and to survive and grow in such an environment. This concept which began to be the ‘in thing’ in corporate world began to take off during the early 1990s and is now seen as the easiest way to counter competition and grow. Many organizations feel that merging with or acquiring companies is much easier than starting a new organization or cheaper than obtaining technology and expertise. But the fact remains that many such mergers and acquisitions (M&A) do not go as planned and have either failed or did not achieve the desired results. One primary reason (among many others) is the clash of diverse organizational cultures that exist within individual organization that were merger or acquired) making its presence felt in the new entity. This paper is a report with regard to the management of organizational culture in ABC Healthcare, an organization formed through the merger of two similar healthcare providers, namely XYZ Healthcare and ABC Dental Services. The problems faced, soon after the merger and, the steps taken to solve them (organizational change) will be discussed after which the end results of the effort will be provided in the concluding section. The organizational structure of the new entity is also provided in the appendix. Background of the merger: ABC Dental Care, a highly efficient and well run organization is now being merged with XYZ Healthcare to form a new entity called ABC Healthcare. The latter company is much larger and has three departments, namely cardiology, nephrology, and urology. Threats of a new hospital coming up in the neighborhood resulted in the above mentioned merger. The employees of ABC Healthcare have no practical experience in handling outpatients, while those of the latter had no experiencing in dental care and hygiene. But ABC Healthcare was proud about its quality of service and felt that it was superior to those given by other healthcare units. They were also a little apprehensive about their lack of experience in handling inpatients. The merger was a cultural disaster since both groups kept to themselves except in case of emergencies. This issue was solved though the practical applications of theory as given in the following sections. Mergers and acquisitions: It would be pertinent to mention a few facts about mergers and acquisitions in this context. According to a Bouno the main motive behind mergers “is the belief that a new, combined organization will help to attain strategic goals more quickly and less expensively than if companies do it separately” (Grankvist, Kollberg & Persson 2005). Competition, obtaining the benefits of economies of scale, obtaining already installed technology and available expertise etc are other factors that encourage companies to pursue M&As. In this particular context, the primary reason was to remain competitive especially with the future opening of a new hospital in the neighborhood. But even though many M&As take place in the corporate world, the fact is that most do not reach the intended targets and goals. A study by Galpin and Herndon finds that “synergies projected for M&A deals are not achieved in 70 percent of cases and that chief executive officers and chief financial officers routinely cite "people" problems and cultural issues as the top factors in failed integrations” (Flanagan, Kreuze & Smith 2004). Organizational culture can be defined as “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems” (Schein 1997). Another major reason is financial, because companies often pay too much in order to acquire a potential partner and also not taking ‘due diligence’ in the whole process. Carleton and Lineberry are of the opinion that “the failure rate of mergers and acquisitions is unreasonable, unacceptable, and unnecessary” (Carleton & Lineberry, 2004, P. 8). This indicates that the failure or lack of expected results in M&A can be avoided if the right steps are taken starting from selection of a partner, paying the right amount, and resolving cultural conflicts after the deal has gone through. The problem here is the last factor, namely the cultural conflicts that is seen in ABC Healthcare. Many experts have written about management mergers and acquisitions and the following steps were taken with regard to the literature in order to solve the problems in ABC Healthcare. Problem solving in ABC Healthcare using organizational change models: It is imperative that an organizational change with regard to the different cultures seen in the merged organizations is necessary. As mentioned in the previous section, many models on managing organizational change have been published. Principles taken from two well-known models propounded by Kurt Lewin and Kottler have been used to tackle the change needed for managing cultural clash in ABC Healthcare is given here. Kurt Lewin’s three step model: According to Lewin, any organization that has impending large scale changes with regard to organizational culture, structure, and behaviour should follow a three step process for smooth transformation from old to new. Burke, Lake & Paine (2008) cite this as “Lewin’s key contribution to organizational change” (233). The relatively simple concept (in principle) needs an unfreezing, moving or transition, and refreezing of attitudes as behaviours. Employees are attuned to the working atmosphere of their former employers and hence need an unfreezing of attitudes so that they are receptive to change. The next step is to move or transform the employees to the new behaviour and culture that is required in the present situation. Once this is achieved, the next logical step is to freeze the newly learnt factors into their minds. Kotter’s eight step change model: This is another universally accepted model of change conceived by John Kotter, who teaches leadership at Harvard Business School. The first step in the process is to create what Kotter refers to as establishing a ‘sense of urgency’ for change within the new organization. To quote his own words: “establishing a sense of urgency is crucial to gaining needed cooperation. With complacency high, transformations usually go nowhere because few people are even interested in working on the change problem” (Kotter, 1996, p. 36). Once this is done, Kotter then explains the next seven steps usually, done in sequence one by one. Management in any setting needs teamwork and this is applicable in managing change as well. So a team that supports and facilitates a smooth change has to be built. This team need not be an official one, but can be comprised of influential (formal and informal) employees to whom others respect and will listen to. There is also the concept of bringing in change agents to make