Moving towards a collaborative culture.

Merging, De-merging, and Emerging

L&M Consulting, Inc. August 28, 2011 Martin Fawbush and Latonia Womack 08-28-11

Executive Summary
Through out this presentation we will discuss the following:


The Merger by and between Company A and Company B. Culture driven by an Organizations business strategy.

Introduction
What happens when an emerging organization purchases another in an effort to maximize results and increase profit? Immediate Success? Not quite.the two organizations in question have to learn to merge their cultures, people, processes and procedures in order for success to be the final result.

Introduction Continued
According to a 2006 survey conducted by Accenture, who is a global management consulting, technology services and outsourcing company, found that less than half of executives surveyed said that their most recent deals achieved expected cost-saving synergies (45 percent). And, barely half (51 percent) said their deals achieved expected revenue synergies.

Introduction Continued
How can this be the case when you take two organizations that should be able to leverage competencies and gain the competitive advantage within its chosen market? Many experts believe that the most common reason are as follows:
   

The lack of integration experience. The inability to prioritize conflicting demands The often myopic focus on getting the deal done A lack of focus on managing the people and culture issues.

Can Company A escape the failure that others have experienced? The good news is YES, if equipped with the right tools.

Can Company A & Company B Meet in the Middle and gain a foot hold in the industry?
When exploring an organizations ability to capitalize on the leveraging its core competencies, one can not dismiss the fact that conflict can result from cultural differences, change, conflicting goals and objectives, limited resources, and the domino effect.


If ignored the result will be a lose lose situation for all parties involved. If acknowledged, addressed, and appropriately dealt with an organization may actually accomplish its stated goals.

Organizational conflict is not based on personal value systems; it is a by-product of changing dynamics within a structure. When left unattended, these dynamics cause conflict within the organization. If these forces clash with personal values, then interpersonal conflict can also occur. (Conflict in the Workplace, n.d.)

Company A Mission Statement

Leverage the Company brand, customer base, and resources to become the air filtration organization of choice. Company A will support the Hoshin Plan as set forth by the organization. In addition, the organization will go above and beyond to meet the needs of all of our clients both locally and globally. Company A will utilize its sales force in an effort to increase sales and will proactively attempt to expand our market base in the process.

Company A Mission Statement Continued

Company A will support the corporate goal of being a growth company. Many of the current and future initiatives are based on growing the business line, and therefore creating additional shareholder value. We will also support the corporate goal to make Company A a great place to work. We assure our workforce represents the diversity of our client base as well as the general population of our geographic markets. We will implement programs designed to maintain associates with a continued high level of satisfaction for our company.

Company B Mission Statement

Excellence We will strive to do it right the first time Integrity We are committed to honesty, truthfulness and honor in out interactions with employees, customers, shareholders and partners. Teamwork We will build trust and confidence among individuals to drive the organizational results and achieve our common vision. Profitability We will ensure consistent financial growth through innovation, efficiency and superior service.

Open Discussion
What are the differences that you see the two mission statements? How do you think this has affected the organizational culture since the merger? Can you see room for a clash of culture between the two organizations?

Major Causes Conflict with an Organization

Opposing interests (or what we think are opposing interests) are at the core of most conflicts. In a modern complex society, we confront these situations many times a day. The modern organization adds a whole new group of potential causes of conflict that are already present. (Concordia University, n.d.)

Major Causes Conflict with an Organization Continued



Competition over scarce resources, time. Ambiguity over responsibility and authority. Differences in perceptions, work styles, attitudes, communication problems, individual differences. Increasing interdependence as boundaries between individuals and groups become increasingly blurred.

Major Causes Conflict with an Organization Continued



Differentiation: Division of labor which is the basis for any organization causes people and groups to see situations differently and have different goals. Equity vs. equality: Continuous tension exists between equity (the belief that we should be rewarded relative to our relative contributions) and equality (belief that everyone should receive the same or similar outcomes). Reward systems: We work in situations with complex and often contradictory incentive systems.

Discussion

Any thoughts on the underlying reason for conflict in this situation?

Respective reasons for cultural differences..



Differences in perceptions, work styles, attitudes, communication problems, individual differences. Increasing interdependence as boundaries between individuals and groups become increasingly blurred. Differentiation: Division of labor which is the basis for any organization causes people and groups to see situations differently and have different goals. Equity vs. equality: Continuous tension exists between equity (the belief that we should be rewarded relative to our relative contributions) and equality (belief that everyone should receive the same or similar outcomes).

