Posted: March 24th, 2023
The Great Destinations Travel Agency will be a world-class company connecting customers to major global tourist destinations. The merger between Holiday Seekers Travel Agency and Small World Travel Agency will create the new firm with increased market reach and a larger customer base. The two partners will build the merger from an agreement to contribute the same resources to develop an alliance based on equality (Bouchikhi & Kimberl 2012, p. 69). The two companies have realized the importance of pooling their capital to improve their productivity and profitability. It would be easier for the merged firm to explore more global destinations and increase the number of customers served since they would have a more significant investment (Bouchikhi & Kimberly 2012, p. 69). However, while such mergers are effective in achieving organizational and business objectives, they face internal challenges since they involve significant changes in management and operating environment.
Description of Issues Affecting the Merger
Leaders make significant decisions to ensure improved performance for their companies. In a highly competitive global business environment, organizations have to keep re-inventing or risk complete failure. One of the ways to achieve the objective is creating mergers between firms operating within the same industry. Such mergers are established to take advantage of the economies of scale and improve productivity (Ahern 2012, p. 531). Such is the strategic decision made by the leaders of Holiday Seekers Travel Agency and Small World Travel Agency to capitalize on a broader market. While companies benefit from such mergers, they are not always easy to form and manage due to issues that exist from demands of managing companies in different cultural backgrounds.
The new firm will encounter significant internal changes, concerning culture and the operating environment. Each of the travel agencies has its corporate culture different from the other. Hence, according to Duvall-Dickson (2016), integrating both firms will be a difficult task for the leaders (p. 16). Indeed, leaders and employees of many companies are accustomed to their beliefs and values. Therefore, managers should take into consideration the previous norms to accommodate them in the new workplace while preparing to create new practices. Some mergers may be unsuccessful because of the resistance to the change demonstrated by employees of the two merging firms. Therefore, the merger might create anxiety among employees and leaders if they are not sure about the possible outcomes of the strategic decision.
Employees are not the only group affected by the change. The managers, including CEOs, are apprehensive of the transition since it will affect their work. Evidently, the merged company will only have one manager at each level in the hierarchy. Hence, the leaders may face challenges transitioning to the new setup, especially since they have to support the other stakeholders. Drori, Wrzesniewski, and Ellis (2011) contend that managers face critical demands during such significant changes, including managing resources and employees to meet the expectations. They are responsible for creating a new culture to support the change and maintain the positive performance of the new firm (p. 626). Generally, the new company will require effective leadership to succeed.
Potential Effects on the Stakeholders
The change will involve various individuals and groups, especially those who will be affected directly by the transition. One of the groups is the leadership of the two merging agencies. The CEOs are already concerned about the security of their management position once the merger becomes successful. The new company will only have one CEO and managers in other posts, indicating that some personnel might lose their leadership position or assume additional responsibilities in the new firm. Leadership is the most important role in the transition process (By, Burnes & Oswick 2012, p. 2). However, anxiety over the security of their jobs might affect them and their potential to manage the change effectively. Therefore, the management might be less motivated to manage other stakeholders to lead the new merger effectively.
Employees are the second group of stakeholders that will be affected by the strategic decision to merge the two travel agencies. The two firms have personnel that currently work towards their organizational goals. While the new merger will still require employees, the entire workforce cannot be accommodated by the merged firm. Thus, the management will be forced to downsize the number of employees. Consequently, some of the employees will lose their jobs. The current workers may suffer from anxiety due to the uncertainty created by the change (Cullen, Edwards, Casper & Gue 2014, p. 270). The remaining staff would also be affected by the change in culture. Working in the new demanding environment will be difficult for the employees, potentially affecting the level of motivation. The change will have significant demands on the current and new employees working in the newly formed organization.
