Halecar and Mid Lans Automotive - Two Cultures Merge - Coursework Example

Halecar and Mid Lans Automotive – Two cultures merge Module of the Number “I confirm that this assignment which I have submitted is all my own work and the source of any information or material I have used (including the internet has been fully identified and properly acknowledge as required in the School guideline I have received.” Contents Contents 1 1. Introduction 3 1.1. Organizational context and circumstance 3 2. Discussion 3 2.1. Strong versus Weak Culture 4 2.2. The Horizontal Merger from cultural perspective 4 2.3. Conducting Cultural Audit 5 2.4. Managing Stress among the employee 5 2.5. Addressing Employee Turnover Problem 5 2.6. Maintaining Job Satisfaction 6 2.7. Managing other cultural issues 7 3. Conclusion 8 Reference List 9 1. Introduction Human Resource Management is one of the most important aspects for organizations to ensure their smooth running of productivity and sustainability in the long run. In order to ascertain continuous development, keeping at pace with industry growth, an organization should take relevant strategies starting from recruitment and selection of staffs to managing performance, eliminating employee dissatisfaction, bringing advancement in training and development as well as controlling issues relating to equity and diversity of the employees (Armstrong, 2012). As a result of growing competition and technological advancement, more and more firms tend to merge with comparatively strong firms in order to protect their existence and to enjoy economic and technological advantages arising out of strong background of the companies merged with. However, as a result of such amalgamation the employees of two different companies experience difference in terms of rules and regulations, working procedure, employee benefits as well as different working culture. Hence, employees of one organization are bound to adopt the cultural practices of the other organization. If not controlled properly, such incidents may lead to serious consequences for the newly merged company in terms of employee dissatisfaction, employee turnover, reduced production and profitability (Legge, 2005). Therefore, human resource team should take corrective actions in timely manner for organizations to sustain in the long run and to enjoy advantages arising out of merger. 1.1. Organizational context and circumstance Halecar is a long established UK based Automotive Manufacturing Company producing British cars for well known Indian Company, Tutu (Excerpt from case study). However, with the decline in the UK car industry, Halecar started experiencing rapid detriment in their production and the company ceased to exist. Workforce had been reduced and the only source of revenue was the Indian Company, Tutu for which they manufactured Nano, the cheapest passenger car in the world. Further pressure from the Indian company as well, to bring efficiency in production process and to shift production to 3 lines on a 24 hour basis, led the management to impiment structural changes into the organization. On 1st of August, 2014, Managing Director of Halecar announced the company’s decision of merging with a comparatively healthy car manufacturing company, Mid Lancs Automotive, with effect from 1st of January, 2015. It was also announced that the merged company will be named as Mid Lancashire Automotive limited which will aim to incorporate fresh culture and work environment that will enhance employee well being and reduce attrition (Excerpt from case study). In this paper, the key issues related to human resources management arising out of the merger between Halecars and Mid Lancs Automotive will be identified and corrective measures should be recommended in order to control such issues. 2. Discussion Organizational culture shows how employees behave within the organization. It also portrays the assumptions, norms, values and belief inherited by the organization aligning with its vision and mission. Hence, managing organizational culture is a critical issue under strategic human resource practices. Organizational culture evolves to be most critical in the time merger of two separate organizations. Each organization constitutes its own culture, values and beliefs. As a result of merger, when one organization becomes compelled of adapting the culture of another, the employees tend to resist the change process. It has been noticed that, more than 30% of mergers failed to derive benefits due to the management’s inability to administer and control the concerns arises out of merger (Armstrong, 2012). In case of Halecar and MiD Lancs Automotive, the in-built culture of these two companies is almost opposite to each other. The production process, employee management system, recruitment procedure, involvement in labour union, scope of training and development, motivation level and performance measurement system which constitute of the culture of the organizations largely differs. 2.1. Strong versus Weak Culture In order to evaluate strength or weakness of organizational culture, three significant elements should be analyzed. The number of values, belief and assumptions shared by the organization shows the underlying strength of the organization. The more the perceived value of the organization, the better solid the culture is (Kirton and Greene, 2010). Considering this element, it can be said that the perceived values and beliefs of Mid Lancs Automotive is much higher than that of Halecar. Understanding this inherent value of the company, Halecar extended their hands to merge with Mid Lancs Automotive in order to survive into the industry in the time of distress. The second element is the level of acceptance of these values and beliefs among employees. If the level of acceptance is high, the culture of the organization is assumed to be very strong. It has also been noticed that, high technology oriented manufacturing process and