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IMT 581: Case Study Analysis : Significance of Communication in Change Management during Acquisitions

by on November 17, 2010

When it comes to change management, effective communication is one of the most significant factors which determines the success of the change being originated .This gains even more significance if the change under consideration is change due to acquisition of a culturally different company where there is considerable scope for miscommunication and misinterpretation due to the differences in the work cultures and the verbal identity adopted by each organization.

The case study analysis examines two extreme cases which deal with acquisitions of companies which are culturally different from the acquiring company .In one case, the acquisition went through smoothly due to a well-defined communication plan while in the other case, the lack of a clearly defined communication plan hindered the cross cultural integration process resulting in distrust and lack of mutual respect and an eventual breakdown in intra-organizational coordination .Given below is a brief synopsis of the two cases:

The first case which deals with Federal express’s acquisition of Flying Tiger line shows how an effective communications strategy helped make the acquisition process go through smoothly despite the huge cultural and organizational differences between the organizations (Federal express was a young company which had a flat hierarchy while Flying Tiger line was a older company with a strict hierarchical structure where each organizational unit was unionized and the compensation structure was determined by the union negotiations).

The second case dealt with the famous DaimlerChrysler “merger” which was considered to a fairy tale wedding as it seemed like both companies had the potential and the background to take advantage of each other’s strong points to establish a successful and working relationship. However the lack of strong and comprehensive corporate communication plan to help handle the strong cultural differences and the unwillingness of the management in trying to bring the whole organization under one unified work environment with a common communication and interaction methodology led to considerable losses to the tune of almost $512 Million in the third quarter of 2000. Declining sales and future losses eventually led to Daimler pay Cerberus $650 million in 2007 to take Chrysler and its associated liabilities off its hands which was a total contrast to the $36 Billion initially paid to acquire Chrysler in 1998.

The comparative case study analysis gave some key insights into what companies can do to ensure that the required information is communicated to all the employees as soon as possible and how companies can use communication as a medium of melding culturally diverse companies together to create a homogeneous blend. The analysis also gave key insights into how communication can pay a key role in unifying the companies under one common compensation package as it was significant to establishing a cohesive work environment.

In closing,I would like you to look at what you think defines a strong communication strategy during an acquisition and provide your inputs on that .I would also be really interested in seeing your inputs on how you think cultural clashes and inter-organizational structural differences affect the way a communication strategy is defined and implemented.

By Mervin F Johnsingh

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12 Comments
  1. Here are some general communication strategies I come up with after reading so many case studies on acquisition and mergers (either success or fail). Firstly, in the very early stage after M&A, managers (or whoever in charge of communication) from new parent company should get their hands on a set of integrated communication programs in which target audiences include staff at all levels, market customers, suppliers and distributors. For significant M&A cases (such as Daimler-Benz AG and Chrysler Corporation in Mervin’s article), a comprehensive program on how to report to government regulatory authorities and investors is particularly essential. Secondly, no matter which department is, the communication must ensure the sincerity, equality and impartiality, also, paying attention to the right communication tools and methods for different levels, for those “higher-ups” in the acquired company, it’s especially crucial to take specific communication programs, if necessary, at all costs to retain key personnel and departments. Finally and most importantly, during the process of communication, not only is it important to take the initiative to explain, but also to pay attention carefully and listen effectively as well. That is to say, by building a mode of “two way communication”, both sides, even multiple ones, can have the effects and outcomes of a good communication.

    Che-Wei Hu, Meng-Chi Lee and Zhenhua Wang

  2. swarnikam permalink

    An Interesting pick, as communication is one of the most important factor that ensures a successful merge.Especially when they have contrasting corporate culture and organizational structure. However what matters is, how should the communication strategy be framed such that it is in the benefit of both the organizations, if the two merge into one unit and follow a single style, then which style would they follow. And how would you communicate this across the organization. All these decisions can be evolved through a successful communication strategy.It is especially interesting in the case of Federal Express which being a young company acquired an older company.Thus, here what was taken into consideration, the dominance of the acquiring company or the age of the company. These are the factors that would shape the communication plan.
    Also, communication plan should be devised to tackle the rigidity of the employees. In reference to Daimler’s case,employees were very rigid with their German cultural and strict methodical ways of working. They looked down on their american counterparts. These are sensitive issues which are often overlooked.

  3. Nice read! To add to this topic of corporate communication in change management strategies in general, a lot of effort is invested in non verbal communication too. For example, companies change their logos, put up new signs or even go to the extent of renovating their interior decor to assist this change.

    Thanks,
    Ajay, Nishant & Paul

  4. Jeroen permalink

    Thanks for an interesting topic, I think that in many ways overcoming language barriers between two people have similarities. The fact they you don’t natively speak the others language means a lot of effort has to be put into first listening to the other person to understand them. Then a key factor to successful communication is that it always happens on the terms of the receiver and needs to tailored as such, which mean that you cannot speak as if to someone that natively knows your language but probably in a simplified yet respectful way. All of this makes into very conscious and deliberate communication, without it I don’t think that the barrier would be overcome.

    – Gauravee, Surry, Jeroen

  5. Thanks for the response ,Jeroen and Ajey put up important as aspects such as the unwritten or unspoken communication which is often not considered but is critical to effective functioning .While I was researching for this case study I came across this interesting term called verbal identity which defines the the specific terminology used in the organizations and how specific processes and methodologies are referred to in the course of day to day work .For example,line management is a term which is common across many manufacturing industries but an evaluation of its true meaning reveals different meanings across each industry and ironically differences within each industry itself .While its great to get people to communicate and mesh together and create a sense of oneness,care should also be taken with regards to how they are going to work together and if they really understand each other.

    Swarnika’s post raises an interesting point of a particular partner looking down on another partner due to a stronger financial base or even a sense of superiority ,how do you change the whole mindset of an organization when you go in for an culture blend like this especially when the mindset has provided you with rich dividends.

    Che-Wei Hu is pretty spot on communication not being a one sided street but instead a mutual exchange of ideas,something which often is missed out in an acquisition as it can become a case of instruction down flow from the acquiring company to the company being acquired.

  6. Mansi Sharma permalink

    The communication plan is devised in such a way that it makes sure that the executives of both the companies are able to communicate with respect for each other, irrespective of who is acquiring and who is being acquired. Executives are distinguished individuals who have great knowledge and expertise. Any unkind dialog can create tension which can effect the communication.

    -Mansi, on behalf of the team (Tien, Ruchi, Mansi)

  7. The communication plan has to be precise and in alignment with both the companies strategies to be effective and generate results. Often M&A’s face the problem of leadership alignments and merging them. Therefore, at the C-level, communication plan might prove out to be effective. Also, as Mansi mentioned, though they two organizations might differ in their market status, its essential to have a respectful and considerable plan for both the organizations.
    Shirish and Ke-Ding

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