Organizational Behavior: Project Report       PGDM-Exec 2012- Term I                    ORGANIZATIONAL BEHAVIOR ISSUE     ...
Organizational Behavior: Project Report                              PGDM-Exec 2012- Term IEXECUTIVE SUMMARYEffect of merg...
Organizational Behavior: Project Report                                                                                   ...
Organizational Behavior: Project Report                              PGDM-Exec 2012- Term II NTRODUCTIONMergers and acquis...
Organizational Behavior: Project Report                                PGDM-Exec 2012- Term ICASE I: D ELL - P EROT S YSTE...
Organizational Behavior: Project Report                                PGDM-Exec 2012- Term ID EAL    ABOUT GROWTHAside fr...
Organizational Behavior: Project Report                                   PGDM-Exec 2012- Term I*Source: www.dell.comDell ...
Organizational Behavior: Project Report                               PGDM-Exec 2012- Term ID ELL ‘ S   CHALLENGEScale Per...
Organizational Behavior: Project Report                              PGDM-Exec 2012- Term IC ULTURAL I NTEGRATION‗REACH‘  ...
Organizational Behavior: Project Report                                       PGDM-Exec 2012- Term Ibusiness. WISE activit...
Organizational Behavior: Project Report                               PGDM-Exec 2012- Term I  desks                       ...
Organizational Behavior: Project Report                               PGDM-Exec 2012- Term ICASE II: P ARKER H ANNIFIN C O...
Organizational Behavior: Project Report                                  PGDM-Exec 2012- Term IS EVEN P ITFALLS          O...
Organizational Behavior: Project Report                              PGDM-Exec 2012- Term ITHE STRATEGY: CONCENTRATIONDuri...
Organizational Behavior: Project Report                                        PGDM-Exec 2012- Term IAn Online Personal Pe...
Organizational Behavior: Project Report                               PGDM-Exec 2012- Term Irelationship-oriented while Am...
Organizational Behavior: Project Report                                              PGDM-Exec 2012- Term I   P I T F AL L...
Organizational Behavior: Project Report                                            PGDM-Exec 2012- Term IApparently from f...
Organizational Behavior: Project Report                                PGDM-Exec 2012- Term IR ECOMMENDATIONSThese pitfall...
Organizational Behavior: Project Report                       PGDM-Exec 2012- Term IR EFERENCEShttp://content.dell.com/us/...
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OB - M&A

  1. 1. Organizational Behavior: Project Report PGDM-Exec 2012- Term I ORGANIZATIONAL BEHAVIOR ISSUE MERGER & ACQUISITION Guided by: Dr. Bindu Gupta Submitted by: Abhishek Rai 11EX-002 Bishnu Kumar 11EX-013 Hemant Katyal 11EX-021 Mitesh Vartak 11EX-034 Ravi Bhandari 11EX-045 Sarika Ahuja 11EX-048
  2. 2. Organizational Behavior: Project Report PGDM-Exec 2012- Term IEXECUTIVE SUMMARYEffect of merger and acquisitions is felt on bottom line of the firm first which transcends intosuccess or failure of firm. Employees of both the organizations are put through changes whichthey may or may not be comfortable with. In this report we are comparing two suchacquisitions, one by Dell and another by Parker Hannifin, for the approach they have taken tomanage the employees during and after the change. We have tried to talk to employees directlyto get their inputs on the process and difficulties faced. We have noted down differentchallenges faced by senior management and various methods they have chosen to affectchange.In the end we have tried to assess effectiveness of merger and acquisition through financialanalysis against main objective of respective firm for the decision.