provision for safety and well being of Mid Lancs Automotive have ensured acceptability of the company among their employees. Facilities provided by the company motivate the employees to stay in Mid Lancs Automotive till their retirements. In contrast, Halecar experiences high employee turnover due to absence of such facilities. Hence, organizational culture is much more enriched in Mid Lancs in comparison with Halecar. Finally, the theory says that the higher the number of beliefs and assumptions, the stronger is the culture of the organization tends to be. From this point of view as well, the number of values and beliefs exist in Mid Lancs Automotive, in terms of recruitment system, employee management, performance management etc. are much higher than that of Halecar’s. This also shows a stronger image of Mid Lancs’s culture. From the analysis of the culture of two companies, it is evident that employees of Mid Lancs Automotive will continue to have a better position in the merged company as a result of strong cultural background of their original company and they will gain an incentive in terms of bargaining power as Managing Director of Mid Lancs Automotive will continue to be the MD of the newly formed company Mid Lancashire Automotive Ltd. Hence, level of difficulty faced by those skilled workers will be much less that the semi skilled workers of Halecar. However, it is upon the strategic management team of Mid Lancashire Automotive Ltd that how they will manage and motivate employees of both the companies in order to accomplish long term objective of the merged company (Sparrow, Brewster and Harris, 2004). 2.2. The Horizontal Merger from cultural perspective Horizontal Merger may defined as the amalgamation between organizations associated with production or manufacturing of similar kind of products and services. From strategic human resource standpoint, this kind of merger is tough to implement as both the firms exercise their distinct way of running business operations. As line of production is similar, such mergers result in downsizing of unskilled workers in order to develop a more cost effective business approach. Initially, interactions among employees of both organizations result in conflict. Since, one of the parties involved in merger happens to be more powerful; people associated with that organization tend to be more compatible with the changes as compared to the employees of other organization. Hence, the management of the merged company should try to establish uniform rules and regulations for all employees in the newly formed company, irrespective of judging them on the basis of the background of their previous company. This will help the company to ensure sound employee management which in turn will demonstrate the benefits of merger in near future (Industrial Relations Center, 1999). The merger between Halecars and Mid Lancs Automotive is also an example of Horizontal merger as both the companies are engaged into automotive manufacturing. However, the production process and employee safety measurements of Mid Lancs Automotive are much advanced than Halecars. As Mid Lancs Automotive recruits more skilled workers, the merger may prove to be potential threat for the employees of Halecars. Conflict may also arise if the well being of the employees of Mid Lancs Automotive is better taken care of as a result of the additional power of their parent company. In order to control such cultural issues resulting out of the merger, the HR team should formulate strategies to manage every aspect of strategic human resource and evaluate the implementation of the strategies from time to time. 2.3. Conducting Cultural Audit Conduction of Cultural Audit will enable both Halecars and Mid Lancs Automotive to understand the differences in values, beliefs, assumptions and practices exercised by each of the companies. The audit also allows the companies to identify the most fitting factors of the two organizations and predict the potential barriers of the amalgamation. Such audit reveals the key elements of the two cultures that are worth retaining (Industrial Relations Center, 1999). 2.4. Managing Stress among the employee Event of structural changes such as mergers create considerable amount of stress among the employees of both the companies involved in terms of uncertainty about job security, transfer, career path, methods of performance evaluation, changes in compensation and changing power and prestige status (Storey, 2007). The sudden notice of merger between Halecars and Mid Lancs Automotive has made the employees stunned due to unpredictability of the news. Such news arises a number of questions in the mind of employees of both the companies regarding their future prospects in the ‘to be merged’ company. In most of the cases, such stress leads to employee absenteeism, performance degradation and huge employee turnover. In order to control all such factors, the management should conduct Merger Stress Audit in order to assess perception of workers regarding the merger and accordingly schedule Individual Counselling and Stress Management Training for the employees. Individual counselling helps the employees to eliminate the fear and negative approach towards the merger. Rather, they should be made understand about the opportunities they will experience in near future in terms of their career mobility in Mid Lancashire Automotive Ltd. Voluntary training on stress management should also be imparted among groups of same categories of employees to clarify the positive consequences of mergers on them. 2.5. Addressing Employee Turnover Problem History of Merger and Acquisition have shown that employee turnover in a post merger condition increases from the normal turnover ratio of the individual firms. The turnover rate ranges from 2% to 35% depending on the level of ambiguity among the employees regarding their future prospects in the merged company (Winstanley and Woodhall, 1999). Another