The Aspects of Culture During Mergers of the Firms Report

It is evidenced that in earlier on, the organization taken over was seen as a rival business, or a competitor, but now, it has become part of this very organization. Naturally, the change in stance could affect future performance of business, especially now that new warring forces has combined together to form one composite whole.

The impacts could be both positive and negative. As is seen, the positives could be seen in terms of better cash inflows, larger quantum of revenue, and better overall performance, in terms of lowered operating costs and higher revenues through improved sales. This is not to suggest that there should be absence of healthy clashed between the firms in merger or acquisitions. It is believed that “the best mergers occur when a fair amount of culture differentiation prompts debate about what is best for the combined organization” (Impact of Culture on mergers and acquisitions, n.d., para.8).

It is seen that the major aspect of culture during mergers or takeovers is that both the firms in question lose their individual culture characteristics, and are blended into one integrated, composite whole. Thus a new organizational culture takes over, perhaps a blend of both cultures, and a brand new cultural value established by the new management of the joint firm.

There are certain aspects to be considered with regard to mergers and they are as follows:

1. It Is necessary to make necessary preparations for changes and its implications even before these changes actually take place.
2. There is need for transparency and openness in communication systems
3. It is also necessary that co-operation and willingness of staff members to co-operate in the new scheme are sought and received.
4. “Address cultural differences directly” (In mergers and marriages, communication is Key: LIMRA international reports on the human factor, 2001, para.9).
5. It is important that human resources aspects are well attended to and resolved
6. The perspectives towards customers should not change as result of Merger
7. The combined brand identity should add greater value than each individually, and this needs to be sustained for future.

Thus it is seen that with the sale of the competitive business into the existing business, synergistic culture could be established, that could have overall beneficial effect on the business. The cultural deficits in one unit could be compensated by the other unit, and similarly the combined strengths and benefits could far overweight individual challenges and issues, especially ones that threaten to undermine the value of the firm and its competitive advantages through business endeavors.

The overwhelming cultural strains could predominate, in terms of work attitudes, relations between the employees towards peer groups, subordinates and superiors and the overall feeling that individual members of work force bear towards the business unit.

It is believed that the answer to this could be seen in terms of providing quality care at affordable prices to the patients of this health care company. There is need to first of all, inculcate leadership qualities within the members of this work group and also provide authority to oversee and supervise work performance. The appointed leader needs to be assertive in ensuring that work standards are met and that objectives of business are attained. Besides the leader also has to motivate the workforce to gain higher productivity, better efficacy, achieve greater competencies through training, work up gradation and better and less tedious ways of doing present work. Since the main strength and asset value of any business is the caliber of its work force, it is important that they are well taken care of, so that they would be in a position to provide good service and aid the management in attaining corporate goals and objectives. Besides, it is also seen that in the context of health care, the best interests of patients assumed most significance, and therefore, it is important that the combined staff should be in a position to combine efforts in order to attain pre-determined objectives. Thus leaders in the merged company need to observe and document changes “in order to detect how the people involved will be affected and how they will feel about the intended change” (Stamper, 2002, para.1).

Thus the first aspect that must be taken into account during review of the post-merger scenario is that charting of corporate goals and drive for achieving business progress, the very reasons why the merger took in the first place, must be properly ordained and sustained, in order that the benefits and advantages of merger are realized. The merged company needs to sink individual, or corporate difference that would obviously be present in both instances, and work to attain synergistic achievements and corporate building. Thus, the company needs to be clear and cogent on what goals need to be pursued relentlessly and how the workforce could be utilized in order to achieve them. Besides, planning and organizing in the changed context are also important factors that need to be considered, especially since now joint decision between both constituents of the health care industry firms needs to be taken into cognizance. But often, it is possible that in a post-merger scenario, one party is able to dominate proceedings over the other, which could thus, sub serve the interests of majority over the minority group. This could, in essence, create areas of attrition, in terms of under representation of minority interests, etc.

“Without understanding the often hidden and implied values that drive decision-making at every level, the chances are great that a merger or acquisition will quickly be awash in misunderstanding, confusion, and conflict.” (Roger, 2000, para.4).