  3. 3. Organizational Behavior: Project Report PGDM-Exec 2012- Term ITABLE OF CONTENTSINTRODUCTION .............................................................................................................................................................4CASE I: DELL - PEROT SYSTEMS PURCHASE .....................................................................................................................5 DEAL ABOUT GROWTH ............................................................................................................................................................ 6 STILL A SMALL SERVICES FISH..................................................................................................................................................... 6 DELL’S CHALLENGE ................................................................................................................................................................. 8 CULTURAL INTEGRATION.......................................................................................................................................................... 9 ‘REACH’ program ........................................................................................................................................................... 9 One Global Certification Program ................................................................................................................................. 9 The Compensation & Benefits Policy ............................................................................................................................. 9 Operational Integration ................................................................................................................................................ 9 Retention Plans ............................................................................................................................................................. 9 Financial Integration ................................................................................................................................................... 10 Enhanced Medical Benefits ......................................................................................................................................... 10 Other Benefits program............................................................................................................................................... 10CASE II: PARKER HANNIFIN COOPERATION- ACQUISITION OF LEGRIS .......................................................................... 12 SEVEN PITFALLS ON THE PATH TO MERGER SUCCESS ................................................................................................................... 13 Pitfall # 1: Preoccupation ........................................................................................................................................... 13 The Strategy: Acceleration.......................................................................................................................................................... 13 Pitfall #2: Conflicts in Operating Pattern ..................................................................................................................... 13 The Strategy: Concentration ....................................................................................................................................................... 14 Pitfall # 3: Change in Business Philosophy................................................................................................................... 14 The Strategy: Conversion & Adaptation ..................................................................................................................................... 14 Pitfall # 4: Organizational Proliferation ....................................................................................................................... 15 The Strategy: Accelerate, Concentrate and Adapt ..................................................................................................................... 15 Pitfall # 5: Infrequent and irrelevant communication ................................................................................................. 15 The Strategy: Accelerate, Concentrate and Adapt ..................................................................................................................... 16 Pitfall # 6: Triangulation .............................................................................................................................................. 16 The Strategy: Concentrate and Adapt ........................................................................................................................................ 16 Pitfall # 7: The Guiding Light ....................................................................................................................................... 17 The Strategy: Adapt .................................................................................................................................................................... 17 CONCLUSION ....................................................................................................................................................................... 17 Financial results of Dell ............................................................................................................................................... 17 Financial results of Parker Hannifin............................................................................................................................. 18RECOMMENDATIONS .................................................................................................................................................. 19REFERENCES ................................................................................................................................................................ 20
  4. 4. Organizational Behavior: Project Report PGDM-Exec 2012- Term II NTRODUCTIONMergers and acquisitions are part of the capitalism history. The 1990 decade was marked by therising of these processes, due to a higher competition level. Accepting change is not an easytask, yet it is hard to imagine any organization making significant changes. It is almostimpossible to envision an organization survival without adapting to changes. As mergers andacquisitions take place, massive amounts of uncertainties take place. During the changes, itbecomes the responsibility of the managers to support and encourage employees. It is essentialto address the impact mergers and acquisitions have on all employees within an organization,what to investigate, ways to motivate change, and how to respond to issues.During the merger and acquisition process, the organization will need to address organizationalbehavior issues that ultimately affect the organization and its continued success. The field oforganizational behavior involves why we do things and how it affects others, the behaviors ofgroups and cultures, how people influence each another, analyzing values and attitudes, andpeople‘s behavior with the influence of different policies.The operating definition for the study of organizational behavior involves the importance of themanager‘s role, contingency conditions being accounted for, areas of interest such as diversity,empowerment etc.We will be discussing 2 cases in this project to analyze the change in employee behavior due toMerger & Acquisitions.
  5. 5. Organizational Behavior: Project Report PGDM-Exec 2012- Term ICASE I: D ELL - P EROT S YSTEMS P URCHASEDell‘s $3.9 billion acquisition of Perot Systems gives the company a better foothold in the ITservices market, but it‘s really just the beginning. Dell‘s purchase of Perot Systems is a downpayment on the company‘s big plans to transform its business. Dell is paying $30 per share forPerot Systems, which is heavily focused in the only two industries growing these days—healthcare and government. Perot and Dell had been long-time partners. Dell had been talkingabout diversifying away from its core PC and server businesses for months, but the Perotpurchase is the first move that illustrates the company is serious about its transformation.Dell‘s Vision is to leverage Perot‘s services capability across the company‘s customer base.Indeed, Dell is certainly focused on making sure the Perot integration goes smoothly. Perot CEOPeter Altabef will head a services unit comprised of joint Perot-Dell services units. In addition,the two companies—both from Texas but about 200 miles apart—hope proximity can make theintegration smooth (even though about a third of Perot‘s employees are in India). Perot and Dellhave partnerships for financing and targeting verticals like health care (48 percent of Perot‘sannual revenue) and government (25 percent of sales).Officials said that Perot is one of the largest IT services providers to hospitals and physicians.President Obama has made healthcare IT a big focus to slow the rate of increasing costs.However, there is an increased degree of difficulty for Dell. Perot has 23,000 employees. ThePrincipals believe that there is a good cultural fit between the two companies. That cultural fitalong with excellent retention packages should keep Perot talent on board.
