Merger Management of Kraft and Cadbury

Merger Management of kraft and CadburyNowadays, disposals essential actively develop and oblige appropriate tilts that fit the dynamic environment. This highlights the importance of compound administerment in judging how flexible and responsive an system is. As more companies wave and diversify, it is indispensable that sm wholeer organisations ar now looking into merger with bigger organisations to boost their share of their market. Bigger organisations are to a fault attracted by the opportunities of tot up in untapped emerging markets. Therefore, the spirit of diversity that we go step forward be displacevass in this report is merger and encyclopaedism (MA). We volition relate this careen to USs kraft paper Foods In collectived, as the comp any(prenominal) recently acquired UKs Cadbury.The issues we buzz off selected to charge on are in the following order attractership and communication, cultural channel, and mental faculty protection. lead is chosen b eca apply leadership is critical to determine the success of an erudition. Firstly, delinquent to the vast number of employees mixed, the choice of an appropriate leadership style is lively to master desegregation in cardinal companies is a smooth process. Next, an good leadership go a focusing improve the productivity of both companies through and through the effectual in allocation of resources to achieve the organizational strategic goals.Communication is chosen beca use up the accomplishment result raise doubts among Cadburys employees on their roles in the new company and its mountain and goals. The detecting of uncertainty around their future could lead to a drop brush up in their esprit de corps and low productivity at work. Thus, it is essential for kraft to use an appropriate communication scheme to increase the awareness of the employees of any impending change initiatives. finale is chosen be ingest of the different civilisations between kraft pape r and Cadbury. Cadbury was founded on Quaker ethics to build a socially merciful business. This philosophy helped Cadbury to build a world-class brand that is close to the wagon of the British people. In contrast, kraft is more of a murder drive company with decades of profit driven mergers and demergers. Thus, it is essential for kraft to draw and observe the cultural differences as sources of synergy and efficiency in order to manage the acquisition process in effect. module resistance is chosen because perplexity and employees do up the core structure of the organisation. The policies under ingestn by these personnel and behaviour exhibited support have an immediate and vital impact on determining how organisation functions. In the horizontal acquisition of Cadbury, Kraft must also be able to seek equilibrium for integrating the provide from both lays of organisation. Conflicts at vigilance trains, diverse working styles and even motivational approaches are many situations that whitethorn hinder and pose challenges.Before implementing any change initiatives, we urge Kraft to conduct diagnosis of the common chord issues menti geniusd above.2.0 Leadership and Communication2.1 translation of LeadershipKoontz and ODonnell (1955, pg 17) the activity of persuading people to cooperate in the achievement of a popular objective2.1.1 Adairs Action Centred LeadershipDuberly (2010) Adairs Action Centred Leadership specimen points knocked surface(p) that a leader discount only be productive when he is able to project all three areas of makes task, case-by-case and team aliment needs- by helping his chase achieve the objectives of the common tasks, generate team dynamics and cater to the individuals needs.2.1.2 Case-StudyRebecca Johnson (2008) The case study of recall Yourself illustrates Britvics use of Adairs action centred leadership to revive their company. For meeting task needs, the use of the balanced scorecard arrangement wit h job descriptions provided their employees with a clearer understanding of their duties and responsibilities. With that, it helped to entrap the coordinateion for employees to achieve their objectives.For meeting individual needs, the use of a carrying out solicitude system with a core set of behaviours allows the employees to know how effectively they are performing relative to expectations. With a performance-based rewards system, Britvic motivated their employees by recognize them accordingly as a form of recognition.For meeting team maintenance needs, a workshop session was conducted for the leaders of Britvic to reflect on their leadership. The insights gained be to be very beneficial to them in their role as a leader as survey results showed that the employee engagement increased from 55% to 70% and employees confidence in leadership leapt to 72%.2.1.3 RecommendationsFor meeting task needs, Kraft needs to provide a detailed road map which includes crabbedized and cle ar goals, a detailed approach for achieving these goals, and a list of resources and metre required to reach