Besides the two groups, other stakeholders of the company would also be affected, including investors, clients, and investors of the two agencies. The customers will face changes in their service provision because of the transition from what they have always known. They will have to adapt to the shift to continue receiving services from the merged travel agency. Investors will make critical decisions to deal with the combined company. Some investors will remain active, while others might terminate their relationships with the new company. The suppliers will experience similar effects because the travel agency will use fewer supplies after merging their operations. Generally, the relationship between the company and the stakeholders will be affected by the change necessitated by the merger.
Solutions to the Challenges
The Great Destinations Travel Agency is critical for the performance of the two travel agencies. However, to enjoy the benefits of the merger, the management should address the identified challenges, including the effects of cultural differences. Notably, the administration will require the input of all the stakeholders to implement the change successfully. Thus, the most critical step in addressing the problems is to engage employees from the initial stages of the implementation process (Cullen, Edwards, Casper & Gue 2014, p. 270). For example, the management should get the opinions and ideas of the employees and incorporate them in making critical decisions. Appreciating their input will play an essential role in addressing anxiety and uncertainty caused by the proposed change.
The second aspect is dealing with cultural differences that might affect the success of the merger. The management should understand the cultures of the two agencies to integrate them in creating the new working environment. They should allow a gradual change in culture to prevent additional resistance by the stakeholders (Duvall-Dickson 2016, p. 16). Leaders should give employees more time to accept the change to gain their support and help in its implementation. They should all understand the need for the shift to transition seamlessly and create new ways of working. Therefore, leaders should involve all the affected stakeholders in initiating and adopting the change to the new firm.
Communication should be a critical part of managing the change. Leaders should understand the most effective strategies to communicate the change to all the affected individuals and groups. Open conversations play an essential role in addressing concerns and anxiety (Cullen, Edwards, Casper & Gue 2014, p. 271). It gives the affected parties a chance to express their concerns and receive feedback from the management. Communication is also a considerable part of conflict resolution since cultural conflicts are evident in such significant transitions. Cheng and Seeger (2012) argue that communication has a close relationship with corporate culture from the perspective of expressing the expectations of working in the new environment. Thus, the management should be willing to provide factual information to all stakeholders in the change process.
Corporate culture plays a vital role in organizations. Consequently, cultural differences are detrimental when employees come together in a shared environment such as a merger of two companies. Major mergers may fail because of cultural conflicts, especially if stakeholders cannot work together effectively (Gammelgaard, Kumar & Worm 2013, p. 564). Culture clash is the main reason why mergers fail since it affects the potential of employees and leaders to work together in the new environment. Whenever a change occurs, it creates differences in the fundamental ways through which people work. Besides, it brings anxiety and frustration when some members feel that their needs are not adequately met in the merged setting.
Managers should define effective ways of managing cultural differences and the potential effects on leaders and employees. While integrating two disparate cultures might appear straightforward, it is one of the challenging tasks for managers in mergers and acquisitions (Gammelgaard, Kumar & Worm 2013, p. 564). Executives should have practical ways of facilitating cultural integration. Proper leadership provides a chance for the company to take advantage of the differences to achieve organizational objectives. Furthermore, leaders are expected to motivate their teams to support the change and accept the new work settings. Companies can only enjoy the integrated benefits when they effectively manage cultural diversities.
The most effective way of avoiding resistance to change in organizations is to identify cultural differences and manage them to prevent further divisions in the workplace. Leaders should involve employees in the change process and collect information on the potential differences, control such variables while dealing with resistance. Leaders achieve the objective by working collaboratively with all stakeholders throughout the change process (Jones & Van de Ven 2016, p. 7). In addition, managers should communicate their vision to employees and allow them time to accept the transition. They should create a culture that supports the achievement of the vision and the strategic direction of the company.
The change is critical, and leadership will play an essential role in the process from the beginning until the transiting stage toward the new working environment. Leaders strive to understand the previous and the new settings to create suitable norms and standards to guide emerging operations. They also work with the team to provide the guidance for the implementation of the proposed change (Gorran 2013, p. 13). The leader will make the change meaningful and communicate its value to the other stakeholders to gain support (Gorran 2013, p. 13). Notably, employees of the two companies will rely on proper leadership to understand the need for the change and accept it as the norm.