  6. 6. Organizational Behavior: Project Report PGDM-Exec 2012- Term ID EAL ABOUT GROWTHAside from utilizing Perot‘s foothold in healthcare and government agencies, the two companiescan grow faster and build ―next-generation capabilities.‖Dell also added that Perot can enhance the company‘s ability to bring next-generation datacenter and virtualization capabilities to customers. Think of the deal as one big cross-sellingproposition. Dell can leverage Perot‘s healthcare and government customers to sell morehardware. Perot, which only has 27 percent of its revenue tied to commercial accounts, getsDell‘s enterprise heft.In a graphic, Dell‘s big plan for Perot looks like this:*Source: www.dell.comS TILL A SMALL SERVICE S FISHWhile Dell‘s plan for Perot Systems looks good on paper it will remain a small services playerrelative to larger rivals. As per Dell it can bolt together Perot‘s services business with its ownand create a global service company with its new set of capabilities. However, today the Dell-Perot services business is an $8 billion unit.
  7. 7. Organizational Behavior: Project Report PGDM-Exec 2012- Term I*Source: www.dell.comDell will have to deliver new capabilities if it‘s to enter the big leagues in services. For instance,IBM‘s global technology services unit had $39.3 billion in revenue in 2008 with its globalbusiness services division delivering sales of $19.6 billion. As a result, IBM doesn‘t have to relyon its hardware business as much as Dell does.It‘s a similar story for HP, which bulked up its services via the purchase of EDS. For the ninemonths ended July 31, HP‘s services revenue was $25.7 billion. Of that sum, infrastructuretechnology outsourcing and technology services represents the bulk of the revenue pie.
  8. 8. Organizational Behavior: Project Report PGDM-Exec 2012- Term ID ELL ‘ S CHALLENGEScale Perot‘s services unit with ―disruptively great value‖ so it can play catch-up to the bigservices guns.*Source: www.dell.comPerot is known for its rigid, by the book culture and reliance on market - Health Care, where thePC manufacturer has little experience. Dell on the other hand was one of the world‘s largest PCVendor and Hardware Provider with excellent international & commercial exposure. Since theculture and vertical focus of the 2 companies is so different, the key would be SmoothIntegration.
  9. 9. Organizational Behavior: Project Report PGDM-Exec 2012- Term IC ULTURAL I NTEGRATION‗REACH‘ P R O GR A MOne Initiative by Dell Services was the launch of ‗REACH‘ Program. Responsible employees fromDell as well as Perot who had a good rapport among their peers were brought together to formREACH teams. The objective of these teams was to engage with different work groups andidentify barriers, to seamless integration at both ends. Employees were encouraged to voicetheir concerns / issues to REACH champions without fear of being penalized for the same.Reach was also a partner to the Global Engagement Team at Dell Services Delivery. Feedbackfrom REACH helped the Global Engagement to revisit the Global Organization‘s Communicationstrategies and rebuild them.O NE G L O BA L C E R T I FI C A T I O N P R O G R AMThe ISO 9001:2008 standard is a common framework that supports Dell‘s shared purpose, tiesdirectly with its customers and suppliers, making them a part of the company‘s commitment toquality and provides Standardized Solutions.This was a step taken to standardize how quality was measured across the global organization.The Perot Service teams were integrated with the Global ISO certification.This instilled a sense of purpose among Perot employees and made them feel a part of a brandwith a much bigger purpose. The Vision gave them a direction and reduced uncertainties andconfusion about their Job goals.T HE C OM P E N SAT I ON & B E N E FI T S P O LI CYPerformance based Incentives & Bonus Plans were launched for Sales and Non Sales employees.As per the Policy employees had the opportunity to earn handsome rewards throughout theyear based on their achievements. This move helped inculcate a Performance and ResultOriented Culture among employees. HR was entrusted with the task of ensuring that eachemployee not only understood the Policy but was also inspired by it.Operational IntegrationProcess and Operations integration was required to achieve Long Term Goals of the NewCompany. To make sure that Perot employees became a part of the Global team, Dellintroduced a Global Career Structure. The new Career Structure allowed the organization tobetter evaluate compensation and benefits and identify similar levels of work, and provide teammembers with flexibility and growth in their career development.R E T E NT I ON P LA NSDell believes in supporting employees with longer tenure and having a strong retirement planfor them. In line with that thinking they announced the change in gratuity plan. The maximumpay out limit has been removed and now Dell would pay gratuity for as long as the employee isin service of the company.Dell rolled out Women In Search of Excellence (WISE) as an Employee Resource Groups atPerot. The mission of the WISE organization is to build a diverse and winning workforce. WISEhas a strong collection of programs, events and communications that seek to enhance theprofessional competencies of members and provide opportunities for networking across the
