MGT501 Contemporary Management

Questions: Assignment - Case Analysis Business Report Word Count : 2500 Task In the contemporary management environment, mergers and acquisitions are hot topics; particularly as mergers and acquisitions are among the most commonly used strategies for growth. The pitfalls of mergers are well known and well-studied in the management literature. Yet, there are some fundamental challenges that organisations keep stumbling over. One of them is integration. Preoccupation with due diligence and political factors surrounding merger negotiations too often leaves a crucial piece in the merger puzzle left till it is too late – integration of cultures and structures and people. It is well known today that poor results from mergers can so often be put down to people issues. In this major assessment you are asked to analyse the following case and answer the questions below using a business report format. Further detail on the format of the business report are provided below. Case study: Who goes, Who stays?    1. What conflicting values are at stake in the case? Identify and explain, using relevant management theory and concepts. Contextualise your answer with reference to literature on integration problems in mergers and acquisitions, with specific reference to people issues. (up to 400 words)   2. Critique the process that is being applied to work out the details of the integration, particularly with regard to structure and top management staffing using relevant management theory and concepts. Ground your answer in evidence regarding people and culture issues in merger integration studies. (up to 700 words)   3. How would you recommend the conflicting values be resolved? (up to 500 words)   4. What process would you recommend that the two senior executives and their HR people follow to work out the details of integration in regard to the top structure? (up to 500 words)   5. Evaluate the usefulness of the management and organisational theories and practices from the subject that you have applied in analysing the case (up to 400 words)   Beyond the resources provided in the topics, you will need to source and use additional literature to support your argument. At least 16 academic and professional references must be used. At least 09 of these sources must be from academic studies. Rationale Successful completion of this assessment will demonstrate your achievement of the following learning outcomes:   • Be able to research and communicate effectively and professionally in a variety of organisational settings.   • Be able to critically analyse and evaluate a variety of management and organisational theories and practices in the context of the contemporary business environment. Presentation.   • The word counts provided in the question are for guidance only. You can vary these as you see fit.   • Use the information on academic writing that you gained in topic 4, together with the skills you have developed while completing assessment 3.   • Use the following format to write your business report.   1. Title page showing the assessment title, subject code and title, your name and student number, and the word count. 2. Executive Summary 3. Introduction – one overall introduction to the report 4. Report sections (this is not a heading)- meaningful use of headings for each question 5. Summary and Conclusion 6. List of references.   • The word count will not include the executive summary, in-text citations and the list of references. Words contained in images, tables and diagrams are included in the word count.   • Include page numbers and a running footer that shows your name and student number and the assessment number.   Answers: Abstract It has been noted that most mergers fail in most reports by the business experts. In one of the recent studies that were conducted by KPMG, it was reported that more than 80% of mergers do not maximize and prioritize return of the shareholders. Historically it has been archived that more than two-thirds of the firms lose the stock market value. At times, the morale and motivation that propels mergers can be based on flaws and in many instances, the challenges linked with trying to make merged firms cooperate successfully may be too sophisticated to be mended (Stunda, 2014). Mergers have been thought to be propelled by the wrong reasons, that is fear. The rise of globalization and the modern technology development may affect the decisions made by the executives in merging a firm. The decision to merge a firm or a company rests on the notion of product fit or market compatibility by the merged firms, however, it is the employees that make a huge difference and, in most cases, such employees get ignored. It is a fallacy to think employee related issues can be ignored and easy to be overcome, and the executives and managers that fail to recognize employees’ efforts end up regretting in the end. Introduction The announcement of the merger between Bio Health and the Dutch-based pharmaceuticals, De Waal Pharmaceuticals was on front page pictures of most prime news in the top of the hour. The photos taken of Steve Lindell and Kaspar the chairman of the Dutch-based pharmaceutical appeared in most newspapers around the globe. De Waal was stationed in the Netherlands and was a European drug manufacturer that was well established while on the other hand, BioHealth was located in New York and in recent years had become attractive to facilitate the merging and acquisition prospects. Both firms manufactured and sold a wide variety of drugs ranging from over the counter painkillers to HIV/AIDS medications. The merged firms would enjoy the advantages associated with economies of scale and would integrate both plants operations and the employees while having many products to push through their distribution routes. Alison one of the directors of BioHealth in charge of sales and marketing and one of the best sales representative that the company had is puzzled of the ongoing of the company (Light, 2001). She reveals how other employees in the firm including her are terrified and that they think Kaspar is responsible for calling the shots. She reveals of her fears of how they have lost five employees and that three others are almost exiting the firm as they are weighing on some serious offers. It was not the first time that Steve is hearing of how people are confused about who was in charge of the firm. Problems and Issues As per the survey that was conducted in 2010 by PWC on the companies that