m&a.pptx

OTSD

MMS & PG – Semester III (HR)Topics:1. Mergers and Acquisitions and role of HR2. Organizational Decision Making3. Organizational Excellence

Mergers & Acquisitions

• Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs.

• Corporate restructuring is the process of redesigning one or more aspects of a company

• Mergers and Acquisitions have been for years the principal tool for corporate restructuring

Mergers & Acquisitions• Reasons and Motives1. Achieving economies of scale2. Increasing market power3. Economies of vertical integration4. Risk reduction5. Tax shield6. Surplus fund7. Complimentary resources8. New business opportunities9. Eliminating inefficiencies10. Diversification11. Long term financial considerations12. Lowering financing costs13. Management preferences

Mergers & Acquisitions Mergers: Merger is fusion of two or more entities and it is a process in

which the identity of one or more entities is lost. In the case of a merger, the assets and liabilities of a company get vested into the assets and liabilities of another company. The shareholders of the company being merged become shareholders of the larger company

• Types of Mergers1. Horizontal mergers : two firms operating and competing in the same

type of business activity2. Vertical merger: between firms in different stages of firms, forward

and backward3. Conglomerate: product extension also called concentric mergers,

geographic market-extension , pure conglomerate mergers

Mergers & Acquisitions Demerger1. Divestitures/Sell offs: the parent company divests a part of the

company to a third party for cash or securities2. Spin-off: a part of business is separated and created as a new

company . The existing shareholders in the company get proportionate in the new one

3. Split up: all capital stock and assets are exchanged for those of two or more newly established companies, resulting in liquidation of parent company

4. Equity Carve-outs: to general public Reverse merger/Reverse takeover Buy Back of shares

Mergers & Acquisitions

• Takeover/Acquisition: Acquisition or takeover denoted a company acquiring controlling stake in another so that the acquirer can have management control over the other. The acquirer company completely establishes itself as the new owner

• Types of Acquisition:1. Friendly takeover2. Hostile takeover3. Bailout takeover: bailout from financial liquidation

Mergers & AcquisitionsMerger of Foreign with Indian : Indian Companies

Act 1956, takeover through FEMAAmalgamation: Amalgamation is blending together

of two or more business entities in a fashion that both lose their identities and a new separate entity is born. in the case of amalgamation, shareholders of both (or more) companies get new shares allotted that are of a new company altogether.

Mergers & Acquisitions• Strategic Alliances1. Supply or purchase agreements: partners join hand

together to keep their supply chain intact2. Marketing, sales and service alignment3. Technology development contracts4. Licensing5. Franchising6. Joint Ventures: new entity, both companies separate and

intact• Leveraged Buy-Out

9

Mergers & Acquisitions• Pitfalls of mergers1. Undue focus on financial aspects2. Employees lose personal effectiveness as a result of

rumors, misinformation and worry3. Infrequent and irrelevant communication4. Perceived lack of authority and understanding of the

employee when the ‘new’ organization forms5. Leadership challenges and failure to articulate the

communicate the vision and inspiration to the employees

Mergers & Acquisitions• Critical HR tasks1. Integrate policies and programs from both companies2. Cultural Integration – asses culture, new culture, follow which culture3. Composing new board, new audit and management team4. Process retention, compensation and benefits packages5. Identify key talents and expertise6. Advise leadership on organization capability7. Recognize customs, symbols, language and ceremonies needed for

cultural assimilation8. Design new performance and reward systems9. Create communication strategies10. Educate organization on what to expect and on new skills

Mergers & Acquisitions• Five integration phases:

– Due Diligence– Organize– Mobilize– Implement– Perform

• Stages of Resistance– Betrayal– Denial– Identifying Crises– Search for Solutions

12

Organizational Decision Making

• Organizational DM: Is defined as the process of identifying and solving problems. The process of responding to a problem by searching for and selecting a solution or course of action that will create value for organizational stakeholders Has two stages: problem identification and problem solution. Decisions vary in complexity continuum and are categorized as programmed (routine) or non programmed (non-routine)

• Individual Decision Making: Rational model & Bounded Rational Perspective

Steps in the Rational Approach to Decision-Making

MonitorDecision

Environment

ImplementChosen

Alternative

DefineDecisionProblem

Specify Decision

Objectives

DiagnoseProblem

DevelopAlternativeSolutions

EvaluateAlternatives

ChooseBest

Alternative 12

345

6

78

14

Steps in the Rational Approach to Decision-Making

– Underlying assumptions• Decision makers have all the information they need• Underlying assumptions• Decision makers have all the information they need• Decision makers can make the best decision• Decision makers agree about what needs to be done

15

Individual Decision making: A Comparative Analysis

Rational Approach1. Involves systemic analysis of the problem,

choices made & its implementation in a logical step by step manner.

2. Generally used in programmed decisions where decision maker has sufficient time for an orderly thoughtful process

Programmed decisions: Programmed decisions are made in routine, repetitive, well-structured situations with predetermined decision rules. These may be based on habit, or established policies, rules and procedures and stem from prior experience or technical knowledge about what works or does not work in a given situation. For example, organizations often have standardized routines for handling customer complaints or employee discipline.

