The Impacts of a Merger on the Culture of the Organization - Case Study Example

Introduction: Much has been written and discussed about the financial aspects of a merger and the impact that mergers and acquisitions have on the financial and capital structures of firms. But the fact remains, that not only do these financial aspects are crucial for a firm, they also have a direct root in the cultural clashes and difficulties that the workforce goes through during the turmoil of a consolidation effort. No single thing plays a more important role in turning a merger into a success story than does effective post-merger consolidation management which allows the employees of the two merged companies to merge culturally. Hence it can be safely said that for the management of a newly consolidated firm, the single most important issue that requires the utmost attention is the development of a strategy that ensures that the employees of the firms can smoothly transit between the pre and the post merger periods. This essay discusses the impacts that a merger has had on the employees of a healthcare organization and the strategic decision-making on part of the management of the organization which allowed the respective workforces to develop a system of trust and respect for each other. The essay also discusses the way mergers can effect the business processes and structures of firms and how management can deal with these issues in a way which ensures that the organizational values and culture is kept intact. The impacts of a merger on the culture of the organization: According to Camara& Renjen (2004), studies by researchers and analysts has confirmed that mergers are as likely to destroy as to create shareholder value. A major cause for this is that mergers bring together two companies which had previously been working according to different policies, had entirely different business procedures and had unique cultures. Due to this, the differences that arise between the employees, as well as the changed rules and procedures seemingly create an atmosphere of uncertainty which is most commonly viewed by the employees as a direct threat. The organization in whose context we will discuss this issue further is a medical centre which has been active in the healthcare sector for the past 25 years. Having a reputation for providing excellent services , it is one of the leading hospitals in the country and according to the reports, a total of 22,080 inpatients and 230,000 outpatients were served in the last fiscal year. Before the said merger took place, the hospital, although extremely well-regarded, was working on a relatively smaller scale and housed 400 beds among which 58 were in the ICU. The hospital was ranked in 8 adult specialties according the 2009 edition of the Best Hospital in U.S.A. Considering the fact that the hospital was ranked very highly by the population of the local area and among the medical professionals, and the fact that the number of patients that were treated on a daily basis were fast outgrowing the hospital’s capacity, the management found a pressing need to expand the scope of the medical centre’s horizon and take it to a higher level by expanding its girth. For this purpose, the management decided on merging with another local hospital that was working almost on the same level but was much less successful. The consolidated set up was going to entail major changes which would mean that while many positions would be abolished due to duplicity, new people would be hired to accommodate the large size of the establishment. Researchers have claimed that organizations which pay particular attention towards looking for merging partners which have a similar set of business principles and value system are generally more successful in making their merger decisions turn out to be favorable. This ensures that there is limited alienation between employees and acceptance of the new system is not slow and difficult (Brommels & Choi, 2009). Although the management at the said organization did spend considerable time researching prospective merger partners, the ultimate choice that it had was still rather unlimited because of the restricted number of hospitals present in the area and due to this, there were marked differences among the two companies that became one. Among the biggest and most obvious differences between the two hospitals was the standard of quality that was associated with them both. While one was considered to be one of the top most respectable and renowned hospitals in the entire state, the other was not as well respected. Due to this reason, the employees of the more respected and well known hospital considered the others below their standards and viewed the other hospital’s staff as being less competent, something which created a sense of estrangement between the two groups. Steps that Management can take to counter these difficulties: Among the foremost steps that the management should take to tackle these post merger difficulties is to communicate the merger strategy to the employees in an effective manner. According to Camara & Renjet (2004), each merger has a basic aim that is hoped to be fulfilled through the consolidation and in this case it is the gaining of increased capabilities that pushed the two companies to join together. If managers take out time to elaborate and point out the number of ways in which the combined organization will better be able to serve people; much better than each of the hospitals could do on their own, it would greatly serve the purpose of pointing out the mergers utility to the employees . Since the driving force in the decision to merge with this particular medical centre had a lot to do with particular services that it offered, it is also important that the management makes the employees aware of the potential of those particular aspects of the consolidation. For instance, the lesser known medical centre had a level I Emergency and Trauma centre which was extremely well managed and was equipped to provide a vast number of emergency medical services to the patients suffering life threatening injuries. compared to this, the Trauma centre of the more respected hospital had been operating at a lower level. Through the merger, the expertise and the respected name of the larger more well known hospital would be combined with the highly trained surgeons and medical diagnostic equipment of the Trauma centre and create a strategic combination that was envisioned to take the merged hospitals to a new level. Therefore, the management should pay extra care to communicate the utility and scope of this merger. It is also important that not only the middle level management takes active part in the integration process, the senior level management also should be directly involved in shaping the integration strategy. The post merger integration should also not be a slow process, but should be carried deftly and with speed so that issues can be tackled in the beginning and the way could be laid for relationship formation among the employees. To do so, it would also be important that cultural differences are viewed as the starting point from where managers can get a guiding source as to what needs to be incorporated into the cultural schemata of the newly merged organization. In the words of Bijlsma-Frankema (2001), differences among organizational cultures create “them-and-us” feelings between employees, and if an organization has to survive past the integration period, it is essential that these feelings are eliminated. For this purpose, not only is there a need for the employees to be aware of the scope of the merger itself, but also of the way it would positively effect their careers and their growth within the organization. Another thing of importance is that the management should make sure that the focus of the employees is not completely taken off their basic responsibilities. Mergers and acquisitions are times during which employee focus does shift inwards and according to Huang & Kleiner (2004), organizations tend to become more introspective, hence it is of utmost importance that managers make sure that employees are not completely disregarding their basic duty which is to provide the patients with a service of the highest merit. By doing so, managers ensure that low performance and productivity periods are discouraged, things which ultimately get blamed on the mergers themselves. The altered systems and shape of the organization: According to Huang & Kleiner (2004), most unsuccessful mergers in the past have arisen because merged organizations suffered from unclear relationship statuses as well as a tendency for carrying on vague, unstructured reporting relationships which hamper the decision making process itself. For this reason, roles would have to be decided and assigned early on in the post-merger period. The structure of the organization and its orientation is also a key factor in this regard. Organization A, which is the reputed medical centre had a deep corporate infrastructure and had been aligned in a central fashion. Organization B on the other hand, had a lean structure and little corporate hierarchy before the merger, being organized in a department wise manner. Therefore, through careful deliberation and discussion in this regard, the leadership chose a de-centralized organizational model which was dependent heavily on the patients responses and opinions, and which also was dependent upon these factors for ultimate decision making. Conclusion: During the initial post-merger period, the organization on the whole faced strategic choices that posed threats to its existence on the whole. However, the key lay in effective communication and in making strategic choices which laid the foundation of trust among the employees. For this purpose, the major hurdle seemed to be the relaying of the facts in a specific manner which informed the employees about the utility and scope of the integration and how it was engineered to make the two organizations benefit from doing what they did best. References: Bijlsma-Frankema, K. 2001. On managing cultural integration and cultural change processes in mergers and acquisitions. Journal of European Industrial Training. Vol. 25. pp 192-207. Choi, S., & Brommels, M,. 2009. Logics of pre-merger decision-making processes: The case of Karolinska University Hospital. Journal of Health, Organization and Management. Vol. 23 No. 2, 2009 pp. 240-254 de Camara, D., & Renjen, P. 2004.The secrets of successful mergers: dispatches from the front lines. Journal of Business strategy. Vol. 25. No. 3, pp 10-14. Huang, C., Kleiner, B. 2004. New Developments Concerning Managing Mergers and Acquisitions. Management Research News. Volume 27 Number 4/5. pp 54-62. Read More