Besides, the team will require a vision for the change. The leadership will create the rationale for the change and communicate the same to stakeholders to convince them on the need for the merger. Change leadership plays a critical role in preventing resistance among employees caused by cultural conflicts and anxiety emanating from uncertainty. Hence, the leader should collect the views of the stakeholders and involve them in the whole process to prevent possible hindrances to the transition (Gorran 2013, p. 13). Change leadership achieves success by understanding the strengths and weaknesses of the team as well as the risks and opportunities of the change process.
Leaders form a positive relationship with the employees to ensure that they are committed to the change and they support its implementation. Notably, when managers are determined to change the organization, they communicate enthusiasm to the employees to gain their dedication. In addition, they can motivate employees to meet the objectives of the transition in a way that prevents potential resistance. In the same aspect, Gorran (2013) indicates the importance of a leadership team, which understands the importance of the change and the need to send the correct message to employees (p. 13). Working with people is the only way for management to make a change with a lasting effect on the performance of the organization.
The style of leadership adopted by the management will play a critical role in the success of the merger process. While many leadership styles are used in organizations, the most effective in change management is the transformational approach. The leadership is effective in leading change since the executives motivate the employees to support the transition. Transformational leadership is useful in a team approach to management since it involves the efforts of a leader to influence others to work towards the vision (Santhidran, Chandran, & Borromeo 2013, p. 350). For example, in the merger between Holiday Seekers Travel Agency and Small World Travel Agency, the leader should ensure that the stakeholders understand and support the need for the change.
The transformational leader identifies the criticality of the change, including the need to increase the market reach for higher profitability. However, the management does not work in isolation when implementing the change. They collaborate with other members of the organization to achieve the objective. According to Santhidran, Chandran, and Borromeo (2013), the leader values the contribution of every individual affected by the transition (p. 50). The leader inspires and motivates the followers to express their opinions about the development. As a result, they build trust with employees who can communicate their concerns and issues that might affect the change process. Consequently, transformational leaders achieve success by recognizing barriers and dealing with them promptly.
Successful transition to the new company and cultural integration will depend on the effectiveness of leadership. Therefore, regardless of the concerns affecting the executives of the two companies, they should believe in the change and ensure that they communicate a positive vision to the employees. Whatever the outcome of the merger, the managers should remain confident, and hence inspire the same attitude to other stakeholders. Appelbaum, Degbe, MacDonald, and Nguyen-Quang (2015) identify the role of the top managers to lead the change and ensure that others are motivated to meet its goals (p. 136). Transformational leaders at the top will work with employees at all levels of the company to create a significant change model and follow it to achieve a seamless transition to the new company.
The change should involve a team spirit to initiate, manage, and implement the merger effectively. Thus, the leaders should create a task force to work effectively in managing the change. Although the team will play the lead role in the implementation of the change, it will engage other stakeholders to achieve its objectives. The unit will comprise of individuals from the two travel agencies to ensure that the interests of all the partners are met in the change process (Appelbaum, Degbe, MacDonald & Nguyen-Quang 2015, p. 136). For instance, the team will engage the two CEOs to discuss the issues affecting the two companies in the transitioning process and the effective ways of addressing them. They will strategically plan for the change by analyzing the current situations at the two agencies and the way forward after the merger.
Decision-making involving team effort is more beneficial for the merger than situations where leaders deliberate and design policies and plans on behalf of the other members. Appelbaum, Degbe, MacDonald, and Nguyen-Quang (2015) support the need for the managers to create an inclusive team involving membership from the two affected firms (p. 136). Such teams are effective in preventing any form of resistance from the affected individuals since issues are identified and effectively addressed. Such teams are also effective in identifying emerging problems to deal with them in time to prevent adverse effects during transition. In this case, they would pool resources to deal with potential challenges affecting the two companies as they merge into the new working environment.
