Acquisition of AD Ltd Company by ABC Company
ABC a manufacturing company was taking over the management of AD Ltd Company also a manufacturing company in the same industry. The aim of this acquisition was meant to improve the productivity of ABC Company and also to increase its market share hence profitability. Prior to this acquisition, ABC Company and AD Ltd Company were major rivals manufacturing similar products and thus their relationship was strained. Each company was in the mission of eliminating the other company from the market and both the companies were very aggressive in ensuring they succeeded.
During the take over, AD Ltd Company was experiencing financial crisis due to heavy reliance on debt financing. AD Ltd therefore agreed on the take over deal due to the pressure it was getting from its debtors. During the negotiations, it was agreed that after the take over, the companies would merge their management team as well as their workers. ABC Company and AD Ltd Company also agreed that to eliminate the risk of duplication of duties, some workers were going to be swapped to work in other departments.
Managers in similar departments from both companies were to carry out their respective functions but in an integrated manner. This meant that the manager in charge of finance in ABC Company for example, was to work hand in hand with the finance manager from AD Ltd Company in the new larger ABC Company. This was problematic in that these two companies were employing different management styles which could lead to conflict in the newly enlarged departments. For example, AD Ltd Company believed in use of debt financing as a means of meeting its day to day running expenses while ABC Company had a policy of reducing short term debts.
Another agreement that was reached on during the negotiations was that due to the combined manufacturing efforts, some of the plants which were operating at a loss were to be closed temporarily. This meant that some of the workers were to be laid off and or sent for compulsory leaves. Some workers from such plants were to be employed in the new merger and had to re apply for the jobs to ensure equal employment chances for all. This could have been a major potential conflict area especially with workers being asked to reapply for their jobs. Labour unrests could have arisen thus inhibiting the production process.
The whole process of negotiation and acquisition was carried out by top management of both the ABC Company and AD Ltd Company. Both the companies did not consult their workers on the purported take over or seek their opinion on how the acquisition and transformation process could be effectively carried out. The management thus overlooked the effects these acquisition and subsequent integration of activities and workers could affect the overall performance of the newly enlarged ABC Company. The acquisition process was not communicated to the workers of both companies.
The workers were notified of the changes after the acquisition bid was over and a deal had been struck by these two companies. The workers were thus expected to carry and adapt to changes and implement them appropriately. Leadership style employed by the management of ABC and AD Ltd companies ABC Company and AD Ltd company leaders were authoritarian and were using their positions and authority bestowed on them to make vital decision of the companies and the workers. Under the authoritarian leadership style also known as autocratic leadership, the leaders is in charge of decision making and he or she never consults his or her workers.
Leaders applying this form of leadership come up with the goals of an organization and even the departments, formulate the strategies to carry out the tasks to attain the goals and direct the workers on how to perform those tasks. The workers or the employees have no control over performance of their tasks (Clark, n. d). In the above case, using the authoritarian form of leadership was ineffective in ensuring a successful transformation of ABC Company. This is because the form of decisions the top management were undertaking were directly affecting the workers and thus consulting them could have been vital.
The provision that after the acquisition similar posts from both companies were to be integrated had a direct influence on the operations of the affected departments. There was need to consult with the department heads and also to communicate the top management idea. This could have been essential in psychologically preparing the managers affected and also in formulation of alternative ways of merging the two companies (Webb, 2003). This form of directive leadership was inefficient in that it led to conflict in the companies. For example, some workers were removed from their areas of specification which led to conflict arising.
Though such changes were necessary, lack of prior communication led to the questioning of workers role in the management which led to labour unrests in the newly expanded ABC Company. Studies on employee behaviour have revealed that people are usually opposed to change especially when it is perceived as being imposed. No matter how appropriate the leaders’ strategies were, lack of communication and employee involvement led to their inefficiency and ineffectiveness (Clark, n. d). Using a different leadership approach could have ensured that the transition process was successful.