these goals. With that, Kraft and Cadbury brook identify common goals so that the employees from both companies cannister work together on common projects in order for a smooth integration to occur.In the case of Kraft, the lay everywhere of Cadburys Somerdale programt led to a divergence of 400 jobs. This ca utilise the Cadburys employees morale to pooh-pooh as they were fearful of further jobs losses. More importantly, this cause a loss of assumption in the leadership of the organisation. Thus, Kraft should make a pledge to them that on that point pull up stakes be no further job losses and pulverisation closures to assure them of their job security. This form of assurance testament restore their morale and bring about greater productivity within the team to meet the team maintenance needs.For meeting individual needs, Kraft should acknowledge employees achieve ments by offering rewards to slide by them motivated. The rewards can be offered in the form of the cafeteria rewards system which offers employees the ability to choose a combination of benefits that best suit their needs.2.1.4 Transformational LeadershipBass, B. M. (1990) There are four factors which make up a transformational leader, namely, charisma, inspiration, knowing stimulation and individualized attention.Firstly, a transformational leader exudes charisma and instils pride in employees within the organisation. He creates sight to guide his followers and as engines of change within the organisation. They are deemed as role models. Secondly, a transformational leader communicates optimism about future goals to inspire his followers.Thirdly, he uses intellectual stimulation which encourages innovation and creativeness in approaches towards identifying and solving problems. Lastly, he shows individualized attention by addressing his followers concerns and providing them w ith training for self-development.2.1.5 Case-StudyCatherine Monthienvichienchai (2007) The case study of Korea Ladder illustrates how Jonathan Cormack took on the role of a transformational leader. He united the both organisations behind a share vision to inspire his employees. They were placed in groups for a discussion to help them realise the shared vision.He also fostered workplace creativity by conducting workshop sessions which were not a common practice in a Korean workforce. It was used as a form of intellectual stimulation to instil a wizard of be spaciousing in the employees. The arrogant feedback received from the employees prove that it was a success. He showed individualized consideration for the ply when he convince the union that the foreign executives should not be removed as their hold up and strengths possessed were essential to bring the bank to the next level.2.1.6 RecommendationsAs the acquirer, Kraft needs to unite the two companies under one(a) visi on by offering communication programs that support the shared vision. The programs can be in the form of workshop sessions which creates a participative environment to foster a sense of belonging and involvement among employees. This environment would enable Kraft and the employees to work out a mutually satisfying outcome (i.e. a win-win situation).Next, Kraft must work at gaining the trust and respect of Cadburys employees to prevent the defection of bright people. Kraft can do so by bringing talents from both organisations together to work jointly on projects. This will encourage employees to focus on their similarities rather than their differences.The organisations various departments need to be restructured and processes must be redesigned to align with Krafts vision.2.2. Communication2.2.1 translation of CommunicationNewman Summer (1977, pg 12) Communication is an replace of facts, compositions, opinions or emotions by two or more persons.Communication edgeDuberly (2010 ) Communication begins when the transmitter encodes a message to convey an idea, the telephone receiver on that pointfore decodes the message to achieve understanding. The context of a message refers to the non verbal cues conveyed by the transmitter to the receiver. The perceptual filter actually influences the way the message is transmitted. It ends with the receiver providing feedback to the transmitter to evaluate the effectiveness of the message.For effective communication on change, we will focus on three communication strategies. Firstly, s pray and pray is used when employees are showered with a wide variety of information, and managers pray that staff will pick up what is needed to be through. Secondly, tell and sell is used when management attempts to both inform employees on changes and sell them on wherefore they are required to the passive employees.Lastly, underscore and explore is used when management engages employees in a dialogue about the change process and s eeks to identify obstacles and the misunderstandings that need to be addressed. Lastly, withhold and uphold is used when information is withheld until it is perfectly necessary to release it.2.2.2 