David Orton PLC - Essay Example

David Orton PLC Table of contents Introduction 3 2. David Orton Plc – analysis of problems and issues faced by the organization – organizational behaviour theory 3 2.1 Motivational state and other issues of concern of Costwise employees 3 2.2 Perceptions that the staff at Costwise have of employees at Ortons 6 2.3 Problems faced by senior managers at David Orton Plc 8 3. Conclusion and Recommendations 10 References 12 Appendix 13 1. Introduction The expansion of firms in the global market has different forms in accordance with their current position and resources but also the market trends and conditions. The development of strategic alliances, such as, for example, in the case of merger, is often considered as the most efficient way for a firm to increase its power towards its rivals. Current paper focuses on David Orton Plc, a firm created through the merger of Orton Group with Costwise, two major competitors in the British retail industry. Emphasis is given on the effects of this merger on employee relationships within both firms participating in the merger. The organizational behaviour theory related to this issue is analytically discussed aiming to identify the causes of current problems in regard to the HRM and the organizational structure of the firms involved. The review of current HR policies in David Orton Plc has led to the assumption that the organization, as consisted by two different firms, faces a series of challenges in regard to the management of HR in all its departments. These challenges seem to be highly related to the structure and the culture of the firms participated in the merger. Suggestions are made for the limitation of operational problems and the improvement of employee relations in David Orton Plc. 2. David Orton Plc – analysis of problems and issues faced by the organization – organizational behaviour theory 2.1 Motivational state and other issues of concern of Costwise employees In order to understand the challenges that Costwise employees have to face since the merger of their organization with Ortons it is necessary to refer primarily to the main events followed the above merger, meaning the events that are likely to affect the employee relationships across the organization: before the merger both firms, Ortons and Costwise have been quite powerful in the British retail industry. However, the two firms had a different culture, as reflected in their strategic priorities: for Ortons, keeping its prices at a rather high level, ensuring the quality of its products, and increasing the number of its larger stores have been the most important elements of the firm’s strategy. In opposition, the stores of Costwise were of various sizes; developing an effective communication with customers has been more important in Costwise instead of increasing the number of profits. Moreover, the level of compensation in Costwise has been lower than that of Ortons, a fact that has not negatively affected the performance of employee in Costwise. After the merger, when the differences between the two organizations revealed, employees in the two firms have been asked to cooperate for promoting the plans of the organization resulted by the merger, the David Orton plc. However, inequalities in compensation and in the participation of employees in the firm’s decision-making process led employees in Costwise at a lower position compared to their counterparts in Ortons. Indeed, the low level of compensation and their exclusion from the decision making process of their organization led employees in Costwise to decrease their performance. The introduction of appropriate policies for increasing motivation in Costwise is clear. Solutions similar with those proposed in the literature, as presented below, could be used in Costwise for enhancing the motivation of employees and improve the productivity of the organization. HR is a key organizational sector. The elements of this sector can be differentiated in each organization in accordance with the organization’s culture and ethics. Most commonly, HR is considered as the central point of organizational activities; this issue is made clear in Figure 1 (Appendix) where the potential parts of organizational behaviour theory, as depended on HRM, are presented. In accordance with the particular diagram, HRM policies are likely to interact with all organizational sectors but they keep, in any case, their position in the top of the organizational hierarchy, in terms of importance of their effects. The above role of HRM in the success of organizational practices has been highlighted in the literature. Emphasis is given on the value of employee motivation for the standardization of organizational performance, even when the local market is characterized by severe turbulences. One of the most important methods for the increase of motivation of employees in Costwise would be the introduction of an appropriately customized training programme. Through this programme, employees would be informed on critical organizational issues, including important plans and initiatives. The use of common theories on learning, such as the social learning theory, which emphasizes on the role of social environment in the learning abilities of individuals (Hellriegel eta l. 2007) can be used in order to explain the value of such initiatives; employees in Costwise could learn how to behave as members of the new organization; they could also understand the needs of this organization and the risks involved. At the same time, meetings should be arranged for giving to the employees of Costwise the chance to state their view, as applicable, on the strategies of their firm both internally and externally; the emphasis on employee participation in critical strategic decisions has been found to enhance employee motivation (Shapiro et al. 2004). In accordance with Griffin et al. (2011) the enhancement of employee motivation can be achieved through various policies, as for instance, ‘organizational rewards, employee participation and