|Organizational Behaviour | |Barclays PLS & Lehman Brothers Merger | |Yasir Irshad | [pic] Executive Summary The Human Resource Management challenges faced by the Barclays PLC after merger with Lehman Brothers were mainly the low motivational levels of Lehman Brothers employees which were due to demise of Lehman Brothers and merger with Barclays PLC. Another factor was of personality differences between employees and groups of employees.
They were required to have a very strong and clear communication with all the stakeholders as communication is a tool which is of most importance in scenario of mergers. Performance management and reward programs were also required to be in place to get all the employees understanding the objectives and goals of the organisation. With merger there is always stress which can be lethal and there was a need to develop a common culture to discourage any cultural clash. Retention policy was required to be in place for the talented staff who can get disillusioned due to merger activity.
The issues related to culture were that these two organisations had their own corporate and national cultures which were being followed for quite some time. Barclays understood the need and tried to make a new common culture so that there is no situation through which a clash arises. The conflict issue was addressed with clear and strong communication and they were given clear understanding of objectives and goals of the organisation. In terms of change the issues were mainly related to insecurities of career, job and monetary terms which were addressed immediately by the management.
The stakeholders must have faced dilemmas about integration of two cultures which will bring change and might also generate conflict between the stakeholders as it might affect the future aspirations of the organisation. Table of Contents Introduction3 HRM challenges4 Motivation5 Personality Differences5 Communication6 Performance Management6 Rewards7 Stress Management7 Development of Common Culture7 Talent Retention8 Pre & Post Merger Phases9 Analysis of Merger Decision10 Culture10 Conflict13 Change15 Conclusion16 References17 Introduction
Merger is known as the combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Merger is a bit different than acquisitions as with merger a new entity is formed whereas it is not necessary in the case of an acquisition. Generally the company’s focus is on the strategic aspects or legal issues when it comes to mergers, but the neglected part in most of the cases is H R. H R is extremely important in mergers as it is the biggest contributing factor when it comes to success or failure of a merger project.
Most of the mergers are unable to produce desired or targeted results only due to issues related to people who are involved, mainly the staff of the company which is being over taken. Mergers can bring uncertainty to the employees if human resource issues are not managed in a professional and attentive manner, which can become detrimental to the future aspects of the companies involved. When it comes to a successful merger the required elements for the Barclays PLC and Lehman Brothers were having an effective leadership which understands how the merger process works and how to implement it.
They need to be clear about their goals and objectives which are expected to be achieved out of the merger exercise. They need to have due diligence on hard and soft issues surrounding the merger and there need to be a well-managed and assured merger team for the whole process. Learning from any past experience of the same nature than it can be very helpful in a smooth transition. The planning needs to be completed early and the most important part in terms of HRM is to retain the talent or key part of the employees and have a strategy in place to avoid mass exodus as it is a very common thing to happen.
This is due to unclear communication between the stakeholders of the concerned organisations. HRM challenges Mergers have become the way to go in the current climate of instability due to the recession. Since more and more companies are now showing the openness and eagerness towards mergers to enhance the business or to achieve stability, the issues associated with mergers are ever so under scrutiny than ever before. The human resource management issues related to mergers are categorised in two phases which are known as Pre-Merger Phase and Post-Merger Phase.
It is important for managers managing the merger to not neglect the human resource management at any stage of the merger process. Only through human resource management the people can be assured of the changes the merger will bring. In the case of merger between Barclays PLC and Lehman Brother, the main human resource management challenges were the difference in cultures of the two organisations involved in the merger process and also the Motivation of staff from both companies and especially those from Lehman Brothers.
People problems are a major cause of failed mergers, and you must ensure that most if not all of the people you want are still in place at the end of the integration period. This is best achieved by carrying out an employee selection process whose pace and substance matches the kind of merger involved. (Kay and Shelton) The main issues faced by human resource management in merger of Barclays PLC and Lehman Brothers are mentioned next and discussion on these challenges is also conducted. Motivation
Motivation levels of Lehman Brothers’ staff were not very high and it was quite normal under those circumstances to expect staff to behave like this. This staff belonged to a company which was a leader in industry not so long ago but now it was being merged or overtaken by another competitive company. For any organization undergoing far-reaching change—and in today’s climate, that probably includes your company—the lesson is the same: Clinging to cultural habits that become outmoded as a company grows and as markets change is a recipe for disaster.