Bounded Rationality Perspective1. Rely more on intuition &

experience rather than sequential logic or explicit reasoning

2. Used when decisions are non-programmed & ill-defined. Takes short cut

Non-programmed decisions: Non-programmed decisions are unique decisions that require a 'custom made' solution. This is when a manager is confronted with an ill-structured or novel problem and there is no 'cut and dried solution'. The creation of a marketing strategy for a new service represents an example of a non-programmed decision.

Trade-off

Trade-off

Trade-off

Trade offTrade off

Constraints and Trade-offs During Non-programmed Decision-Making

Personal Constraints:Desire for prestige, success;personal decision style; and

the need to satisfy emotional needs, cope with pressure,

maintain self-concept

Organizational Constraints:Need for agreement, sharedperspective, cooperation,

support, corporate culture and structure, ethical values

Bounded Rationality:Limited time, information,

resources to deal with complex,multidimensional issues

Decision/

Choice:Search

fora high-quality

decisionalternati

ve

17


Management Science Approach:Is the analog to rational model of individual decision making

• Came in to being during WW II• Used mathematical and statistical techniques to urgent

and large scale military problems• Same approach diffused in to corporations and big

businesses• Used in quantitative data analysis, operations research• Use in situations where variables are measurable• Simulations Models and Stochastic Modeling

Organizational Decision Making Carnegie Model: (Satisficing-bounded rationality-coalitions)• Based on bounded rationality approach to individual and organizational

decision making• Organizational level decisions involved many managers and final choice was

based on a coalition (alliance) among managers• Reason being organizational goals are ambiguous and operative goals are

inconsistent• Managers tend to be rational but are constraint by time, resources and mental

capacities. So they form coalition• Decisions made under this model are satisficing rather than optimizing

problem solutions• Means that organizations accept satisfying rather than optimizing solution• Managers are concerned with immediate problems and short term solutions • So they engage in problematic search (looking around in the immediate

environment for solutions)• Discussion and bargaining are especially important in problem identification

stage of decision making.

Choice Processes in the Carnegie Model

Hold joint discussionand interpret goals and problems

Share opinions

Establish problem priorities

Obtain social supportfor problem, solution

Adopt the firstalternativethat is acceptableto the coalition

Conduct a simple,local search

Use established procedures ifappropriate

Create a solutionif needed

Managers havediverse goals,opinions, values,experience

Information is limitedManagers havemany constraints

Uncertainty Coalition Formation Search

Satisficing

Conflict

21

Organizational Decision Making The Incremental Decision Process Model• Managers select alternative courses of action that are only slightly, or

incrementally, different from those used in the past• Places less emphasis on political and social factors and more on structured

sequence of activities undertaken from the discovery of the problem to its solution

• Major organization choices are usually a series of small choices that combine to produce the major decision.

• Organizations move through several decision points and may hit barriers along the way called ‘decision interrupts’ which means organization has to look for alternatives.

• Perceived to lessen the chances of making a mistake• Called the science of “muddling through”• They correct or avoid mistakes through a succession of incremental changes• Tries to explain how organizations improve their programmed decisions over

time

22

The Incremental Decision Process Model

• Identification Phase: problem recognition– Recognition (becoming aware of the problem & the need to take the

decision)– Diagnosis (systematic & detailed if time permits or quick & immediate)

• Development Phase: solution identification– Search (look for alternatives within the organizations repertoire of solutions)– Screen (eliminate what does not apply)– Design (if the above is not applicable design a custom made solution)

• Selection Phase: choosing the solution– Judgment: (when final choice falls on a single decision maker & judgment is

based on experience) – Analysis: (alternatives evaluated in a more systematic manner like

management science techniques)– Bargaining: (happens when selection involves group of decision makers, so

conflict happens, solved through coalition of carnegie model)– Authorization: (when decision is finally accepted authorization takes

place).Dynamic Factors: (refer to the feedback loops as a result of decision interrupts)

Organizational Decision MakingModels for Learning organization:• Learning organization and organizational learning• Types of organizational learning: exploration and

exploitation (single-double-triple)• Levels: Individual, Group, Organizational and Inter-

organizational• Combining the Incremental process and Carnegie

models• Garbage Can Model

Organizational Decision Making Knowledge management and IT: The sharing and integrating of expertise within

and between functions and divisions through real-time, interconnected IT. Has important implications for both organizational learning and decision making

1. Codification approach: knowledge is carefully collected, analyzed, and stored in databases where it can be retrieved easily by users .Results in a collection of standardized organization best practices, rules and SOPs

2. Personalization approach: IT designed to identify who in the organization might possess the information required for a custom job. More reliance on know-how, insight, and judgment to make decisions

Factors affecting organizational learning:• Cognitive structure: system of interrelated beliefs, preferences, expectations,

and values that predetermine responses to and interpretations of situations. These shape the way managers make decisions and perceive environmental opportunities and threats

• Cognitive biases: systematically bias cognitive structures to cause misperception and misinterpretation of information, thereby affecting organizational learning and decision making. Many types of biases viz. Cognitive dissonance, illusion of control, frequency, representativeness, projection, ego-defensiveness, escalation of commitment

