MANAGING POST-MERGER-INTEGRATION PROJECTS
A case study in the metal construction business
Master thesis, MscBA, specialization Change Management
University of Groningen, Faculty of Management and Organization
May 17, 2011
MARIUS VIERWIND
Student number: 1750089
Halvinkhuizerweg 29
3882 BE PUTTEN
06-22 74 41 40
M.F.Vierwind@student.rug.nl
Supervisor University
dr. B.J.M. Emans
dr. J. Rupert
MANAGING POST-MERGER-INTEGRATION PROJECTS
A case study in the metal construction business
Marius Vierwind
ABSTRACT
Challenged by the many failures of mergers and the many actions that influence the outcome of mergers, this research focuses on which managerial actions positively influence a post-merger-integration project (PMI). More specifically it elaborates what mechanisms are important to make the actions work. A case study research was conducted to examine which integration factors positively influence the PMI between three integrating metal construction organizations. Nineteen interviews have been conducted with employees, managers and a director who were involved in this PMI in the Netherlands. Ten managerial actions, related to distinct integration promoting factors, were discussed with the interviewees as regards their impact and effectiveness. Three examples of this integration promoting factors are: the quality of the integration objective, the quality of an integration plan, and the quality of the internal communication. Results show that all those integration factors do have impact by increasing the assertive behaviour of the employees, reducing unclarity and stress among the employees, optimizing the utilization of the available knowledge, increasing the mutual trust between the employees and the top of the organization and, finally, by providing trust among the clients.
Keywords Post-merger-integration, Acquisitions, Mergers
Index
Structure of this research ... 5
Background information ... 5
1. FACTORS INFLUENCING POST-MERGER-INTEGRATION PROJECTS ... 8
1.1Mergers and Acquisitions ... 8
1.2Post-merger-integration ... 9
1.3Factors influencing the post-merger-integration ... 9
1.3.1 Organization and Management: ... 10
1.3.2 Human Resource: ... 11
1.3.3 IT: ... 13
1.4Research objective and research questions ... 15
2. METHODOLOGY ... 16
2.1 Data Collection ... 16
2.1.1 Qualitative research ... 16
2.1.2 Procedure of the interviews ... 16
3. RESULTS ... 19
3.1 Organization and Management factors ... 19
3.1.1 Quality of the Integration objective ... 19
3.1.2 Quality of an integration plan. ... 21
3.1.3 Explicitness of the responsibilities ... 22
3.1.4 Quality of time management ... 23
3.1.5 Quality of the leadership style ... 25
3.2 Human Resource factors ... 27
3.2.1 Quality of the retention and recruitment plan ... 27
3.2.2 Quality of the internal communication ... 29
3.2.3 Quality of the external communication ... 31
3.2.4 Quality of the action plan ... 32
3.3IT factor ... 33
4. DISCUSSION ... 35
4.1 Important factors and their meaningfulness ... 35
4.1.1 Important integration factors ... 35
4.1.2 Mechanisms that contribute to the success of PMI ... 36
4.2 Practical recommendations and the conclusion ... 39
4.2.1 Practical recommendations ... 39
4.2.2 Conclusion: ... 40
4.3 Theoretical implications and Limitations ... 43
5. REFERENCES ... 44
6. APPENDICES ... 48
APPENDIX 1: Introduction of the research and the researcher ... 48
APPENDIX 2: Introduction and design of the interviews ... 51
Structure of this research
This research report is divided into four chapters. This introduction elaborates on an integration project which has lead to this research. Thereafter, the first chapter elaborates theoretical information about integration projects, the research objective and the research questions. The second chapter elaborates on the method for data collection and data analysis. The third chapter expounds the results of this research. Finally, the fourth chapter provides insights in how to integrate companies effectively by interpreting the results. Additionally, limitations of this research and recommendations for further research are mentioned.
Background information
This research is based on a single case study within Vlastuin Group. Vlastuin Group is an innovative contract manufacturer based in The Netherlands. The company contains multiple B.V.’s 1. Core business of this company is developing, producing and assembling metal constructions for the automotive sector. Due to the economic recession, which started in 2008, the business environment of the B.V.’s of Vlastuin Group changed. For instance, the turnover of one of the B.V.’s, Vlastuin Sheet Metal Construction (VSMC), decreased with 50%. In order to survive this decline, the branch manager of VSMC decided to reduce costs by reorganizing. However, the economic recession didn’t come to an end and the reorganization of VSMC would not be sufficient to prevent the B.V. from bankruptcy in the near future. Another B.V., Vlastuin Rolling Equipment (VRE), was confronted with a decrease of their orders of tank trailers by 90%. To conclude, three B.V.’s of Vlastuin Group faced the same kind of difficulties since the start of the recession. In order to prevent one or more B.V.’s from going bankrupt, the director of Vlastuin Group decided to integrate three of the B.V.’s, namely: Vlastuin Rolling Equipment, Vlastuin Sheet Metal construction (VSMC) and Vervat Staal, as showed in figure 1.
1 B.V. is a Dutch abbreviation of Besloten Vennootschap. The English term would be Limited company. These
FIGURE 1
Organization / Integration chart
VRE was the biggest B.V. located in Kesteren (table 1). VSMC with its 65 employees was located in Maarsbergen. The smallest B.V., Vervat Staal, was also located in Kesteren and has been a subcontractor of VRE and VSMC for many years. Vlastuin Group bought Vervat Staal in 2008. TABLE 1 Characteristics of B.V.’s Location Employees VRE Kesteren 100 VSMC Maarsbergen 65
Vervat Staal Kesteren 20
The purpose of the integration of the three B.V.’s is to avoid bankruptcy by reducing the costs. Examples of cost reductions in this situation would be reducing the rent, because VSMC will not hire their own location anymore and a decrease in salary costs as there are fewer employees after combining the companies.
integration of three B.V.’s was necessary in order to lower costs and prevent these companies from going bankrupt.
