Dewaal Pharmaceuticals and Biohealth Labs - PDF

Running head: DEWAAL PHARMACEUTICALS AND BIOHEALTH LABS 1
DeWaal Pharmaceuticals and BioHealth Labs
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Executive Summary
Mergers and acquisitions are commonly used by organizations to increase their revenue.
The successes and failures of such ventures depend on various factors. This essay analyzes the
merger between DeWaal Pharmaceuticals and BioHealth Labs to determine the factors that are
affecting its success. The analysis entails the examination of the organizational culture and
management styles, which are the conflicting values in the merger. The analysis also critiques
the process used in the integration. Recommendations for the conflicting values, such as
designing the top management, cultural change and changing the management style, are given.
Lastly, the essay evaluates the usefulness of the management theories, concepts, and practices
used.
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Introduction
Mergers and acquisitions are a common practice among contemporary organizations.
They are mainly used to increase market share, gain a competitive advantage and explore new
markets (Rafferty& Restubog, 2010). Additionally, the success of these strategies depends on the
organizations’ ability to adapt to changes. According to Rafferty and Restubog (2010), over the
years, merging has led to the failure of organizations due to mistakes made in the post-merger
phase. To fully understand such errors, this report analyzes the post-merger process of DeWaal
Pharmaceuticals and BioHealth Labs.
Conflicting Values
One of the conflicting values affecting integration after the merger between DeWaal
Pharmaceuticals and BioHealth Labs is related to their cultures. DeWaal Pharmaceuticals is a
Dutch company that highly values its beliefs, which is expressed in Kaspar van de Velde's
refusal to shut down the Indonesia plant since it is linked to the colonies. On the other hand,
BioHealth Labs is an American company, which does not highly regard such values because
Steve Lindell is willing to shut down the plant based on performance. Cultural conflicts are
sometimes experienced after mergers as revealed by a study carried out on integration after a
merger between two National Health Service trusts (Ovseiko, Melham, Fowler, & Buchan,
2015). Ovseiko et al. (2015) state that the study showed the conflict resulted from differences in
operation because one was team-oriented and the other was not. The theory of mergers and
acquisitions and Cooper's model explains that the cultures of companies involved in a merger
have to be similar for the merger to succeed (Stahl & Voight, 2004). Based on this assessment,
the conflict being experience is inevitable.
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The other conflicting values between DeWaal Pharmaceuticals and BioHealth Labs is
related to the management styles used. According to Junni and Sarala (2014), two studies
regarding the effect of leadership and employee relationship during mergers revealed that a good
relationship assists in reducing the employees’ change resistance. For this case, the lack of
effective leadership has made some employees refuse to move to America, and others have quit.
Steve Lindell employs a democratic style of leadership while Kaspar uses the autocratic one. For
example, Steve discusses ideas with Kasper before making any decisions, but Kaspar mainly
makes decisions without considering Steve’s ideas, which gives him the upper hand. According
to Bhatti et al. (2012), democratic leaders make decisions with the help of others while autocratic
leaders make decisions without the contributions of others. Generally, both leaders are using the
situational leadership theory because the decisions made are task oriented and aimed at getting
themselves out of the post-merger situation (Korzynski, 2014). Overall, both leaders exhibit
different styles of management and it is affecting the employees’ morale.
Critique
The staffing process Steve Lindell and Kaspar van de Velde are using during integration
is not effective. Firstly, the two need to define the criteria for hiring the top executives of the new
company. Initially, the two had decided that Kaspar would choose the leaders of human resource,
global marketing, and Europe operations. Steve would choose the leaders of finance, research
and development and the entire company's operations. These top managers are selected based on
who Steve and Kaspar deem fit. This method is ineffective because Steve is reluctant to accept
some of Kaspar’s choices such as Christian Meyer as the head of Human Resource and some
executives like Sandy Allen had left. To avoid such conflicts, Steve and Kaspar should have
outsourced the hiring process to a consulting agency. According to Rajamäki (2017), a study
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revealed that hiring a recruiting firm guarantees that competent employees are hired. For this
case, the appointed firm can assess to decide the best candidate for the job. Hiring a firm also
demonstrates democratic leadership through delegation.
The organizational structure used to run the new company is not appropriate. Steve
Lindell was chosen as the Chief Executive Officer and Kaspar van de Velde as the chairman.
Steve is the senior executive, yet Kaspar’s leadership skills make it seem like he is the one.