had closed business deals on merging and acquisitions, hurdles related to communication emerged as one of the top elements that were responsible for the fall of most synergies (Impraise, n.d.). Making effective communication to employees while empowering them and developing a culture that enables them to thrive is all primary and vital for the integration process (Dlabay & Scott, 2011). The occurrence of mergers and acquisitions always has the possibility of making managers and employees be left in the dark. The lack of answers and fear always deters top-level management from disseminating information needed by employees in redirecting their course of actions in the merged firms. Rumors always have the ample chance and opportunity of filling in mystery and vacuums and the employees and employees, on the other hand, are left to think for their own on why the firms are being merged and how the merged firms will affect their work (Andriuškevi?ius, 2015). It is the lack of communication that leads to distrust and workplace uncertainty making employee engagement efforts reduce significantly. Communication is one of the skills that should exhibit itself and develop naturally, though it can be the toughest skill to learn (Nogeste, 2010). The process of managing any primary project in any merger or acquisition should ensure that employees from both firms are informed inclusively in most times and events (Omoye & Aniefor, 2016). The employees should be informed of the integration process through different modes of communication such as emails. When the management is aware of the fears and concerns of the employees and proactively giving answers not only develops transparency and trust but also leads to a merger that is successful. Steve Lindell is not open minded in staffing issues of the new enterprise. Lindell’s approach on speed can be said to be slow and is also unwise as he thinks he can make the selection decision now and fix the problem later in the event that things do not fall in place. In the modern era of management by top-notch executive, Lindell is seen as myopic. Allowing talented employees leave can be termed as being irresponsible as it expensive and time-consuming to replace such high caliber individuals. Lindell shows up for the meeting without a plan for the staffing integration and it is for this reason that he is entitled to make rusty decisions haphazardly. Steve should have come to the meeting with a strategic plan that could entail a mechanism of retaining core executives through possibly awarding them bonuses after the successful merging process. A communication strategy that eases their fears is also critical, and an examination and a selection process for top-level management in the new firm is also vital (Czinkota, Ronkainen, & Moffet, 2011). The process of streamlining the two firms on the basis of contractual terms and compensation strategies as the two companies are quite different based on the country of origin and as such a clear and a transparent channel should be engaged (Light, 2001). Both Steve and Kaspar have to put their heads together and craft an overall plan and Steve should go back to the original plan of evaluating the top-notch managers of the two firms. The process of appraisal would be critical for some reasons, for instance, it is not transparent if due considerations have been made on the competencies that the merged firms would require from a group of leaders in delivering an optimum performance (Steigenberger, 2016). The management should first define the new competencies and their linked behavioral indicators. Steve also confesses to Bruce that he is not happy with the executives from the Dutch. As such this is a problem that is common in most mergers as there is the habit of favoring the people that one is familiar with. It is critical to examine executives in an open and transparent manner to both firms. The primary motive should be to eliminate bias and emotion in the staffing process and facilitate that the most deserving employees in terms of perfect match job descriptions specified in the new roles. This ensures that in the long-run, the most qualified personnel get employed. The use of an objective appraisal methodology allows and assists the executives to fathom that the stacked deck is not against them and thus provides them an ample chance for them to portray how they fit the competencies that the merged firms need. The success of any merger begins with the understanding of authority that is who has power and how are they using such power (Gatti & Chiarella, 2013). Steve has to use some pressure on Kaspar in the process of integration. The process of integrating firms requires utmost speed. Steve has to urgently assemble the people that they already chose and make them the center of a selected group. It is also not transparent enough on whether Steve and Kaspar are statistics to assist them in making critical decisions. For instance, it is unwise for them to develop a plant network haphazardly during their lunch meeting when they could have employed analyses that are focused and in-depth with regards to the cost, product quality and service delivered (Srdan, Abdullah, & Dev, 2011). Also, none of the two leaders has demonstrated that they can rise above cultural disparities. For instance, Steve’s opinion is that his team seems to get it right while Kaspar, on the other hand, feels indebted to protect his employees stationed in Indonesia. Steve made a mistake of first focusing on regulatory approval rather than concentrate on issues that mattered most to the operations of the company. Lindell is trying to achieve all by himself and his first blunder was to think that all could happen by himself. He focused on attaining regulatory approval while he let everything else get to be drained. Instead, he should have chosen a legal team to situate that the situation was dealt with thus providing the much-needed direction on his part. Importance of Management Theories and Practices Knowledge management is vital for mergers and acquisitions as it is one of the strategies that gets employed for survival and growth and is associated with facilitating the competitiveness of the firm over its rivals (Faulkner, Teerikangas, & Joseph, 2012). Cross-border mergers are generally used strategy as a mode of entry in internal markets and constitute a big share of world foreign direct investment in the host nation. However, in the 21st century, knowledge management is increasingly identified as