HBR Case Study: Analyzing the DeWaal BioHealth Merger Challenges

This case study examines the merger of DeWaal Pharmaceuticals and BioHealth Labs, highlighting conflicting values, management issues, and integration challenges. The analysis identifies issues such as differing leadership styles, staff turnover, and regulatory hurdles. It applies management theories like Elton Mayo's behavioral therapy, Fredrick Taylor's scientific management, and Henry Fayol's theory to understand the impact on employees and organizational structure. The study critiques the integration process, emphasizing staffing problems, lack of communication, and inadequate reward systems. Recommendations include establishing a clear organizational culture, implementing a unique decision-making process, and creating an employee brand. Conflict resolution strategies involve understanding conflict sources, respecting stakeholder interests, and seeking expert opinions to facilitate a smoother merger and improve the overall outcome for the newly formed DeWaal BioHealth Company.

Running head: HBR CASE STUDY 1
HBR Case Study
Name
Institution

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HBR Case Study
The identification and explanation of conflicting values in the case using relevant
management theories and concepts
Undoubtedly, the merger between two pharmaceutical companies DeWaal
Pharmaceuticals and BioHealth Labs resulted in different conflicting values and management
issues that threatened the successful operations of the propose DeWaal BioHealth Company. For
instance, the merger faced numerous management wrangles among other staff problems that
further hindered efficient operations. Remarkably, while Kaspar had insisted on having his
employees lead the departments of HR, operations in Europe, and global marketing. On the other
hand, Steve insisted on controlling COO, CFO, and Research &Development departments. The
stipulated division of labor and responsibility clearly did not auger well with some top-level
employees and management team. Moreover, the merger faced increased turnover rates, general
incompetence among the staff, regulatory hurdles presented by the FTC and the European
Commission.
Most of the above-stipulated challenges have been caused by the poor attitudes exhibited
by some of the employees who are not satisfied with the terms stipulated under the merger
agreement. For instance, the two CEOs both feel that they should have more control in the
management of the new company while some junior employees are increasingly becoming
worried about the projected changes that their jobs are likely to bring into their lives. Elton
Mayo’s behavioral therapy of management supports mergers implies the increased need for
employee productivity and this may have a significant impact on the psychological status of the
employees. The theory further reiterates that employees would love to feel involved and

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important especially during the early sags of the merger. Such motivated employees are likely to
respond positively to the varied changes in their respective work settings. As such, Peter should
make Kaspar feel more valued and respected by giving him some responsibilities that befit his
stature as competent CEO.
Another important value that can be derived from the case study is the significant change
in organizational norms given the unique cultural composition and structure of the two
companies. According to Suddaby (2010), HR professionals from both companies must work
together to establish a new individual and organizational culture and this may force employees to
give up some of their values and practices in favor of the new procedures. Therefore, Steve and
Kaspar should conduct regular employee integration meetings to further facilitate cooperation
and reduce the increasing turnover rates. Fredrick Taylor’s theory of scientific management also
points out that the organization should champion for the integration of employees to maintain
and improve production and performances (Langley et al., 2013). The company can comfortably
attain this by encouraging the employees to know each other through the numerous bonding
activities that will be organized by the HR department. According to McKinlay & Starkey
(2008), DeWaal BioHealth Company requires serious team-building activities to strengthen the
rapport and enable the formulation of new work procedures.
Critique of the process used in the integration
Integrating two companies to work as a single entity with shared vision, mission,
customer bases and organizational objectives can be very challenging. Indeed, there are
numerous cultural, managerial, economic and political issues that often results into anxiety and
conflicts during such complex processes. Every company aim at successfully navigating possible
mergers based on clear vision, comprehensive strategies and strong leadership skills. An

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instrumental part of any merger and acquisition involve preparing for and effectively managing
arising issues that are inevitable.
One of the primary issue common in any merger or acquisition includes staffing issues
and increased efficiency. In most instances, mergers involve having significant reduction or
increase in staffing among other important changes. According to Green (2016), a merger is
more likely to go more smoothly is the employees and other relevant stakeholders are adequately
protected from all uncertainties and are effectively involved in the formulation of diverse
business processes.
In this particular case, Kaspar insisted on having his employees lead some of the
departments in the newly formed DeWaal BioHealth Company. Some of these departments
placed under direct control of Kaspar’s company included of Human Resources, managing the
company have expanded operations in Europe, and conducting global marketing of the firm’s
brands (Bailey, 2014). Conversely, Steve was tasked with controlling other important
departments at the newly formed DeWaal BioHealth Company. The departments unilaterally
paced under Steve’s control included COO, CFO, and Research &Development among other
managerial issues. In addition, Steve and Kaspar were both fighting to have a large share in the
direct control of the company and this resulted into more confusion and anarchy among the
employees.
However, the proposed structure and top management staffing proposed by Steve and
Kaspar did little facilitate the integration processes and successful operations of the new DeWaal
BioHealth Company. Despite the new changes in the management structure and systems, both
Kaspar and Steve failed to keep the staff under their respective control informed of the stipulated
changes (Trautwein, 2013). For instance, the staff did not have a clear chain of command on who