Culture and its relation to strategy

An organizations approach to conflict resolution can be closely linked to its culture. Research has indicated that organizations that are hierarchical and authoritative, are less likely to embrace conflict management systems (CMS). While organizations that are nonhierarchical and equalitarian are more likely to embrace a CMS.

The Cost of Conflict

Organizational conflict can result in the following: Wasted Time
Research shows that up to 42% of employees time is spent engaging in or attempting to resolve conflict. Lets look at this from this perspective: You have an employee with an annual income of $50,000, who is expected to produce eight hours of work per day. Excluding weekends, holidays, vacations, etc., an employee will work approximately 200 days per year. The same employee, with annual salary and fringe benefits will experience total compensation of $46.87 per hour. How much of your time is wasted attempting to resolve internal/external conflict?

The Cost of Conflict Continued

If the following information presented is true this would mean that an employee who is paid $50,000 to perform a particular function for eight hours a day, is truly costing an organization $21,000 per year because they are indirectly or directly engaged in conflict. In our situation, you have an organization that has approximately 200 employees + an additional 6000. The loss could potentially be great to an organization. Note - Each individual salary is different. You may have a worker-bee who has an annual salary of $26,000, or you may have an executive who has an annual salary of $150,000. This fact could dramatically effect the quantitative assessment of the loss experienced, as a result, conflict resolution must be embraced from the top to the bottom, and it must filter through out the entire organization. Conflict doesnt discriminate It can effect everyone!

The Cost of Conflict Continued

Bad Decisions
Employees normally get the information that they need from other employees or coworkers What happens if there is unresolved conflict between a decision-maker and an information source? Can the decision maker trust the co-worker to provide accurate information? What happens of there is unresolved conflict between decision-makers? Are decisions being made based on what is right for the organization? Organizations are run by humans, and as a result human feelings can not be omitted when discussing reasons for conflict. Many individuals have the innate need to:  Protect their self esteem  Preserve their power  Maintain their social status within the work group Can the need to be proven right override an individuals objectivity? Can this same need lead to lost profit for an organization? The answer is YES

The Cost of Conflict Continued

Lost Employees
Organizations invest in employees skills by paying a premium salary and by training them. Exit interviews, which explore departing employees underlying reason for quitting reveal that chronic unresolved conflict is a decisive factor in at least 50% of all voluntary departures. In addition, conflict accounts for up to 90% of the cause of involuntary terminations. In our case is it possible for BAMS to replace employees that have 10, 15, 20 years merchant services experience? What cost is associated with replacing such employees? Can effective Conflict Resolution salvage the employee employer relationship?

The Cost of Conflict Continued

Unnecessary Restructuring
Managers sometimes restructure the design and flow of tasks to reduce interaction between conflicting employees. Usually, the original task design was created because that was the logical way to get things done, assuming employees could work together cooperatively. Work that is restructured to avoid conflict is usually less efficient. Questions to ponder. 1. 2. 3. 4. 5. Will the restructure result in a value add to the organization? Are individuals still working within their area of expertise? Have we really addressed the underlying issue? (Conflict is merely, the end
result of a larger issue, has the underlying issue been unmasked and appropriately dealt with?)

Are there quantifiable results, that prove the restructure was a success? If not, why continue to waste valuable time and resources attempting to reorganize, if the main issue has not been identified and addressed?

The Cost of Conflict Continued

Sabotage, Theft, and Damage
Accidental or Inadvertent Errors Convert sabotage of work processes Blatant destruction of company records/files.

Lowered Job Motivation

Dealing with a person that is difficult, and allowing ones own perception to be eroded by the unrelieved stress that accompanies such a relationship.

Lost Work Time

Absenteeism associated with job stress. (Mental Health Days ) Water Cooler time. (Expressing personal feelings to others through out the work day) Defusing breaks (smoke breaks, walks around the building, sit and spend moments, etc.)

Health Costs
EAP costs. Rate of claims vs. company premium paid.

The Cost of Conflict Continued

Lets pull them all together and assess the possible loss an organization may experience per individual employee if conflict is not appropriately resolved.

Cost Factors 1. Wasted Time 2. 3. 4. 5. 6. Reduced Decision Quality Loss of Skilled Employees Restructuring Sabotage/Theft/Damage Lowered Job Motivation

Estimated Cost $168,732 $50,000 $56,250 $52,500 $10,000 $26,250 $26,250 $1,050 $391,032

7. Lost of Work Time 8. Health Costs Total Costs

Over a ten year period potential loss to an organization is $3,910,320. Many of the above cost factors are not easily quantifiable. Dana allowed for this in his calculations.