Instead of using the autocratic approach, a more democratic or participative approach could have been adopted by these leaders. The leaders should have involved the workers during the take over bid especially those who were to be directly affected by the acquisition. As noted from the above scenario, the departments in ABC Company were to be expanded to accommodate the AD Ltd management team. Communication and preparing the department heads to such intended changes could have been vital in reducing conflicts in these departments.
Some workers were also to be moved from their departments and thus consultation and communication was necessary. Change management strategies utilised by ABC Company The overall management of ABC Company changed after the acquisition of AD Ltd Company. Some of the notable changes were that the company had expanded and also its production capacity was also increased. The running of the departments also changed since new management team from AD Ltd Company was being integrated in the management team of ABC Company.
Some workers were also moved from their earlier working places and new workers from AD Ltd Company were joining the expanded company. To ensure efficiency and effectiveness, employees in ABC Company and the AD Ltd company which was taken over were swapped. This was also meant to reduce the tension that was there after being business rivals for a long time. This led to creation of a new culture in ABC Company. The main goal of ABC Company before was to become the market leader by acquiring a bigger market share than AD Ltd Company.
Due to the acquisition, the company had to change its mission from competition to improving quality and quantity. The management style of ABC Company also had to change to accommodate AD Ltd leaders (Nickols, 2003). The type of change strategy that was employed in the above scenario was that of power coercive approach. This form of strategy assumes that people are compliant and usually do as they are told by their superiors. Power coercive change strategy believes that for changing process to be successful, power and authority has to be imposed on employees.
The main aim of this form of strategy is reduce the options that the workers may have concerning the change about to be implemented. In the above case, the workers were supposed to implement the decision already made by the management. No consultation was done when making these decisions although most of them were directly affecting the way employees were expected to perform their tasks. Another strategy that the management used is what is referred to as environmental adaptive strategy. People are known to resist change at first but with time they readily adapt to their new roles.
Under this strategy, the management makes the decisions regarding change without consulting the employees and leaves the workers to adapt gradually to this change. This is quite evident in the above case whereby workers are supposed to adapt to the new form of management created (Riyadh, 2005). These forms of change management strategies which were employed by the company were effective in instituting change in ABC Company. As noted earlier, AD Ltd Company agreed to the deal of acquisition deal due to its weak financial position. Time factor was thus essential in negotiating the deal.
Engaging workers in the negotiations would have led to consumption of time. The management wanted to reach a verdict before AD Ltd could cancel their offer. With the acquisition of AD Ltd, the workers of this company had no other option but to adapt to their new environment. Due to lack of alternatives left for the workers to exercise, using the environment adaptive strategy was timely and efficient. Also since the working environment of the two companies were almost similar, adapting to and adhering to a new form of management was easy.
Both these two strategies employed by ABC and AD Ltd companies in instituting change were effective (Diamond, 2007). Power basis of the leaders of ABC and AD Ltd companies To institute change in both the companies, the leaders in used two forms of power as their bases. ABC Company was expanding its operations by taking over the running of AD Ltd Company. In so doing, there were changes in its management which were to take place as well as in the operations of the company. AD Ltd on the other hand was handing over its management to ABC Company and also part of its management team and workers.
To carry out these tasks, these companies needed to be backed up with the necessary authority or power. One form of power used in bringing about these changes is the legitimate power. Legitimate power is the power which a leader gets or is given by the position he or she holds in a company. This power emanates from the office one holds. The power thus rests on the office and not on the person. Once a leader leaves such an office, his power ends and who ever occupies that office takes up such power (FRENCH & RAVEN, n. d).
In an organization, the management team or the top organizational leaders have power to make decisions concerning or influencing the organization without consulting the workers. Legitimate power gives top management the authority to institute change in the organization as they may find necessary and beneficial for the organizational well being and survival. ABC and AD Ltd Companies management utilized this form of power during the negotiations and decision making process and in ensuring compliance with the new working environment (Preston, n. d).