In January 2010 the main objective, preventing the companies from going bankrupt, has been achieved. However a few problems occurred during the integration project. For instance Vlastuin Metaal (the name of the three integrated B.V.’s) had to deal with a decrease in the delivery reliability of 30%, which is unacceptable. Moreover, the employees of VRE, VSMC and Vervat Staal were not as assertive as is required in the new organization. In the end, the effectiveness of this integration project as a whole is highly questionable.
In order to understand why these problems occurred, the director of Vlastuin Group wanted to evaluate the integration project. The first part of the evaluation became the motive for this research and is elaborated below.
1. FACTORS INFLUENCING POST-MERGER-INTEGRATION PROJECTS
1.1 Mergers and Acquisitions
Today’s business environment is constantly changing, as is stated in literature. Therefore, there is a profound need for organizations to change their nature and their practice of management. This implies that organizations change in order to realign themselves with their environment (Beer and Nohria, 2000) and by doing so, improve their business situation (Honore and Maheia, 2003). Due to the economic recession of 2008 academics and managers are extremely aware of this reality. At that time, rapid changes in structure and processes are necessary in the entire organization. Mergers and acquisitions are tools that support these changes (Appelbaum, et al. 2007). For denoting this subject, the ‘umbrella’ term ‘merger’ is used in this text (Bakker, 2003). It is the integration stage of a merger that constitute the subject of this research.
Mergers, which are projects, due to their clear goals, limited budgets, schedule, and resources (Pinto, 2007; Cleland and Gareis 1994), can be qualified as ‘planned change projects’. And therefore these changes can be managed (Burnes, 2004). Unfortunately, we do not know much about these planned change projects. What we do know is that one-third of the mergers worldwide do not achieve their financial objectives (Coff, 2002; Elsass and Veiga, 1994; Lubatkin, 1983). In other words, it is highly remarkable that, despite the increased popularity of mergers (Cartwright and Schoenberg, 2006; Vasilaki and O’Regan, 2008), the results are very disappointing. This fact should motivate managers and academics to learn from the experiences of today in order to merge companies more effectively in the future.
1.2 Post-merger-integration
Schweiger (2002) mentioned that managers who did successfully integrate companies, started with the integration stage as soon as possible. This means that the PMI stage starts as soon as integration is being considered. Unfortunately, this preparation is not always possible. For instance, when an integration is necessary due to an economic recession. Therefore, the rest of the PMI phase becomes more important for the effectiveness of the integration.
Epstein (2004) in addition, states that the PMI stage, although examined a lot, is the least understandable stage. Although it is clear that managing the integration factors appropriately determine to what extent the PMI is a success (Birkinshaw, Bresman, and Hakanson, 2000).
As stated above, this research focuses on integration factors that positively contribute to the success of the PMI. To link these factors to the PMI success we have defined PMI success as the prevention and reduction of internal problems in the organization during the PMI.
Examples of problems that might occur are loss of customers, loss of required knowledge and problems in the production process. This definition is chosen because internal problems have a significant influence on the long-term financial success of the merger (Zollo and Meier, 2008; DiGeorgie, 2003).
Paragraph 1.3 elaborates integration factors, that supposed to contribute to the success of a PMI.
1.3 Factors influencing the post-merger-integration
1.3.1 Organization and Management:
The first theme; ‘organization and management’, includes factors that are interesting because each internal stakeholder can have an opinion about the meaningfulness and the importance of these factors. Five factors, that meet this criteria and that are important for each project, according to Pinto (2007), are selected. These factors; the integration objective, the explicitness of the responsibilities, time management, the integration plan and the leadership style, contribute to the success of the PMI by optimizing the utilization of the organizational resources. (Pinto, 2007).
Firstly we distinguish the integration objective. According to Storey and Gander (2000), the integration objective influences the success of a merger. All effective integration objectives have three aspects in common. The first aspect is that the objective of the integration is clear to all the stakeholders. The second and third aspects are that these objectives are useful and realistic (Pinto, 2007).
The second factor that can be distinguished is the explicitness of the responsibilities. Clear responsibilities contribute to the PMI success. Because employees are more productive when they do know what they themselves, and the other employees, are responsible for. This includes the alignment of expectations that come along with these responsibilities. (Birkinshaw, Bresman, and Hakanson, 2000)
The third factor that can be differentiated is how the organization manages time. There are two time related aspects that contribute to PMI success. The first aspect is that the organization provides enough time to the employees to adapt to the changes (Schweiger, 2002) . The second aspect is about the timeline. This timeline, that describes what and when things have to be done, is known by all the stakeholders. This timeline enables the persons responsible to monitor progress on fixed times (Caluwe et al., 2002; Galpin and Hernbon, 2008; Epstein, 2004).
the lay-out of the production process and the way to align work structures-, and therefore enables the organization to achieve the aspired objectives (Pinto, 2007).
The fifth factor that can be distinguished is the style of leadership. Since a director has a great influence on the effectiveness of the integration, his style of leadership will too (Appelbum et al., 2007; DiGeorgio, 2003). There are two types that can be distinguished, namely: the task-oriented leadership style and the relation-task-oriented leadership style. In a task-task-oriented leadership style the director tells the managers exactly what to do and when to do it. So this leadership style consists only a one way communication, namely: top-down. While in the relation-oriented leadership style there is a two-way communication between the top of the organization and the lower levels of the organization. So the focus of this leadership style is more on supporting the employees instead of directing them. In order to integrate as effective as possible an adequate mix between these two leadership styles is needed (Caluwe, 2002).