  10. 10. Organizational Behavior: Project Report PGDM-Exec 2012- Term Ibusiness. WISE activities focus on our community within and beyond Dell and developmentopportunities for its members.A key challenge for Dell was to prevent its operating expenses from ballooning as revenuesrecovered in 2010. The additional burden associated with integrating a large services assetwould make this difficult.Financial IntegrationIn order to control its operating expenses, Dell Services brought Structured and Cost effectiveHR Policies & Guidelines into practice.Once these policies were rolled out, there was an Organization wide drive to educate employeesand bring them up to date with the new systems & procedures.This Top to Bottom Communication method reduced Confusion and helped orienting theemployees towards more important issues.There were strict mandates for Code of Conduct, Use of Company Resources, Domestic /International Travel, Expense Report Submission etc.E N HA N CE D M E D I C A L B E NE FI T SThe employees were offered better Insurance Plans, Wider Coverage, Reduced premium burden,improved Service by new Third Party Administrator. The management supported the HR andfinance teams in implementing these changes. The teams were able to further reduce premiumscharged, despite the fact that the claims to premium ratio for the last year were as high as150%.O T HE R B E NE FI T S P R OG R A MOther Benefits program that underwent a change in the last few months Benefit Remarks Medical insurance policy Employer funded policy for Employee, Spouse and Children with higher insurance coverage. Various options for parent coverage Life insurance policy Redefined as 2 times annual base salary or a minimum of 5 lakhs in case of an unfortunate event Accident insurance policy Redefined as 2 times annual base salary or a minimum of 5 lakhs in case of an unfortunate event Holidays Revised the policy to prioritize the holiday list as per most preferred per location Employee Assistance Program Introduced counseling services to cater to employees who need support at their work or personal front Long Service Awards Roll out of the new 5 year Service completion awards Medical insurance onsite help Help desks to cater to employee queries and claims
  11. 11. Organizational Behavior: Project Report PGDM-Exec 2012- Term I desks reimbursement easier for Dell‘s medical insurance program Disability insurance Stronger disability insurance to cater to the needy
  12. 12. Organizational Behavior: Project Report PGDM-Exec 2012- Term ICASE II: P ARKER H ANNIFIN C ORPORATION - M ERGER W ITHL EGRIS I NDIAParker Hannifin Cooperation acquired the pneumatics and actuator company – Legris SA in2008. Legris is headquartered in Rennes, France, it manufactures fluid circuit components andsystems for pneumatic, hydraulic, and chemical processing applications. Its 2007 Legris SA waspresent in 35 countries, had 10 production plants, employed 2000 employees and had revenuesworth €233m.The purpose of the acquisition was to diversify Parker‘s operations internationally, extend andcomplement its existing technologies, and take advantage of opportunities in less cyclical end-markets, such as life sciences. The acquired company brought with it new technologies andmarket opportunities. Legris enhanced Parker‘s worldwide presence in the pneumatic andhydraulic fluid circuit systems market while significantly bolstering Parker‘s European presence.Legris‘ strong brand recognition and innovative products and systems were widely availablethrough a well-established distribution network, and complemented Parker‘s ability to providecustomers with the industry‘s broadest package of fluid circuit technology.Parker bought Legris from Groupe Legris Industries, which planned to focus on its industrialequipment and turnkey plant engineering activities. These include: its Savoye warehousing anddistribution logistics operation; Keyria, which makes building materials; and Clextral, which isinvolved in food processing