Daimlerchrysler_M&a

Examining the DaimlerChrysler M&A business failure By understanding the impact that individuals, groups and structure have on behavior within organizations, and by applying such knowledge, managers will be able to make the organization work more effectively. Applying Organizational behavior (OB) theories in today’s changing working environment help organizations in dealing with innovation and change, and to mitigate the risk of failure. In order to explain the business failure of DaimlerChrysler M&A, this analysis will show how the Organizational behavior theories that were omitted could have resulted in an organizational culture that thrives on change and optimized outcomes. Background information Chrysler had been experiencing problems for many decades. Starting in the 1950s, the company was hurt when Chairman K.T. Keller and its best group of engineers left the company to take over the U.S. missile program that put men on the moon, and could not recuperate until the early 1980s with new president and CEO Lee Iacocca. With Iacocca as CEO, Chrysler saw its golden era from 1983 to 1993. When the Merge of Daimler and Chrysler took place in 1998, many of the key upper managers left the company leaving Chrysler in a vulnerable position; In 2007, Chrysler was acquired by Cerberus capital management; the lack of experience and knowledge of the new owners in the auto industry lead them to hire an equally inexperienced CEO, Bob Nardelli, who failed to be the leader who could have restored the loyalty of the dealers, Cerberus failed to inspire faith “had those dealers recommitted to the company and gotten excited about their potential, they would have sold more cars, which Chrysler desperately needed” (Wallance, 2009). The DaimlerChrysler Merge and acquisition Daimler-Benz’s acquisition of Chrysler in 1998 for $36 billion is one example of M&A that failed because the acquiring company did not integrate the target properly, ignored negative effects of the merger on target employees that eventually erode productivity. The lack of attention to reestablishing leadership continuity within the top management of the target firm created instability, which lead to the loss of firm specific knowledge, damaged established shareholder relationships, delayed or terminated on-going strategic projects, and increased uncertainty on managerial direction for executives who join the company years after the initial acquisition (Krung & Walt, 2008). In addition to, cross-border mergers are complex; for DaimlerChrysler to be able to succeed, it would require cohesion not just between two headquarters, in Stuttgart and Auburn Hills, Michigan, but also between a host of offices and factories with different national and corporate cultures. Krung and Walt (2008) stated that “many believed the M&A with Chrysler was driven largely by the personal motives of Daimler-Benz’s chief executive rather than synergy objectives” (p.18). After the merger, DaimlerChrysler lost almost $13 billion in market value through 2007, later on in the same year; the company announced that it would sell 80% of Chrysler to the firm Cerberus Capital Management LLC. OB theories to examining the business failure Certainly, DaimlerChrysler executives failed to motivate their employees’ tolerance for change. One of the challenge and opportunities of Organizational behavior is in deed stimulating innovation and change “victory will go to the organizations that maintain their flexibility, continually improve their quality, and beat their competition to the marketplace with constant stream of innovative products and services” (Robbins & Judge, 2007). Merging two organizations creates uncertainties, insecurities and usually withdrawal from valuable employees. This withdrawal creates high stress among employee, which usually leads to lower productivity and reduced job satisfaction (Davy et al., 1989). Organizational Behavior theories aid managers to explain or predict such key outcomes. In addition to lower productivity and reduced job satisfaction, absenteeism, turnover, deviant workplace behavior and organizational citizenship behavior are dependent variables o responses affected by independent variables (presumed cause of some change in dependent variable). Independent variables are: Individual level variables Personal or biographical characteristic such as age, gender, and marital status, and inherent emotional framework such as values and attitudes, personality and emotions. Other individual level variables that affect employee behavior are: perception, individual decision making, learning and motivation. Group level variables Individuals in groups are influenced by the patterns of behavior they are expected to exhibit, what the group considers to be acceptable standards of behavior, and the degree to which group members are attracted to each other; communication patterns, leadership, power and politics, and levels of conflict affect group behavior. Organization system level variables The design of the formal organization; the organization’s internal culture; and the organization’s human resource policies and practices (selection processes, training and development programs, and performance evaluation methods) have an impact on the dependent variables. Productivity is one of the major concerns of Organizational behavior, and of course, for the merging organization as well; that is why managers want to know exactly what factors will influence de effectiveness and efficiency of individuals, groups and the overall organization (Robbins & Judge). Management honest behavior, and open communication with employees, will create a less stressful workplace and will built trust. Kindness, understanding and flexibility with workers as they go through the merger will help them overcome and probably reduce some of the anger, resistance to change, loss and other symptoms usually felt by employees at this time (Schweiger et al., 1987). For DaimlerChrysler M&A, Organizational Citizenship Behavior (OCB) should had been encouraged, OCB is a type of behavior that promotes effective functioning of the work environment. Behaviors such as helping others in their team, avoiding unnecessary conflicts, tolerance and respect are very important during a merge and acquisition. Daimler and Chrysler staff members would had gone beyond job descriptions to contribute to organizational success, this theory would had help to have a smooth transition of the two merging companies. Conclusions Based on the Organizational behavior theories above mentioned, individual’s behaviors are affected by individual, group or organization variables. OB theories could help explain and predict that after the merger between Daimler and Chrysler, individuals who showed lower Productivity, absenteeism, turnover, or low job satisfaction, might had been affected by internal, group or organization variables, such as individual values, or the degree to which group members are attracted to each other or even the organization internal culture. The assessment of the organization using OB theories would help managers to take the actions that could make the organization work more effectively. References: Davy, J.A., Kinicki, A. Scheck, C. and Kilroy, J (1989), Acquisitions make employees worry: companies ease the pain through effective communication, Personnel Administrator, 84-90 Krung, J.A. (2003). The big exit: executive churn in the wake of M&As. Journal of business strategy, 29(4), 15-21. Retrived on July 6, 2009, from Emerald database. Robbins, S. P., & Judge, T. A. (2007). Organizational behavior (12th ed.). Upper Saddle River, NJ: Pearson Education Schweiger, D.L., Ivancevich, J.M. and Power, F.R. (1987) Executive actions for managing human resources before and after acquisition, Academy of Management Executive, 1(2), 127-38. Wallace, E. (May, 2009) Why Chrysler failed. BusinessWeek, Retrived on July 5, 2009, from businessweek.com/lifestyle/content/may2009/bw2009055_922626_page_5.htm