flexible work arrangements’ (Griffin et al. 2011, p.125). On the other hand, Miner (2007) notes that the performance of HR policies, including those focusing on the increase of employee motivation, is not standardized being influenced by the culture and characteristics of the particular organization; furthermore, organizational culture and goals can be explained using an appropriate organizational behaviour theory, such as ‘the agency theory, the game theory, the five forces model of Porter or the social networking theory’ (Miner et al. 2007, p.19). After identifying the characteristics of a specific organization using the most appropriate organizational behaviour theory, then the development of an effective policy for enforcing employee motivation would be feasible in regard to the particular organization (Martin et al. 2010). From another point of view, Tosi et al (2011) noted that the development of effective policies in regard to the increase of employee motivation is difficult in organizations that have contradictory cultural characteristics; this is the case of David Orton plc, a firm resulted by the merger of two organizations with totally different cultures, as revealed through their strategic priorities and their HR policies. Moreover, Greenberg et al. (2009) stated that the development of effective HR policies is not possible in organizations where communication is low, as for example, in the case of David Orton plc, the firm developed after the merger of Costwise and Ortons Group. Under these terms, the enhancement of employee motivation in Costwise would be achieved only by updating existing organizational structure and priorities, as aligned with the guidelines of Ortons Group, which is the firm controlling the new organization as arranged in the context of the merger. 2.2 Perceptions that the staff at Costwise have of employees at Ortons As explained above, since the merger, the job status of employees at Costwise has been deteriorated. The financial turbulences in the local market but also the rules of the Competition law have been used by managers in Ortons as reasons for excusing the closure of Costwise branches. Moreover, as made clear, employees at Costwise are not compensated equally with their counterparts at Ortons. Also, managers at Ortons do not take the views of employees at Costwise into consideration when developing key organizational decisions, related also to the operational plans of Costwise. This means that employees in Costwise are not asked to state their view in regard to various organizational issues, even for those of low importance for the organizational performance. In other words, employees at Costwise are treated unfairly compared to employees at Ortons, a problem that is partially justified by the fact that Ortons has the control of the organization resulted by the merger between Ortons and Costwise. In this organization, the David Orton Plc, employees of Ortons have an advantage compared to the employees of Costwise, a fact that is reflected to all the organizational plans and policies, which are likely to favour employees at Ortons rather than those working at Costwise. In this context, it could be assumed that employees at Ortons try to make employees at Costwise to feel that they do not have position in the new organization and that they should leave the organization, a fact that would allow the employees at Ortons to get the full control of the new organization. It is clear that the merger has resulted to the deterioration or even the loss of the position of employees at Costwise, a problem that is expected to be further worsened and that needs to be appropriately addressed, otherwise it can negatively affect the performance of the new organization, David Orton Plc, even in the long term. Under these terms, the perceptions of employees at Costwise, as described above, can be characterized as justified. However, these perceptions could lead to severe problems in the organizational performance, a fact explained in the literature published in the specific field. 2.3 Problems faced by senior managers at David Orton Plc The severe problems in regard to employee relationships and communication within David Orton Plc seem to be related to the decisions of the firm’s leader. In fact, as noted in the case study, the merger between Ortons Group and Costwise has been a strategic decision not adequately reviewed, as of its potential effects on the organizations involved. As a result, since the merger both Ortons Group and Costwise have loss their power within the British market while an opposite outcome would be expected, meaning the increase of the competitiveness of the firms as members of a powerful organization. At this point, the events that followed the merger between the two organizations seem to justify the view that the firms’ leaders have not adequately examined the criteria and the effects of the specific strategic decision; this fact is made clear, in particularly, in the case of Ortons. The above organization had achieved, before the merger, a continuous and strong growth. Since the merger, the organization has been fighting for keeping, at least, its position in the local market. In accordance with French et al. (2011) the responses of leaders under the same conditions, meaning the conditions in the internal or the external organizational environment may be different. The above view is based on situational contingency theory, which notes that the behavioural characteristics of a leader are not necessarily decisive for predicting his response in regard to a critical organizational problem (French et al. 2011, p.454). In this context, leaders that have managed to react successfully in a problem of their organization may not manage to respond effectively to other organizational problems being influenced by the conditions in the organizational environment (Ahmad et al. 2008). The failure of David Orton to organize successfully the merger of his firm with Costwise can be explained using the above theory. The merger through