The case of the DaimlerChrysler and AOL–Time Warner merger presents significant evidence of the importance of strategic human resource management (SHRM). According to information provided in the case study, the merger of all four organizations should have been a great success, and all experts praised the merger. Both companies were large household names, and their potential combined influence on the market was premeasured as dramatic. However, the merger failed due to several reasons, one of which includes the cultural differences between the companies. A close analysis of the reasons why the merger failed, in this case, could emphasize how important it is for the businesses to consider cultural differences and how SHRM can maintain the successful integration process in mergers.
Many aspects of a merger could be perceived differently by business-leading people. According to the case study, the cultural differences were worsened by the fact that businesses perceived the merger differently. The merger itself presents a complicated and continuous process that requires significant efforts and mutual understanding, or at least a consideration and willingness to cooperate from both sides. However, both companies made the mistake of thinking that a merger is a short event that includes paperwork and minor organizational changes. While it is correct that the paperwork organization and signing is a vital step in the legal aspects of a merger, disregarding the differences in management peculiarities contributed to the negative result of the merger.
Furthermore, perceiving the merger as a one-time event reduced the area of consideration of potential issues for both businesses. According to Sapkota et al. (2019), other vital aspects of a merger should be considered in the integration plan, including the flow of decisions, leadership styles, communication methods, and level of trust between the leaders. The information from the case study suggested that in the merger process between DaimlerChrysler and AOL–Time Warner, both organizations’ leaders focused on deciding which IT system would be used for accounting and e-mails. Therefore, both organizations underestimated the complexity of the merger process, which resulted in a negative outcome.
In addition, the case study information mostly focused on cultural differences between business-leading people. However, the employee perspective and human resource management also play an important role in merger and acquisition processes. Employees and their level of productivity represent one of the most valued assets of an organization. According to Cooke et al. (2021), mergers present significant challengers for employees of both organizations and potentially can affect their performance and level of commitment to organizational goals. In addition, the aspect of change in psychological ownership for employees and executives can result in increased turnover rates (Degbey et al., 2021). In many cases of mergers, ineffective SHRM resulted in wage stagnation and reduced levels of employee satisfaction. The case study primarily focused on cultural differences between people from DaimlerChrysler and AOL–Time Warner. In this case, SHRM employee-oriented practices such as supportive leadership style that nurtures employee resilience and employee assistance and development programs could have been used to overcome the challenges presented by merger and acquisition processes.
Considering other factors that influenced the negative outcome of the merger attempt that was present in the study determined more vital details of reasons behind the merger failure. Another significant moment is that the business-leading people did not like each other, or in other words, their cultures did not fit. Moreover, their differences in automobile manufacturing and digital entertainment backgrounds could have contributed to the overall level of alienation from contribution to the merger. According to Sarala, Vaara, and Junni (2019), the role of the human side or a human factor in merger and acquisition processes is still understudied. The authors defined that many factors could influence merger and acquisition processes, from different communication methods to representatives’ gender, emotions, and specific characteristic of the industry (Sarala, Vaara and Junni, 2019). Therefore, it is likely that both sides were motivated by the potential financial success of the merger without necessarily showing their willingness to cooperate.
However, the material aspect and financial motivation present a small portion of factors that favor the successful merger or acquisition process. According to Sarala, Vaara, and Junni (2019), the pre-acquisition phase should include assessing the firm’s socio-material aspects, including its culture, capabilities, and key employees. Acquiring the information about the socio-material aspect ensures the basis for the plan of successful integration. Thus, in strategic human resource management, the merger process should consider socio-material factors rather than focusing purely on material motivation.
In conclusion, the study of the unsuccessful merger between DaimlerChrysler and AOL–Time Warner presents a real case of the importance of SHRM and its benefits to the integration process. The merger is a complex continuous process that carries multiple potential threats to businesses. The threats should be considered by assessing socio-material aspects during the pre-acquisition phase. Therefore, collecting more information on the other organization’s culture and capabilities is beneficial to planning integration. Furthermore, mergers often negatively influence employee productivity and cause increased turnover rates. Thus, applying the knowledge and principles of strategic human resource management to the merger processes is beneficial to the successful integration between two organizations.
Reference List
Cooke, F. L. et al. (2021) ‘Riding the tides of mergers and acquisitions by building a resilient workforce: a framework for studying the role of human resource management’, Human Resource Management Review, 31(3), pp. 1-9.
Degbey, W. Y. et al. (2021) ‘The impact of psychological ownership on employee retention in mergers and acquisitions’, Human Resource Management Review, 31(3), pp. 1-16.
Sapkota, R. et al. (2019) ‘Issues and analysis of leadership, strategy, behavior, and accounting of mergers and acquisitions: a case study of a merger of two mega-corporations’, International Journal of Organizational Innovation, 12(2), pp. 180-191.
Sarala, R. M., Vaara, E. and Junni, P. (2019) ‘Beyond merger syndrome and cultural differences: new avenues for research on the “human side” of global mergers and acquisitions (M&As)’, Journal of World Business, 54(4), pp. 307-321.