and specialty chemicals. Together, these activities represent abouttwo-thirds of Legris group sales.Though Legris SA was fully acquired worldwide, In India there was a merger with Parkerretaining a 74% share in the company. Up to the point in the transaction where the papers weresigned, the merger business was predominantly financial - valuing the assets, determining theprice and due diligence. Before the ink was dry, however, this financially driven deal became ahuman transaction filled with emotion, trauma, and survival behavior.Human capital challenges, such as cultural fit and leadership selection, were cited as theprimary difficulties encountered. The complication in the Merger was amplified because of cross-cultural situations, since the companies involved were from two different countries.In the following section, we discuss some downsides of the Merger and how the organizationcoped with them. We visited Legris India Private Limited and talked to a few Line Managers andHR Executives. The findings include problems resulting from the merger, the strategy adoptedby the organization to overcome these problems and the appropriate strategy from themanager‘s point of view.
  13. 13. Organizational Behavior: Project Report PGDM-Exec 2012- Term IS EVEN P ITFALLS ON THE P ATH TO M ERGER S UCCESSThe seven pitfalls represent the critical and vulnerable areas of the Merger. These areas mustnot only be valued for their negative impact on the critical success factors that drove the "deal",they are the very agenda for the organizations action in the critical first 90 days of the newentity.In the case of international mergers and acquisitions, such as Parker & Legris the complexity isoften compounded by the difference in national cultures. People living and working in differentcountries react to the same situations or events in very different manners.P I T F AL L # 1: P R E O CC U P A T I O NIn Legris India, individual preoccupation with "How is this all going to impact me?" weakenedcommitment to the job at hand. Employees were concerned and insecure about their and theorganization‘s future. They were concerned about the change in management styles andreporting managers. Change in Systems and procedures of conducting business activities. This,in turn, translated into people looking for work in other companies. The firm in the midst oftransition lost some of its own talent - strengthening the competition.What was less apparent is the pervasive loss of productivity of those who remained. In Indiawhere people identify largely with groups, people started to look for support within their group.When group members and immediate managers were not able to provide answers because theywere not part of the negotiation process, they became uncooperative and unproductive. Lineemployees and managers at all levels lost a minimum of 15% of personal effectiveness as aresult of rumors, misinformation, and worry. Some teams broke down and some became lesseffective in the first few days after the Merger.THE STRATEGY: ACCELERATIONThe strategy adopted at Legris India was to Speed the integration to reduce the uncertainty andanxiety. Delayed decisions to "ease the pain" only magnify and sustain the pain and prevent thecompany, the individuals and /or the groups from getting on with the work and their lives.Smooth and effective integration was thus based on acceleration; concentration and creating acritical mass for operational change (adaptation).Employees were trained on new Policies, Applications & Softwares, in order to productivelyengage them. Off Site Meetings were organized and employees from the same departments inthe two organizations were called. These initiatives reassured Legris employees and infused asense of belonging among Legris in them.P I T F AL L #2: C ON FL I CT S IN O P E R A T I N G P AT T E R NTolerance for uncertainty varies widely around the world and this variation can play havoc ininternational Mergers like the one we are considering. For example, American employees tendto require more structure and definition of their role and responsibilities than do Frenchemployees. When Parker, an American Company acquired Legris a French company, Parkermanagers often expected high level of Role Clarity & Delineation, Frequent reporting & Followup that was not forthcoming, because the Legris employees deemed it unnecessary. Legrispersonnel on the other hand were more varied and autonomous in their approach. Legrisemployees when instructed to institute and follow systems and be subject to controls andchecks often view this as a question on heir capability. There was a clash of opinions andexpectations and value was eroded.