1.3.2 Human Resource:
The second theme; ’human resource’, includes four factors, that are derived from Schweiger (2002). These factors are the retention and recruitment plan, the internal communication, the external communication and the action plan. They all contribute by utilizing the human resources effectively. Since the 1980s it became obvious that these factors contribute, by facilitating the effectiveness of the organization and management factors, to the success of PMI. (Houghton, Anand and Neck, 2003; Birkinshaw, Bresman and Hakanson, 2000).
a. “Staffing the integrated organization b. Retaining key people
c. Managing employee redundancy” ( Schweiger, 2002, p. 171)
The second factor of the human resource theme is the internal communication which is a crucial factor in mergers (Appelbaum et al., 2007; Messmer, 2006). Bert et al. (2003) mention that poor outcomes of PMI are often caused by ineffective communication during the integration process. Especially employees, directly influenced by the integration issues, desire an intensive and effective communication amongst themselves and with the top of the organization. By means of an effective communication program, employees have a better understanding of what is going on and what will be the changes for them. This information is very important to employees. Therefore, when the formal channels do not provide the necessary information, they will gather more information in an informal manner. This informal information is less accurate and often consists of: rumours, assumptions based on past experiences, information from the media etcetera. Such an uncontrolled information process can lead to ideas and actions that could damage the post-merger. Therefore communication frequently, which is a common factor of success in post-merger, is highly recommendable. Schweiger (2002) divides effective internal communication, in order to build confidence in the integration, into three aspects. The first aspects is about providing the appropriate kind of information. The second aspect deals with the appropriate manner to communicate and the third one with the right moment of doing so. Furthermore, Schweiger (2002) differentiates between the kind of information the directors think is important to communicate towards employees and what really is, as shown in table 2. In addition, Appelbaum et al. (2007) mentioned that direct and honest information, communicated as soon as possible, is the most effective.
TABLE 2
Important messages to communicate internally during a PMI
What directors think are important What employees think are important
What is the vision of the integrated organization? Will I (the employee) have a job?
What are the strategic benefits of the integration? How can I (the employee) be successful in the new environment?
What are the reasons for the changes / integration?
The third factor of the human resource theme is the external communication which is also a crucial factor in mergers (Appelbaum et al., 2007; Messmer, 2006). Stakeholders, like customers and suppliers, will be affected by the integration, and have a direct influence on the success of the integration. Therefore, the external communication is essential as well (Epstein, 2004). Schweiger (2002) divides the external communication into two aspects: providing each stakeholder 1) with the appropriate kind of information, 2) at the right time.
The final factor of this theme focuses on how to manage problems. According to Epstein (2004), an action plan enables the persons responsible, to anticipate as soon as possible (by collecting the necessary knowledge and competencies), due to the clear responsibilities. Solving emerging problems, like for instance: production- or process problems, as soon as possible stimulates the PMI success.
1.3.3 IT:
The third theme; ‘IT’, includes only the IT factor.
Despite the central position of IT systems in organizations they do often not get the right attention during the PMI. This is remarkable because compatible IT systems highly contribute to the success of the PMI by preventing production problems. IT systems congruent most effectively when there is clarity about 1) which IT system will be used after the integration, 2) how the IT systems will be integrated and 3) when this has to be done (Epstein, 2004). This integration strategy should be known and supported by all the employees and managers (Fitzgerald, 2003).
TABLE 3
Framework for post-merger-integration projects
ORGANIZATION and MANAGEMENT
Factor Definition
1. Quality of the integration objectives
An integration objective that is useful, realistic and clear to all stakeholders
2. Explicitness of the responsibilities Responsibilities that clarify expectations about who is responsible for what, during the integration project
3. Quality of time management Management that provides enough time for the employees to adapt to changes. And provides clarity, through a timeline that is known by all the stakeholders, about what and when things have to be done.
4. Quality of the integration plan A plan, built on the organization’s vision and developed at the start of the integration. This plan describes what the organization should look like.
5. Quality of the leadership style An adequate mix of a task-oriented leadership style and a relation-oriented leadership style
HUMAN RESOURCE
Factor Definition
6. Quality of the retention and recruitment plan
Provides clarity on which knowledge is needed during the integration project. It also clarifies the required competencies to become a competitive organization
7. Quality of the internal communication
Provides the right information (table 2) towards employees and managers at the right time and in an appropriate manner
8. Quality of the external communication
Provides the right information towards the stakeholders at the right time.
9. Quality of the action plan Provides a protocol that enables persons to responsible to develop an appropriate solution for the emerged problem
IT
Factor Definition
10. Quality of the integration strategy of IT systems
Provides clarity towards employees and managers on how and when to integrate the different IT systems. Moreover it clarifies which IT system will be used
1.4 Research objective and research questions
Paragraph 1.3 presented factors that, according to the literature reviewed, may be supposed to have a positive contribution to the PMI. In order to articulate our understanding of the importance of these factors, the PMI situation at Vlastuin (see introductory section) has been analysed. In a case study set-up the following two questions have been addressed as regards each of the (ten) factors that were distinguished:
1. To what extent does it positively contribute to the success of the PMI ?
2. METHODOLOGY
In the previous chapters the research objective and the research questions are presented. In this chapter the methodology of this research is explained. Both the method for data collection and the analysis of the data will be elaborated.
2.1 Data Collection
2.1.1 Qualitative research
Post-mergers are delicate and therefore need a cautious evaluation approach. The appropriate way to investigate a post-merger project is by using case studies. According to Flick (2006), case studies have to contain information on existing literature (as was expounded, here, in the preceding chapter) as well as contextual and personal information. Yin (2003) states that ‘guided conversations’ are an essential source to gather this kind of information. Therefore, in this research, information is assembled by extended, one on one, interviews. This is a method that provides the opportunity to gather a great diversity of information (Emans, 2004).
2.1.2 Procedure of the interviews
The respondents have been selected by the HRM manager of Vlastuin Group. By selecting the respondents, the managers made sure that the respondents represented the different organizational levels and the different B.V.’s, as shown in table 4. This is important, because respondents with different backgrounds may respond differently towards merger (Verschuren, 2003). The respondents were the executive of Vlastuin Group, five members of the integration team and thirteen employees.
