OTSD

MMS & PG Semester III (HR)

Topics:
1. Mergers and Acquisitions and role of HR
2. Organizational Decision Making
3. 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 Motives
1. Achieving economies of scale
2. Increasing market power
3. Economies of vertical integration
4. Risk reduction
5. Tax shield
6. Surplus fund
7. Complimentary resources
8. New business opportunities
9. Eliminating inefficiencies
10. Diversification
11. Long term financial considerations
12. Lowering financing costs
13. 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 Mergers
1. Horizontal mergers : two firms operating and competing in the
same type of business activity
2. Vertical merger: between firms in different stages of firms,
forward and backward
3. Conglomerate: product extension also called concentric mergers,
geographic market-extension , pure conglomerate mergers

Mergers & Acquisitions

Demerger
1. Divestitures/Sell offs: the parent company divests a part
of the company to a third party for cash or securities
2. 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 takeover
2. Hostile takeover
3. Bailout takeover: bailout from financial
liquidation

Mergers & Acquisitions

Merger of Foreign with Indian : Indian
Companies Act 1956, takeover through FEMA
Amalgamation: 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 Alliances
1. Supply or purchase agreements: partners join
hand together to keep their supply chain intact
2. Marketing, sales and service alignment
3. Technology development contracts
4. Licensing
5. Franchising
6. Joint Ventures: new entity, both companies
separate and intact
Leveraged Buy-Out

Mergers & Acquisitions

Pitfalls of mergers
1. Undue focus on financial aspects
2. Employees lose personal effectiveness as a result of
rumors, misinformation and worry
3. Infrequent and irrelevant communication
4. Perceived lack of authority and understanding of the
employee when the new organization forms
5. Leadership challenges and failure to articulate the
communicate the vision and inspiration to the
employees

Mergers & Acquisitions

Critical HR tasks
1. Integrate policies and programs from both companies
2. Cultural Integration asses culture, new culture, follow which
culture
3. Composing new board, new audit and management team
4. Process retention, compensation and benefits packages
5. Identify key talents and expertise
6. Advise leadership on organization capability
7. Recognize customs, symbols, language and ceremonies needed
for cultural assimilation
8. Design new performance and reward systems
9. Create communication strategies
10. 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

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
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Steps in the Rational Approach to DecisionMaking

Implement
Chosen
Alternative
Choose
Best
Alternative

Evaluate
Alternatives

Monitor
Decision
Environment

3
5

Develop
Alternative
Solutions

Define
Decision
Problem

Specify
Decision
Objectives

Diagnose
Problem

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
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Individual Decision making: A Comparative Analysis

Rational Approach
1. 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 Perspective

1. Rely more on intuition &
experience rather than sequential
logic or explicit reasoning
2. Used when decisions are nonprogrammed & ill-defined. Takes
short cut
Non-programmed decisions: Nonprogrammed decisions are unique
decisions that require a 'custom
made' solution. This is when a
manager is confronted with an illstructured 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 nonprogrammed decision.
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Constraints and Trade-offs

During Non-programmed Decision-Making
Bounded Rationality:

Limited time, information,

resources to deal with complex,
multidimensional issues

Trade-off

Trade off

Trade off

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, shared
perspective, cooperation,
support, corporate culture and
structure, ethical values

Trade-off

Tradeoff

Decisio
n/
Choice:
Search
for
a highquality
decisio
n
alternat
ive

Organizational Decision Making

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
17

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
Uncertainty
Information is
limited
Managers have
many constraints

Conflict
Managers have
diverse goals,
opinions, values,
experience

Coalition Formation
Hold joint discussion
and interpret goals
and problems
Share opinions
Establish problem
priorities
Obtain social support
for problem, solution

Search
Conduct a simple,
local search
Use established
procedures if
appropriate
Create a solution
if needed

Satisficing
Adopt the first
alternative
that is acceptable
to the coalition

Organizational Decision Making

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

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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)
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Organizational Decision Making

Models 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

1.
2.

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
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
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

Distortion of Organizational Decision Making by

Cognitive Biases

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Improving Decision Making and

Learning
1.
2.

3.
4.
5.
6.

Adopting strategies for organizational learning: Listening to dissenters, converting

events into learning opportunities, experimenting
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
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
Devils advocate: a person who is responsible for critiquing ongoing organizational
learning. A method for overcoming cognitive biases and promoting organizational
learning by institutionalizing dissent
Dialectical inquiry: teams of decision makers generate and evaluate alternative
scenarios and provide recommendations
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
26

How Devils Advocacy and Dialectical Inquiry Alter the Rational

Approach to Decision Making

27

Organizational Decision Making

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 persons or groups 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

28

Organizational Decision Making

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

29

Learning Organization Decision Process When Problem

Identification and Problem Solution Are Uncertain

PROBLEM IDENTIFICATION

When problem identification is

uncertain, Carnegie model
applies
Political and social process is
needed
Build coalition, seek agreement,
and resolve conflict about goals
and problem priorities

PROBLEM SOLUTION
When problem solution is
uncertain, Incremental process
model applies
Incremental, trial-and-error
process is needed

Solve big problems in little steps

Recycle and try again when
blocked

30

Illustration of Independent Streams of Events in the Garbage Can Model of

Decision-Making
Problems

Solutions

Middle Management
Participants

Problems
Solutions
Choice
Opportunities
Participants

Choice Opportunities

Participants

Choice Opportunities

Department A

Solutions

Department B

Problems
Solutions
Choice
Opportunities
Participants

Choice
Opportunities

Problems
Solutions
Choice
Opportunities
Participants

Solutions

Problems

Participants

Problems
Participants

Problems

Solutions

Participants

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Contingency Framework for Using Decision

Models
Certain

Certain

Solution
Knowledge

Problem
Consensus

Individual:
Rational Approach
Computation

Individual:
Bargaining, Coalition
Formation

Organization:
Management Science

Organization:
Carnegie Model

Individual:
Judgment
Trial-and-error

Uncertain

Uncertain

Organization:
Incremental Decision
Process Model

Individual:
Bargaining and Judgment
Inspiration and Imitation
Learning Organization:
Carnegie and Incremental
Decision Process Models,
Evolving to Garbage Can
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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
ways
1. 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 congruence
4. 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

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Organizational Excellence
Creative Excellence
1. 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 ,Devils advocacy, Effective planning, pilot testing,
periodic review, stabilization, scale up

THANK YOU