Leadership and change management in mergers and acquisitions

¶ … leadership and change management are very crucial factors in the determination of an organization's success. One of the main causes of organization failure is poor leadership. This coupled with the lack of appropriate change management program can quickly send an otherwise profitable business venture into the dreaded domains of bankruptcy and losses. This paper is therefore dedicated to the investigation of the effects of leadership and change management on organizational culture and organizational performance in the case of corporations undergoing mergers and acquisitions The role played by an organization leader is to align the organization's resources, envisioning of the future of the organizations and the motivation of the employees in the firm in order to achieve better results in terms of performance and profitability. A viable leadership strategy must therefore be devised and coupled with an effective change management strategy in order to ensure that businesses remain profitable in this contemporary corporate environment that is marred with stiff competition. It is crucial that any given organization is guided effectively in the process of corporate growth and development by connecting the workforce and the management. The benefit of this is the seamless integration of leadership and workforce with the main business processes. Organization culture must therefore be preserved while ensuring that the new and existing business missions are upheld. Due to the dynamism in the contemporary business environment, it is necessary that certain changes be updated in order to ensure that the organization a new set of core capabilities as pointed out by Prahalad and Hamel (1990).

Dynamic business environment

The dynamism of the business environment means that several activities such as mergers and acquisitions (M&A) are common in the corporate environment. This is because merger and acquisitions are an integral part and parcel of many firm's operational strategy. This is as a result of the fact that moves such as these have been praised and proven as being of significance in the achievement of corporate growth as well as rationalization and diversity (Cartwright and Cooper, 1992). The contemporary corporate environment is characterized with several firms having to deal with too much chaos and culture change so as to achieve an acceptable level of corporate dynamism and growth (Berquist, 1993). A look at organization culture reveals that several factors affect the level of organization change as is common during acquisitions and it is therefore extremely crucial for leaders who hope to obtain a high acceptance level after an organizational change to be ready for the daunting task as postulated by Michaela and Burke (2000). Major challenges lie in the selection of the most appropriate set of actions that are both achievable and viable within the firm's capacity in order to handle change as well as the ever present resource constraint. Extant literature that depend on the 'great man' theory of leadership as indicated by Judge et al., (2002) does reveal that a given situation is also a major player in the determination of the effectiveness of a given leader. An effective leader should therefore be able to behave in a different and appropriate way according to different situations (Stogdill, 1974; as well as Yukl, 2002).

The rational for this research is to make sure that the concepts of leadership as well as management are utilized effectively for the promotion of organization culture and raise the level of employee acceptance during normal organizational processes such as mergers and acquisitions. It is important to point out that the concepts of leadership and management are two distinct terms with different meanings (Kotter,1990). They are however meant to serve as each other's complement in a given organizational system. Their functions and characteristics are unique to each other. Kotter, further points out that leadership and management are both integral for the achievement of a perfectly managed organization. The management aspect being concerned with the planning, control and the institution of certain necessary systems and organizational culture in a given firm. The leadership aspect however is mainly concerned with the expectation of change in the organization and how to perfectly cope with the changes in a visionary manner.

The need to align leadership and organization culture with strategy

It is important to have good leadership and appropriate organization culture in order to have a successful merger and acquisition

. It is paramount that leadership and organization culture be aligned with organization strategy in order to achieve a perfect integration in the case of an M&A. It is pointed out that good leadership should be cultivated in the early stages of the process of integration by means of coaching, relying on continual feedback as well as through participation in formal activities

Role of organization culture

Organization culture has been a dominant topic in management literature for a long time now. There are new techniques of assessing as well as changing organization culture in the domain of organization development. Several researchers have come up with various ways of determining the components of organization culture and the means of measuring and changing it. It is fortunate that currently there exists a lot of knowledge on organization culture and the ways of measuring it. The unfortunate news however is that organization culture can never be easily changed. Before proceeding, it is necessary to define organization culture. The definition provided by Schein (1985) is the most widely accepted one. It identified three important levels of organization culture; these are;

Basic assumptions

Values

Artifacts

Basic assumptions

These are the circumstances that are usually taken for granted in a given organization as the "normal and correct" methods of doing things. The do lie at the deepest level of organization culture and are the most difficult to alter. As an example we consider the situation documented by Schein involving an engineering firm and entails decision making; employees were valued as being the main source of business ideas. The assessment of the ideas had to be done by a particular workgroup as well as all relevant parties prior to their acceptance. According to Schein, the values of a given firm form the next level of organization culture. What this means is that they form the core of what ought to be executed in the firm' business process.