  14. 14. Organizational Behavior: Project Report PGDM-Exec 2012- Term ITHE STRATEGY: CONCENTRATIONDuring the first 90 days, focus and get everyone to focus on the 20% of the goals that yield80% of the economic value. Dealing with uncertainty explicitly is critical to the success of aMerger. Engage employees in development and change initiatives and let them not lose sight ofbusiness goals.It would do well to the senior management to appreciate that, the economic value of Legris maynot be where its American partners expect it. For example, an American company acquiringLegris may find that the value of its new acquisition lies more in the Market Share and theBrand Legris has developed for itself rather than in the proficiency of its operations.Guidelines and Processes were introduced in critical functions. Purchase of Non Stock items &hardware was standardized. Advanced Software and effective Applications & Tools werelaunched and employees were up graded on how to use them. A Business Continuity Plan (BCP)and Disaster Recovery Plan (DRP) were made mandatory.A Back up Plan was made for each position, to protect the business from any exigency. 4 levelsof Audits were conducted to upgrade processes in all departments up to Parker Standards.These were: Desktop Audits, SOX Audits, FACE Review and Statutory AuditP I T F AL L # 3: C HA N GE IN B U S I NE S S P HI LO SOP HYThe philosophy under which Legris operated was attaining High Sales Volume. In order toachieve this, the company extended very liberal credit terms to its Customers and Distributors.As a result the Distribution of Legris products was very strong, the company captured theIndian Market Share and grew very fast.The Business Philosophy of Parker Hannifin on the other hand was more prudent. Along withincreasing Sales volume, the Company also aimed at high liquidity or Cash Flow. Thereforeapart from achieving high Sales figures, it was also important for Sales personnel to recoverpayments from Distributors / Customers.Also, the Cash locked in Inventory had to be kept under check and parameters were set up tomeasure the same. Various Checks and Controls were integrated with the Software, Reporting &Performance Management System. This necessitated frequent Inspection and Audits on part ofthe managers and Reporting by the employees.These were two entirely different approaches of doing business. The expectations from theemployees were also very different. Employee Goals had to be mapped to the neworganizational goals and it had to make sense to them. Managing this Change became central tomaking the merger work.THE STRATEGY: CONVERSION & ADAPTATIONThe Organizational Structure and Compensation and Benefits Structure were revamped in orderto reflect the change in Business Strategy.Parameters to measure Payments Realized / Payments Outstanding & Inventory Level wereinstituted to appraise employee performance. These were DSO (Daily Sales Outstanding) & DSI(Daily Sales Inventory). The impact of these constraints on business performance wascommunicated and demonstrated by Senior Management.
  15. 15. Organizational Behavior: Project Report PGDM-Exec 2012- Term IAn Online Personal Performance Plan was introduced. The employees were coached on how toupdate their goals in consultation with their manager, and the assessment was done everyquarter. These changes made the Performance Review process more objective and transparent.A Sales Incentive Scheme consistent with the new performance parameters was rolled out andconveyed to the employees.For Non Sales employees a half yearly Bonus Scheme called RONA (Return on Net Assets) wasintroduced. The bonus paid out under this scheme was based on the Profits earned as a functionof the assets of the division.The employees had to be convinced of the Importance and benefits of these numerous changes.It was important to effectively communicate to the employees how these various changes wouldhelp them develop and progress with the organization.Increments were paid out twice in the year following the Merger. This gave rise to an optimisticand affirmative feeling in the minds of the employees.P I T F AL L # 4: O R GA NI ZA T I ON A L P R OLI F E R AT I ONAfter the merger with Parker was formalized, few committees and integration teams wereformed. The objective of these teams was to handle the transformation and integrationinitiatives. However these transition teams those were designed to be all-inclusive and torepresent a sign of "new partnership‖, started weighing heavily on an organization seeking tokeep its eye on its customers and the market. More effort was being placed on temporary rulesand reporting relationships than the work itself.THE STRATEGY: ACCELERATE, CONCENTRATE AND