Contemporary Management Case: BioHealth-DeWaal Merger Analysis

This case study examines the merger between BioHealth Labs and DeWaal Pharmaceuticals, focusing on the management challenges that arise from conflicting values, communication barriers, and organizational culture differences. The report identifies issues such as conflict between the CEO and Chairman, employee retention problems, and the need for effective integration strategies. Recommendations are proposed based on theories like Vroom’s Expectancy theory, Job Embeddedness, Herzberg’s Two-Factor theory, Communication Accommodation theory, and Cognitive Dissonance theory. The analysis discusses the integration process and evaluates the usefulness of these theories in addressing the identified challenges, emphasizing the importance of people-oriented strategies and positive organizational culture to ensure a successful merger.

Running head: CONTEMPORARY MANAGEMENT
CONTEMPORARY MANAGEMENT

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Executive summary
This report follows the case study of the merger between two major firms, New York-
based BioHealth Labs and Holland-based DeWaal Pharmaceuticals and the major issues or
problems associated with mergers. Conflict management as well as resolving communication
barriers has been identified as major hurdles for the company. Additionally, the conflicting
values of both the firms as well as the organisational and cultural differences have been
highlighted in this report. Recommendations to overcome these challenges have been proposed
with respect to several relevant theories, such as Vroom’s Expectancy theory, Job
Embeddedness, Herzberg’s Two factor theory, Communication Accommodation theory,
Cognitive Dissonance theory. The overall process of integration of the merger has been
discussed along with the evaluation of the proposed theories for this purpose.

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Table of Contents
Introduction......................................................................................................................................3
Conflicting values at stake in the case.............................................................................................3
Critical analysis of the process for integration with respect to structure and top management
staffing.............................................................................................................................................5
Recommendation on resolving the conflicting values.....................................................................7
Process to be implemented for the two senior executives and their HR for following integration
to the top structure...........................................................................................................................9
Evaluation of usefulness of the management and organisational theories and practices from the
subject............................................................................................................................................10
Summary and Conclusion..............................................................................................................11
References......................................................................................................................................13

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Introduction
Mergers and acquisitions are key factors involved in the corporate growth strategy of
firms. It aids in the progress and development of a firm, both in financial as well as
infrastructural terms. Regardless, there may be a number of challenges following the completion
and implementation of the merger, which may come from the top management to the staff of the
company. This paper focuses on the case study of the M&A between BioHealth Labs and
DeWaal Pharmaceuticals and the associated challenges and issues following the implementation
of the M&A. There have been conflicting values identified between the Chairman and the CEO
has been evident, which causes a panic among the staff, which results in the disintegration of the
skilled employees. The integration of the suggested solutions to the problems is mentioned,
along with the application of relevant management theories for the better practices of the firm.
Conflicting values at stake in the case
The CEO Steve Lindell and the Chairman, Kaspar van de Velde has demonstrated
perfectly the ability to work and collaborate together. Regardless, the issue in the values and
opinions causes delay in the implementation of the eminent and necessary decisions. It may be
stated in this regards that there are positions or designations for 65 individuals, in both New
York and the Netherlands, with 120 people competing for the positions (Light, 2001). Both the
companies BioHealth Labs and DeWaal Pharmaceuticals have skilled and qualified individuals
fit for the positions (Light, 2001). Since, the M&A had taken place between firms from two
different countries, a major difference in the cultures has been evident, as is prominent in case of
the work cultures. Firstly, a challenge of communication is evident between the leaders of both

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BioHealth Labs and DeWaal Pharmaceuticals, as can be supported by their meeting for lunch.
Their discussion for closing plants and delegation of positions demonstrate a stern conflicting
attitude. In addition to that, the major challenge has been identified as the process and scope of
employee retention (Frankel & Forman, 2017). It was evident that BioHealth Labs in the
meantime of 2 months from the merger had lost about 5 skilled employees, as the employees had
evaluated potentially better offers (Light, 2001).
Figure 1: Job Embeddedness theory
(Source: Sanjeev & Surya, 2016)
The Job embeddedness theory may be taken into consideration in this case. This theory
chief outlines that the employee consider the links that they have with thee organisation or the
fellow colleagues may influence their decision of leaving or staying. For instance, in this case,
the employees of BioHealth Labs have started to leave their posts after the M&A, which can be
an evidence of the dissatisfaction of the employees related to the merger with the Holland
Company. Moreover, considering Vroom’s Expectancy theory, it may be stated that the