Case-StudySarah Butcher (2005) The case city of Recovery plan illustrated the use of tell and sell as a communication strategy to persuade the bankers at Citigroup to be receptive to the new performance idea and compensation system. With regards to the revised compensation system, Citigroup need to sell to their bankers the idea that gift payout will not be solely based on arrive at financial targets but also dependent upon comprehensible understanding of the shared responsibilities.Another communication strategy adopted by Citigroup was spray and pray in educating their employees on the ethics and the banks code of conduct. It is a top down and one way communicating approach as the responsibility of communicating the acquired knowledge to the rest of the employees falls on the should er of 3000 senior employees at Citigroup.2.2.3 RecommendationsFor effective communication, Kraft can adopt the underscore and explore method acting whereby they conduct a limpid and truthful dialogue with the employees to address the differences in finis and to identify any constraints for the change to be implemented. Kraft can also go beyond reassuring the Cadbury employees of their motive regarding the closure of the Somerdale plant.Since this is a two-way communicating process, the feedback generated from the active employees will be useful in resolving misunderstandings and build consensus on key issues.Kraft has to be cagy especially when dealing with redundancies. The communications, compensations, and benefits for redundant workers need to be clear and direct so as to build trust and inscription.In addition, they should also take a closer look at the effects of survivors (remaining workers) who suffered from low morale and decreasing commitment, trust and loyalty towards the organisation after the merger. Kraft can being by educating and persuading survivors of their good intentions by accounting personally for their action. On the other hand, the survivors need to be informed of their specific job roles and entitlements.Unless companies experiment to deal with this survivor syndrome by demonstrating to the remaining employees that the process for determining redundancies was transparent and professional, and those made redundant were treated fairly and lawfully, the general productivity and morale are less likely to be affected adversely.3.0 Cultural change3.1 Definition of stopping pointDrennan (1992) defined organisational destination as, Culture is how things are done around here. It is what is typical of the organisation, the habits, the prevailing attitudes, the grown-up pattern of accepted and expected behaviour.And as aptly phrased, culture is the key factor for making or breakage a merger and acquisition deal. (Accenture, 2000)3.1.1 Un derstanding Organisational CultureTo ameliorate understand organisational culture, different methods are used, one being the Onion unclothe (Duberley 2010, modified from Schein 1992, 2004) Schein suggests three levels to organisational structure artefacts (e.g. talking to, environment, rituals), espoused values (organisations strategies, goals, philosophies) and basic underlying assumptions level (subconscious perceptions, thoughts and feelings that are the ultimate source of values and actions).Onion Skin (modified from Schein)3.1.2 Sources of Organisational CultureThe founder, organisational history, industry and size of the organisation impact its culture. (Duberley, 2010) Organisational culture is also reflected by national cultures and professional subcultures. (Hofstede, 1981)3.1.3 Influence of National CultureThe difference in various elements of a country such as languages, laws, values and attitudes will lead to one nations culture diverging significantly from some oth er (Hofstede, 1980 Tayeb, 1989 Wilson, 1992)As an example of national culture, Adler (1997) describes Americans strong individualistic tendencies evidenced in their language such as trounced the opposition, and their human resource management based on individual knowledge and skills.(Calori and De Woot, 1994 Hemel Hempstead A European Management Model beyond Diversity), we understand that though organisational culture in the unite Kingdom has similarities with the United States, certain significant differences include the adversarial relationships with labour, the tradition of the manager as a gifted amateur (as opposed to the professionalism of US managers) and the influence of class differences in the firm.3.1.4 Cadburys and Krafts CultureCadburys culture stems from its founder of Quaker origins a paternalistic and macroscopic-hearted culture, which also focuses on the well being of groups rather than the individual. This translates to the idea that the leader knowing what is be st for the organisation and its followers (i.e. leaders as dear father figures). Cadburys culture of principled capitalism is what makes Cadbury great and it has productively make a socially benign business.Cadbury has a loyal workforce that consists of staff and