It can lead to misuse of talent, reward leadership styles that have become dysfunctional, and undermine the company itself. The very attributes of a strong corporate culture that underlie a company’s success often carry the seeds of its destruction. (The Conference Board Review Website) Keeping this in mind the motivation of Lehman Brothers staff was a real cause of worry for the Human Resource Management Team at Barclays PLC. Personality Differences With the merger there was also expected clash between different personalities from both sets of employees. Human Resource Management was required to be ware of this as there were a lot of different personalities were involved and this can create a clash which is not in the best interest of the organisation and can also result in failure of the merger process and can also affect the desired outcomes in a negative manner. Human resource management need to eliminate the mentality of them-us. Even though it is big challenge but still it is one which can be achieved successfully. Communication Communication is the basic element required for success of an organisation and it becomes ever so important when it is the case of a merger between two companies.
During the complex and thoughtful merger process where the Barclays PLC were trying to bring two different groups of employees together, it was extremely important to have a flow of information and to have constant communication. It is important to stay connected with emotional feelings and motivation of employees. It was important for the human resource management to keep the communication clear and make sure that everyone is well informed through the internal official sources rather than getting information through rumours or through press and media. Performance Management
Performance management can also be a challenge where the management has to review performance and this phase will not be completed without coaching and mentoring. The set of employees from Lehman Brothers will be in need of coaching and mentoring mainly as without this it will be extremely difficult to make them adjust in new organisation and new set of rules. This management needs to be extremely accurate as repercussions of this going wrong can be harmful for not only the merger process but in fact for the future of the organisation and employees alike. Rewards
Having a comprehensive and competitive reward scheme is also important and can become a challenge as without this factor it is not possible to make the new culture sustainable. It will also make sure that employees of Lehman Brother also feel part of the organisation and they will try to give their input for the good of the company. If there is no reward plan then it might become extremely difficult to motivate employees and achieving the targets. Stress Management With the hype surrounded by merger can cause disruption and this result in creating stress on the employees.
Stress makes people under perform and this is totally opposite to what is expected out of the merger. The change in organisational structure and the management structure can lead to employees getting stressed. The whole process of merger also creates stress on employees as they are unaware of what is going to happen and are also worried about job security. Positive and clear communication is required to manage the stress. Development of Common Culture It is also a challenge to develop a common organisational culture after merger.
Employees who have worked under separate organisational cultures will be reluctant to adopt new culture but it will be responsibility of human resource management to make sure that a new and common culture is devised and adopted by all concerns. Without a common culture there will not be a sense of ownership and direction. Employees will be reluctant initially to adopt the cultural changes as it is with all other changes but it will be a task for human resource management to implement it successfully.
Talent Retention Another Challenge will be of talent retention as in case of a merger, most of the talented employees start to get stressed due to rumours and uncertainty. This talent starts to leave the organisation for better opportunity or they are snapped up by other organisations due to the experience and talent they possess. Pre & Post Merger Phases The merger phases consist of the assessment and evaluation of cultural and organisational differences between the two organisations and the concerned staff as well.
This normally includes the organizational cultures, life cycle of the organization, different styles of management in organisations and role of organizational leaders. The mergers are not so much easy for the employees as well specially for the employees of company that is going to be merged and in this case it was Lehman Brothers and can be distressing for the employees of acquired firms; the impact can range from anger to depression. The usual impact is high turnover, decrease in the morale, motivation, productivity leading to merger failure.
The other issues in the merger activity are the changes in the Human Resource policies, downsizing, layoffs, survivor syndromes, stress on the workers, information system issues etc. The human resource system issues that become important in merger activity are human resource planning, compensation selection and turnover, performance appraisal system, employee development and employee relations. Merger activity poses an altogether new set of challenges for the human resource managers in Barclays PLC and Lehman Brothers which were acquiring and acquired organizations respectively.
The merger activity as proven by studies and research has a serious influence on the performance of the employees especially during the transition period. The whole activity generates stress on the employee. This stress is usually result of differences in human resource practices, uncertain environment, cultural differences, and differences in organizational structure and changes in the managerial styles. Analysis of Merger Decision Through this analysis it will be explained what implications the challenges had on the merger process of Barclays PLC and Lehman Brothers and the decision of merging will be discussed too in lieu of the evaluation erformed in previous section of this report. Culture Organisational cultural can be stated as the values, customs, rituals, attitudes, and norms shared by members of an organization, which have to be learnt and accepted by new members of the organization. Culture can also be thought off as unwritten rules which are followed within an organisation. Based on the research of Dr. Geert Hofstede, There are differences between national and organizational cultures. For global companies it is important to understand both, organizational and national culture, in order to impact organizational performance.