ADAPTForm small, agile, quick-acting teams, including people from both companies of the Merger,with a clear mission, empowered integration team managers and with direct access to seniormanagement and to their support. Transitions do not need to be demonstrations of democracyin action.Clear leadership and strong support is essential to these teams; without it, they often breakdown into sub-teams (one sub-team for each company in the Merger). This is particularlycommon in the international mergers, since language and cultural differences create significantcommunication issues.In the case of such international Mergers Organizational change should be brought about in away such that it is harmony with the Organizational Culture. For example, since in Legris Indiathe sense of hierarchy is strong, therefore change was brought about from the top andemployees at all levels were instructed to expect new directions from their managers. Thishelped in making the merger successful.P I T F AL L # 5: I N FR E QU E NT A N D I R R E LE V ANT C OM M U NI CAT I O NFear and a lack of all the answers deterred top management from providing the information thatcustomers, shareholders and employees need to redirect their action to the value-added of thedeal. Rumor fills mystery and vacuums. When there is communication, it often lacks informationand substance that explains and supports stakeholders interests.Communication can break down even though the working language of the two parties in theinternational merger is the same. Because Legris employees are inclined to be more
  16. 16. Organizational Behavior: Project Report PGDM-Exec 2012- Term Irelationship-oriented while Americans tend to focus on tasks, the parties held conflictingpositions on issues like:  Role Clarity & Delineation  Management Style & Frequency of Reporting  Financial Controls & Audits  Policies and Guidelines  Credit Terms / Payment TermsLegris employees perceived Parker managers as very uncompromising and insistent in gettingtheir systems and procedures accepted. They were seen as bureaucratic and regulatory in theirmanagement style. Parker managers in turn believed that Legris employees were veryunsystematic and unprofessional in their approach. Tension decreased when the teams realizedthat their goals were the same but their ways of achieving them were quite different.THE STRATEGY: ACCELERATE, CONCENTRATE AND ADAPTFrequent communication, through multiple avenues - print, voice mail, e-mail, meetings, andvideo should be adopted. In times of stress, the "noise" of survival and uncertainty drowns outthe message. Over-communicate and remember that responsibility for a message beingreceived lies with the sender as well as with the receiver. A recent PricewaterhouseCooperssurvey of 124 mergers indicates that those firms that implemented effective communicationsstrategies showed better results in customer focus, employee commitment and productivitythan those firms that had a delayed communication strategy.P I T F AL L # 6: T R I A N GU L A T I O NWithout clear lines of authority and clear understanding of where they fit in, employees andmanagers are caught in a web of conflicting objectives and old loyalties. This type oforganizational and personal strangulation robs the new entity of the very energy it needs toovercome the losses in productivity.The tolerance for "fuzzy", temporary organizational charts and decision-making processesdepends on the companies involved in the merger. In Legris, both organizational chart andchain of command was traditionally, clearly defined. However in Parker, employees are quiteaccustomed to overlapping organizational structures and Matrix roles. Since Legris employeescould not understand them, paralysis resulted. A Legris employee reporting to two managers, asin a matrix organization will likely be quickly overwhelmed. He / she may interpret the situationas having to meet two complete sets of expectations and perform two separate jobs. In theIndian culture, asking managers to discuss their conflicting requests would be viewed asinsubordination.THE STRATEGY: CONCENTRATE AND ADAPTConcentrate on substance rather than form, and focus on helping people adapt. Managementshould provide the information that people need to be comfortable with the new organization;this information depends on peoples cultural backgrounds. In Legris, people needed to knowwhere and how they fit in the department pyramid and objectives; such may not be the case inother countries.The management realized the importance of the above and all Legris employees were graded inline with Parker Grading System. Job Descriptions, Reporting relationships and departmentcharts were firmed up and communicated to the employees.