Thus it is necessary, that in the common good of the organization, the individual or group differences are sunk and all members of the work force work together for benefit of the merged unit. There needs to be high degree of communication, receptivity and common understanding in order to achieve corporate short, medium and long term interests and sub serve group and individualistic interests for common goal and team building. Besides, the need for team performance that underlies goal fulfillment is also intrinsic and a major aspect of cultural aspects in mergers.

The business need to benefit from the combination of the strengths of all parties to the merger, which, in effect forms their common interests and benefits. Besides it is also possible that in a merger, the weaknesses or disadvantages of one party could be neutralized or even eliminated. For instance, Company A’s corporate policies are strait-jacketed, strict and inflexible. In a competitive global business environment, this policy may not succeed to a very large extent. Again, Company B adheres to a non-formal, casual set of rules that may or may not be followed by its staff members. Indiscipline could become the bane of this organization if things were allowed to continue in this fashion. A merger of these two cultural ideologies could give rise to much needed blend between two extremes and could augur growth and business development for this company. Moreover, it is also seen that the blending of these two cultures could help raise business prospects and bring the best of the performance of workforce in the unified unit, thus creating better avenues for the business.

Describe what the organization will look like, in terms of systems and shape

The description of the merged unit, with regard to its operational systems and size need to be seen from the following perspectives:

1. Scope of business
2. Bearing of common liabilities
3. Management
4. Corporate Performance
5. Taxation
6. Participation
7. Termination of Business
8. Profits sharing

It is necessary to consider each of the above characteristics in a merged cultural context.

Scope of business

It would indeed be deemed fit to consider that the combined resources of both, say Company A and Company B, would be larger than that of each considered separately, considering their common customer base, joint goodwill (perhaps absence of ill will) and mutual strengths and competitive advantages. It could be termed a marriage between corporate families which bring concomitant benefits to both parties.

Bearing of common liabilities

By far, liabilities of individual firms could cause cultural imbalances in that they may be onerous and cannot be withstood by one firm. Through consolidation and mergers, it may be possible to jointly share corporate liabilities, thus benefiting both firms. Besides contingent liabilities that may accrue to the firm at any future time may also be confidently faced, since now there are more firms to share common liabilities.

Management

This critical aspect would now be jointly addressed, depending upon the common covenant signed by new members of the merger. The main danger that could arise could be that one constituent representation in the merger may become more powerful than the other, which may result in future squabbles for power and influence. The cultural aspect needs to consider this aspect critically and devise ways and means by which this could be overcome.

Corporate Performance

To a very large extent, prior to merger, each company, whether A or B, were individually accountable for their performance to their respective shareholders, but in the merged scenario, they now need to be accountable to a common Board of Directors or Senior Management team. Perhaps the merged management may be better equipped and well balanced as compared to the earlier team.

Taxation

The merger may bring about tax benefits to its constituent members, and they may find themselves in a better position, vis-à-vis their tax commitments, then if they were acting individually in the pre-merger scenario.

Participation

Under the merger scheme, employees may have a better voice and could contribute better to overall managerial effectiveness than in a rigid and flexible regime that throttled innovative practices and scientific corporate thinking.

Termination of Business

Mergers may benefit ailing companies in more ways then one. Through injection of life saving liquidity and capital funds, they could be more than rejuvenated and brought along profitable lines of business. Besides, they could also be downsized in order that efficient systems do not suffer at the expense of inefficient workforce, who needs, nevertheless to be compensated.

Profit/Loss sharing

It is seen that this vital aspect of business would depend upon the covenant of merger, or acquisition. This has been the result of protracted discussions and deliberations of the future projections of business and its many ramifications. However, the cultural aspects need to consider that one firms does not gain undue advantage at the expense of a smaller firm.

Conclusion

Change is an inevitable part of business and changes brought about by mergers and acquisitions could augur well for all parties, given the kind of competitive business environment in which firms presently operate. Mergers could further downplay the deficiencies and weakness in corporate systems while allowing their strengths and competitive advantages to be fully utilized.

Reference List

Impact of Culture on mergers and acquisitions. (n.d.). Evan Carmichael. 2010, Web.

In mergers and marriages, communication is Key: LIMRA international reports on the human factor. (2010). AllBusiness. Web.

Roger, M. (2000). How culture affects mergers and acquisitions. AllBusiness. Web.

Stamper, A. (2002). Analyzing the cultural impact of a system. Science Direct. Web.