According to Eze (2015), the company’s chain of command is supposed to outline the
responsibilities of its leaders. Presently, Steve and Kaspar have not established a clear chain of
command because Kaspar is making the final decisions and Steve is the senior executive. The
lack of a clear chain of command has affected the shareholders because the share price has
reduced by twenty percent. Moreover, the employees are also worried, and some have already
left BioHealth. Lastly, the media reports concerning the lack of leadership in the company may
affect its image and future revenue. For the merger to succeed, Steve needs to exercise his
leadership skills or restrict Kaspar’s skills by setting policies.
The process used to integrate the two companies does not have strategies to deal with the
different cultures. Steve Lindell is aware that cultural differences exist between the two
companies, but he has not developed strategies to deal with them. Based on Cameron (2008)
analysis, BioHealth exhibits a clan culture. The culture is defined by the friendliness of the
employees since Allison Whitney and Bruce Bollinger efficiently communicate with Steve, their
senior executive, about what is going on in the organization. On the other hand, Dewaal
Pharmaceutical’s culture is hierarchical. The culture is depicted in the way Christian Meyer
insists on using assessment tools to choose top executives because procedures matter but for
Bruce and Steve they do not. Due to these differences, failing to create strategies that clearly
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define the accepted cultural values for the new organization is planning to fail. Cameron (2008)
recommends the use of stories and activities that illustrate the accepted culture to foster cultural
change. For example, teamwork can be highly valued in the workplace, and it can be
demonstrated by showcasing successful teamwork projects.
Lastly, the process is characterized by slow decision-making techniques. According to
Schuler and Jackson (2008), it is essential that the recruitment of employees, especially the top
executives (who are retained), occurs a few days after a merger. For this case, Steve chose to
concentrate on the regulatory issues instead of retaining his employees. As mentioned earlier, he
has lost one of his top executives, and others are almost leaving. It is worth noting that Steve and
Kaspar understand the importance of completing this process, but they cannot agree on the
solution. In addition, these two executives have not chosen the plants that will be shut down.
This indecisiveness is affecting the selection of top executives because the job positions are not
clearly defined. It would be more efficient if Steve outsourced the recruitment process. For the
indecisiveness, they could use data analytics to make decisions.
Solutions to the Conflicting Values
Designing the top structure of the organization is a way to reduce the conflicts witnessed
after the merger. According to Ovseiko et al. (2015), influential leadership that is characterized
by excellent decision-making skills can be used to reduce conflict in the organization. Therefore,
Steve and Kaspar should recruit the top managers and define the organizational structure.
Additionally, excellent leadership skills can assist in creating a new culture that reflects the
values of the new organization. A study carried out on mergers and acquisition that occurred in
South Africa between 2002 and 2010 revealed that approximately 70 % of the respondents
agreed that top management plays a role in the change process (Barker, 2013). Having senior
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management on board creates commitment that steers the post-merger processes. For these two
companies, Steve and Kaspar may have to agree on a new leadership team. A team-oriented
leadership will ensure everyone is involved in the transformation process to avoid the anxiety
and loss of employees.
Choosing an appropriate management style can positively affect the post-merger process.
Bhatti et al. (2012) suggest that democratic leadership is suitable when the focus of the
organization is the employees’ morale while autocratic leadership is suitable when the
productivity of the company is the main focus. In this case, the two companies’ employees are
feeling anxious and reluctant to change. This attitude has made BioHealth lose some valuable top
managers. Therefore, to solve this issue, Steve needs to involve the employees in the post-merger
process. His conversation with Allison reveals his inability to reassure the employees and his
ignorance of its significance because he asks her to calm the other employees. Steve should
personally discuss the process with his top managers to avoid losing them. Additionally, it will
build trust that will help them overcome the resistance to change.
Lastly, the cultural differences witnessed in the new company can be minimized by
cultural change. Cameron (2017) suggests the use of a seven-step process that leads to cultural
change. The first step is the identification of the values that will change and those that will not.
The second step requires the use of stories to communicate the values. An example is a story
about the events that led to the merger. The third step is determining the activities that will be
stopped or continued. For example, the team projects may be continued. The fourth step requires
the celebration of small wins, which means cultural changes should be recognized and
celebrated. The fifth step is the determination of metrics to measure success. The sixth step is the
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use of communication in the change process to minimize resistance. The last step is the
development of leadership that reflects the cultural change.