TABLE 4
Distribution of the respondents
Organizational layer VRE VSMC Vervat Staal
Employees 6 4 3
Integration team 4 1 0
These respondents received an email (appendix one2) from the HRM manager. This email consisted of two parts. The first part was written by the HRM manager and the second part by the researcher. The goal of this email was to ask whether they wanted to take part in this research. Moreover, it clarified the aim of the interviews and why the respondent was selected. Furthermore, it was emphasized that all the information would be treated confidential. The second part of the e-mail, written by the researcher, was a short pre-introduction of the research. It introduced the main questions of the interviews and the expected duration time of an interview. Finally, it elaborated on how the researcher would protect the anonymity of the respondents. All the information gathered in the interviews, would be transformed in such a way that it would not be possible to reconstruct which respondent had said what. In addition, the researcher asked permission to use a recording device during the interview. These recordings would only be used by the researcher, who conducted all the interviews. These efforts to protect the anonymity of the respondents had been made to improve the interview results (Emans, 2004).
2.1.3 Interviews
Each interview started with a short introduction of the purpose of the interview, as shown in appendix two. The first question asked in the interviews, was a general question on the respondent’s feelings and insights on what went wrong and what went well during the
integration project. Due to this open question there could arise important factors that were not identified in the theory section (appendix 3, question 1). Subsequently, it could identify mechanisms that raised from this factor.
The second to the eleventh interview questions were divided into two sub-questions. Each integration factor identified in chapter one, table 3, was dealt with in these two sub-questions. Interview question two covered the first factor the third interview question covered the second factor etcetera. All the definitions of the integration factors were explained to the respondents before the interviews. The interviewer however did not inform the respondents about the PMI definition used in this research. Therefore they were not influenced in their response.
The sub-questions, for each factor, were: a: “To what extent was the factor important to integrate successfully?” and b:“How does the respondent explain this importance?” In order to recognize the mechanisms (sub-question b), the respondents were asked to explain their
answers and stimulated to describe practical situations. The interviewer had to ask for these practical notes when a respondent did not recognize any mechanisms. However, the interviewer did not press the respondents, therefore the respondents did, understandably, not always provide mechanisms. Each integration factor is defined as presented in table 3. Subsequently, a 7-point ordinal scale, from very important to very unimportant, is used to score the interviewees answers to the first sub-question.
The seventh integration factor ‘internal communication’ was, in contrast to the other ones, divided into more than the regular two sub-questions (appendix 3, question 8). These
questions were added because literature emphasizes that it is very important to communicate the right information, to the right persons in an appropriate manner and time, as presented in table 3. Therefore the extra questions asked were:
8c. What kind of information had to be communicated internally?
8d. On what bases does the interviewee came to the conclusion of sub-question 8c? 8e. When does the information (mentioned at sub-question 8c) had to be
communicated internally?
8f. On what bases does the interviewee came to the conclusion of sub-question 8e? 8g. On what manner does the employee wanted to hear the information (mentioned
in sub-question 8c)?
8h. On what bases does the interviewee came to the conclusion of sub-question 8g?
3. RESULTS
Chapter 3 describes for each integration factor separately the answers to the interview questions that were asked about it. The results are presented in tables and are clarified in the text above these tables. These tables, for example table 3.1.1 clarify in the first row how many interviewees did respond. The second row clarifies the importance of the integration factors for the PMI success (research question 1). To interpret the results of the first sub-questions of the interviews (research question 1), the importance scale that was used (from very unimportant to very important) has been linearly transformed into a scale from 0-10 and the outcomes of that transformation have been averaged
The answers given by the different respondent categories to the second sub-questions related to each factor (about underlying mechanisms) are written down in the tables of chapter 3, together with the number of missing data involved, and commented on in accompanying texts.
3.1 Organization and Management factors
3.1.1 Quality of the Integration objective
All nineteen interviewees mentioned that a clear integration objective is important to integrate effectively (see table 3.1.1). In doing so, the interviewees separated the integration objective into two aspects, namely a short term objective and a long term objective. The short term objective is to prevent Vlastuin Metaal from going bankrupt, by reducing the costs. The long term integration objective is to become the best contract manufacturer in the metal construction business supported by a clear organizational structure.
3.1.1.C). Employees and members of the integration team emphasized that the economic recession, and its negative consequences for Vlastuin Metaal, were clear to everybody. Therefore, the short term objective did not need to be explained extensively.
Table 3.1.1 presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms, the short term objective and the long term objective, are mentioned by the interviewees. Finally, it shows that five employees and one team member did not mention any mechanisms at all. In order to integrate effectively the short term objective should be supported by a clear long term objective. The quality of this long term integration objective will be evaluated more extensively in the factor ‘integration plan’, as presented in table 3.1.2.
TABLE 3.1.1
Interview outcome related to factor: ‘Quality of the integration objectives’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,3 8,3 8,3
M ec h a n is m s m en ti o n ed
3.1.1.A Clear short term integration objectives stimulate cooperation.
1 1 0
3.1.1.B Clear short term integration objectives stimulate the empathy of employees
5 0 0
3.1.1.C Clear integration objectives improve communication about expectations.
0 3 0
3.1.1.D Clear long term integration objectives results in a clear lay-out of the production process. This enables employees to think along with the organization about how to integrate effectively.
8 0 0
3.1.1.E Clear long term integration objectives stimulate acceptation and proactive behaviour of
employees.
0 0 1
3.1.2 Quality of an integration plan.
All the interviewees mentioned that a good integration plan is important to integrate effectively, as presented in table 3.1.2.
The main advantage of an integration plan is that it provides a more structural change, according to two employees. This structural change is necessary, because factors like the internal communication, the external communication, the development of responsibilities, the management of time and the integration of the IT systems influence each other. Therefore, an integration is more effective when all the actions are communicated and tuned, according to the two employees mentioned. An example of a more structural change includes that there is a description of which IT functions have to be integrated before the organizations can integrate physically (mechanism 3.1.2.A). Moreover it provides trust among funders, according to another employee (mechanism 3.1.2.B). In addition, it provides the possibility to assign responsibilities to employees according to two employees and four team members (mechanism 3.1.2.C).