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alignment of the goals of the employees, with that of the organisation is imperative (Sarala,
Junni, Cooper, & Tarba, 2016). However, in case the interests are not aligned, it may lead to the
employees going their own way, as is demonstrated by the employees of BioHealth Labs,
following the merger, which may have been perceived to facilitate a change in the organisational
culture as well as the organisational goals (Thietart, 2016). According to Alshmemri, Shahwan-
Akl & Maude (2017), the people problems are the issues related to HR are the major challenges
faced by an organisation following a merger or an acquisition due to the attempt at merging two
very different cultures and aim at collaborating for further benefits. As per the human relations
theory, it is observed that the supposition that productivity has increased the improvement of
work condition has been confirmed in this experience. It was, so, concluded that the
human relations and the work environment that results from there and the
creation of bonds among the workers those who observed by administration are
worried for their socio economic condition. Furthermore, it is evident that both the
leaders have failed to communicate effectively with one another, thereby failing at the attempt to
collaborate and come to a concrete decision regarding the operations of the firm (Pinheiro et al.,
2016).
Critical analysis of the process for integration with respect to structure and
top management staffing
The process of integration for BioHealth Labs comes with numerous conflicting matters.
For instance, Steve tries to strike up collaboration with Kasper, in which he fails, due to the
major organisational as well as the cultural differences prevalent between both the organisations
(Heracleous & Werres, 2016). It is evident that both organisations are considering promoting

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their best employees with the fullest potential for the identified 65 positions and are failing to
come to an agreement. The organisational structure and the culture of the companies are quite
different and it requires time and effective communication skills in order to mitigate these issues
(Angwin, Mellahi, Gomes & Peter, 2016). The Communication theory highlights the attainment
of information and the methods through which it is conveyed to the recipient. It has been
established through several research that culture lies at the heart of mergers, as is represented in
this case. Furthermore, the issues arising are mostly people-oriented which is proven by a series
of laboratory experiments conducted in the year 2000 (Lebedev, Peng, Xie & Stevens, 2015). A
decreased performance has been evident in case of most firms undergoing a merger, due to the
differences in culture of both the organisations.
According to the neoclassical theory, individuals understands the involvement of
behaviour sciences with management . As per this theory organisation is considered as a social
system and the performance of the organisation gets affected by human actions. (Rees & Smith,
2017). This may be evident in this case as Steve is seen changing his communication style to
bargain with Kasper. Additionally, the Cognitive Dissonance theory is evident in the
conversation between Steve and Alison, who claims that the employees are concerned of
Kasper’s manipulative abilities; however, Steve tries to avoid listening to the issues to match his
actions, claiming that he is still in charge of the firm (Light, 2001). It may be stated that Steve is
not efficiently taking up the duties as members of the top management take responsibility. Steve
fails to secure the position for several of his deserving candidates namely, Bruce and Vijay
Naipaul (Light, 2001). Therefore, it is obvious that people management issues are likely to pile
up for the CEO.

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The structure of both the companies is different from one another. The subject of
“synergy” is often used to describe the concept of the integration of mergers and the benefits
derived out of them (Gomes, Mellahi, Sahadev & Harvey, 2017). It may be stated in this context
that synergy gain have been identified as the major objective for various firms to undergo M&A.
The top management staffing in BioHealth Labs is close-knit, regardless, it becomes evident that
the employees are not assured of their positions and thus keep leaving the organisations for better
options. It is the responsibility of the top management or the CEO to be assuring and patient with
the staff. The state of confusion exists among the employees and they need assurance and
stability which Steve fails to provide them (Steigenberger, 2017). This situation can be clearly
explained with Herzberg’s Two-factor theory, which establishes that there are hygiene and
motivational factors playing a crucial role for the employees to be retained in the organisation,
which can be established as achievements, recognition, supervision, company policy, work
conditions, relationship with top management, promotion, growth, job security and more, as is
illustrated in Figure 2 (Wheelen, Hunger, Hoffman & Bamford, 2017). All of the aforementioned
factors have been under scrutiny due to the recent M&A of the company and the imbalance
causes a distinct lack of satisfaction among the employees.

