Rebuilt to Last: An Organizational

Rebuilt to Last: An Organizational Change Initiative

The cases analyses describe the situation that Arvin industries went through in an attempt to institute change the organization's structure through enhancing its core values and purpose. The argument given in this scenario was that organizations with clearly spelt out vision have better returns. Channeling of the intended re-orientations led the company to a merger with a company that employed the same methodology to bring in cultural change. The two organizations felt they had a better opportunity to merge and create a formidable force against its competitors. Despite the fact that Arvin was doing well prior to the merger, the need for a culture change brought about by Hunt led the organization to the merger. With the results obtained from the merger, Arvin industries stood a better chance in retaining the structure previously held.

Background of the company

An Arvin industry is a manufacturer and supplier of light vehicle automotive industry with is origin based in Columbus, Indiana. From a partnership business, the company has grown to a global status with branches and outlets in four continents Clerkin, 2009()

The company success rate is indicated by consistency to pay dividends to its share holders, customer retention, dominance in the market and low labor turnover Clerkin, 2009()

The restructuring of the company was first undertaken in 1993 aimed at elevating it to a world-class-competitor through focus on quality management. The approach to ensuring quality called for employees to be trained on waste reduction and quality production. The result of the restructuring was a reduction of; labor cost; cost of quality production; selling costs, administrative costs; general expenses and high productivity was achieved.

The restructuring of the company brought about reduction of total cost and support a steady earning in revenue, its growth and profits Clerkin, 2009()

Change in leadership of the organization which was carried out in the 1997 brought in a whole new perspective for the company. His leadership target to give the company a vision sitting reasons for the need for a vision. His leadership was guided by a Collins and Jerry Porras (1994), book "Built-to-last. In an effort to ensure that the organization and its managers shared in his notion, Hunt (the incumbent CEO) distributed a copy of the book the executive staff. They were also assigned a chapter in the book with the obligation to teach the executive staff on the how the chapter of the book was relevant to the company.

At the offsite meeting which worked as the stage opener for the second restructuring, the CEO gave his personal experiences as well as his philosophy "always safe" to the executives. From the presentation Hunt made, it was clear that the always safe philosophy he always held will not apply given his new challenging position as the CEO of Arvin industry. His advocacy was a complete disengagement with the past traditional focus and a shift to a new way.

The outcome of the three day offsite meeting was a success with members of the executive convinced they needed a vision and a new culture of running the organization. They were also convinced that the organization's core values and purposes need to be focused around a vision. The three day meeting was culminated with coming up with "Big Hairy Audacious Goals" (BHAGs) Clerkin, 2009.

These were further classified in to distinctive departments that they fell under. By the end of the three day meeting, it was agreeable that the CEO would formulate using the BHAGs a draft vision statement. This would be shared with the team for further input.

The vision was shared with managers from around the world who met twice a year for training, planning, team building and camaraderie Clerkin, 2009.

It is in this meeting that the CEO shared his idea of Built to last. The idea was embraced, and the managers adopted it willingly accepting reforming the company to one with a vision guided with the horizon they seek to reach.

The ultimate success of Hunt effort to drive Arvin industries was to build an organization that last dependent on how well the philosophy would be embraced.

The problem

The change in leadership in the organization brought ideological changes. This in effect led to its collapse of a once successful company with a market out-rich beyond its own boundaries. In business, there is a need to take risks and act boldly but all this should be taken with ideal calculation in mind Larsson & Finkelstein, 1999.

In the case of Arvin industries, the calculation was omitted when the company CEO (Hunt) considered merging on the grounds of a culture. The consideration that with similar values success that last can be embraced is clearly wrong conceived. It is needful to look in to the business case when considering a merger Lubatkin, Schulze, Mainkar, & Cotterill, 2001.

An evaluation of the benefits a company stands to gain with a merger is necessary Lane, Cannella, & Lubatkin, 1998.

Critical look of the likely cost and benefits likely to trickle down from a merger is also necessary Mark Lefcowitz, 2010.

Similarity in culture and core values of organization with disregard to the results from actions taken is not sufficient to consider a merger as it argued by Lane et al., 1998()

The two CEOs' desire to merge with a company with similarity in culture was misguided. Critiques to the merger were skeptical as to how either of the two companies would share customers while they were different. It is argued by Kusewitt, 1985()

that potential mergers are thought of in terms of how much related organizations are. In the case for Arvin and Meritor, the matter of relatedness was the mere culture adopted.

Arvin on its own hard attained a sizeable market share which, as exemplified by its track record of over the years was under no immediate potential threat. As is argued by Lane et al. (1998)

, mergers are meant to give a company a chance to survive impending competitions. This was not the case for Arvin industries. Rather, the merger was driven by bullish personal interest to bring in a culture whose additional value to the company was not necessary.

At the time of incumbent CEO -- Hunt, the company had managed to reduce its cost -- labor, quality, and distribution cost -- which meant that the culture present at that time ensured optimal operations Clerkin, 2009.

