Due to globalisation, mergers between firms from varied geographic locations have become common (Mor Barak, 2013). These mergers can lead to immense business gains. However, they also come with cultural and power dynamics conflicts. Similar is the case of merger between DeWaal Pharmaceuticals and Bio-Health Labs. Both the firms have merged with little assessment of cultural dynamics and are now facing the brunt of major roadblock due confusion and lack of clarity.
Mergers are done with an aim of getting fruitful rewards in terms of increase in scale, market share and profit (Dai, 2017). However, these mergers bring with them conflicts of interests due to cultural and value differences.
Conflict is a real or perceived clash of interest arising due to distrust, fear, power struggle and cultural dissimilarities between the merging companies (Gomes, N, Weber, Y, & Yedidia Tarba, 2012).
In the given situation of a merger between DeWaal Pharmaceuticals and Bio-Health Labs, it can be seen that the two companies are in a conflicting situation. The reason of this conflict is that the two companies and their leaders are from culturally dissimilar background and have a different way of working (Alvesson, 2010). The two companies have merged and become one but their mindset and culture has not yet merged. One of the major tasks of conflict management theory is to identify sources of conflict so that it can be resolved (Campbell, 2018). According to work done by Dominic Busch in conflict management culture differences along with differences in ethnicity can lead to major value conflicts (Furlong, 2010). According to management theory, conflict management model propended by Blake and Mouton’s, problem solving techniques can be applied to this situation (Furlong, 2010).
DeWaal Pharmaceuticals is a Dutch company with a focus on protection of long-standing business units and staff. Chairman of DeWaal Pharmaceuticals, Kaspar van de Velde, is a slow-paced person who does not want to close down redundant operations based on sentiments of his culture. On the other hand, Steve Lindell, CEO of Bio Health Labs, is an American businessman who believes in speed and wants to retain his best men. Therefore, the conflict arises because their values are different.
Majorly, mergers fail due to people management issues (Campbell, 2018). Cultural conflict is at the root of disoriented people management during mergers. An approach towards problem solving as propounded by Blake and Mouton’s with a vision for better integration based on needs assessment as propounded by Khun and Poole, can help resolve this conflict (Dai, 2017) . Problem solving and integration is required in terms of leaders’ and manager’s approach to work. Both the leaders need planning and strategic people management for this merger. Therefore, conflicting values of time management, people management and sentiments are inhibiting the merger between the two companies from becoming successful.
Mergers are undertaken with a purpose of increase revenues and profit (Campbell, 2018). However, merger integration is a difficult task because of the cultural and people management issues involved (Ellis, Raveh, & Tarba, 2013). According to management theory, conflict during a merger integration process arises because of fear and insecurity of staff. After a merger many people tend to loose their job (Tarba, 2016). However, the challenge of people management during a merger is to retain the talented people and reduce fear and insecurity in the mind of the staff.
The current process being followed in the merger of DeWaal Pharmaceuticals and Bio health labs lack long term perspective on people and culture management. As per research, lack of people orientations ad workforce fear and insecurity has been cited as the main reason of merger failure (Bergamin, 2017). The first issue in the current merger situation is problem of power dynamics. Both the leaders want to wield their power and influence decision making so that they are considered as more powerful in the eyes of the stakeholders. This is leading to an oversight in decision making and improper balance in implementing the integration. There is no clarity on who is in control. The leaders of the two organisations should make a plan and decide the functions that each will handle (Bergamin, 2017). This will reduce the leadership crisis and power struggle.
Another major issue with process of integration in this case is the speed. The companies are going very slow in terms of planning the top management staffing. Cultural difference between the organisations is the cause of the delay. This is leading to turnover of talented employees. According to management theory people are most important assets of a company and post-merger it is very important that talented people are retained (Tarba, 2016). Therefore, both the leaders need to make tough decisions regarding planning the people management process.
According to management theorists and thinker’s communication failure is another reason for conflict and fear in organisation during merger process (Davenport, 2017). As per conflict management theory it is very important that the top management communicates with the employees and assures the talented employees regarding their jobs, promotions, role and pay package etc (Davenport, 2017), This can help in empowering employees and creating a culture in which they can thrive and work without fear.
In the current situation Steve, the CEO of the merged organisation, has failed to communicate effectively with his core employees regarding their role. He has lost one of his most trusted and valued employees due to this lack of communication. He has also not made any effort to meet and know the core employees of the other organisation. This lack of communication is also instilling job insecurity and leading to employee turnover. Sieve needs to improve his effective communication or her will loose his talented pool of employees very fast.