25

Distortion of Organizational Decision Making by Cognitive Biases

26

Improving Decision Making and Learning

1. Adopting strategies for organizational learning: Listening to dissenters, converting events into learning opportunities, experimenting

2. Game theory: Game theory is a study of strategic decision making. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers tool to help managers improve decision making and enhance learning: Interactions between organizations are viewed as a competitive game

3. Nature of the top-management team: The way the top management team is constructed and the type of people who are on it affect organizational learning

4. Devil’s advocate: a person who is responsible for critiquing ongoing organizational learning. A method for overcoming cognitive biases and promoting organizational learning by institutionalizing dissent

5. Dialectical inquiry: teams of decision makers generate and evaluate alternative scenarios and provide recommendations

6. Collateral organizational structure: an informal organization of managers that is set up parallel to the formal organization structure to “shadow” the decision making and actions of managers in the formal organization

27

How Devil’s Advocacy and Dialectical Inquiry Alter the Rational Approach to Decision Making

28


Garbage Can Model• A view of decision making that takes the unstructured process to the extreme• Decision process is not seen as a sequence of steps beginning with a problem and

ending with a solution• Decision makers are as likely to start decision making from the solution side as the

problem side• Different coalitions may champion different alternatives• Decision making becomes a “garbage can” in which problems, solutions, and people

all mix and contend for organizational action• Selection of an alternative depends on which person’s or group’s definition of the

current situation holds sway• Deals with the pattern or flow of multiple decisions as opposed to how a single

decision is made• Are applied to organic structures operating in highly uncertain environment• Termed as organized anarchies

29


• Garbage Can Model: consequences• Solutions may be proposed even when

problems do not exist• Choices are made even without solving

problems• Problems may persist without being solved• A few problems are solved

30

Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain

When problem identification isuncertain, Carnegie model applies

Political and social process isneeded

Build coalition, seek agreement,and resolve conflict about goalsand problem priorities

When problem solution is uncertain, Incremental process model applies

Incremental, trial-and-errorprocess is needed

Solve big problems in little steps

Recycle and try again when blocked

PROBLEM IDENTIFICATION PROBLEM SOLUTION

31

Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making

ProblemsSolutionsChoice

OpportunitiesParticipants





Choice OpportunitiesChoice Opportunities

Participants Participants

Middle Management

Problems Solutions

Solutions

Participants

ProblemsProblems

SolutionsChoice

OpportunitiesProblems

Participants

Participants

Solutions

Department A Department B

32

Certain Uncertain

Contingency Framework for Using Decision Models

ProblemConsensus

Individual: Rational Approach Computation

Organization: Management Science

Individual: Bargaining, Coalition Formation

Organization: Carnegie Model

Individual: Judgment Trial-and-error

Organization: Incremental Decision Process Model

Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can

SolutionKnowledge

Certain

Uncertain

Organizational Excellence• What is OE? Training to better prepare members to enable

themselves and enable others to be more successful. Organizational excellence is designed for permanent change by focusing on managing the five key pillars

• Pillar 1: process management• Pillar 2: project management• Pillar 3: change management• Pillar 4: knowledge management• Pillar 5: resource management

Organizational Excellence

• EFQM Model of OE: The model can be used in four ways1. To help determine where an organization is on their

journey towards excellence.2. To provide a common language to enable the exchange

of ideas and information, both within and outside the organization.

3. To integrate existing & planned activities, improving organizational efficiency and effectiveness.

4. To provide a basic structure for the organization's management system.

Organizational Excellence Competitive Excellence: Competitive excellence becomes

critical in domains where competition for clientele or resources has to bite to it.

1. Mission: Focus for all organizational activities in a competitive situation.

2. Vision: Vision of excellence has to be useful to a competing organization

3. Core values: Goal congruence4. Management Style: In sizeable organizations participatory

management style may be very appropriate. An entrepreneurial organic management style can also yield excellent results

5. Management Systems and Structures: Marketing’ system, and environment scanning system

6. Renewal mechanism: Use double loop learning via survey feedback, image sharing, sensitivity training MBO and periodic reorganization studies are useful and brainstorming 35

Creative Excellence1. Mission, Vision, Core Values: General, global, varied missions. Core values need

to be anchored. Entrepreneurial vision of turning into a unique, pioneering organization

2. Management Style: Flexible, open, informal, nurturing, Organic style and entrepreneurial or participatory

3. Policy Framework: Opportunistic growth, recruiting young professionals, open communication channels, decentralization, meritocracy, accountability, Collaborative relations

4. Management Systems and Structures: Relatively flat hierarchy, large span of control, broadcast operating information, matrix, flexible structure, high interaction regardless of hierarchy, job redesigning, face to face conflict resolution. Train managers and staff to operate in two different modes (B and P)

5. Renewal Mechanisms: Brainstorming, Organizational experiments, Think Tank, Creativity training ,Devil’s advocacy, Effective planning, pilot testing, periodic review, stabilization, scale up

Organizational Excellence

THANK YOU

m&a.pptx

Documents