Artifacts

These are the behaviors and physical manifestations of organization culture that are overt. They are the most superficial. They can be observed with a lot of ease and are much easier to alter as compared to assumptions as well as values. The artifacts do include the procedures that are followed in the firm, the form of technology employed and the accepted methods of communication. It is worth mentioning that the process of altering the artifacts never yield any changes of organization culture. In order to achieve this, a person must eventually achieve the values as well as the basic assumptions. In light of the definition of organization culture, it is worth mentioning that organization culture can be measured. This implies that it is possible to identify as well as understand a given organization's cultures that are unique. The ability to measure organization culture does not imply that it can quickly be changed in order to transform and improve the organization. What is important is to learn and comprehend fully the existing organization culture in order to initiate the real change.

The measurement of culture

It is important that culture is measured. The existing processes are however deemed insufficient. A study by Hofstede et al. (1990) revealed that the differences in organization culture can be best explained by the various practices that employees of different firms commented to share in common. This commonality is what Schein referred to as artifacts. Hofstede et al. (1990) went ahead to conclude that the main differences that exists between the organization cultures can best be described through a sharp focus on six to eight dimensions of a given firm's practice. The two main ones that they discovered are the extent to which a given culture was employees Vs. Job oriented as well as the manner in which it was process vs. results oriented.

It is paramount that the study of organization culture focuses on practices such as performances and behaviors as opposed to values which in deed are more challenging to measure. A word of caution though is that in the process of measuring culture, there is a need to recognize the possible existence of other subcultures in various areas of an organization. Even though there may be a general consensus on the basis and technique of doing things, there exist variations that occur within the given units. These variations are never a violation of the broader organization culture but instead make them unique.

Assessment of organization culture

The assessment of organization culture is not the same as altering it. This therefore means that it can never be changed by the organization's top management. Organization culture therefore develops over an extended period of time via the interactions as well as relationships of certain key persons and groups; some of which exists outside the organization (Bate,1990). A perfect example being the cases of IBM and GM where most of the recent moves to bring culture change involved the application of pressure from persons outside their boards. Culture is therefore instilled through a network of relationships and never through the formal structure of authority as this is the basis of creating culture as well as adapting it.

A study by Gordon (1991) indicated the important role played by external influence of the organization culture. He concluded that the values and basic assumptions of any business organization are heavily influenced by three major external factors: These are; competitive environment, societal expectations and the requirements by customers. Firms that are faced by the highly dynamic and complicated business environment can successfully employ cultures that are adaptable and flexible.

Literature review

Extant literature has been dedicated to the concept of organization change. It has been described as an empirical observation in a given organization and is gauged using the variation of shape and quality as well as state over time as pointed out by Van de Ven and Poole (1995).There has been deliberate attempt to include new and improved ways of thinking, operating as well as acting (Schalk, Campbell and Freese, 1998). However, the main objective of organizational change is to ensure that a given business entity perfectly adapts to the dynamic and changing environment of conducting business (Barr, Stimpert and Huff, 1992; Leana and Barry, 2000).Organization change could be initiated also to improve the performance of a business entity (Boeker, 1997; as well as Keck and Tushman, 1993). The definitions that are given do encompass various situations that must be distinguished by the application of certain specific dimension of establishing the acceptable change topologies.

There are studies that are dedicated to the determination of the scope of change since it is the variable that is most used in the design of change topologies. In this manner, the organizational changes can be conveniently defined using the level of evolution of the changes ranging from high-scope ones / strategic to the low-scope ones (Blumenthal and Haspeslagh, 1994; Greiner, 1972; Levy, 1986; Nadler and Tushman, 1990).

