Human aspects of strategy implementation

• Behavioral issues in strategy implementation• Matching culture with strategy• Human side of M &A• Leadership, power & politics• Employee morale• Personal values &business ethics

Behavioral issues in strategy implementation

• It is vital to bear in mind that organizational change is not an intellectual process concerned with the design of ever-more-complex and elegant organization structures. It is to do with the human side of enterprise and is essentially about changing people’s attitudes, feelings and – above all else – their behaviour. The behavioural of the employees affect the success of the organization. Strategic implementation requires support, discipline, motivation and hard work from all manager and employees

Influence Tactics: The organizational leaders have to successfully implement the strategies and achieve the objectives. Therefore the leader has to change the behaviour of superiors, peers or subordinates. For this they must develop and communicate the vision of the future and motivate organizational members to move into that direction.

Power: it is the potential ability to influence the behaviour of others. Leaders often use their power to influence others and implement strategy. Formal authority that comes through leaders position in the organization (He cannot use the power to influence customers and government officials) the leaders have to exercise something more than that of the formal authority (Expertise, charisma, reward power, information power, legitimate power, coercive power)

Empowerment as a way of Influencing Behaviour: The top executives have to empower lower level employees. Training, self managed work groups eliminating whole levels of management in organization and aggressive use of automation are some of the ways to empower people at various places.

Leadership Style and Culture Change: Culture is the set of values, beliefs, behaviours that help its members understand what the organization stands for, how it does things and what it considers important. Firms culture must be appropriate and support their firm. The culture should have some value in it . To change the corporate culture involves persuading people to abandon many of their existing beliefs and values, and the behaviours that stem from them, and to adopt new ones

Values and Culture: Value is something that has worth and importance to an individual. People should have shared values. This value keeps the every one from the top management down to factory persons on the factory floor pulling in the same direction.

Ethics and Strategy: Ethics are contemporary standards and a principle or conducts that govern the action and behviour of individuals within the organization. In order that the business system function successfully the organization has to avoid certain unethical practices and the organization has to bound by legal laws and government rules and regulations

Managing Resistance to Change: To change is almost always unavoidable, but its strength can be minimized by careful advance Top management tends to see change in its strategic context. Rank-and-file employees are most likely to be aware of its impact on important aspects of their working lives. Some resistance planning, which involves thinking about such issues as: Who will be affected by the proposed changes, both directly and indirectly? From their point of view, what aspects of their working lives will be affected? Who should communicate information about change, when and by what means? Whatmanagement style is to be used?

Managing Conflict: Conflict is a process in which an effort is purposefully made by one person or unit to block another that results in frustrating the attainment of the others goals or the furthering of his interests. The organization has to resolve the conflicts.

Linking Performance and Pay to Strategies: In order to implement the strategies effectively the organization has to align salary increases, promotions, merit pay, bonuses etc., more closely to support the long term objectives of the organization

Matching culture with strategy

Organizational effectiveness results from the alignment of three main components:

Culture: How we do things around here in order to succeed. Leadership: Creating a vision and direction for the

organization and mobilizing people to accomplish them. Strategy: Establishing the fundamental focus for action that

the organization must take in order to provide significant added value to customers.

strategy

leadershipculture

The Four Core Cultures

Collaboration Diversity •

Involvement United We Stand,

Divided We Fall Harmony • People

Interaction Complementary

Pragmatism

ControlSystematize • Objectivity • Order •

Stability Standardization • Utility •

Realism Discipline •

CultivationGrowth and Development •

Commitment •

Growth Commitment and

Dedication • Involvement Creativity

Purpose • Let Things Evolve • Subjectivity • Values

are Paramount • Meaningfulness

Fulfillment

CompetenceProfessionalism • Pursuit of Excellence • Continuous

Improvement • Competition for It.s

Own Sake •

Efficiency • Autonomy and Individual

Freedom •

• Culture is important because it limits or enables strategy. It provides consistency, order and structure, and sets internal ways of life and patterns for internal relationships. It determines conditions for internal effectiveness and drives effective performance. .The most important thing that leaders can do is create and manage culture. The most important culture driver is the nature of the business. If you understand what the business is about, you are likely to understand the core culture.