The Process for the Top Structure
From the above assessment, it is evident that the new organization requires a new process
to restructure the top management. The first stage should entail the selection of an integration
manager. Schuler and Jackson (2008) recommend that the manager should be someone who is
not running the business to ensure that the focus is only on the integration process. For this case,
it is better if the company outsources the service to a consulting firm that can handle the hiring
process too. Hiring a consulting company will also give Steve and Kaspar time to focus on other
essential aspects of the merger. Additionally, the manager should exhibit strong leadership skills
to provide a clear direction for the company (Schuler & Jackson, 2008). It is also important that
the leader learns about both firms before beginning the integration.
The second stage is designing a team that will manage the integration. The leader
selected earlier will create a team composed of the company's two senior executives, other top
executives and his colleagues from the consulting firm. The team will make it easier for decision
making and implementation. The third stage is designing the structure of the company. For this
case, Steve and Kaspar have not yet decided the plants that will be shut down, which is affecting
their ability to choose executives. According to Schuler and Jackson (2008), the management
structure should have been designed a few days after the merger to avoid uncertainty in the new
company. Therefore, the consulting firm should use data analytics to determine the plants that
should continue running.
The fourth stage is retaining the top performing employees. Schuler and Jackson (2008)
state that the integration leader should aim to retain a majority of the employees. For this merger,
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the leaders should retain an equal number of employees to promote equality. The leader should
ensure that the company does not lose other employees by speeding up the hiring process. To
encourage equality, each company should provide potential employees in the various fields
based on what was decided during the merger. The team can decide whether the candidate
qualifies for the position based on appropriate hiring techniques. Assessing the candidates is
crucial because it eliminates the conflicts being experienced at the moment due to selecting
employees based on instinct and past performance.
After hiring the managers, the team needs to motivate the employees. Schuler and
Jackson (2008) recommend the use of incentives to retain employees. For example, the company
can increase the salaries of some of its top executives. To motivate the rest of the employees,
Steve and Kaspar need to communicate better by allowing them to express their fears and
grievances freely. Additionally, these leaders should find time to address these issues personally
or delegate the task to the team that is handling the integration. Lastly, the team should assist in
implementing strategies to manage change.
Usefulness of the Management Theories and Concepts Used
The situational leadership theory is significant because it defines the decision-making
styles used by Steve Lindell and Kaspar van de Velde. According to Kaifi (2014), situational
leadership is effective because it focuses on two aspects, which are tasks and relationships. Steve
and Kaspar portray situational leadership that is task oriented. The two differ in their decision-
making style where Steve is consultative, and Kaspar is autocratic. Additionally, they both
neglect the relational aspect of this type of leadership because they are unable to anticipate the
needs of the employees. An empirical study carried out to determine the situational leadership
intensities of millennials, and Generation X revealed the millennials have higher intensities than
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Generation X (Kaifi, 2014). This analysis may imply that it is easier for Steve than Kaspar to
adapt to the situation. This finding can be demonstrated by Steve's ability to quickly shut down
poor-performing plants while Kaspar wants to hold on to them based on values. This illustration
shows that this theory depicts the leadership style being used.
The democratic leadership theory is also used as a recommendation. A study carried out
on teachers from public and private schools about the democratic leadership type, and job
satisfaction revealed that a relationship exists between the two. Additionally, it showed that
democratic leadership led to more job satisfaction. For this analysis, the democratic leadership
theory is recommended to improve the relationship between the top executives and the
employees. It is meant to urge the top executives to communicate to the employees to build trust
and prevent them from resigning. The executives may also gain valuable insights about what is
going on in the company, which may be helpful in the change process.
Another practice that is recommended for the company is Henri Fayol’s chain of
command. According to Crumpton (2013), this principle assists in decision making because a
detailed structure is used. For this company, Steve Lindell would be assigned responsibilities as
the senior executive, and he would have the right to make final decisions on some issues. This
method would reduce the conflicts witnessed. This explanation shows that this principle plays a
significant role in the analysis.
Conclusion
The success of a merger highly depends on the compatibility of the organizations’
culture, retention of top executives, and management style. From the analysis, the cultures of
DeWaal Pharmaceuticals and BioHealth Labs are not similar. The two senior executives are too
busy trying to make decisions that they do not realize. Meanwhile, the employees are scared and
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resigning. These issues have affected the success of the merger. However, they can be resolved
by changing the management style, selecting the top executives and implementing a strategy to
improve the organizational culture. Ultimately, after the implementation of the solutions the new
organization is expected to earn the estimated returns.
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