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was the new CEO or any other middle-level managers. The increased staff turnover rates can
also be attributed to the lack of an adequate reward system that could remit bonuses and other
incentives to the hardworking employees.
Steve and Kaspar did not follow due diligence when dealing with the employees given
that most of them felt secluded from the daily management of the entity, and this further
contributed to the slow start of DeWaal BioHealth Company. Instead, the two CEOs could have
encouraged their senior staff to assume more responsibilities especially during the initial stages
of the merger negotiation. According to Cartwright & Cooper (2012), assigning more
responsibilities to the staff and increasing their contributions to the merger negotiation processes
could have streamlined DeWaal BioHealth Company’s management structure and staff loyalty.
Specifically, the CEOs Steve and Kaspar remained confidential and did not involve key staff in
assessing key deliverables. Alternatively, the CEOs could have assessed individual abilities and
skill levels during the negotiation process to further help in making decisions on the appropriate
structure of management that benefits DeWaal BioHealth Company.
According to Bowditch, Buono & Stewart (2011), Steve and Kaspar did not accurately
assess the gaps in skills and had no effective methods of filling such gaps. While the CEOs were
assigned different responsibilities, they did not pay little attention to the different organizational
structures that both companies had in place. Fredrick Taylor’s theory of management argues that
organizations in a merger should have a clear structure that can be used to incorporate different
management issues and processes. Moreover, Henry Fayol’s theory of management supports that
most employees become more efficient and productive if an organization has a clear
management structure.
Solving conflicting values

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Remarkably, the management of the newly formed DeWaal BioHealth Company require
rigorous programs that clearly state organizational objectives and strategies that should be
incorporated among the employees. For instance, the company can clearly define various issues
that are likely to change during the integration process. According to Suddaby (2010), one of the
primary challenges facing mergers in inadequate information on various project dynamics.
Therefore, the company should issue clear information to middle-level managers and other
employees who are considered to play an integral part in the whole process. Effective
communication may also minimize the possible negative impacts that are often associated with
the change management procedures particular during mergers. Moreover, when issuing such
communication, the company should recognize major challenges rather than belatedly
highlighting actual decisions that should be implemented. Also, the firm can constitute a
competent change team that will be responsible for issuing such communication.
Another important recommendation that the company can implement is the expect
identification of an appropriate corporate culture and management chain. The company can
achieve this by selecting competent individuals from both companies to lead the integration of
unique organizational cultures. The selected individuals will present their varied viewpoints on
the merger, identify appropriate practices and institute new job descriptions to avoid possible
conflict of interest. The team of professionals will also be tasked with formulating and defining
important work procedures with the primary objective of increasing teamwork and addressing
various issues that often arise among the members.
The steering committee will also consider various strengths and weaknesses of the
existing organizational structures of the respective companies. According to Kast & Rosenzweig
(2004), the strength of corporate entities in a merger must be taken into consideration especially

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during the integration of different companies. As such, the study recommends that the steering
committee should establish clear structural controls that will give accurate information on the
expected and predictable level of performances.
Similarly, the company should implement a unique decision-making process that is
generally accepted by both companies who are part of the integration process. According to Rice
(2013), any new company must establish an exceptional decision-making style that will speedy
the management processes at the company. Such processes will also help the new company to
retain its customers and competent employees further strengthening their competitive edge. The
decision-making model will also include various players who will be responsible for
understanding and communicating issues effectively. The team will also be responsible for
communicating deadlines and encouraging the employees to remain steadfast and committed
towards attaining organizational goals (Shafritz, Ott & Jang, 2015).
Additionally, DeWaal BioHealth Company should establish a distinctive employee brand
with a specific view of understanding their workforces. This will include retaining experienced
and middle-level managers from both companies and ensuring that the selected team can help the
company to create a unique brand image and name. The CEOs also failed to provide proper
motivation to their employees during the early phases of merger negotiation. Abraham Maslow
theory supports that human beings have insatiable needs that are mostly organized into
hierarchies and will strive to satisfy most of them. Therefore, the CEOs should have applied
Maslow’s theory of motivation to reward good performance by setting high-performance goals
and objectives.
Recommended process to sort the integration problems