Moving Towards a Collaborative Culture

If the observations are correct, an organization can only benefit by embracing conflict resolution methodologies, and integrating the concept of ADR into its long term business strategy. Lets explore apparent differences in organizational culture.

Will include a graph based on Company A

Will include a graph based on Company B

Moving Towards a Collaborative Culture Continued

Each mergers own unique dynamic must be understood in order to devise the best strategy and structure for cultural integration. Deep and serious conflicts, which respect to people and culture, proliferate when acquires introduce the acquired personnel to their visible ways of doing things. Experience has shown that the integration agenda with respect to people and culture requires two distinct area of focus the address the invisible drivers of behavior. (Booz, n.d.)

Moving Towards a Collaborative Culture Continued

Acquired employees can quickly pick up and learn from what is visible to them, i.e.., what they see and experience from day one. What they dont get the chance to understand is the Invisible the beliefs and values that have been built into the acquiring organization over time that causes people to do what they do. Without understanding what makes each other tick and that prevail (invisible), both organizations quickly become frustrated with the different ways of doing things. Furthermore, the instinctive need to make themselves right whenever they dont understand this new way of doing things is what inevitably hijacks day-to-day activities and interactions. (Booz, n.d.)

Moving Towards a Collaborative Culture Continued

Drivers of Human Behavior
Visible
Behaviors and Actions

What We Do
1. How are decisions made 2. How is Time Used 3. How we interact with each other

Invisible

Levels of Engagement

What we Know to be Important

How We Feel
State of Mind 1. Shock, fear anger, and uncertainty stress 2. Ego conflicts, jockeying, and power struggles. 3. Hope, optimism, inspiration, and integrity.

How We Think
Mindsets 1. Beliefs and values 2. Motivations and Intentions 3. Prioritizes and assumptions

Moving Towards a Collaborative Culture Continued

Five Stages for Transforming the Mindsets that Underpin Each Culture
Stage
I

Mindset
I didnt realize anyone did it different from us = My way is the only way Having acquired you I think our way is better than yours =My way is the best way I need to start understanding what your way is and why you are the way you are =You have a good way too

Descriptor
Ignorance y Isolation

Enabled by

II

Arrogance

y Exposure y Perceived threat y Defensive first impressions Objective feedback on two cultures Creating awareness Grieving processes New team building opportunities to work together y Culture management education y Understanding underpinning behaviors, systems and symbols y Managing mixed team, making decisions together y y y y y Definitions of strategic imperatives y Definition of desired culture y Activities to build identification with new entity y Entry of new neutral people, and exiting those who remain stuck in the past.

III

Respect

IV

What can we learn from each way of doing things and how would each way help the value proposition of this business =Let me learn your way Lets define what we want and create our way together

Enquiry

uilding

Implementation of Conflict Management Systems

Phase One: The organization creates the essential foundation on which a system can be built. It is both exploratory and creative in that it explores the state of the organization, locates an internal champion, convenes a design team, obtains leadership support, and creates a plan. Phase Two: The organization gathers information with which to build. It researches and analyzes workplace systems in other organizations as well as its own and then explores the data with employees and management to get beyond the myths regarding such systems. Phase Three: The organization builds on the two prior phases and develops a preliminary structure. This is the meat of the design process. This preliminary plan is tested and refined through employee focus groups and presented to the organizations leadership for approval.

Implementation of Conflict Management Systems

Phase Four: The organization finishes the system design, deciding critical issues such as the inclusion of mandatory arbitration. Changes requested by senior leadership are incorporated into the design and summary plan description is completed. Phase Five: The organization launches and markets the system, clarifies the roles of the various participants, and trains supervisors to support the system. Phase Six: The organization gives the system long life. It enables the system to become embedded in the organization by instilling incentives, maintaining credibility, reinforcing activity, analyzing results, and readjusting the system over time to ensure long-term success. (Lipsky, 2003)

Communication
Open and Honest Communication is key, when attempting to merge two cultures, or implement conflict management systems. The directive must penetrate an organization from the top down.

May assist in development Of the strategic vision. Must Ensure Middle Managers Are on board, directive must Be penetrated through the Remainder of the organization.

Responsible for creating The strategic vision of An organization.

Executive A

Senior Vice President A

Senior Vice President B

Senior Vice President C

Middle Manager A
Must Ensure that The operational Strategy is in line with the vision.

Middle Manager B

Middle Manager C

Middle Manager D

Worker A

Worker B

Carries operational strategy.