Power and authority in an organization are essential since they are essential for gaining influence and for ensuring employees implement the strategic decisions taken by the management. In ensuring and encouraging change in ABC Company, the management may use different power influences. One of the power influence strategy used by the management in ensuring this change is implemented is the use of reward system. The management of ABC Company promised to reward its department management teams which were to work best under the integration (Michelson, 1985).
Ensuring that the directives were well explained to the employees helped in ensuring compliance by employees. Ambiguity is a source of defiance and thus a manager should ensure that all necessary details are explained to their subordinates. Using the position a leader has makes him or her at an advantage of being in a position to influence the mind set of employees and make them believe that the intended change is vital for the organizations. Some of the power issues that arose due to the process of change was handled by the management were issues like the role of employees in management of ABC Company.
This created or led to development of mistrust on the management’s interest on the overall development of the employees (Michelson, 1985). Conflict management process Due to the expansion of ABC Company and the dissolution of AD Ltd Company, conflict could have arisen. One of the major conflicts that were experience was in the management of the newly expanded departments. Leaders in the departments were not adequately prepared on the changes which were not adequately prepared for the expansion and the eventual integration of the management teams of these two companies.
Conflict arose due to the different management style which the leaders were employing. Also, since these two groups were initially rivals, there was the negative perception each group had concerning the other group. Such differences led to conflicts in the departments which the management had to solve to ensure smooth running of the expanded company (Conservation Technology Information Center, n. d). Conflicts arose also from the employees especially those who had been transferred to other departments within the expanded organization.
Lack of prior communication about the intended changes made adaptation hard and also the changing process was seen as being forced. Such negative impacts of the change led to emergence of conflict in the organization. On the other hand employees from AD Ltd Company who had been assimilated to the larger ABC Company also found it hard to work under this new management. The breaking of social groups of employees from both companies also led to conflicts. There was mistrust between employees from both companies which was manifested by hostility and segregation.
Handling such conflicts was the next vital activity of the management (Ford, 2002). To ensure successful handling of conflicts in an organization, several steps have to be followed by the management of an organization. The first step in conflict handling involves identifying and analyzing the conflict. Under this stage, the conflict management team seeks to establish the root cause of the conflict. The next step of the process involves determining the appropriate strategy to reduce or eliminate the conflict. Several strategies are available which the management may adopt.
The management adopt a collaborative form towards conflict resolution. This form results in a win-win situation. Compromise may also be used to solve conflict whereby both conflicting groups are forced to reach a compromise over an issue. The third strategy is competition whose outcome is usually a win-lose scenario. Accommodation may be used to solve conflicts whereby one groups agrees to accommodate the other groups view. The last strategy is avoidance. Under this strategy, the conflicting issue is avoided which leads to lose-lose situation for the conflicting groups (Groenewald, n. d).
Pre-negotiations mark the next stage of conflict management. Under this stage, the conflicting groups agree to negotiate and a verdict is used using any of the above strategies. The last stage of this process is the implementation stage. All articles agreed on are then implemented and a follow up is carried out to ensure that both groups adhere to the agreed measures. On the above scenario of acquisition, the management took a negotiation approach in dealing with conflict which arose. The department leaders from both companies were allowed to air their views and a compromise was reached.
The leaders agreed to work together for the common good of the expanded company. The workers from the expanded company were also allowed to negotiate their cases and they reached a compromise. This method of conflict solving was effective as it helped in reducing the tension which was building in the organization. Negotiations and the afterward compromise also helped in improving relationships within the organization as not side felt demeaned by the management. Role of culture and organizational design in the changing process Organizational culture and design are vital in ensuring a smooth transition of an organization of company.
Organization culture is usually rooted in the history of an organization and to change it is a difficult task and is also a continuous process. The expansion of ABC Company required an integration of cultural values and norms of the company with those of AD Ltd Company. From the case above, it is apparent that these two companies though in the same industry, they were holding different cultural values and norms and also believes. Being major rivals in the industry only served to heighten their differences. Each group held a belief that their opponents was in a mission of eliminating them and thus hatred and mistrust existed between them.