reason for high turnover is invalidation of the acquired skills of workers in one company as a result of using high technology oriented manufacturing process of the other company (Cook, 2009). Analyzing the employee turnover trends of Halecars and Mid Lancs Automotive, it has been noticed that Halecars is characterised by high turnover ratio of as much as 55%. Reasons behind such high turnover ratio was the organization’s inability to provide proper safety measures for the workers working in the factory, the factory being literally old fashioned. Using technologies from the ancient era and absence of training and skill development workshops to upgrade the workers according to the industry demand also formulates considerable reason for employee turnover. Clearly, the workers don’t foresee any long term career prospect in Halecars and tend to leave the company whenever they receive a job with better future prospects. In contrast, employees of Mid Lancs Automotive are engaged into manufacturing high quality automobiles which are used mainly for exports. Accordingly, the employees are provided necessary equipments for their safety at workplace. Though the employees are already equipped with several relevant skills, further training and skill development programs are also conducted from the company’s end in order to keep them upgraded as per industry standard. Naturally, employee turnover ratio is very less in Mid Lancs Automotive and the employees tend to stay in the company till retirement. From this analysis, one thing is very prominent that the potential threat for job cut is more for the workers of Halecars as their skills may become irrelevant as a result of adopting high technology oriented manufacturing process of Mid Lancs Automotive. However, in order to control the increasing level of tension among Halecrs’s employees due to probable risk of downsizing as a result of merging with Mid Lancs Automotive, the management of Mid Lancashire Automotive should demonstrate additional concern towards the workers of Halecars. Initiative should be taken to provide required technical and job oriented training and time to time counselling should also be done in order to clarify them the motivation behind the merger in terms of their own benefit. In other words, the employees should illustrate that as a result of merging of two firms, workers will get an opportunity to acquire the technical knowledge and gain a work experience of high technology oriented manufacturing process. Working procedures, regulations and safety measures will be appointed as per the standards followed by Mid Lancs Automotive as well. This will increase the bargaining power of the unskilled workers from Halecars. Hence, training and timely counselling can control the fear of downsizing among the employees (Gibb, 2007). Coming to the employees of Mid Lancs Automotive, the workers should be motivated by the mission taken by the management of merged company, to become “employer of choice” by 2016 (Employer of Choice, 2014). This statement highly indicates that the management of Mid Lancashire Automotive Ltd will strive to provide a better working condition, performance management and rewards procedure for the employees. Hence, their growth path in the merged company will be defined and of course, they will get an opportunity to excel in their career through clearly stated growth path. Continuous motivation regarding this factor will tend the employees of Mid Lancs Automotive to set back in Mid Lancashire Automotive Ltd. 2.6. Maintaining Job Satisfaction The biggest challenge for a company in post merger situation is to maintain job satisfaction among the employees of both the individual organizations. Job dissatisfactions arises because of the reasons such as uncertainty about pay scale, job security, disruptive communications and rumours, ambiguity regarding career growth as well as for relevance of acquired skills in the merged organization. Also, the primitive employees resist for developing their skills due to age constraints or any other problems. Hence, in most of the cases, job satisfaction decreases in a post merger scenario (Bach & Sisson, 2005). In order to control such cultural issues in Mid Lancashire Automotive Ltd, the Human Resource Management Team should take corrective actions, way before the occurrence of such incidents. Employees of Mid Lancs Automotive may feel that acquiring a less competitive company will lead to increase financial burden on the balance sheet of their own company and the company’s growth will be decelerated as a result of carrying cost of Halecars (Smith, Burgoyne and Araujo, 1999). However, the employees should be made to understand the objective of the merged company to produce an exclusive 4x4, superior quality cars which will be marketed internationally. Manufacturing of such international standard cars will definitely enhance the production requirement of Mid Lancashire Automotive Ltd. Again, the company’s strategy of mass marketing of their product will require producing cars of high volume and low cost. These low cost international standard cars will be expected to attract customers from all segments and revenue generation will be expected to be high. Increment in revenue generation as well as operating in a profit sharing motive will definitely enhance pay packages and incentives of the employees as a whole. Such motivation may help the company in ascertaining job satisfaction of the employees of Mid Lancs Automotive. In order to enhance satisfaction level among employees of Halecars, they should be interpreted the benefits of getting merged with a proficient organization. For this purpose, historical data should be shown to them regarding the negligible number of health and safety issues reported against Mid Lancs Automotive after 2008. This will establish the management’s concern for employee well being and hence tend to satisfy the employees in their new assigned jobs (Sisson and Storey, 2000). 