  17. 17. Organizational Behavior: Project Report PGDM-Exec 2012- Term I P I T F AL L # 7: T HE G U I D I NG L I GH T At the time in Legris when leadership and active management was most called for, the stress and uncertainties associated with the merger caused an inward focus and a retreat to safe and high ground. More leadership was needed, at this time. One of the primary expectations from the leader was to articulate a vision and inspire others to join in that vision. Proclaiming a new vision and handing out laminated cards, however, would not create a new vision for the new entity. A clear new vision would capture the critical success factors and economic drivers that brought the entities together. THE STRATEGY: ADAPT Only a new culture in Legris India could create the context for true change to happen and hold. Changing culture means changing behaviour. One of the quickest way to effect change and create the new company was to develop and place in all key positions those individuals who were the true representatives of the new culture and who can lead effectively people on both side of the companys cultural divide. Few key executive in responsible and leadership roles were identified. They were required to participate in Workshops titled ‗Developing Leadership‘ and ‗Developing Change Champions‘ These training programs would be conducted over few weeks and the participants were groomed to be future leaders. These people grew to become role models who would demonstrate, with the visible active support of senior management, what the new culture was. C ONCLUSION F I NA N CI AL R E SU L T S OF DELL Perot Systems Dell Corporation Total Total net Net revenue: Gross margin: gross revenue margin Total net Total gross Product Services Product Services revenue margin $ 50,002 11,492 61,494 7,934 3,462 11396 NA NA2011 % of 81.30% 18.70% 100.00% 15.90% 30.10% 18.50% NA NA Revenue $ 43,697 9,205 52,902 6,163 3,098 9,261 NA NA2010 % of 82.60% 17.40% 100.00% 14.10% 33.70% 17.50% NA NA Revenue $ 52,337 8,764 61,101 7,667 3,290 10,957 NA NA2009 % of 85.70% 14.30% 100.00% 14.60% 37.50% 17.90% NA NA Revenue $ 53,378 7,755 61,133 NA NA 11,671 2,779 4822008 % of 87.00% 13.00% 100.00% NA NA 19.10% 100% 18.50% Revenue $ 50,101 7,319 57,420 NA NA 9,516 2,612 3932007 % of 87.00% 13.00% 100.00% NA NA 16.60% 100% 17.10% Revenue *NA- Not Applicable/ Not Available
  18. 18. Organizational Behavior: Project Report PGDM-Exec 2012- Term IApparently from finance figures, Dell was able to strengthen its position in service sector whichwas main objective of the merger. Also Dell was able maintain margins in the business and withthe passage of time was able to improve on the margins. In the hindsight Dell utilized thisopportunity very well to further diversify its portfolio.F I NA N CI AL R E SU L T S OF P A R K E R H A NNI FI N PARKER HANNIFIN (millions) 2010 2009 2008 2007 2006 Sales North America $3,624 $3,735 $4,250 $4,064 $3,993 International 3,811 3,896 5,006 3,901 2,903 Operating income North America 487 395 608 598 597 International 394 351 789 533 354 Operating margin North America 13.40% 10.60% 14.30% 14.70% 15.00% International 10.30% 9.00% 15.80% 13.70% 12.20% Legris Sales NA NA NA 232.9 222.3 Operating income NA NA NA 42.2 33.8 Operating margin NA NA NA 5.90% 9.70%*NA- Not Applicable/ Not AvailableParker was able to reduce its dependence on North America through acquisition of Legris,though it could not drive home the advantage due to global recession. Still we could see largerportion of sales and income from international markets than North American market from 2008onwards. We could not gather data on how technically this merger benefitted Parker Hannifin.
  19. 19. Organizational Behavior: Project Report PGDM-Exec 2012- Term IR ECOMMENDATIONSThese pitfalls of mergers and acquisitions challenge todays leaders to a new standard ofmanaging change. The strategy is clear - accelerate, concentrate, adapt, and in the case ofinternational M&As, consider cultural differences. The human and cultural issues that separatethe successful from the unsuccessful mergers and acquisitions are not about some abstractvalues or the "soft stuff", but the concrete reality of productivity, economic value and sustainedgrowth.
  20. 20. Organizational Behavior: Project Report PGDM-Exec 2012- Term IR EFERENCEShttp://content.dell.com/us/en/corp/about-dell-investor.aspxhttp://www.dell.com/http://www.hoovers.com/http://www.legris-industries.comhttp://phx.corporate-ir.net/

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