Table 3.1.2 presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms are mentioned by the interviewees. Finally, it shows that eight employees, one team member and the director did not mention any mechanisms at all.
TABLE 3.1.2
Interview outcome related to factor: ‘Quality of an integration plan’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,3 8,3 8,3
M ec h a n is m s m en ti o n ed 3.1.2.A
An integration plan ensures that all managerial actions fit together. Therefore it provides structural change.
2 0 0
3.1.2.B An integration plan provides, when
communicated effectively, trust among funders. 1 0 0
3.1.2.C An integration plan provides a possibility to
assign responsibilities to employees. 2 4 0
3.1.3 Explicitness of the responsibilities
All the interviewees mentioned that explicit responsibilities are important to integrate effectively, as presented in table 3.1.3.
Explicit responsibilities provide more clarity among employees and managers, according to seven employees and one team member. Employees on the plate preparation division for example will have clarity about who is responsible for the drawings. Therefore, they will know who can help them when there are problems with these drawings (mechanism 3.1.3.A). Other important advantages of explicit responsibilities, besides reducing and solving problems, are the positive influence on the production productiveness, through the reduction of mental problems and an increase of assertive behaviour among employees, according to 4 employees, 3 members of the integration team and the director (mechanisms 3.1.3.B & 3.1.3.C).
Table 3.1.3 presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms are mentioned by the interviewees. Finally, it clarifies that two employees did not mention any mechanisms at all.
TABLE 3.1.3
Interview outcome related to factor: ‘Explicitness of the responsibilities’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,3 7,2 8,3
M ec h a n is m s m en ti o n ed
3.1.3.A Explicit responsibilities provide more clarity for employees and managers; therefore it prevents and reduces production- and integration problems.
7 1 0
3.1.3.B Explicit responsibilities stimulate the assertive behaviour of employees. Which, due to ad-hoc problem solving, results in less production problems
3 3 0
3.1.3.C Explicit responsibilities reduce mental problems (stress, burn-out), resulting in less production problems.
1 0 1
3.1.3.D Explicit responsibilities reduce the need of flexibility of employees.
3.1.4 Quality of time management
All the interviewees mentioned that effective time management is important to integrate effectively, as presented in table 3.1.4. Subsequently, all the employees, the members of the integration team and the director emphasize that a timeline is an important tool to manage time effectively. Moreover, eight employees, five team members and the director mention that a clear vision is required in order to create this timeline. In addition, two employees and two members of the integration team stated that clarity about the lay-out of the production process will also help to create this timeline.
The main advantage of effective time management is that it provides clarity to the stakeholders, according to eleven employees, five members of the integration team and the director. Moreover, a timeline provides an opportunity to monitor progress on fixed times. This will reduce delays in the production process (mechanism 3.1.4.A). Furthermore, effective time management reduces the stress that employees experience, which helps them to become assertive, according to eight employees and three team members. Eventually this will result in less production problems (mechanism 3.1.4.B). In addition, the employees get enough time to adapt new knowledge and skills, which are needed to be productive in their new work environment, according to four employees, two members of the integration team and the director (mechanism 3.1.C).
TABLE 3.1.4
Interview outcome related to factor: ‘Quality of time management’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,3 8,3 8,3
M ec h a n is m s m en ti o n ed
3.1.4.A Effective time management provides, through a timeline, clarity. Therefore it reduces the chance on delay and it provides the time to solve the causes of production- and integration problems.
11 5 1
3.1.4.B Effective time management reduces stress which, along with clarity, enables employees to become assertive. This will, due to ad-hoc problem solving, result in less production problems
8 3 0
3.1.4.C Effective time management provides time to the employees to gain knowledge and skills.
4 2 1
3.1.4.D Effective time management reduces the need for flexibility of the employees.
3 2 0
3.1.5 Quality of the leadership style
All the interviewees mentioned that the style of leadership is important to integrate effectively, as presented in table 3.1.5.
A task-oriented leadership style is more effective at the start of the integration then the relation-oriented leadership style. The task-oriented leadership style provides speed and clarity. Speed is necessary to prevent the company from bankruptcy, according to six employees, five team members and the director (mechanism 3.1.5.A). And clarity is needed, because the employees and the members of the integration team are, especially at the beginning of the integration, both afraid of making mistakes and therefore less prone of making decisions, according to eight employees, two members of the integration team and the director (mechanism 3.1.5.B & 3.1.5.C). So, a leader that provides an objective and the route towards this objective is needed, according to three employees, two members of the integration team and the director (mechanism 3.1.5.D). This task-oriented leadership style will only be effective when it results in a good integration plan. Therefore the leader needs assistance of good, experienced sparring partners, according to the director and the members of the integration team. Subsequently the leadership style should develop to a more relation oriented style. This style provides more commitment among the employees (mechanism 3.1.5.G). In addition it ensures that the capabilities of the employees are optimally utilized (mechanism 3.1.5.H). However this style is only applicable when important aspects between the director and the managers, such as: responsibilities and tasks are clarified.
TABLE 3.1.5
Interview outcome related to factor: ‘Quality of the leadership style’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,5 8,3 8,3
M ec h a n is m s m en ti o n ed
3.1.5.A A task-oriented leadership style maintains the speed of the integration. And therefore it provides the opportunity to survive.
6 5 1
3.1.5.B A task-oriented leadership style provides clarity for managers. (Through a workable framework and the installation of the integration team that plans the integration)
3 2 1
3.1.5.C A task-oriented leadership style provides clarity for employees, which gives them the opportunity to respond.
5 0 0
3.1.5.D A task-oriented leadership style results in less accuracy, but is needed to survive.
3 2 1
3.1.5.E A task-oriented leadership style ensures that everybody pursues the same goal.
0 1 0
3.1.5.F A relation-oriented leadership style provides more endorsement among employees concerning the acceptance of decisions.