In a recent ITAP webinar, Dr. Geert Hofstede discussed “Integrating Corporate Practices and National Cultural Values. ” The topic is highly relevant to organizations operating in a volatile global economic environment. While economic turmoil creates challenges and failures, it also creates opportunities as evidenced in a large number of mergers and takeovers: Doosan and Bobcat, Lloyds and HBOS, Barclays and Lehman Brothers, Citigroup and Wachovia. The list is long. Many of these names have strong national brand identity. (ITAP International Website)
The matter here with regards to difference was not only a difference of cultures in two corporate giants; in fact it was a difference of two national cultures as well. The issue faced by merger team was also of how to integrate two different national cultures which were different from each other. Barclays had the British culture whereas Lehman Brothers was a pure U. S. national and corporate cultural model. It would be a bigger task for Barclays PLC to introduce a culture which is a national culture than changing just the corporate or organisational culture of Lehman Brothers.
Mainly it is said that organisational culture is developed from the past performances of the organisation. In this case Lehman Brothers had been successful for a very long period of time so it had developed a sort of a positive culture but the setback which forced them to file for chapter 11 might have damaged the positive and healthy culture somewhat. Barclays PLC understood the importance of the negativity that is created by cultural clashes but it was aware at that Lehman Brothers employees had excelled in that culture and they would help them in creating a common new culture post-merger.
Barclays appeared to recognize that Lehman Brothers was only as good as the employees who make up the firm. If 30 percent or more of Lehman’s United States and Canadian work force quits before the deal closes, it has the right to walk away from the deal. Barclays has also identified 200 employees “that have been designated as key to the success of the business,” according to the filing, along with eight employees designated as “critical” to the firm. Barclays requires a “substantial majority” of those 200 key employees and all eight of the critical employees to stay on or, again, the deal won’t close.
Employees who do stay on should expect to receive the same amount of bonus money for 2008 that Lehman had set aside for them before it collapsed. Sources close to Lehman told DealBook that those bonuses would probably be around 60 percent of what employees received in the previous year, because of the depressed market. The written agreement says that Barclays cannot reduce the bonus pool unless more than 10 percent of the employees set to receive bonuses quit by the end of the year. So if only, say, 9 percent quit, the remaining employees would benefit as the bonus pool would be split among fewer people. DealBook Website) This states that the culture at Lehman Brothers was never to be completely eliminated by Barclays PLC; in fact they wanted to retain staff of Lehman Brothers to make a common and new organisational culture. Even though this was not a straight forward thing but they had to take the key employee and staff of Lehman Brothers on board to keep the winning mentality of the past going and develop a culture which no doubt will be dominated by the culture of Barclays PLC but will also have shades from the positive culture which was a forte of Lehman Brothers’ success for such a long time.
Conflict Conflict is a state of clash between two or more individuals or organisations which is open and prolonged. It can also be said as disharmony between people, ideas or interests of the stakeholders. In every organisation there will be a conflict which can be between individuals or it can be between departments or it can also be between working group or teams. Conflict is not necessarily a negative thing all the time. If conflict is managed with professionalism and with a will to draw something useful, it can become a useful tool to focus on something and getting a positive response out of it.
In case of merger between Barclays PLC and Lehman Brothers, it was expected that there will be conflict between two sets of employee belonging to these organisations. Since it was a merger of two cultures as well, there was always a danger of conflict and if not managed properly it could tarnish the merger process. The most important thing for the Barclays PLC management was the integration and merger process and they could not afford to have a conflict at that early stage in the proceedings.
Barclays PLC made clear communication with all stakeholders and thus this also helped keep a check o conflicts. They also earmarked around 200 staff from Lehman Brothers to hold the key posts to keep any conflict in check and this gave a clear message that employees from Lehman Brothers were not there to make up the numbers only; in fact they were valued and respected by Barclays PLC as the major factor for future success.