The ideology brought in by Hunt can only be termed as an attempt to leave a mark rather than ensure a continued success. The intent to build-to-last was ideal but misplaced as far the merger goes. The merger had nothing to offer to Arvin industry given that a no market threat was posed by Meritor. Arvin industry was not under threat of going down owing to its products success in the market.

Why Firms Merge

Firms merge out of a belief there exist synergies allowing them to work more efficiently together than apart Lubatkin et al., 2001.

This notion seem to be most dominant reason for considering a merger and the case for Arvin and Meritor the synergy was the need to build-to last. The argument presented against the notion of synergy by Balmer, John M.T., and Dinnie (1999)

is, against prediction and expectation of efficiency most mergers are not successful.

According to Balmer et al., 1999()

the mergers driven mostly by locking out competition are susceptible to failure owing to haphazard planning. The failure to conceptualize and plan for the desired goal will eventually lead to failure of a merger Balmer et al., 1999.

In the case of Arvin and Meritor, the merger wiped out the grounds previously earned. The reasons Balmer et al., 1999()

give for the high rate of failure in mergers are;

The immediate restructuring process that it calls for which leaves a segment of the organization with inadequate leadership to carry on process initiated

The low morale among employees owing to the restricting process

Ill implementation procedures which in essence leave out core action area

The large span of control resulting from the merger which reduces economies of scale

Deprivation of authority which can lead to squabbles among the leaders of an organization

According to Balmer et al., 1999()

, mergers need to be considered in the wholesome aspect and the effects be assessed to eliminate the possibility of failure. A wider picture of the goals and planning procedures needs to be put in place to ensure success.

The problem diagnosis

When Hunt took over leadership of the organization, he made ground for the executive and managers to incorporate and embrace the build-to-last ideology that he held this was to see to it that the organization wholesomely embraced the synergy in their daily activities. This is all that entails building a culture as given by, Senge, Roberts, Ross, Smith, & Kleiner, 1994.

They argued a culture needs to be embraced at all levels of an organization for its full impact to be felt. Upon the merger, the embrace of this culture was not clear. Whether or not prior to the merger Meritor inculcated the notion of built-to-last effectively is not clear. Then again, creating insecurity to employees (senior management) when the merger was endorsed deals a hard blow on the employees. With the merger, the senior management staffs were sent on early retirement Clerkin, 2009.

These were the same people that hunt had given a role to inculcate the notion of Built-to-last in the organization. What this implies is that those left in the organization would not easily carry on the legacy since no one is present to enforce or oversee it.

Need for understanding mergers

As was earlier mention, the merger between Arvin industries and Meritor was based on the similarity of ideology. The business case was not considered and more so part of profitability and market capture. The need to access not just the reason behind the merger but also the possible impact of the merger was missed out. The two principles were overwhelmed by the desire to build entities that would last inconsiderate of short-term and long-term result.

Assessments and tests

For the success of a merger, solid and practical planning process prior to a merger is necessary. The case presented by Arvin and Meritor is hugely different since the planning stage though undertaken independently did not seem cohesive Kusewitt, 1985.

The case for Arvin going for the Built-to-last culture seemed to yielding result and was embraced across the board. Incorporating Meritor without sufficient assessment of their embrace on the matter inadequate.

A merger where the drive is a culture requires that both sides to have a complete embrace of the same culture. The assessment of the impact that the merger would have is also necessary since adjustment will need to be made Kusewitt, 1985.

Undertaking mergers is expected to distort running of things in an organization whose impact need to be evaluated. Taking a plan on how to undertake the merger guided by the likely effects expected will give the merger an opportunity to contribute to success rather that draw backs Lubatkin et al., 2001()

Self-interest

Demsetz (1983) brings in the aspect of self-interest arguing that manager actions are driven by their own concern. This argument also known as the agency theory Demsetz (1983) is to a large extent seen in the merger of the two companies. The Two CEOs are seen to have brought in their ideology with an understanding and conviction to build an organization that will last. However, disregard to the potential impact the culture would have on the organization is not given. The CEOs seem to be blind to the potential impact on market control and profitability of their organizations. Their perspectives on the issue seem to be the merging of ideas to a culture will lead to sustainable growth.

Recommendations

Mergers seem to be a one-time opportunity towards success or failure. Lack of proper planning and management will lead to losing out on an opportunity to embrace success. The case at for Arvin and Meritor exemplifies what lack of planning and misconceived ideas on mergers can lead to. Entering a merger is a continuous process one that requires an initiation process long before the deal is made. Drawing agreements on the terms of the merger is not enough; the assessments of each company and its potential are required. At the stage of assessment, the necessary measures that will see to the success of the merger need to be rolled out. The companies need to access the changes they will have to undergo and where necessary provide measure to counter negative impacts of the merger. Thorough check on the need for reorientation of the companies resources to accommodate the merger and pending changes is necessary Balmer et al., 1999()