Reasons for the Job Losses - Case Study Example

?Case Study Fields’ initial actions upon acquiring LPB The first thing that Mrs Field’s Holdings did was to reduce the administrative staff of the acquired company from 53 to just 3. They did this by merging the various support functions that were common to both the organizations. These departments were - human resource department, finance and training and development. The 3 employees that were retained were from operations and R&D teams. Debbi also initiated the designing of combination stores which would offer customers the new products acquired along with the original offerings. To give the senior management a feel of the new operational scenario, they were asked to work in these combination stores. Many outlets were closed down as a consolidation drive. Reasons for the above actions The company felt that their present staff strength in the support function areas was enough to take up the consolidated work load. Mrs Field’s always believed in the philosophy that keeping high employee strength diverts the attention of the employees from processes and operations to employee management which causes inefficiencies to creep into the system. Hence, only indispensable employees of the previous organization were kept. This makes a logical sense as the support functions usually add to the administrative cost and hence reduce operating margins. R&D and operations of the acquired company are the functions where Mrs Field’s employees would not have any expertise. Hence, it is imperative to keep the experts of these functions so as to understand the technicalities of operations and products and carry out a smooth merger of the two entities. New store designs were also required because the company plans to sell both products from the same outlets as this merger is considered to be logical extension of the previous business. Using same facility for both the products will also provide economies of scale to the company as Mrs. Field’s already has a store structure which has the bake area just behind the service area. Some modifications (if required) can be made for baking the new products within the same facilities. The facilities added from LPB act as outlets to reach out to the new market segment of LPB. Thus, there will be synergistic effect from merger of outlets. Asking senior management to work on the shop floor will help them acclimatise themselves with the new environment which will further help them in understanding the pros and cones of the new situation for better future planning. Views as an LPB store manager at this time As an LPB store manager I would be very much worried about my job security. Looking at the way support functions of LPB were integrated, with just 5.67% of the staff retained, the situation does not look very promising. However, one positive aspect of this retention policy is the fact that employees with expertise in areas not known to Mrs Field’s employees have been retained. Since at present both operations at the store level have to be merged, inputs of LPB store managers would definitely be required as the acquiring company’s managers would not understand the nuances of the business. Thus, in the near future, there is some amount of job security depending on one’s performance standing before the merger. It is understood that only the best performing store managers, who are perceived to be well acquainted with the business, will be retained. But after that it depends on how well the LPB managers are able to gel with the new work culture and create a niche for themselves. LPB managers will have to face the challenge of understanding the work culture of the new organization and adapt to it at the fastest pace. They may also face resistance from junior team members of Mrs. Field’s as they would perceive the new managers as different from them and lack trust in them. Pros and cons of the merger On the face of it, the business does look like an expansion into similar products. Most of the new products require baking in which Mrs. Fields is already an expert. There is backward integration through this acquisition. For example, if the production of bread starts, the same material will be used for preparing sandwiches. Thus, bread can be sold as a product while the sandwich is a value added product. LPB products were competition for Fields which has now been converted to synergistic merger. However, there are lot areas which may be unknown territory for Mrs. Field’s holding. The difference lies in the product characteristics itself. LPB products have a shorter shelf life (as they are perishable) than the cookies that Mrs. Fields produces. The storage facility for these products may not be available at the current Mrs. Fields stores. Other products like soups would require installation of gas or other equipments which were not available at Mrs. Fields store earlier. Use and portability of the Fields' information systems at LPB Field’s information system is highly proactive and was designed to provide decisional support at store level to managers. It has input facilities so that any exceptional information can be input to “train” the PCs so that they can then incorporate the differences and take apt decisions later. They also require hourly data to predict hourly production at store level. The portability of this system at LPB is a herculean task but not an impossible one. First the database needs to be updated to incorporate all the new products and information. Some historical data would need to be gathered for creating real time predictive models for the new products. A study would be required to be conducted to understand the interaction of the new products with the old ones. For example, production of bread should be higher in outlets that are also selling sandwiches. New systems would be required to be installed at the LPB outlets. The full system integration would take at least a year’s time or more. Essence of Randy’s explanation of the losses after the acquisition Randy considers these losses as R&D expenses which had to be incurred because the company was going to establish a combination store structure post merger. However, out of the stores that were closed down, many of them were already making losses or not performing as per expectation. Thus, these losses would anyways have been incurred because carrying on with such stores would not have been sustainable for Fields in the long run even if this merger had not transpired. Randy is only trying to cover up the long impending consolidation exercise under garb of the merger. Future of LPB and its employees post consolidation of management structure and information technologies LPB employees face some amount of uncertainty with respect to their future career prospects and even their job security. There might also be some job losses. With the change in management structure, the employees would now require to work as per the new systems and processes which the Fields management would propose. They will have to adapt to the new culture. They will also have to understand the new systems and processes. Supervisors from LPB might face lack of trust and retaliation from the subordinates of Fields. However, there can be immense opportunities for some who have good knowledge of the existing systems at LPB. Some of them can be trainers, merging advisers and so on. Reasons for the same Job losses will occur as such consolidations necessitate non value add activities to be eliminated. Fields already has a philosophy of following low employee culture. Hence they would try to retain the best of the talent but not tolerate inefficient employees as this would result in higher acquisition cost. As already seen, Fields has used technology at the store levels. Thus, the managers and other staff of LPB will need to upgrade themselves to enable them to work on these new systems. The reasons for problem faced by LPB supervisors is that usually in such acquisition cases, the acquired entity is perceived by the acquirer as a weaker entity. This creates a perception in them that they know more than the acquired company employees and hence cannot take their order. For those who have developed an expertise during their stayed in LPB, there can be immense opportunities as their knowledge would be required to help build consolidated IT systems at the new combination stores. They can also provide training inputs for the LPB products and processes for the Fields employees. Thus, there are both opportunities and threats for the LPB employees in the merged entity. It is entirely up to them to see whether they fall prey to the uncertainties and distrust or take it upon themselves to convert the situation to their advantage. Read More