1 0 0
3.1.5.G A relation-oriented leadership style ensures more commitment of employees.
3 0 0
3.1.5.H A relation-oriented leadership style ensures utilization of the capabilities of employees,
3 0 1
3.1.5.I A relation-oriented leadership style of the director enables managers to explain decisions towards employees.
0 2 0
3.2 Human Resource factors
3.2.1 Quality of the retention and recruitment plan
All the interviewees mentioned the importance of a retention and recruitment plan for an effective integration, as presented in table 3.2.1. This plan is based on two aspects, according to all the interviewees namely:
a. The knowledge that is needed to be viable as an organization. b. The knowledge that provides the organization growth opportunities.
The retention and recruitment plan used in this case, was composed out of three groups, namely:
a. Employees who need to stay, due to their specific knowledge or experience. b. Employees who can stay, if the financial developments allows it.
c. Employees who will be fired, because they have no indispensable skills.
The advantage of an retention and recruitment plan is that it provides clarity, which helps the top of the organization to keep the right knowledge, according to nine employees and four team member (mechanism 3.2.1.A). The needed employees, employees from the first group, will stay motivated because they get job security and they feel appreciated. The employees that belong to the second and third group can react by searching a new job. To summarize, the organization can be specific about each individual situations (mechanism 3.2.1.B). Moreover, when the required competencies of all the functions are known, the ability to efficiently place the employees will increase (mechanism 3.2.1.C).
Table 3.2.1 presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms are mentioned by the interviewees. Finally, it shows that one employee did not mention any mechanism at all.
TABLE 3.2.1
Interview outcome related to factor: ‘Quality of the retention and recruitment plan’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 8,3 8,7 8,3
M ec h a n is m s m en ti o n ed
3.2.1.A Retention and recruitment plan provides clarity within the top of the organization. And therefore they are able to keep the right knowledge.
9 4 0
3.2.1.B Retention and recruitment plan provides an opportunity to communicate about employees’ individual situation. This clarity ensures that employees with important knowledge stay.
8 4 1
3.2.1.C Retention and recruitment plan provides an opportunity to utilize the capabilities of the employees.
5 0 0
3.2.1.D Retention and recruitment plan prevents rumours and a culture of blaming. And therefore reduces stress.
6 2 0
3.2.1.E Retention and recruitment plan guarantees survival.
0 0 1
3.2.1.F Retention and recruitment plan provides an opportunity to guarantee continuity to clients.
0 0 1
3.2.2 Quality of the internal communication
All the interviewees mentioned that the internal communication is the most important factor to integrate effectively, as presented in table 3.2.2.b. Table 3.2.2a presents the most important messages that have to be communicated during the integration. Four of these five messages have a direct influence on the employee’s personal situation. Two of these messages are clearly the most important, namely:
a. Will I (the employee) have a job?
b. What changes in my (the employee) job and role?
All the interviewees stated that the message on job security is the most important and has to be communicated personally in a dialogue between the employee and the director or his own manager. In addition, this information has to be communicated as soon as possible. The other messages become important when there is clarity about job security. Finally, the interviewees stated that that the best way to communicate the other messages is through dialogues with the director in the production hall meetings. To conclude, a two-way communication is the most effective way to communicate internally.
TABLE 3.2.2a
Interview outcome related to: ‘Crucial information to communicate’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1 Im p o rt a n t m es sa g es
A: Will I (the employee) have a job? 13 5 1
B: What changes in my (the employee) job
and role?
9 4 0
C: How can I (the employee) be successful
in the new environment? 3 0 1
D: What are the reasons for the integration? 3 0 1
E: What are the provisions for layoffs 2 4 0
communication is that it provides trust among the employees. This trust has a positive contribution to employees their willingness to solve problems in the production process, according to five employees, two team members and the director (mechanism 3.2.2.D).
Table 3.2.2b presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms are mentioned by the interviewees. Finally, it shows that five employees did not mention any mechanism at all.
TABLE 3.2.2b
Interview outcome related to factor: ‘Quality of the internal communication’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 9,6 9,7 10
M ec h a n is m s m en ti o n ed
3.2.2.A Effective internal communication provides clarity to the employees.
6 3 1
3.2.2.B Effective internal communication reduces stress and fear through clarity about each other’s expectations.
2 0 1
3.2.2.C Employees become more assertive through clarity about responsibilities and
expectations.
4 3 0
3.2.2.D Effective internal communication makes reconstruction of the organization
possible. And it increases problem solving, in the production process, through the increase of mutual respect and trust.
5 2 1
3.2.3 Quality of the external communication
All the interviewees mentioned that external communication is important to integrate effectively, as presented in table 3.2.3.
The advantage of effective external communication is that it reduces logistic problems, because suppliers will know where and when they should deliver their products (mechanism 3.2.A). Moreover, it improves the trust of the clients, because they understand that the integration is needed to become a competitive organization in the near future. The clients trust the organization, and hope that they get better delivery conditions in the future. And, while an organization cannot survive without clients, it is important to win their trust so that they will not leave, according to four employees, four members of the integration team and the director (mechanism 3.2.B). Finally, effective external communication contribute to PMI success, by preventing production problems, because suppliers stay loyal to the company. (mechanism 3.2.3.C)
Table 3.2.3 presents the importance of this factor. In addition, it clarifies how many times the presented mechanisms are mentioned by the interviewees. Finally, it shows that five employees did not mention any mechanisms at all.
TABLE 3.2.3
Interview outcome related to factor: ‘Quality of the external communication’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 7,7 8,3 8,3 3.2.3.A Effective external communication reduces
logistic- and production problems through clarity about delivery to the suppliers.
4 0 0 M ec h a n is m s m en ti o n ed
3.2.3.B Effective external communication ensures trust among the clients, which results in loyalty. And therefore the clients will stay.
4 4 1
3.2.3.C Effective external communication ensures that suppliers won’t leave and therefore delivery reliability remains. This prevents production problems.