the process more effective. Once a team is in place, steps to form a ‘compelling vision’ among team members have to be created. This vision will then be transferred to others by the members of the team gradually. Kotter calls this process transference of vision. The next step is to identify and remove specific obstacles that stand in the way of change. In a cultural setting, the obstacles will primarily be man-made by other influential employees who are resistant to change. Resistance to change is actually not an objection in the real sense, but a fear or uncertainly about the future. Once the people who become obstacles have been identified, steps can be taken by talking to them individually and making them understand the need to change in the new setting. If they are not cooperative even after repeated efforts, bold steps to remove them (firing, transferring) from the scene should be done. Achievement of targets is always exhilarating for any person. But a long-term target may result in people losing interest in the change process. Challenging, but achievable short term targets should be set and steps taken to see that they are met. A very important factor (next step) is to see that the momentum of change however small is not let up. If momentum is lost, the whole process may need to be re-started. Any change that is now present in the organization should now be firmly anchored into the culture of the new organization. This is something similar to re-freezing as conceived by Lewin as his third and final step in the change process. Practical application in ABC Healthcare: As mentioned earlier, ABC Dental Care was well-managed and employees were proud to be working for the organization. With their perception of the working style of XYZ Healthcare, the employees felt superior and hence did not make efforts to mix with their new colleagues. It did not take long for employees of the latter company to become aware of this attitude. Even though departmental staffing was mixed, with employees from both organizations working within a department, relations were frosty and uncooperative. This resulted in wastage, and disorder with regard to dealing with both in and outpatients. One positive factor in the whole process was that employees of both organizations had a professional attitude. So, when it came to dealing with major healthcare problems, differences were cast aside. Problems in scheduling appointments, billing, etc primarily due to proper lack of communication resulted. On the whole, it was the administrative side that was affected. Solving the problem was done through practical implementation of Kotter’s model in which Lewin’s three step process was also included. Some minor changes in sequence in the eight step process were also made. For example, the core team was formed first before establishing urgency. This was done because if the sense of urgency was first understood by the core team, then the rest of the steps would be follow more easily. An equal number of people from both (merged) organizations were included in the team consisting of nine people. But the leader of the team was the new CEO who was appointed from outside. Hence, there was no resentment regarding the leadership. The leader first spent time with each of the team members individually striking home the urgency of change and cooperation. A new vision with core emphasis on a balance between service and profitability evolved with inputs from all team members. This created a sense of belonging among the team members and relationships began to thaw within two weeks. Once the transference of vision to the team was complete, each member then went about the process of making their own followers aware of the urgency and the value of the vision. This was done informally and in small groups initially. Later on, this process began to given on a more common platform. It was found that five employees were the primary obstacles who resisted the change. Once again, the team went to work, and the end result was that one of them had to resign while the rest of them changed their views. Once these obstacles were out of the way, short term targets were set. For example, it was decided to reduce the number of customer complaints in the outpatient department by 75% in a matter of one month. The staff managed to reduce it by 90%. This was communicated to the other departments and enthusiasm and healthy competition between departments arose. Continuous communication of the results, coupled with training was done which helped to cement all the changes. It soon became a part of the day to day activities of the organization. The unfreezing started with the team members, and then moved on to other employees. The change was then brought about the team which was followed by refreezing (cementing). Now the organization is an efficiently run and well-respected on in the field of quality healthcare. Conclusion: Mergers can create a lot of problems especially with regard to differences in organizational culture. But proper management of change can definitely help in solving this problem. It is a time consuming and patient process. An organizational chart with departmental heads, whose previous employment status (in brackets), is given in the appendix. But as seen from the above case, a proper team and a leader can effectively solve the problems and make the new organization competitive, efficient, and profitable. Works Cited Burke, W, Lake, DG & Paine, JW. (2008). Organization Change: A Comprehensive Reader, Illustrated Edition: John Wiley and Sons. Carleton, JR & Lineberry, CS. (2004). Achieving post-merger success: a stakeholders guide to cultural due diligence, assessment, and integration. Illustrated Edition: John Wiley and Sons. Flanagan, D, Kreuze, J & Smith, OM. (2004, Aug). Merger and acquisition opportunities: due diligence activities offer internal auditors numerous opportunities to help ensure the success of proposed company integrations. Internal Auditor. Retrieved May 23, 2009, from CBS Interactive Inc: http://findarticles.com/p/articles/mi_m4153/is_4_61/ai_n6169115/ Grankvist, A, Kollberg, C & Persson, A. (2005, Jan). Implementation of Organizational Culture Following a Merger. Master’s Thesis. Department of Business Administration and Social Sciences: Lulea University of Technology. Retrieved May 23, 2009, from: http://epubl.luth.se/1404-5508/2005/018/LTU-SHU-EX-05018-SE.pdf Kotter, JP. (1996). Leading change. Illustrated Edition: Harvard Business Press. Schein, EH. (1997, Oct). Organizational Culture & Leadership. Retrieved May 23, 2009, from: http://www.tnellen.com/ted/tc/schein.html APPENDIX ORGANIZATIONAL CHART OF ABC HEALTHCARE Read More