Research Design

The cross-institutional study is to be conducted that involves the collection of data from various universities that recently merged with other colleges of advanced education. An extensive longitudinal and quantitative study is to be conducted. The study is to cover all the campuses of four universities that are involved within a period of eight months. This would then be followed by a qualitative study that stretches across all the participants of all the universities' campuses. The four universities are to be selected due to their similarities in terms of the number of merging partners, location as well as the basic differences that exists between them such as orientation, size and length of existence.

Instrumentation and Data Collection

Data collection plans

Triangulation is then to be involved that entails the quantitative and qualitative data gathering techniques (Jick, 1979) in order to maximize the chances of obtaining valid as well as reliable data from the subjects who are scattered across the four institutions.

Quantitative data collection

The quantitative data collection would involve the use of questionnaires that is to be administered to a selected cohort of respondents at a two-month interval for a period of eight months. These questionnaires are to use the type approach instruments as pointed out by Harrison (1975) so as to measure the extent of organizational culture. This Harrison survey had previously been demonstrated to be useful in the tracking of the cultural changes in an organization (Ashkanasy, Broadfoot and Falkus 2000). Harrison's instrument is based on the premise that there are for major types of organizational culture. These are role definition, power, person/support and task/achievement.

The variables in this research are:

Organization culture

Effects of changes in organizational performance

Organizational performance (Judged by the level of employee productivity an level of profitability)

Measurement of organization culture

The organization culture is to be measured in this research using Harrison's Organizational Ideology Questionnaire (Scott et al., 2001).

The questionnaire for measuring organization culture

This questionnaire is adapted from the ideology of Roger Harrison's Organizational Ideology Questionnaire. Various organizations have certain behavioral patterns. Which are a set of common myths, symbols and doctrines. Organization culture has a major impact on its efficiency and profitability since it has a strong influence on the way decisions are made, the method of using the human resource and the workforce response to challenges in the work environment. According to this questionnaire, organization culture is categorized into four types:

Power

Role

Task

Self

This questionnaire helps in the identification of the dominant culture in the form and what the respondents believe it ought to be.

The instructions for completing the questionnaire

For the each of the questions (1 to 15);

Choose (4) for the one that is the best representation of you organization. Choose (3) to the statement that best represents the position of the organization. Choose (2) to the preceding as (1) for the statement that least represent the organizational structure.

On completing the questionnaire;

Sum up the scores for each of the options a-d in separate design for the existing organization culture and for the preferred one.

As an example for the questions numbered 1 to 15 if falling under option (a) then you score 5 by 3,5 by 2 and 5 by 1 for the organization's existing culture. The summation for option (a) would then be 30 for the organization existing organizational culture

(a) Power

(b)Role

(c) Task

(d) Scores

The "Existing culture"

The "preferred culture"

Measurement of organization performance

Organizational performance, an important variable in this proposed research and whose usage is very common in most organizational research is to be measured using return on equity to FDA approval and net profit taxes (NPAT) as pointed out by March & Sutton (1997).

Operational definition of all variables

The variables in this research are:

1. Strategies for change management

2. Effects of changes in organizational performance

3. Organizational performance (Judged by the level of employee productivity an level of profitability)

Reliability and validity of questionnaires

Questionnaires are very reliable since they hold individual opinions that are not biased to a very large extent. They are therefore valid since the same result can be elicited from repeated administration.

Results of pilot studies

The pilot study is to be carried out at a local institution and it will involve 20 workers at the institutions and three top management officials. This will be used to set the pace for the actual research.

Data analysis

The analysis for qualitative was done using a special statistical procedure known as ANOVA (Analysis of variance) while the mean and variance of the qualitative data will be evaluated.

Results of the data analysis

The mean and standard deviation of the variables in the quantitative study for all the four institutions are to be evaluated and then tabulated. As for the qualitative analysis results, a summary of the statistics from the ANOVA techniques for the analysis of the questions presented at the interviews were tabulated as shown below;

Results of the ANOVA analysis

Dependent variable: Organization culture

Total

Existing culture Preferred culture

Variable

Mean

SD

Mean

SD

Mean

SD

Power

Role

Task

Score

Implications

The implications of this research are that it will improve the level of organizational leadership and how to react to change management for various firms. The aim is to improve organizational performance through the use of good leadership and proper change management practices.

The major limitation to this research would be time, funds and the huge geographical disparity to be covered when travelling to the different institutions.