The Four Core StrategiesSynergyClose partnership • High

customization Total solution • High

personalization Co-development

CertaintyDependability • Efficiency

Interaction with Customer

EnrichmentFuller realization of potential

Growth of Customer • Raising of

human spirit • Further realization of

ideals, value, higher-order purposes

SuperiorityOne of a kind • Create market niche

Extremely unique • Unmatched

product / service • Excellence •

Constant innovation • Operational

excellence Product leadership • Reinvention

The Four Core Leadership

ParticipativeTeam Builder • Coach • Close Partner With Customers •

Integrator • Push for Consensus •Conflict Manager • Amiable •Pragmatist

Integrator: Ensures Utilization of

Diversity

Epicenter: People Process

Motive: Affiliation

Goal attainment: Unique customer

DirectiveAuthoritative • Conservative •

Driver Firm and Assertive •

Definitive • Realist

Structurer: Builds Systems

Epicenter: System

Motive: Power

Goal attainment: Organizational

system

CharismaticCultivator • Catalyst • People

Steward Idealist • Commitment

Builder Expressive • Idealist

Developer: Appeals to Higher-

level Vision

Epicenter: Values

Motive: Self-actualization

Goal attainment: Value-centered

Standard SetterConceptual Visionary • Challenger

of Others • Spurs Competition •

Tough Taskmaster • Stretcher of

People Analyst

Exceller: Drives Constant

Improvement

Epicenter: Concepts

Motive: Achievement

Goal attainment: Conceptual

Human Side of Mergers and Acquisitions

Types of Business Combination

• Merger or Amalgamation– Merger or amalgamation may take two forms:

• Absorption  is a combination of two or more companies into an existing company.

• Consolidation is a combination of two or more companies into a new company.

– In merger, there is complete amalgamation of the assets and liabilities as well as shareholders’ interests and businesses of the merging companies.

• Forms of Merger:– Horizontal merger  it is a merger when two or more firms dealing in the

similar lines of activity combine together. – Vertical merger   it is a merger that includes two or more stages of

production/distribution that are usually separate. A supplier and company. E.g., a leather supplier and a shoemaker.

– Conglomerate merger  it is a merger in which the firms engaged of totally

different unrelated activities combine together.

Acquisition

• Acquisition may be defined as an act of acquiring effective control over assets or management of a company by another company without any combination of businesses or companies.

Types of Business Combination

• Takeover – The term takeover is understood to connote hostility. When an acquisition is a ‘forced’ or ‘unwilling’ acquisition, it is called a takeover.

• Parties in the Acquisition - a) Holding company – it is a company that holds more than half

of the nominal value of the equity capital of another company, or controls the composition of its Board of Directors.

b) Subsidiary company- the company with the lesser number of share is called subsidiary company. Both the companies maintain separate forms of accounts.

• Most merger activity is fairly well planned relative to financial, product line & operational decision, the human element of merger & acquisition is often ignored. ILO found that neglecting human resource activities in merger & acquisition results in a much higher risk of failure. The lack of communication erodes trust & loyalty, resulting in increased job insecurity & workplace stress. The ILO reports states that a full two third of merger fail to achieve their objective, largely because of the inability to merge cultural & other human factors.

HR’s role in merger/acquisitionPre-deal Due diligence Integration

planningimplementation

Identifying people related issues

Estimating employee related costs

Developing communication strategies

Managing employees communications

Assessing individual’s fit with new needs

Estimating employees related saving

Designing talent retention program

Aligning rewards with organizational needs

Assessing ‘cultural fit’ between organization

Assessing cultural issues as potential challenges

Planning for overcoming resistance

Monitoring the new culture & employees dynamics

Educating top management on HR aspects of transaction

• Pre-deal- selection of the target organisation

• Due diligence- during which time the parties meet & disclose all information relevant to the merger.

• Integration planning or pre merger activity just prior to the formal launch

• Fourth stage is actual implementation

Role of HR in Mergers and Acquisition

• 1. Due diligence should be very clear2. Employee’s dissatisfaction to be avoided3. Conduct common understanding programmes with the executive level employees of the company which you are going to takeover.4. Negotiate and make the Union Leaders understand about the entire issue and their future positions after M&A.5. Clear assessment of Manpower to be done6. Understand the Org. Structure/Salary Structure and try to reduce the parity between the two companies.

• 7. Understand all the legal cases pending with the acquiring company and take full accreditation of the cases to take next steps8. Information to sent to all the bodies as per statute.9. Proper Audit with re to Fixed and Tangible asset to be done and accordingly value to be determined.10. Proper retrenchment policy to be implemented for excess staff

• The Human Side of M&A Activity

Plenty of attention is paid to the legal, financial, and operational elements of mergers and acquisitions. But executives who have been through the merger process now recognize that in today’s economy, the management of the human side of change is the real key to maximizing the value of a deal. The management of the human side of M&A activity, however, based upon the failure rates of M&As, appears to be a somewhat neglected focus of the top management’s attention. People issues occur at several phases or stages of M&A activity. More specifically, people issues in just the integration phase of mergers and acquisitions include:

1) Retention of key talent;

(2) Communications;

(3) Retention of key managers; and

(4) Integration of corporate cultures.