0 1 0
3.2.3.D Effective external communication improves brand awareness.
0 1 0
3.2.4 Quality of the action plan
The director mentioned that a plan, that describes how to deal with problems, is not the most important factor to integrate effectively, as presented in table 3.2.4. The employees and the members of the integration team stated that this plan is pretty important.
Although this plan is not the most important factor, because each occurring problem is different, it is important to solve problems. Especially in lean-producing companies where each small problem at the beginning of the production process becomes a big problem at the end of the production process, according to four employees two members of the integration team and the director (mechanism 4.2.4.A). Therefore each problem had to be solved, due to an ad-hoc developed solution. This solution includes that it is clear who is responsible for the actions that need to be taken, according to four employees and one team member (mechanism 3.2.4.B)
Table 3.2.4 presents the importance of this factor. In addition, it shows that five employees and two members of the integration team did not mention any mechanisms at all.
TABLE 3.2.4
Interview outcome related to factor: ‘Quality of the action plan’
Interviewees Employees. N= 13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 6,4 7,1 5,0
M ec h a n is m s m en ti o n ed
3.2.4.A Standardized plan how to handle problems is not important because every problem is different. But problem solving is important.
4 2 1
3.2.4.B An ad-hoc plan clarifies responsibilities and therefore increases problem solving.
4 1 0
3.3 IT factor
3.3.1 Quality of the integration strategy of IT systems
All the interviewees mentioned that integrating the IT systems in time is important for the effectiveness of the PMI, as presented in table 3.3.1. Especially the members of the integration team emphasized this by grading the importance with an average of 9,7. Furthermore all the interviewees mentioned two aspects that made it more difficult to integrate the IT system, namely:
a. When speed is the focus of the integration.
b. When the organization lost a lot of knowledge, about processes and products, before the integration of the IT systems.
The main advantage of integrating the IT systems in time is that it prevents a lot of problems, because the whole production depends on this system. According to four employees and three members of the integration team and the director these problems consist of:
1) delay in the production process which results in a decrease of the delivery reliability, 2) producing bad or double products
3) delay the overall integration (mechanism 3.3.1.A).
Another advantage of integrating the IT systems before the physical integration is that it also provides clarity to division managers and employees. While the managers will know how much they can produce, the employees will know what and when they have to produce products (mechanism 3.3.1.B).
3.3.1 IT factor
Interview outcome related to factor: ‘Quality of the integration strategy of IT systems’
Interviewees Employees. N= 11-13 Integration team. N= 5 Director. N= 1
Importance (the average on a scale from 0 - 10) 7,8 9,7 8,3
M ec h a n is m s m en ti o n ed
3.3.1.A Integration of IT system is necessary because the production process depends on it.
4 3 1
3.3.1.B Integration of IT system in time provides clarity and it reduces mental problems of the
employees and the managers. Which results in less production problems.
1 3 0
3.3.1.C Integration of IT system later on requires more energy.
2 2 1
3.3.1.D Integration of IT system later on results in quality problems of products.
2 3 0
4. DISCUSSION
Chapter four presents the discussion of the results. The first paragraph of chapter four provides answers to both research questions: “to what extent does it positively contribute to the success of PMI?” and “What causal mechanisms, if any, do bring about that contribution to PMI success?” (So this research does not measure the successfulness of the integration factors that were used.)
The first part of this paragraph presents the first research question by showing the average importance of each integration factor. These average marks are calculated as follows: The three different organization levels provided their average mark in the tables of chapter 3. These three averages are added and the outcome has been divided by three.
The second part of the first paragraph presents the mechanisms that directly contributed to PMI success (as defined in paragraph 1.2). So each mechanism, that according to the respondents contributed to: the retention of customers, the retention of required knowledge or the reduction of problems in the production process , has been qualified as a mechanism that has a direct influence on PMI success. Subsequently, the relationship between the integration factors and the mechanisms are presented in table 7.
The second paragraph presents the practical recommendations and the conclusion. The practical recommendation are based on the independent integration factor that has an indirect influence on PMI success. Finally, the third paragraph presents the limitations of this research and recommendations for further research.
4.1 Important factors and their meaningfulness
4.1.1 Important integration factors
The first research question was: to what extent does it positively contribute to the success of PMI? Table 6 shows that all the integration factors were viewed to be, to some level,
TABLE 6
Importance of the integration factors
In the next paragraph the mechanisms that contribute to the success of PMI (as defined in paragraph 1.2) will be presented.
4.1.2 Mechanisms that contribute to the success of PMI
The second research question was: What causal mechanisms, if any, do bring about that contribution to PMI success? Table 7 shows only the mechanisms that positively contribute to the PMI success (as defined in this research) by reducing and preventing internal problems. The mechanisms mentioned are directly linked, by the respondents, with the internal problems that were presented in paragraph 1.2, namely:
• the loss of customers,
• the loss of required knowledge,
a. save, utilize and gain knowledge b. stakeholder involvement
c. employees trust
d. unclarity and stress reduction e. employees assertiveness
Consequently, there are four integration factors, that indirectly (that is: by triggering the five mechanisms) contribute to the success of the PMI. In this paragraph only the five mechanisms, that directly contribute to the PMI success, will be elaborated.
TABLE 7
Mechanisms that contribute to PMI success Mechanisms
(linked to PMI success as defined in paragraph 1.4) Save, utilize and gain knowledge Stakeholder involvement Employees trust Unclarity and stress reduction Employees assertiveness In te g ra ti o n f a ct o rs
1.Quality of the integration objective
2. Quality of an integration plan
3. Explicitness of responsibilities X X
4. Quality of time management X X
5. Quality of leadership style
6. Quality of the retention and recruitment plan
X X
7. Quality of the internal communication
X
8. Quality of the external communication
X
9. Quality of the action plan
10. Quality of the integration of the IT systems
4.1.2A: Save, utilize and gain knowledge
The first mechanism presented in table 7 is ‘save, utilize and gain knowledge’. This mechanism contributes to the PMI success by reducing the loss of required knowledge, according to the interviewees. There are two integration factors that directly influence this mechanism, namely: the retention and recruitment plan and time management. The retention and recruitment plan, contributes to the PMI success by ensuring that the top of the organization knows which knowledge has to be saved. Moreover it provides employees, who have this knowledge, the motivation to stay, and finally this plan provides the ability to effectively place these employees. Time management, contributes by providing enough time to the employees to adapt new knowledge and skills.