managers who have been in the organisation for a long period. Cadbury has a long tradition of high quality production and closely of its factories make use of its local comm symmetry, in that locationby ensuring that the brand itself is close to the hearts of locals. What this translates to is a family oriented and communal working atmosphere where staff takes strong pride in their work.Krafts culture is more performance oriented and is more focused on the meeting of sales and performance goals. Kraft is the quintessential traditional multinational business firm. There is a accessory culture present virtually staff and managers perform in relation to the rewards they get. Most rewards they expect are material and on an individual basis. Furthermore, Kraft is very much implicated in destroying competition and seeks many alternatives and ways to ensure they are everlastingly ahead of competitors. Krafts culture is less communal and the working atmosphere is contrasted a family atmosphere, in that people view each other as merely working colleagues and do not share deep friendships with one other. Staff and managers in Kraft are productive and focused in their work and more or less of them have a passion for business.3.1.5 Potential of Post-Acquisition Culture ClashThe acquisition will damage Cadburys current culture as the striking differences between Cadbury and Krafts culture may damage Cadbury existing successful culture of principled capitalism. This would bring about lower morale and performance and de-motivated staff. Krafts competitive and goal orientated culture might cause staff burn out amongst the Cadbury employees as they may feel insecure and uncertain. Krafts mercenary culture may create a lack of trust, which will discontinue Cadbury staffs strong loyalty. By joining an American company, Cadbury risks losing UK benefits schemes to American procedures. Also, consumers may feel betrayed by the loss of its original organisational goals, resulting in a weakened brand. However, one advantage is that Cadburys shareholders will profit through the acquisition with the worlds second largest regimen manufacturing company.3.1.6 Case-Study(Quote your Reference)SCB (an America-originated company) acquired and merged with KFB. SCB was successful with the merging of cultures due to effective communication, the understanding of the differences in cultures and the understanding that If you dont stretch things at all then nothing will change, but if you stretch things too far or too desist youll leave people behind.The approaches SCB used were the Conciliative, Educative and Corrosive approach, evidenced in the heavy use of consultation, training and use of networking . With this, they successfully overcame problems of national culture and cultural change such as over-enthusiastic labour unions and differences in management styles, to name a few. What Kraft and Cadbury can learn from this is the importance of communication and flexibility in the use of approaches.3.1.7 RecommendationsBecause culture is an essential element in an organisation, culture analysis should play a major role in an acquisition.Both qualitative and quantitative analysis exists in corporate culture visual artefacts or manifestations of the organisation, the espoused values and basic assumptions (The Onion skin model) of the organisation have to be properly evaluated. This is essential to better understand the Krafts inner-workings and most importantly, its employees and their feelings toward the acquistion. The difference in national cultures of a UK in comparison to US organisation also impacts organisations greatly. Thus, Kraft should exercise patience and understanding t o ensure that culture change is implemented and not resisted.(Whittle et al (19913) We understand that culture change is not a single event but an on-going sequence of changes. Flexibility is important, as different dos of the change program may require appropriate approaches.4.0 Resistance and Resentment Felt by Cadbury Employees4.1 Definition of Individual and swapWe will be illustrating the definition using case-study of the acquisition of Cadbury by Kraft. The process involves organisation undergoing a transformative change. This is so as the nature of change is large-scale and fundamental. At the same term, the effect is permanent and can be observed in the long-run.This issue raises the question of uncertainty which in turn, brought about greater anxiety. According to Schein E. et al. elaboration on Kurt Lewins(1951) Three-Step Model, anxiety can be broken down to two major forms survival and wise to(p) anxiety. The former pushes for change while the latter obstructs ch ange. In order to commingle the change, Scheins theories suggest an inclination towards minimizing the learning anxieties.Generally, there are three areas we will be investigating with regards to the case-study.Firstly, the consideration of parochial self-interest which will need us to look into how the various groups in organisation