which the David Orton plc was created has been inappropriately planned and organized; the severe cultural differences of the two organizations were not taken into consideration; the differences of the firms in terms of their strategic priorities and their operational mode were also ignored. As a result, as revealed through the case study, the merger has led to the deterioration of the financial performance of both firms. David Orton plc does not have the power expected by its initiators and this fact is highly related to the lack of effective planning regarding the strategic priorities of the new organization, i.e. whether it would focus only on large stores but also on small stores. The HR policies of David Orton plc should be also more carefully reviewed ensuring that equality and motivation are promoted within the organization. In the study of Hartel et al. (2006) reference is made to the role of emotions for developing critical organizational strategies. It is explained that emotions of employees can severely affect the completion of critical organizational policies and for this reason they should be taken into consideration by the organization’s planners before setting the context of any important organizational plan. One of the key organizational problems that managers at David Orton plc have to face is the following one: communication across the organization is poor, meaning the level of collaboration between employees for facing daily operational issues. Towards this direction, the development of effective policies for improving communication and collaboration within the organization should be the priority for managers at David Orton plc. However, the severe motivational issues reported in the organization, especially in one of the firms/ members of David Orton plc, the Costwise, indicate that, the HR policies developed at David Orton plc have been inadequate to respond to the needs of employees, a fact which can also lead to the assumption that managers at David Orton plc are unable to identify the motivators of employees and enhance their creativity, which can be a factor more decisive than compensation when the increase of employees’ productivity is attempted (Mullins 2007, p.276). 3. Conclusion and Recommendations The improvement of performance of David Orton plc is highly depended on the increase of employee motivation, which is currently quite low across employees, especially the employees of Costwise. Different measures could be suggested to the firm’s managers to achieve the above target. Adler et al. (2008) emphasized on the importance of inspiration as a key criterion for increasing employee motivation. The use of well-known, and adequately tested theories, on employee motivation, such as ‘the Maslow’s hierarchy of needs theory or the Herzberg motivator-hygiene theory’ (Champoux 2010, p.165), could increase the chances of success of such initiatives. It should be noted that any chosen theoretical framework of this type would be related to the organizational culture, as influenced by the local culture and social ethics (Sinha 2009); thus, before introducing any relevant scheme (for instance, training schemes, increase of compensation, rewards/ benefits, promotion), it would be necessary for the firm’s manager to check the culture of the organization involved. Costwise had a different culture from Ortons; therefore, no similar measures would be taken for both the organizations. Rather, any such measure should be appropriately aligned with the organizational environment and culture ensuring, in any case, that equality is promoted across the David Orton plc. The use of advanced strategies for supporting motivation, such as the promotion of ‘positive energy and full engagement’ (Nelson et al. 2007, p.138) would further contribute in the success of the relevant organizational plans. The findings of the empirical research developed in this field could also help managers at David Orton plc to identify the HR policy that would be most appropriate for the particular organization. In accordance with Bakker et al. (2008) employee motivation is positively related to employee engagement. Moreover, Saari et al. (2004) state that the success of HR policies cannot be guaranteed since the responses of employees in these policies is depended on their personal attitudes. On the other hand, Voe et al.(2004) support that the ability of managers to support their organization’s HR policies is related to their ability to understand the needs of the organization and those of the employees. From a similar point of view, Suhman et al. (2009) note that the success of organizational strategies cannot be guaranteed; strategies that have proved successful in a particular industry may be found to be inappropriate for another industry. Even among firms within the same industry differences can be identified in the performance of the same organizational strategy. From this point of view, the enhancement of employee motivation in Costwise should be carefully planned, as the risks involved can be many. The lack of effective communication between the employees of Costwise and those of Ortons, could threaten the success of any relevant plan. Managers in Costwise should ensure that the promotion of changes within the organization, as a result of its merger with Ortons, will not lead to the deterioration of staff morale within the organization, a fact that could lead to further decrease of employee performance. References Adler, N., Gundersen, A. (2008) International dimensions of organizational behavior. Belmont: Cengage Learning. Ahmad, F., Gilkar, N., Darzi, J. (2008) Organisational Behavior. New Delhi: Atlantic Publishers & Distributors. Bakker, A., Schaufeli, W. 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Managing Organizational Behaviour: Individuals, Teams, Organization and Management. Cheltenham: Edward Elgar Publishing. Appendix Figure 1 – Organizational behaviour theory – diagram (Source: http://www.emeraldinsight.com/journals.htm?articleid=879587&show=html) Read More