Merging the activities of these two companies through the acquisition process meant that they had to change these believes and also change their approach thus their culture (Symphony Orchestra Institute, 2005). The differences in the cultural practices of these two companies made the changing process to be slow and difficult. The competitive ideology which was held by employees of both companies and the mistrust which had been developed over quite a long time of being in the same industry made was a major hindrance to effective transition in the expanded ABC Company.
The social groups which these companies’ employees had formed were also hard to break through to allow the formation of social relationships inclusive of both groups. Since these two companies had been rivals, their main aim was to continuously improve their products by improving their technologies and ensuring that the other company could not access it. The use of different means of producing or manufacturing similar products was challenging to the effective production. Each group insisted on their method being the best and also the process of learning how to do things in a different way was not easily adopted by all the employees.
Since the companies had different cultures, it was vital to develop a culture different from the already existing ones. Culture however is not easily developed as it evolves overtime especially on issues like social bonding and organizational norms (Heathfield, n. d). Organizational design is also another issue which may hinder or encourage change in an organization. The organization design employed by ABC Company is hierarchical in nature thus making it hard to effectively incorporate the expansion carried out. It is characterised by well defined hierarchies and authority and information flows in a down ward direction.
It has a bureaucratic form of administration which made it difficult to implement the changes quickly and efficiently. Incorporating the new management team took longer than necessary and also admission and swapping of employees was slow slowing and inhibiting the changing process. Such an organizational design is not effective and does not support changes in an organization (Autry, 1996). To ensure a smooth transition, a more interactive and integrative organizational design could have been adopted by the organizations.
Eliminating the barriers by reducing the hierarchies in the organization could have ensured that the transition period was much lesser and quicker. For change to be effective, a less hierarchical organizational design is required (Cameron & Green, 2004). Conclusion Change in any organization is inevitable. For survival and growth of any company, it is essential for the management to devise or come up with different methods of performing tasks. Such methods usually necessitate a change in the operations of the organization.
To ensure that change is effectively instituted, there are several requirements which the management must meet. One of the essential ingredients to effective and successful change in an organization is good and skilled leadership. Different leadership style should be adopted depending on the required change. Leaders are symbols of influence and change and poor leadership would thus translate to poor productivity and implementation of change. The change required should dictate the kind of leadership style to be used. For issues or matters of urgency, an autocratic approach would be most effective.
However, decisions made on behalf of workers should be well explained at a later date (Want, 1990). Another important aspect in ensuring effective transition is to ensure that the change strategy that an organization employs is in line with its objectives. Just like leadership, change strategies should be based on their impact to the overall environment. Change is always resented by people under normal circumstances. Management should aim at ensuring the employees embrace the changing process. In managing the changing process, the first agenda of the management team should be to create a desire to change in employees.
They should explain the advantages of the intended change and also outline the consequences of continuing with the current status to the organizations productivity and profitability. In an organization, no matter how effective a leader and the purported change is profitable, not every person appreciates this. Conflict is bound to arise as some individual resent the change. This is more evident where change involves change of positions and ways of performing tasks. Managing such conflict is essential since poor handling of the same would have detrimental effects on the changing process.
Conflict should be handled as early as they are identified to reduce the effects they may have if not earlier handled. The management should establish a conflict management team to handle such issues (Condliffe, 1991). Another hindrance to successful change in organizations is culture and organizational design. Culture is essential in an organization and should not be undermined by management while thinking about change in an organization. The employees should be prepared in advance before instituting the changes and the effects that the purported change could bring to the operations and regulations of an organization.
In ensuring a culture is ready to embrace change, the management should develop a culture of innovation and invention. Encouraging creativity in an organization would also help develop a culture in employees that change is vital and inevitable. With the dynamism in the business environment, it is important to develop an organizational structure which is easily adaptable to change. A more interactive and integrative design which encourages more open and direct communication should be adopted (Itzin & Newman, 1995).
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