Introduction
The global semiconductor industry has recorded tremendous growth over the past four decades. The 2008 economic crisis affected the industryâs performance negatively. Due to the economic stimulus packages adopted by different governments, the industry is experiencing a recovery, but at a slow rate. A review of the industry conducted by the World Semiconductor Trade Statistics [WSTS] in 2014 shows that the global semiconductor industryâs sales grew by 9% (Semiconductor Industry Association 2014). Another study by the International Monetary Fund [IMF] shows that the industryâs growth in 2015 is expected to be 3.8% (Semiconductor Industry Association 2014). Despite this forecast, the semiconductor industry is expected to undergo significant improvements in the future given the increasing demand for semiconductor products across diverse customer groups such as governments and industries. The growth is expected to be experienced in different regions. The Year on Year [YoY] sales growth in the Americas and the European regions is expected to be 5.3% and 1.5% respectively (Semiconductor Industry Association 2014).
The above review indicates that the Americas and the European semiconductor industries will experience varied growth. To enhance its growth in the wake of the slow rate of economic recovery, NXP Semiconductor announced its intention to merge with Freescale Semiconductor on 2nd March 2015. The merger will cost NXP Semiconductor $40 billion. The merger is expected to enhance the firm’s industry leaders regarding the production of general-purpose microcontroller and automotive semiconductor solutions. Through the merger, NXP Semiconductor intends to attain high economic profits by exploiting the market opportunities. This goal will be attained through the development of synergies, hence offering high-quality semiconductor products.
The announcement by NXP Semiconductor has caused significant changes within the firmâs operation. The merger intention has triggered uncertainty amongst employees regarding their continued stay in the firm. Some employees have perceived the merger as a threat to their jobs. Consequently, the organisation has experienced instances of resistance to the desired change. This aspect has culminated in the emergence of voluntary turnover intention amongst the organisationâs workforce. Moreover, some employees are of the view that the merger will lead to the disruption of the organisationâs culture. These sentiments might limit the organisationâs ability to achieve the desired goal. This paper involves a critical review of the issues faced by NXP Semiconductor in the course of implementing its change project. The paper assesses the strategic management and leadership practices that the firm should consider.
Analysis of issues in the M&A
The contemporary business environment has become challenging over the past decades due to the existence of business cycles, viz. boom and recession. Consequently, business organisations are increasingly adjusting their strategic management practices to remain competitive. One of the approaches that most businesses have considered entails the formation of mergers and acquisitions [M&A]. Adams (2014) emphasises that mergers and acquisitions have become a fundamental element in organisations’ corporate strategy. M&A enables organisations to deal with industry changes such as technological changes, high costs of operation, and new markets (Alvesson & Sveningsson 2007).
Culture shock
In its quest to merge with Freescale Semiconductor, NXP Semiconductor will encounter a significant culture shock. Culture shock might increase the level of stress amongst employees due to the cross-cultural transition associated with the intended merger. The existence of cultural shock in the course of implementing the merger will be increased by the nature of the merger, which can be described as âa merger of equalsâ as the two firms operate in the same industry. Moreover, the probability of the merger being characterised by intensive culture clash arises from the fact that the two companies are located in different countries (Ates & Bititici 2011). NXP Semiconductorâs operations are based in the Netherlands while Freescale Semiconductors is based in the US. The two countries are characterised by significant national culture differences (Zhu & Huang 2007).
The situation is further worsened by the fact that the two firms are characterised by unique organisational cultures. These differences might translate into a cultural conflict between the two firms (Brown & Cregan 2008). Therefore, failure to manage the cultural differences between NXP Semiconductors and Freescale Semiconductors will affect the likelihood of attaining the desired merger intention. The cultural differences between the two organisations might have a negative psychological impact on employees. For example, employees might develop a sense of loss regarding organisational identification. According to Hay Group (2015), over 90% of corporate M&A fail to achieve the desired objective. The failure might arise from poor integration of the two organisationsâ structures and cultures. Therefore, it is imperative for NXP Semiconductorâs management team to incorporate effective cultural shock management practices.
One of the strategies that NXP Semiconductor should consider in its quest to manage culture shock entails acculturation, which underscores the importance of considering all the cultural aspects involved in the merger. Balogun and Johnson (2005, p. 29) affirm that acculturation is ‘the change that happens over time in beliefs, attitudes, values, and behaviour of persons in direct contact with persons representing the other culture’. Brockner and James (2008) further emphasise that the acculturation theory underscores the importance of analysing the potential impact of a proposed M&A on employees and the implemented organisational systems. Poor culture management can affect the already achieved synergies.
