“A merger goes wrong”

“A merger goes wrong” Presented by: Brad Barnes James Bell Chris Brennan Steve Marcus Dinesh Warnakula

Who are we and what do we do? • Who we are: The BSM Group including: Chris Brennan, Brad Barnes, Dinesh Warnakula, James Bell and Steve Marcus. • What we do: We are a Business Solutions group focusing on Human Resource issues with specific experience in merger related HR issues. • Task: The BSM group has been called in by Tech-House Inc. to address the related Human Resource issues stemming from the merger between Tech-House Inc. and Funk-Ware Technologies.

Company Backgrounds • Tech-House Inc. – Pre Merger • Established in 1985 • relatively old for a high-tech company. • gained notoriety for telecommunications hardware development • employs 300 employees including a comprehensive sales staff • based in Ottawa, Canada • CEO Timo Maas • Funk-Ware Technologies – Pre Merger • Established in 1998 • develops cutting edge telecommunications software • employs 30 employees concentrating in R+D, engineering with small sales staff • CEO John Presley

New Tech-House Inc. • Tech-House Inc. acquired Funk-Ware Technologies in April 2003. The new Tech-House Inc. senior management group incorporates a blend of former Tech-House Inc. senior management and Funk-Ware senior management. • All employees of Funk-Ware technologies have been amalgamated into Tech-House Inc. including a new department of software R+D.

Problem Overview The two companies, merged a year ago. Ever since they have experienced a number of difficulties. We have chosen four scenarios based on employee and business issues which occurred as a result of the formation of Tech-Ware. These are: • Poor coordination of the sales teams. • Employee turnover. • Job-related stress and dissatisfaction. • Divergence of opinion and culture amongst senior management.

Poor coordination of Sales Teams When the two companies merged, some employees were laid off as a result of duplication or core competencies were recognised within a department such as the R&D team of Tech-House, and their practices were adopted within the new merged department. However in the case of the sales teams, the product offering of each merged company and the sales techniques of the sales people were so different it was decided that both teams would be kept on with the intent to knowledge share and eventually integrate policies, practices and benefits.

Sales employees movie clip

Role Perceptions Motivation Ability Situational Factors Mars model related to Sales Problem Values Personality Perceptions Emotions Attitudes Stress Individual Behaviour and Results

Ability • Includes both the natural aptitudes and learned capabilities required to successfully complete a task. • Aptitudes: natural talents that help employees learn specific tasks more quickly and perform them better. • Learned capabilities: the skills and knowledge that you have actually acquired. • In reference to ability Bill Slade does not have the technical knowledge of the software product. This will hinder his efforts in selling the software since he will not be able to explain it well to a customer during a sales meeting.

Role perceptions • Enable employees to understand specific tasks assigned to them, the relative importance of those tasks, and the preferred behaviors to accomplish those tasks. • Clarify the preferred direction of effort. • In this case, the sales executive of “Funk Ware“, Bill Slade, does not have the ability to sell the software of the company. He has not received proper sales training like Blake Carruthers has from his company “Tech-House“. • Sales training helps a sales executive understand their role in the company and how to present themselves to the customer. It also shows them how to listen and communicate properly to customers.

Solution • The new company needs to setup sales presentation sessions for the sales people in Funk-Ware in order to help them understand their selling roles for the company. • In addition, technical sessions need to be given to Funk-Ware to enable them to increase their ability in understanding and selling the software.

Increased turnover of employees • The employees in the pre-merger Funk-Ware Technologies, were very satisfied with their job. • Since the company’s main focus is on R&D of computer software, their projects were well funded. • After the merger with Tech-House, high employee turnover rate was observed. • Most of these workers were originally from Funk-Ware Technologies • What went wrong? • Let us see the video clip for some clues…

Employee Turnover clip

Turnover solution • Q. What are the main reasons for the increase in employee turnover? • - Motivation • - Job satisfaction • + Stress The merger between Tech-House and Funk-Ware Technologies resulted in violation of employee expectations. This has in turn caused a decrease in job satisfaction amongst the employees.

• Leaving the situation • Quitting, transferring • Changing the situation • Problem solving, complaining • Patiently waiting for the situation to improve • Reducing work effort/quality • Increasing absenteeism EVLN model of job dissatisfaction Exit Voice Loyalty Neglect

Turnover solution • The model that explains this situation is the EVLN model • Four ways employees can respond to job dissatisfaction are: Exit-Voice-Loyalty-Neglect • Brian responded to his dissatisfaction by using the EXIT method. Why? • Raj has to stay, however he may choose to use voice, loyalty or neglect to affect the company’s productivity or decision making

Turnover remedies • Company needs to prioritize employee relations. • Involve employees in decision making. • If possible increase funding for the R&D division.

Work related Stress • Many of the merged company’s employees have been experiencing stress as a result of the organizational changes. • To many this can merely be attributed to teething problems of the new structure. However for others, the extra work asked of them combined with a poor reporting system and mis-guided management have led to more serious symptoms as we will see with our friend Stuart…

Counselling Session Clip

Problems identified at counselling session • Stuart’s stress is impacting on his family and personal life. • Stuart may exit the organization for an attractive and fulfilling opportunity with his friends if his voice is not heard and management fail to recognize and correct the situation for Stuart and his colleagues. • Stuart’s stress is attributable to: • Increased workload • Incompetent management • Lack of recognition • Exhaustion

Stress in the work-place • Stressed employees should act as an indicator for management that there is a problem within their team. It is something that needs acting on quickly to reduce the effects of: • Employee health issues, both mental and physical • Decreased productivity (neglect) • Absenteeism (neglect) • Employee turnover (exit) • Failing group cohesion and conflict • Uncomfortable work environments

Solutions • Recruit more employees/ redistribute tasks to reduce stress and burnout • Increased management involvement and commitment • Talk to the employees • Understand their problems • Implement steps to help them achieve goals • Improved rewards system to support work/life balance; positive reinforcement, salary/holiday increase • Create 360’ feedback and support loop

Conflicting Values • Tech-House executives only concerned with financial and marketing logistics and internal benefits of merger • Employees of Tech-House and Funk-Ware possess conflicting values systems • Funk-Ware values the importance of giving back to community • Tech-House largely values bottom line only • Values incongruence increases CPWB’s, creates conflict, and decreases motivation and productivity

Conflicting Values Clip

Conflicting Values Solutions • Allow Funk-Ware software unit employees to form a Social Committee • Social Committee concerned with organizational culture • applies for funding for charitable donations, events: all employees in company expected to vote on approval of funding

Expected Implementation Results • Cultural Integration. • New social committee benefits all employees, community, company's perceived CSR. • Value systems begin to merge due to company-wide input; new job applicants aware of new values. • Overall organizational citizenship improved as value systems merge. • Productivity and Motivation increase, CPWBs and conflicts decrease.

Summary

“A merger goes wrong”