HR issues in three Stage Models of Mergers and Acquisitions

• The three stages:

• (1) Pre-combination;

• (2) Combination and integration of the partners; and

• (3) Solidification and advancement.

Pre-Combination

• Identifying reasons for the M & A Forming M & A team/leader Searching for potential partners Selecting a partner Planning for managing the process of the M and/or A Planning to learn from the process

Combination and Integration

• Selecting the integration manager Designing/implementing teams Creating the new structure/strategies/ leadership Retaining key employees Motivating the employees Managing the change process Communicating to and involving stakeholders Deciding on the HR policies and practice

Solidification and Assessment

• Solidifying leadership and staffing Assessing the new strategies and structures Assessing the new culture Assessing the new HRM policies and practices Assessing the concerns of stakeholders Learning from the process

Role of the HR Department in M&A activity

1.Developing key strategies for a company’s M&A activities

2. Managing the soft due diligence activity

3. Providing input into managing the process of change

4. Advising top management on the merged company’s new organizational structure

5. Overseeing the communications

6. Managing the learning processes

7.Re-casting the HR department itself

8. Identifying and embracing new roles for the HR leader

9. Identifying and developing new competencies

Conclusion

• Merger and Acquisitions success entirely depends on the people who drive the Business, their ability to Execute, Creativity, and Innovation. It is of utmost importance to involve HR Professionals in Mergers and Acquisitions discussions as it has an impact on key people issues. As Mergers and Acquisitions activity continues to step up globally, Companies involved in these transactions have the opportunity to adopt a different approach including the increased involvement of HR professionals. By doing so they will achieve a much better outcome and increase the chance that the overall deal is a total success.

Personal values & business ethics

BUSINESS ETHICS

• Head of Merck once said,

“when I went to Japan 15 years ago, I was told by Japanese business people that it was Merck that brought medicine after world war 2 to eliminate TB which was eating up their society. We did that. We

didn’t make any money.”

A basic problem

• Ethical course of action is not always clear to a company’s manager.

• Managers are answerable toward investors & shareholders.

• If company spend all money on charitable projects that lost money they’ll claim that company is not justified in investing their money and hence act unethically

Purpose of course

• To provide a deeper knowledge of nature of ethical principles & concepts, and understanding of implication of these concepts in ethical problems encountered in business.

• In short“To provide enough knowledge and understanding that can make their ethical course of action clear. “

Ethics: define as,

“A conception of right & wrong conduct, serving as a guide to moral behavior”

OR“The discipline that examines one’s moral standards or moral standards of

society”

Business Ethics can be defined as,“An application of general ethical ideas to business behavior is Business Ethics”

Morality

• Standards that an individual or a group has about what is right & wrong, or good & evil

• Sources include family, society etc.• Moral Norms: general rules or statements

• “Always tell the truth”

• Moral Values: Statements describing objects or features of objects that have worth.

• “Honesty is good”

Role of Ethics in Business

• Thompson & Strickland (1995):“A strong corporate culture founded on ethical principles and sound values is a vital driving force behind continued strategic success.”

Arguments For & Against Business Ethics

Objections to Bringing Ethics into Business

• Perfectly Competitive Free Markets

• Interest of firm

• Ethics means obey the law

PRISONER’S DILEMMA

• ASSUMPTIONS• Police commissioner tells each prisoner separately;

• If neither admits that the two of them robbed the store, they will both be kept in jail for 1 year.

• If both prisoners confess to robbing the store, each will get 2 years in jail.

• If one keeps quiet while the other confesses, one who keeps quiet will get 3 years in jail while the other one will go free.

Prisoner’s Dilemma: Summary

• A situation that gives 2 choices to both parties. i.e. cooperate or do not cooperate.

• If both parties cooperate both gain

• If both parties do not cooperate neither will gain

• Any 1 cooperate 1 who does not will gain

Why Ethical Problems Occur in Business

Reasons

• Personal Gain & Selfish interest

• Competitive Pressure on Profits

• Business Goals Vs Personal Values

• Cross-Cultural Contradictions

5 VIEWS OF BUSINESS ETHICS

• Business is business

• Act consistently with the law

• Good ethics means good business

• Conventional morality

• Universal morality