4.1.2B: Stakeholder involvement
The second mechanism presented in table 7 is ‘stakeholder involvement’. This mechanism contributes to the PMI success, by reducing the loss of customers and by reducing problems in the production process. There is one integration factor, that directly influences this mechanism, according to the interviewees, namely: the external communication. The external communication contributes by increasing the trust of the clients. This trust results in more loyal customers and therefore reduces the loss of these customers. External communication also contributes to PMI success by increasing the trust of the suppliers. This trust results in more loyal suppliers, who therefore provide the same delivery reliability as before the integration. This enables the organization, together with clarity on where and how the suppliers can deliver their products, to produce with minimal production problems.
4.1.2C: Employees trust
4.1.2D: Unclarity and stress reduction
The fourth mechanism presented in table 7 is ‘unclarity and stress reduction’. This mechanism contributes to the PMI success, by reducing problems in the production process. There are four integration factors that directly influence this mechanism, according to the interviewees, namely: explicitness of responsibilities, time management, the retention and recruitment plan and the integration of IT systems. The first explicitness of responsibilities and time
management, contribute by increasing clarity among employees and managers about who is responsible for what and when things have to be done. Moreover, the integration of IT systems provides clarity to managers and employees, by providing them information on how much can be produced and when this has to be done. In addition, the explicitness of
responsibilities and the retention and recruitment plan, contribute by reducing stress among employees and managers.
4.1.2E: Employees assertiveness
The fifth mechanism presented in table 7 is ‘employees assertiveness’. This mechanism contributes to the PMI success, by reducing problems in the production process. There are two integration factor that directly influences this mechanism, according to the respondents, namely: explicitness of responsibilities and time management. The explicitness of responsibilities contributes to PMI success by increasing the assertive behaviour of employees, who consequently solve problems in the production process more adequately. Time management enables the employees to become assertive as well.
4.2 Practical recommendations and the conclusion
This paragraph provides practical recommendations on managing a PMI and the conclusion of this research. The practical recommendations are derived from the integration factors that have an indirect influence on PMI success. The conclusion, however, derived from the integration factors that have a direct influence on PMI success (table 7).
4.2.1 Practical recommendations
quality of the leadership style. Therefore, our recommendations are derived from the independent factor, the ‘leadership style’.
Leadership style
The interviews showed that a director who adapts a task-oriented leadership style at the beginning of the integration, provides the necessary speed by making general decisions, such as: choose one working style and decide which production location had to be closed. In addition, it provides clarity when the director presents the integration objective. This enables the employees to stay focused on this objective. One of the most important responsibilities of the task-oriented leader at the start of the integration is to compose an effective integration team. This team creates the initial integration plan which ensures that all the integration factors are fit together, and results in a more structural change.
Experienced CEO’s mention that an effective integration team has to be generated (Dunphy, 2000). Conditions for an effective integration team, that can be managed by the director, are:
a. Appoint an experienced project manager that leads the integration team. b. Appoint experienced and motivated team members.
c. Appoint team members that have knowledge about the products and the processes. d. Provide trust, through clarity towards the team members about job security and the
selection criteria.
Subsequently, the role of the task-oriented director is changing. The director has to act like a sponsor, and in some cases even as a client, of the team as well. These new roles of the director require a relation-oriented leadership style besides the initial task-oriented leadership style. A director who combines these leadership styles effectively: provides the necessary speed due to an clear integration objective and it enables the integration team to be effective, through an effective integration plan.
is a distinction between the integration factor ‘leadership style’ and the other factors. Because the leadership style is an independent factor that influences all the other factors.
The left side of figure 2 shows that the integration factor ‘leadership style’ indirectly contributes to the PMI success by influencing the other integration factors. Paragraph 4.2.1 describes that a director who effectively combines a task-oriented leadership style with a relation-oriented leadership style will enable an integration team to create an integration plan. Figure 2 subsequently, shows that this integration plan ensures that the integration factors, that have a direct influence on the PMI success, are fit together (paragraph 4.2.1). This factor ‘planning the integration’ changes over time due to the input of new information from
external stakeholders and employees. Figure 2 also shows that this integration plan influences the internal and external stakeholders. In other words these factors are interrelated.
Finally, figure 2 shows the results of the second research question, as described in paragraph 4.1.2. These results provide clarity on how the six integration factors directly contribute to PMI success. Figure 2 provides this information by showing the linkages between the integration factors, that are described in paragraph 4.1.2, and the mechanisms that raised from these factors that contributed to PMI success. These mechanisms ultimately results in a successful combination of the aspired objectives, namely:
• the retention of customers,
• the retention of required knowledge
• reducing problems in the production process
FIGURE 2
4.3 Theoretical implications and Limitations
While drawing conclusions from the results of this research, one must keep in mind that the findings are based on one single case study. Therefore, these findings cannot be generalized. In addition, this case study had only a small sample, namely 19 of the 185 employees. However, it does provide some implications for current theory and further research. Firstly, all the factors that are important during PMI, according to current literature, are also important in this unique situation. So, these findings are consistent with current literature. Secondly, although current literature emphasizes the importance of the PMI factors, it does not elaborate practical recommendation on how to manage these factors. Further research should investigate how to manage the PMI factors most effectively. More specifically further research should investigate how to form an effective integration team, because this research elaborated the important role of this integration team. But, current literature does not elaborate extensively how to generate an effective team.
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