will reply upon their immediate interests in the company. With a likely shift in management, Cadbury staff will be reassigned to new job roles and positions in Kraft Inc. this may affect the individuals and probably also management. A possible reshuffling of manpower by HR will see the Cadbury staff go through a series of re-employment tests to allocate them to suitable tasks. This means that potential loss of authority and power especially for the executives and leaders of Cadbury relevant to their positions resulting in a conflict between their self-interests and the organizations interests. Therefore, the move to quit by the staff may be explained by this clash of interests.Next, the misunderstanding may be another consideration since the top management could be inconsistent in impartation their messages while middle-level managers could have failed to communicate clearly and on a constant basis to employees. They may put off the delivery of what they deemed as negative news. At the same time, employees are interpreted to be in denial and avoid the truth. They are sceptical of success and are unwilled to move out of their comfort zone to embrace change.Lastly, the tolerance for change is low as the former Cadbury staff may take huge pride in how they go about doing their work. Kraft personnel sound off otherwise and what they thought to be desirable for the organisation could be in contradiction with the new staff. The former Cadbury staff may reject changes while Kraft personnel likewise will stick to their ways of carrying out tasks.We will look into the Model of Stages of Psychological reply by convert and Hyde (1996 ) adapted from Elizabeth Kubler-Ross(1969) and see how it affects the individual change of Cadbury worker.Model of Stages of Psychological ReactionWhen Kraft Inc. based in the America announces the acquisition of UKs Cadbury on February 2010, there was first, feelings of shock among the stakeholders and also the employees of both companies as the ongoing speculation has been realized.Upon the acquisition of Cadbury, subsequently Kraft drew up plans to smooth the process of integration of the UK-based competitor into the confectioner family. However, at this stage the general sentiments among the people involved are denial. The employees may make up ones mind it difficult to come out of this particular stage.Implementation of the changes to the different levels of organisation as Kraft begins to incorporate and find a fit for the new employees, new teams and new managers. At this stage, employees may experience depression and letting go but the main idea is that most personnel will not be able to come out of the previous stage so they will have reverse or stay put in the previous phase. Thus, not all will complete this cycle.Some may progress beyond and go into the word meaning and testing stage which we believe to consist of majority to be the lower level of staff and employees while the senior management figures most probably regress or stay in the denial stage or even move on to another company extremely likely for the case according to the article 120 of clxv Cadbury Staff Leave Since Krafts Takeover on webpage http//www.foodanddrinkdigital.com/sectors/food-manufacturing/120-165-cadbury-staff-leave-kraft-takeover.Case Study(Quote your reference) In January 2005, Gillette was acquired by PG. The merger resulted in around 6000 job cuts which was equal to 4% of the unite workforce of the two companies.The process of post-merger integration of these two companies faced an inevitable resistance. A number of people were told that they had joined what they th ought was a long employer with sufficient size and famous brand. They felt that Gillette was a leader in the industry on many fronts.Not only were some Gillette staff personally un inclined(p) for the takeover, because they often felt that their company was the better one, they also did not believe in the tremendous opportunities that were promised by top management from PG. Gillette employees had to face the unpleasant dilemma of whether moving to PG (and coming to terms with the changes) or leaving the company.PG and Gillette essentially had two different corporate cultures. Employees of Gillette hoped that Gillette, because they had been so large and successful, would be able to influence PG post-acquisition. But hoping for that was a complete utopia, as one former employee said. Gillette was absorbed into PG and very little from its culture was left, another said. Rather than change, employees voluntarily but reluctantly left the jobs they thought they would have until retireme nt.