being a vital strategic role for an enterprise and as such the literature on management in activities by mergers is limited (Grave, D, & B, 2012). Despite the many cases where mergers have failed to deliver a positive outcome, knowledge management instruments are strategically vital to the success of mergers. As such it is important to understand the role of knowledge management with regards to the context of mergers and to identify elements that facilitate its adoption in mergers, recommending that the effective adoption of knowledge management in a merged firm can assist in exploring and exploiting knowledge during the post-merge phase. Management theories and practices are important in developing and providing the relevant literature that is crucial in gaining the breadth of knowledge in the management of people. Staffing issues have been the prime factor for the success of most merged firms that have different cultures and with proper management styles, such issues can be curbed in a modest manner. As a matter of fact, management theories provide guidance and framework on how to manage such firms that have been merged (SIA Partners, 2017). With the use of proper theories and literature the whole issue of cultural integration can be solved by matching the required profiles with the competencies and skill sets of a particular individual (Lewis, 2013). The integration of current human resource practices in merged firms can help overcome issues with favoring some preferred candidates and as such proper selection methods are employed in attracting talented and top-notch candidates that are an asset to the company. Staffing policies ensure that there is fairness and openness when it comes to selecting the management that is to cruise the company amidst turbulent waters of cultural diversification and strategic operations that need to embrace while leaving others. The many cases of merged businesses have been as a result of due negligence and ignorance by management to implement the relevant theories of management and practices. Recommendations The two individuals from the HR department should be left out of the process as they have grave limitations. As for Christian, he cannot make decisions solely as he needs outcome based on results or a computer to conduct the job for him. Bruce, also, despite having perfect instincts and not being afraid of opening up to Steve and telling him what he thinks acts just like a clown. Thus, it is crucial that before a meeting of the selection panel, both Kaspar and Steve should put Christian aside and also Bruce should also follow the same suit. The best approach, in this case, would be to outsource people from outside who can help conduct the appraisal. The use of external consultants can generate valuable expertise to the human resource incorporation process as they ensure that they conduct interviews that are both in-depth and structured at the same time. As independent participants, outsiders analyze the situation without the burden of politics from the internal operations of the firms, loyalties or clashes based on power. The outsiders are more probable to deliver assessments that are more accurate of how the executives align perfectly with the needed competencies. They are also innovative in recognizing other new roles within the organization that for people who are deemed as assets but have been placed in second place in the quest for identifying the best pool of candidates.   Steve in one way or another could have avoided losing talented yet valuable employees by dealing with the problem as soon as possible. He would have been much far ahead and better if he had led the conduction of an evaluation of the top executives as a requirement of due-diligence strategy as many forward-thinking firms are doing currently. Unfortunately, Lindell is learning the hard way on the hurdles posed by the integration of the two firms. However, adopting and implementing this approach accords him every opportunity of retaining some of his key workers thus assembling a perfect team. As such it will serve him better on the journey of becoming a fruitful merger. Managers who look at their employees through the lens of their culture end up creating problems in the selection process as the underlying factor is that such people are not as good as their team is and are therefore unfit for some positions and tasks. Thus, both Kaspar and Steve have to learn to distinguish a style by a particular candidate and this may portray the corporate culture from their perceived performance in the newly merged firms. Steve and Kaspar think that they are objective when it comes to selecting strategic people and thus consider that their approach is best. However, they may be wrong in the following accounts. Both Steve and Kaspar seem to be at odds when it comes to the sensitivity of speed in choosing the top management for the new company. Kaspar is not worried about the slow pace the whole process is moving on and Steve, on the other hand, is much concerned about the sense of urgency. The stability that accompanies senior team is a crucial short-term strategy that needs to be taken care of as soon as possible. It is the senior executives chosen that propel the organization and are thus the main determinants of success or failure of the newly merged firm. Summary and Conclusions For whichever reasons for merging or acquiring, it is crucial that decision-makers take into consideration intangible factors. However, it may be difficult to understand the human perspectives in mergers as they are often overlooked in most cases. The top executives overlook such components due to the idea of being in a position to rehire workers and managers. However, the long-term impact is detrimental to the results of the merged enterprise. A cultural strategy is crucial for managers and employees in fathoming the extent to which a merger may impact culture. It is through constant feedback that managers are able to fathom the concerns of their workers before such employees become a threat to the company in the long-run. However, by implementing such a strategy, the merged firms are aware of the cultural variations and engage with employees throughout the merging phase and propagate a cultural shift. References Andriuskevicius, K. (2015). Opportunities and Challenges of Value Creation through Merger and Acquisitions in Cyclical Economies. Procedia - Social and Behavioral Sciences, 213(1), 764-769. 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