The members of the team will have different roles to play in the change process. For example, some members will perform the role of assessing the internal and external factors that might affect the transition towards the new working environment. They will present their findings to the rest of the task force to make proper decisions, which would achieve the objectives of the whole team (Appelbaum, Degbe, MacDonald & Nguyen-Quang 2015, p. 136). The team will involve individuals to implement the change once presented with all facts. By negotiating the process and making clear deliberations, the team will spearhead the merger between the two companies to create a functional and profitable organization, the Great Destinations Travel Agency.
The Model for Implementing Change
Leaders should understand the most effective framework to implement the change. Kurt Lewin proposed one of the famous models to explain transitions to new business environments, involving employees to avoid resistance. Figure 1 below shows the three stages proposed by Kurt Lewin for change implementation.
Figure 1. The Kurt Lewin’s Three Steps Model, Sarayreh, Khudair and Barakat (2013)
In this stage, Lewin proposed destabilizing the equilibrium to discard (unlearn) the current behaviors and effectively adopt new ones. The theorist believed that this would not be achieved easily and that the methods used in one situation would be appropriate in all circumstances. The unfreezing of the current situation might be a complicated process and may involve some challenges, including resistance and conflicts (Sarayreh, Khudair, & Barakat, 2013, p. 267). Thus, the management should understand the situation when implementing relevant measures during transition and adopt new approaches of operation. The leaders should realize the comfort zone in the current workplace and implement new processes, including a new culture. The management recognizes the need for change and should communicate it to employees.
The change process does not end at the unfreezing stage. The process of unfreezing creates the motivation for change, but does not predict or control the direction for the transition (Sarayreh, Khudair, & Barakat, 2013, p. 267). Leaders should consider all the forces and factors that might affect the change through an evaluation of the available alternatives. The leader should also address any possible uncertainty that might result from the proposed transition. Employees and other members of the organization should believe in the change and start accepting it. At this stage, the change takes form.
The last phase in the change process is refreezing the transition. The group transitions to a new quasi-stationary equilibrium to maintain the acquitted behaviors and culture. The change is institutionalized and sustained in the new environment (Sarayreh, Khudair, & Barakat, 2013, p. 267). Employees begin working in a new way which becomes a part of the culture of the merged organization. The leader creates a supportive environment to ensure that the organization does not regress to the old behaviors. Members of the organization must now feel comfortable with the new culture and support achievement of the new organizational goals and objectives.
Steps to Sustain the Change
The management should move a step further after transitioning to the new working environment. The change process does not end at the adoption stage because sustaining measures may fail and might not have the intended long-term effects. The management should strive to effectively integrate the two cultures and create common beliefs and values based on the needs and interests of the new firm (Yoon & Kim, 2015 p. 163). The management should continue working with all the stakeholders to create lasting effects for the success of the merged firm.
It is critical to ensure that the new firm operates from a novel cultural perspective, but one that respects the differences in the partnering agencies. The management should further institutionalize the transition through proper documentation. The process may include the need to train the employees and leaders, including those who have been working for the two agencies since the merged entity presents new demands (Yoon & Kim, 2015 p. 163). Employees need the training to understand the new operating environment and begin building a different culture for the Great Destinations Travel Agency. Therefore, stakeholders should understand the expectations of the entity in order to meet them.
Mergers are standard in all industries and are meant to improve the productivity and profitability of the firms coming together to create the common entity. However, many such arrangements fail due to internal challenges in implementing the change. The partners are formerly individual companies with their different corporate cultures, beliefs, and values. Thus, reconciling the differences to create a seamless entity is not always easy. However, effective management could play an essential role in ensuring the success of such mergers. The leadership should identify the most suitable leadership theory and change model to enable the transition into the new company. Research reveals that the transformational style is the most effective in the change process. Furthermore, the management can apply Kurt Lewin’s Three Steps Model to implement and sustain the change. Evidently, the leaders should understand the operating environment and create a lasting difference by working with all the stakeholders in the two travel agencies.
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