There were initially fears from Lehman Brothers employees that they will be forced out of jobs but Barclays PLC decided to make a communication with concerned staff and made sure that no conflict was made. As part of the Purchase Agreement, Barclays required a “substantial majority” of the 200 employees designated as key employees and all eight of the critical employees to stay on or the deal would not close. Additionally, all 10,000 Lehman employees were offered employment. Lehman Lotto Website) This made sure that there was not a conflict between employees and management or even between two sets of employees and everybody could work for a common goal and that was to make this merger process smooth and successful. To stop any conflict the management decided to make strong and proper communication to make sure that there is no conflict of interests and also no conflict of understanding any objectives which the organisation was striving to achieve.
According to analysis the conflict management was very strong and effective from the Barclays PLC management. They were clear in terms of defining goals and objectives along with a comprehensive reward and appraise plan. All this was made sure by a very good Human Resource management strategy. Change Change is a very difficult thing to manage and also extremely difficult to accept no matter how much positive change it is. Change can be of any type from external changes to internal change elements.
It can include technology or any legislative change by the government or law makers. In the case of merger between Barclays PLC and Lehman Brothers this change was brought by the merger of two giants of the financial service industry and also with the presence of two different corporate cultures, two different sets of national cultures and also squaring up of two sets of employees who had different working styles, vision and perceptions driven by their past experiences and cultures.
Since there were a lot of individuals involved in this merger process of Barclays PLC and Lehman Brothers; it made acceptance of change a little of a challenge for Human Resource management as it challenged the selective perception of both sets of employees and in particularly those from Lehman Brothers. These employees had their own habits and way of approaching work which suited to organisational culture which was practiced previously and it also generated a sense of losing freedom in these staff members.
With mergers there is always a fear of unknown which made employees get worried about “What is going to happen now? ” and they must have started to worry about the financial implications it would bring if they were to be fired or made to work in compromising financial conditions. They did not want to lose the job and career security they had in the past and were unaware of the kind of reception they would receive in the new organisation. Conclusion
There were issues related to the merger of Barclays PLC and Lehman Brothers and there must have been some dilemmas faced by the stake holders with respect to the massive risk which was taken by the company. The stakeholders must have been unsure about the level of success they would achieve with the initial phase of integration as integrating two different organisations with their own historic organisational cultures could become loggerheads and there could be a clash that may obstruct the plans of Barclays PLC.
Moreover this deal was done in the time of massive economic recession and it was a huge investment at that time and the outcome was totally dependent on the successful integration of the two organisations. Many of the analysts have declared this as a wonderful show of opportunism by the Barclays PLC by grabbing Lehman Brothers at a price which is far less than what it would have been under normal circumstances. There was a danger of clash between two cultures and it might bring up a conflict or even mass exodus of talent from the organisation.
Employees are susceptible to change and this is not beneficial for the organisational goals and objectives. Now a day there has been a court case filed against the Barclays PLC merger of Lehman Brothers which has been backed by creditors of Lehman Brothers as they claim that the deal was undervalued and according to different reports this claim is somewhere between ? 5bn to ? 10bn. There have been allegations of Lehman Brothers employees being involved in this undervaluing of the business as they had guarded their own vested interests rather than those of the organisation and its creditors.
Barclays claim that no irregularity was done and everything was done in a professional and lawful manner. There are still lots to come out of this deal which has been labelled by some as Deal of the Century. References • Tom Junod. (2009). The Deal of the Century. Available: http://www. esquire. com/features/barclays-deal-of-the-century-1009-5 Last accessed 23 July 2010. • Dr. Geert Hofstede. (2010). Organizational Culture and National Culture. Available: http://www. itapintl. com/whoweare/news/146-organizational-culture-and-national-culture-whats-the-difference-and-why-does-it-matter-. tml? lang Last accessed 23 July 2010. • Laurie J Mullins (2010). Management and Organisational Behaviour. 8th edition Prentice Hall. • Hope Greenfield. (2009). Culture Crash. Available: http://www. tcbreview. com/culture-crash. php Last accessed 24 July 2010. • Anon. (2008). Ex-Lehman Broker Accused of Passing Merger Tips. Available: http://dealbook. blogs. nytimes. com/2008/12/19/ex-lehman-broker-accused-of-passing-merger-tips/ Last accessed 26 July 2010. • Andrew Ross Sorkin. (2008). Who’s Getting What in the Lehman-Barclays Deal.
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