Employee turnover and employee retention problem is a major threat of any merge (Dai, 2017). Uncertainty of the direction of the organisation, cultural issues and job insecurity can lead to employees leaving. In the current situation the problem of employee retention is very large. Both sides have lost many talented employees and many are in the process of looking for other jobs. Therefore, the leaders of both companies need to make speedy decisions regarding staffing of the top managerial roles in the company. Speed of the staffing process is very less currently and the approach towards the matter is casual. Both Steve and Kaspar need to be more serious about the issue and make structured plans on managerial roles (Dai, 2017). They can then compare their plans and decide on the areas where they disagree. However, oral communication over lunch, as is the case in the current situation, cannot solve the issue. If the two leaders don’t take fast and serious stock of the situation, they may face a lack of talent in the organisation.
Therefore, the process of integration needs to be fastened with proper cultural integration and a focus on employee retention and speedy action.
Cultural outlooks and values are imbibed in a person’s nature and way of thinking (Boonstra, 2012). It is very difficult for anyone to look beyond their cultural values. However, in a situation where two organisations are merging, they need to come together and think beyond their individual cultures (Bergamin, 2017).
DeWaal Pharmaceuticals and Bio health labs need to formulate a process which will help them in resolving their value conflicts.
Both the leaders of the merging firms should identify the work area for themselves (Boonstra, 2012). No organisation can have two leaders. Such a scenario can lead to uncertainty and power struggle. Therefore, both leaders should divide their areas and focus on their area with cooperation and non-interference.
Both the organisations should make a list of their talented people and decide what roles to be given to each (Boonstra, 2012).
Steve, the CEO should not be too soft on Kaspar and tell him the need for time management. He should be open about time wastage leading to employee turnover. This will help Kaspar in understanding the value system of Bio health.
A 360-degree performance appraisal should be done of all employees of both the firms and employees should be selected and retained for the roles based on this appraisal (Campbell, 2018).
A review should be done of management styles and managerial values of both the firms so that the best practices of both the firms can be brought to light (Bergamin, 2017). This will help managers in understanding styles and values of each other.
Steve is the CEO of the new organisation. Hence, he needs to understand on what issues he needs to stand his ground and not bend. This will help him to put his priorities in place (Bergamin, 2017). He needs to prioritise his actions. He also needs to understand the fundamental values of the other organisation. There could be certain issues to which they are fundamentally attached. For example, the plan in Indonesia which is redundant but has sentimental attachment for the Dutch. Therefore, he needs to let go of such issues for the time being because going too much after these issues can lead to major roadblocks.
Steve should also formulate a roadmap for the future (Bergamin, 2017). That is, two years of five years projections for the firm’s profitability and growth. This will help Kaspar in understanding the importance of planning for the organisation.
Furthermore, it is important to communicate with his employees, especially those he wants to retain. He must confide in his employees and empower them to make decisions so that there is employee retention and progress (Campbell, 2018).
All these measures will help in resolving the value conflict in the organisation and will lead to better work relationship between the merging organisations.
Merger of two culturally diverse organisations can lead to major conflict with in the firm. (Campbell, 2018) It may affect the pace of the merger and if not checked can also lead to merger failure.
Following process is recommended to the two firms for adequate integration of people, processes and cultures of the two firms.
The CEO that is Steve must communicate with his key employees regarding the merger. He and his HR manager must inform the employees regarding the post-merger expectations. He and his HR team must explain to all the key employees especially the ones he wants to retain, that the future will be bright for them (Campbell, 2018). He must assure them a role in the post-merger scenario. He can tell them that their role might change but their importance for the company will remain the same.
Both the firms must come up with a shared vision for the future (Bergamin, 2017). This will help the firms and the employees in understanding that now they are a joint force. A shared vision will also give a proper direction and purpose to the organisation. This will help in reducing fear, indecisiveness and insecurity.
Leaders of both organisations should sit together and plan on the daily operations and work force management (Campbell, 2018). This must be considered as serious business and should not be taken casually. The two leaders must decide the areas where they absolutely won’t give in and areas where there is scope for negotiations. Additionally, both should be prepared to walk a mile and give up on areas which might be of importance to the other organisation (Campbell, 2018). For example, if the Indonesia plant is important to the Dutch, then the American company should consider giving up its plan to shut it down for the time being. Additionally, role of each upper management employee should be put on paper and discussed and cleared.
For proper staffing management each employee of both organisations should be put under the scanner. Their past performance and capabilities should be discussed and based on it their roles should be assigned (Boonstra, 2012). This should be done based on appraisals and hard facts and not on personal rapport or biases.