(Quote your Reference) In a joint press release at the time of their merger in 1997, the president of Daimler-Benz, Jrgen Schrempp, and the president of Chrysler, Robert Eaton, declared that there will be no plant closures or layoffs as a result of the merger. However in 2000, the company announced there would be between 20000 and 40000 job cuts in the North American Chrysler division. Schrempp, by then the DaimlerChrysler president, claimed that the company was overstaffed by at least 6%.Announcing redundancies two or three years after the initial deal can cause even greater stress to the employees who thought that they were survivors. Employees are better prepared to handle the bad news straight after the transaction than two years later, after the newly merged culture has started to take practice when they thought they could rely on managements assurances regarding the merger, often accompanied, as in the Daimler/Chrysler example, with promises of no future redundancies.4.1.2 RecommendationsThe negotiation and agreement approach would be much recommended. The resistance stems from Krafts inability to walk the talk of retaining the Somerdale plant in operation. On top of walking the talk, they are expected to keep behaviour consistent with messages, keep commitments and promises, and demonstrate some energy and enthusiasm regarding the change. Only then will team members feel they can take the next step of commitment.Kraft has to deploy the soft power to facilitate integration between the two cultures. The soft power provides an effective mean for Kraft to reach out to employees at a personal level. This promotes the instalment of a long-term positive relationship as empathy and communicating at employees level builds trust and strengthens their commitment to the organisation.5.0 ConclusionIn view of the acquisition of Cadbury, it is critical for Kraft to establish an effective leadership team to pave the way for a change programme. Kraft can adopt Adai rs action leadership to have an overview of the three areas of need and ensure that they are met adequately. The success of the acquisition is also influenced by how well Kraft communicates to their employees on the change. Thus, Kraft should use the underscore and explore method to address the possible challenges and problems caused by culture differences.Due to the diverse cultures of Kraft and Cadbury, onion skin method can help Kraft identify the differences to prevent culture clash. With this in mind, Kraft can set directions for the management and employees to realign their styles of working to fit the companys vision. This will pave the way for Kraft to achieve their objectives and develop a strong standing corporate culture at the same time.Effective HR management may be a viable solution but in the long-run, in order to foster a harmonious relationship and spirit of unity among the management and employees. It is necessary to inculcate positive employee attitudes and promot e willingness to learn with the acceptance of changes. Eventually, the organization can help staff to align their interests with those of the company so as to keep motivation high level across all departments.6.0 Appendices6.1 number of ReferencesReferences for Leadership Communication role of SourceReference ListReference BooksBernard M. Bass, Ruth Bass (2008), models of Leadership, The Bass Handbook of Leadership Theory, Research, and managerial Applications (4thedn), pg 17, Simon SchusterM V Rodriques(2000), The Meaning and Process of Communications, Perspectives of Communication and Communicative Competence, (1st edn), pg 12, Concept Publishing conjunctionBass, B. M. (1990), organisational Dynamics, From Transactional to Transformational Leadership Learning to Share the Vision, pg 22, wintertimeCase StudiesRebecca Johnson (2008), Refresh yourself, slew Management Magazine, pg 32Catherine Monthienvichienchai (2007), Climbing the Korea ladder, People Management Magazine, pg 30Sarah Butcher (2005), Recovery plan, People Management Magazine, pg 34Lecture NotesDuberly (2010), Change Management Lecture NotesReferences for Staff ResistanceType of SourceReference ListReference BooksEsther Cameron Mike Green (2004,2009), devising Sense Of Change Management A Complete Guide to the Models, Tools and Techniques of Organizational Change (2ndEdition) various ChaptersMoeller S., (2009), Surviving MA Make the Most of Your Company Being Acquired, John Wiley Sons LtdAdolph G., Pettit J. and Sisk M., (2009), Merge Ahead Mastering the Five stand Trends of Artful MA), Booz Company IncMaginn M. D., (2007), Managing in time of change, McGraw-HillCase Studies Gillette and DaimlerOnline Articles120 of 165 Cadbury Staff Leave Since Kraft Takeover by Chris Farnell on July 29,2010 accessed on Saturday August 28, 2010Kraft Gets Boost from Cadbury Thursday August 5, 2010 taken from The paries Street Journal Earnings accessed on Saturday August 28, 2010Kraft Criticised over Cad bury Factory Pledge May 26,2010 taken from BBC News Business accessed on Saturday August 28, 2010Lecture NotesDuberly (2010), Change Management Lecture Notes Session 5 The Individual and ChangeQuotesEsther Cameron Mike Green (2004,2009), Making Sense Of Change Management A Complete Guide to the Models, Tools and Techniques of Organizational Change (2ndEdition) What gets in the way of change resistance to changeSchein E. Page 57, Kogan Page Limited, London UK