2.7. Managing other cultural issues Other cultural issues arise in a newly merged company by the means of industrial relations of employees from individual organizations, methods of recruitment, training and development, parameters of performance management, equality and diversity as well as emotional syndromes emerges among the employees as a result of merger. Different employees may have different sort of industry relations. Strength of labour union also varies along with various companies (Redman and Wilkinson, 2009). For instance, all their organizational issues related to industrial relations are managed by their Managing Director himself whereas Mid Lancs Automotive has a separate HR Controller department to regulate disciplinary actions and monitor issues related to industrial relations. Having separate department within the company to control issues related to industrial relations, Mid Lancs Automotive neglects the policy standard mentioned the Transport and General Workers Union. However, according to Statutory Trade Union, if more than 20 people are engaged in manufacturing or business operations in a company, recognition of independent trade union becomes unavoidable as per statutory regulations (Is4profit, 2008). Merging of the companies with different industrial relations environment, should lead the merged company to identify and practice industrial relation as regulated by Transport and General Workers Union (Information and Advice Service, 2008). Procedure of recruitment and selection also differs in the companies to be merged. In Halecars, recruitment is processed only on the basis of word of mouth. No specific requirement of skills is mentioned in the time of recruitment and local men are easily appointed to work in the factory as their production process is highly non standard. In contrast, Mid Lancs Automotive follows structured recruitment system and appoints multi skilled workers with many relevant external qualifications which have helped the company to emerge as one of the best automotive companies in European and North American markets (Excerpt from case study). In a post merger scenario, Mid Lancashire Automotive Ltd should follow such streamline recruitment and selections procedure based on the required criteria, so that the company may reduce the cost involved in on job training process and the cost foregone as a result of appointing unskilled workers (Taylor, 2005). With a skill enriched employee base of the new company, Mid Lancashire Automotive Ltd’s manufacturing process will also become of international standards which in turn will give the company’s bottom line a big boost. However, existing semiskilled employees should be appointed for the repetitive works in the workshop (Pilbeam and Corbridge, 2010). As per the reports from the management of Mid Lancashire Automotive Ltd, the newly formed company has taken a mission to emerge as one of the best automotive manufacturing company in the industry. In order to accomplish this objective, employees should be provided additional on job trainings and they should be carefully motivated towards achieving the objective (Forth and Millward, 2003). Achieving such objective will require the employees to put an extra effort which will direct the company to gain additional revenue. Hence, in order to keep the motivation level constant among employees, management should announce reward procedure, both financial and non financial and link performance measurement with that (Armstrong, 2006). This will help the employees to work more for their own benefit. In turn, the merged company will be benefitted and they will be able to easily establish their position in the industry. 3. Conclusion A proactive industry survey has shown that, even if financial incentives are achieved, issues arising out of defective human resource management have resulted in substantial loss due to failure of merger. Hence, merging of cultural issues should be given equal importance to the firms engaged into merger activity. After analyzing the pre merger condition of the two companies involved into merger and the present declining situation of the UK Automotive Industry, it can be inferred that the only option left to Halecars to prove its existence into the industry was to engage in merger activity with Mid Lancs Automotive, a company with sound structure, policy and procedure. Mid Lancs Automotive incorporates an organization structure with several required departments, structured recruitment and selection process, good employee relation and very less turnover rate. Hence, if carefully implemented the employees of Halecars will be well off from the facilities derived from Mid Lancs Automotive. Mid Lancs Automotive will also get an opportunity to expand their business into emerging markets such as in India as it will gain access to the clients of Halecars as a result of the merger. However, in order to derive such benefits employees should be motivated well and they should be clarified the motive behind the merger and how the merger can be advantageous for them. Therefore, if cultural and HR related issues such as employee turnover, employee dissatisfaction and level of stress can be addressed in the recommended manner, this merger will tend to promote Mid Lancashire Automotive Ltd in the long run, in terms of revenue and profitability. Reference List Armstrong, M., 2006. Performance management: key strategies and practical guidelines. London, Kogan Pages. Armstrong, M., 2012. 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Globalizing Human Resource Management. London: Routledge. Storey, J., 2007. Human Resource Management: A Critical Text. London: Thomson Publications. Taylor, S., 2005. People Resourcing. 3rd Edition. London: Chartered Institute of Personnel and Development. Winstanley, D. and Woodhall, J., 1999. Ethical Issues in Contemporary Human Resource Management. London: Palgrave Macmillan. Read More