The joint firm should aim to create a new culture (Bergamin, 2017). This will happen by mixing the employees of both the firms and imbibing a sense of organisational work in them. This will help in reducing friction and improving work ties.
Therefore, by undertaking these steps the merger can be made into an effective one and conflicts can be reduced.
Conflict can arise because of clash of interest between two parties (Bergamin, 2017). Conflict in any organisational merger can lead to roadblocks, talks breakdown and even failure of the merger (Bergamin, 2017). Management thinkers have propounded various models and theories in management practices to deal with conflicts. The theory which has been used in this analysis is Blake and Mouton’s theory of conflict management (Davenport, 2017). They propounded five styles of conflict handling. These are forcing, withdrawing, smoothing, problem solving, and compromising. This analysis used the concept of problem solving to create solution for the value and cultural conflicts in the merger between the two companies (Bergamin, 2017). Problem solving involves efforts made by both the parties to create solutions in order to reach an agreement (Dai, 2017). This is useful because it is based on deep analysis, consensus and amicable decision making
Additionally, integrative model given by Khun and Poole has also been used to come up with solutions for the conflicts in this situation (Dai, 2017). In the integrative model conflict is seen as a chance to integrate the needs of the conflicting parties and create a sense of belongingness and unity. Therefore, in this analysis it has been suggested that the companies compromise on the Indonesia plant for the time being so that better integration can be made.
Through an integration of needs, management of both the merging organisations can assess each other’s talents and learn to work together in order to achieve joint organisational goals. Conflict resolution through problem solving can address the most important problems facing the firm. Through an emphasis on problem solving, the firm can prioritise its needs and actions. Therefore, in the present situation of the merger between a Dutch and an American company the firm can address the basic issue at hand that is leadership issue, people management issue and cultural conflict. After pinpointing these issues, the firm can then formulate solutions for the same.
Additionally, these models are useful in resolving the conflict in the given situation because it focus on solving the problem at hand and integrating both the organisations (Boonstra, 2012). These models can help in forming a combined culture for both organisations. Hence, it can be said that management theory can assist organisations in making conflict management techniques. By using problem solving and integrative techniques, decisions can be taken through formal discussions and dialogues.
Therefore, it can be inferred that models of conflict management and organisational theory are very important for proper resolution of conflicts in an organisation post-merger.
Summary and Conclusion
Mergers are undertaken to increase a company’s market share and scale of operations. However, conflicts arise due to cultural differences, power struggle, fear and insecurity. For the purpose of integration of a culturally diverse organisation, its is essential that that the leaders of the two merging organisations have their priorities right. In the current case of the merger between the two pharma companies, the issue was major culture difference, lack of communication with employees, unclear power dynamics and lack of planning. Such a situation can be managed through proper planning process by using problem solving techniques. Communicating well employees and clarity on role dynamics can also help address the various conflicts. It can thus be summarised that proper and orderly planning and decision making can help resolve the major issues between the two merging firms.
References
Alvesson, M. (2010). Understanding Organizational Culture. London: Sage.
Bergamin, ,. S. (2017). Mergers and Acquisitions: Integration and Transformation Management as the Gateway to Success. New York: Springer,.
Boonstra, J. (2012). Cultural Change and Leadership in Organizations: A Practical Guide to Successful Organizational Change. New Jersey: John Wiley & Sons.
Campbell, A. (2018). Global Leadership Initiatives for Conflict Resolution and Peacebuilding. Hershey: IGI Globa.
Dai, ,. X. (2017). Conflict Management and Intercultural Communication: The Art of Intercultural Harmony. NewYork: Routledge.
Davenport, J. (2017). Employee Communication During Mergers and Acquisitions. New York: Routledge.
Ellis, K. M., Raveh, A., & Tarba, S. Y. (2013). Integration in large, related M&As: linkages between contextual factors, integration approaches and process dimensions. European Journal of International Management,, 6(4), 368-394.
Furlong, G. T. (2010). The Conflict Resolution Toolbox: Models and Maps for Analyzing, Diagnosing, and Resolving Conflict. New Jersey: John Wiley & Sons,.
Gomes, E., N, A. D., Weber, Y, & Yedidia Tarba. (2012). Critical success factors through the mergers and acquisitions process: revealing pre?and post?M&A connections for improved performance. Thunderbird international business review, 51(1), 13-35.
Mor Barak, M. E. (2013). Managing Diversity: Toward a Globally Inclusive Workplace. London: Sage.
Tarba, S. Y. (2016). Mergers and Acquisitions in Practice. Abingdon: Taylor & Francis.
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