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When solving such conflicts, Steve and Kaspar should first ascertain the sources of the
conflicts and understand some of the common drivers that may propel divisions during
organizational mergers. According to Young & Ghoshal (2016), every stakeholder in a merger
must realize that mergers result into loss of a significant amount of influence and status among
other important organizational changes. Moreover, the newly formed organizations through
mergers and acquisition are more likely to establish their own cultures and business processes.
Therefore, to pivot the mission and vision of the new company, Steve and Kaspar apply relevant
to conflict resolution strategies that are subsequently stipulated (Shafritz, Ott & Jang, 2015). The
first step that Steve and Kaspar should follow when initiating the conflict resolution process is
the creation of higher deals that makes each and every stakeholder comfortable with the
management and operation of the company. This will enable Steve and Kaspar and other
employees to establish shared goals and objectives that based on the psychological experiences
and well-being of every important stakeholder.
Secondly, Steve and Kaspar should have a clear respect for the interests of every
pertinent stakeholder. For example, Steve should listen to Kaspar’s desire to have more stakes in
the management of the newly formed company. This will enable the organization to incorporate
diverse opinions and management principles that will ultimately help the company to recognize
its core competencies and improve on its weaknesses. Moreover, the management of the merged
companies should seek expert opinions and encourage associated parties not to confine their
thinking to being the ultimate “winners and loser”. The primary objective of seeking expert
opinions is to encourage the members to compromise and be ready to settle for less for the
general wellbeing of the company. According to Hatch (2018), seeking others’ opinions and

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incorporating such perspectives into the management of the company will result in a stronger and
well-managed entity.
The management teams should also clearly spell out various issues that are deemed
important in the organization. Such issues may include new wages and salary structure, reward
system, terms of employment, new job descriptions and postings. According to Daft, Murphy &
Willmott (2010), giving clear information especially during mergers and acquisition can
eliminate possible confusion, anarchy, and ambiguity that are often seen as the primary causes of
conflicts. Moreover, coordinated approaches to promptly solve arising challenges among the
employees will further strengthen the merger processes.
The management should further solicit input from the employees by giving them time to
air their varied opinions without any fear of intimidation. When soliciting information from the
employees and other important stakeholders, there should be clarity on what the company
considers to be negotiable and those that cannot be compromised. This will prepare the
employees to act quickly and decisively towards ensuring full respect for the company’s interest
(Duymedjian & Rüling, 2010). Such clarity will also encourage inclusivity, improve the
company’s credibility and eliminate possible confusions and ambiguities that are often common
during the integration of different companies.
Useful management and organizational theories and practices in the case
According to Burke (2017), when two firms agree to merge to form a new business
entity, there are numerous HR and corporate issues that are likely to arise. For instance, the two
top CEOs Steve and Kaspar both wanted to control operations in the newly formed company. As
such, Steve and Kaspar ignored different management theories that include general rules guiding
top-level and middle-level management of the merged companies. Subscribing to such theories

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could have helped Steve and Kaspar to effectively relate with other employees based on the long
and short-run business objectives.
The above conflicts can be explained using Max Weber’s bureaucratic theory of
management. According to this theory, top management in organizations should clearly establish
a distinction between authority and power (Langley et al., 2013). The theory attests that power
brings forth submission through threatening to punish or inflicting the actual punishment. Weber
clearly demonstrates that a clear division of labor, a well-stipulated hierarchical structure and
employee selection based on technical expertise can significantly reduce possible conflicts. Steve
and Kaspar did not give clear specifications of the complete set of management rules that were to
govern the merger as suggested by Max Weber. Instead, Steve and Kaspar purposed to stick with
the written documents on legal power, formal relations and division of labor further hindering
the successful performance of the merger
Moreover, the identified conflicts facing the merger can be explained using Fredrick’s
Taylor theory of scientific management. According to this theory, Steve and Kaspar did not
concentrate on improving the efficiency of labor productivity. The theory proposed varied
reward systems as effective methods of increasing efficiency among the employees (Hill, Jones
& Schilling, 2014). Specifically, the theory stresses on teaching, training and developing
workforce especially after a merger to help them improve their service delivery. Steve and
Kaspar failed to fully harmonize their personal interests and that of the employees especially
with their constant wrangles and power struggles.
In general, this theory puts more emphasis on securing mutually understanding relations
between employees and employers with the primary objective of establishing fair levels of
performances and rewarded competent staff. In addition, the conflicts that faced the newly

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integrated company can be explained using Henri Fayol’s administrative theory of management
(Alexander, 2013). According to this theory, Steve and Kaspar failed to instill discipline,
authority and responsibility and effective division of work among the employees.
Correspondingly, the theory stresses on good remuneration systems, the unity of command and
centralization of organizational activities.

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