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Figure 2: Herzberg’s Two-factor theory
(Source: Barba-Sánchez & Atienza-Sahuquillo, 2017)
Recommendation on resolving the conflicting values
The leaders of both BioHealth Labs and DeWaal Pharmaceuticals have been trying to
actively come to an agreement regarding the plants and the assets of the individual companies,
which are now a part of the merged firms. The contingency theory principally outlines the major
causes of conflicts as well as the effective strategies implemented by individuals or firms in
order to manage people related challenges faced by the organisation. As per the case study by
Light (2001), it has been evident that the conflict is massive between the leaders, thereby leading
to a miscommunication within the staff of the organisation as well. For instance, Steve is forced
to demote Bruce, despite his intentions of not doing so. This can be attributed to one of the major
strategies of the Conflict management theory, which may be ascertained to be compromise.
When Christian Meyers is named as Head of HR of the company, Bruce is demoted, on the

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proposition of Kasper (Light, 2001). Though compromise is essential, it must only be done when
absolutely necessary, as it gives a ‘win some-lose some’ outcome and the long-term objectives,
as well as the important values are derailed. Additionally, making better offers may negate the
chances of comprises (Sammut‐Bonnici & Galea, 2015).
Furthermore, there are other lingering issues such as people management and employee
retention challenges as it is evident from the conversation between Steve and Allison. Steve
needs to have certain goals in mind which are to be taken into account while furthering the
negotiation sessions with Kasper (Light, 2001). It would be advisable for Steve to be able to
break the proverbial ice with Kasper. Certain collaboration activities which are common in the
Dutch culture should be taken into consideration as a sign of respect for their culture.
Negotiations with Kasper may be fruitful in case Kasper realises that Steve as CEO means no
disrespect. The Conflict management theory can be extensively applied to the issues. An extra
integration effort is required in order to manage the polarisation of the employees, as well as the
tendency of groupings among the employees which enhances segregation in the positive work
culture and the disruption in the overall organisational output (Tian, Cordery & Gamble, 2016).
Promoting a positive culture as well as providing certainty to the employees is essential.
Moreover, collaboration and avoidance are not options in this case, which could have proven to
be beneficial as there are no losers in these strategies (Light, 2001).
Process to be implemented for the two senior executives and their HR for
following integration to the top structure
Focusing on the benefits of the people is to be set as the primary goal for the
organisation. Being employee-oriented, despite the merger is to be primary process to be

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followed. In addition to that, the organisational policies are subject to review following a M&A
procedure, which should revise the policies owing to the employee-oriented nature of the rules
and protocols (Allen, Peltokorpi & Rubenstein, 2016). Moreover, the senior executives or the
HR Heads for both the companies need to develop a common ground for facilitating a proper
culture within the organisation. Firstly, a positive workforce and environment influence
employee retention as well as employee performance and productivity positively. Additionally, it
is to be noted that analyses such as the SWOT analysis may prove beneficial as it provides an
insight into the individual strengths of the firms (Holtom, 2016). It is to be taken into account,
that the merger had been undertaken with the prime objective of utilising the joint resources as
well as conjoin the strengths of the firms to increase productivity significantly (Greve & Man
Zhang, 2017).
It is to be noted that the alignment of the goals or objectives of both the organisations
participating in the merger is essential as the activities of the competitors remain unknown and
the companies remain vulnerable during the time wherein the organisations struggle to
thoroughly integrate the merger from the top management to the executive and the workforce
levels. Furthermore, the unexpected changes in the strategic environment are to be taken into
account, through the concept of “always on strategy”. It focuses on exploring and evaluating
signs of disruption in the strategic and the external environment of the business. This may be
further facilitated by conducting a Porter’s five forces analysis, which provides a valuable insight
into the power and the potential activities and strategies of the existing competitors as well as
new market entrants (Kiazad, Holtom, Hom & Newman, 2015). Additionally, it explores the
power of the consumers or buyers and the suppliers who may take advantage of the lagging
period after the merger between the firms. Lastly, motivating the employees through the use of

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several conventional motivational factors as mentioned in the Herzberg’s Two factor theory,
such as remuneration, rewards, recognition can be offered to encourage positive productivity.
Evaluation of usefulness of the management and organisational theories and
practices from the subject
The organisational theories of conflict management would play a crucial role in the
mitigation of the conflicts, thereby prompting the leaders to arrive at a conclusion for the firm.
The Herzberg’s Two factor theory has been considered multiple times in this report to emphasise
on the isolation of the factors identified to develop motivation for increased performance and
productivity (Holtom, 2016). The factors for motivation and hygiene as depicted in Figure 2,
outlines the potential solutions to resolving the people management issues prevalent in the
organisation, due to the merger. In addition to that, a number of communication theories,
namely, Communication Accommodation theory, Cognitive Dissonance theory, have been found
to be present in the given case study. The aforementioned theories have been found to be
applicable as an explanation for the behaviour of Steve on various occasions.
With the help of Administrative management theory, it attempts in finding a rational way
for designing an organisation. This theory calls for a formalised administration structure, a lear
labour division with the help of delegation of power and authority has been relevant to areas of
responsibilities.
Furthermore, this particular theory also states that the behaviour of an individual is based
on the expected outcomes. Hence the activities undertaken by the individual strongly reflect the