Through acculturation, NXP Semiconductors will be in a position to determine cultural fit with its target firm, viz. Freescale Semiconductors. Cultural fit involves assessing the degree to which the organisational culture of two firms can be harmonised to support the M&A process (Ulijn, Duysters & Meijer 2010). Moreover, undertaking cultural analysis will enable NXP Semiconductors to assess the potential source of culture clash in the M&A. This aspect will provide the organisation’s top management with insight into the best cultural management strategies to adopt.
NXP Semiconductors should integrate effective modes of acculturation. One of the techniques that the firmâs management team should consider includes integration. In the acquisition process, NXP Semiconductor and Freescale Semiconductor intend to establish a new company that will be characterised by high performance (NXP 2015). In a bid to manage their organisational culture differences successfully, NXP Semiconductor should integrate the concept of integration.
Integration involves a situation whereby the firms involved in the M$A intends to retain their respective culture and identity. Saunders, Altinay, and Riordan (2009) argue that integration is an essential determinant in attaining post-merger success. According to NXP (2015), Mr Clemmer [NXP Chief Executive Officer] will serve as the CEO of the merged firm. The CEO might experience challenges in managing the new firm due to the prevailing cultural differences. In the course of undertaking the managerial duties in the new firm, the CEO must incorporate the concepts of adaptation and interaction between the two firm’s cultures (Dyck & Neubert 2010).
The interaction will make it possible for the two firms to transfer various elements of culture. The integration strategy does not lead to a loss of cultural identity amongst the involved firms (Zafar & Afzal 2008). Consequently, employees of the respective firm retain their cultural elements such as beliefs, assumptions, and other organisational practices. Cabrey and Haughey (2014) assert that integration is only possible if the firms involved in the merger are willing to accept the acquirerâs structure. Thus, integration culminates in significant changes in the respective groupâs cultures.
Managing resistance to the change
Successful implementation of change projects within organisations demands the adoption of effective strategic management practices. One of the critical strategic management aspects that organisational leaders should consider entails human capital. James, Wooten, and Dushek (2011) contend that HRM practices determine an organisation’s ability to attain a competitive edge by developing a strong competitive edge. Graetz and Smith (2010) contend that change projects trigger resistance behaviour within an organisation’s workforce. According to Wittig (2012), employee resistance to change is acceptable as it involves a transition from the known to the unknown. Some of the notable resistance behaviour includes vocal protests, sabotage, withdrawal, and lack of commitment to job tasks. For example, employees might communicate negative feeling regarding the intended change (Luscher & Lewis 2008).
Under the merger agreement, NXPâs CEO will serve as the new CEO to the new entity. Thus, there is a high probability of employees at the top management levels at Freescale Semiconductors developing the perception that their job will be threatened. Moreover, the announcement of the change initiative might increase the rate of absenteeism amongst employees. In extreme situations, some employees might consider quitting their work. The change project might be characterised by passive and active destructive behaviours (Sims 2009). Such occurrences may lead to a reduction in the organisationâs productivity. Failure to manage such behaviours might limit the firmâs intention to implement the change project successfully (Shang 2012).
Resistance management strategies
In a bid to implement the change project successfully, the top management at both NXP and Freescale Semiconductors must integrate effective resistance management practices. Some of the aspects that the organisation’s top management should consider entailing supportive and participative practices (Palmer & Dunford 2008).
Participative approach – it is imperative for the organisation’s top management team to consider the concept of employees’ involvement to ensure a high level of readiness regarding the intended change project. Neves (2009, p. 216) affirm that managers ‘should focus on creating readiness for change by minimising resistance and transforming employees into agents of change’. One of the aspects that the organisation’s top management team should integrate into its quest to develop a readiness to change entails communication. Effective communication during the change process eliminates uncertainty regarding the change. The communication should be open to establishing an environment for the development of new ideas, mutual trust, and the development of shared vision (Paraskevas 2006).
Wittig (2012, p. 24) emphasises that the ‘amount and quality of information that is communicated to employees influences how they react to change’. NXP and Freescale Semiconductor should ensure that the communication strategy adopted is two-dimensional. First, the top management should ensure that the change message is designed effectively. The organisations’ top management should integrate five main elements, which include self-efficacy, the appropriateness of the change, principal support, discrepancy, and personal valence.
In communicating the appropriate of the change, NXP and Freescale should ensure that all employees understand the difference between the current and the desired organisational state. Kouzes and Posner (2010) affirm that this aspect can entail communicating the impact of macroeconomic forces such as economic depression and change in government regulations.
NXP and Freescale management teams should provide employees with an opportunity to participate in the decision-making process. The participative decision-making process will allow the firms’ management teams to understand the employees’ opinions regarding the change project. Subsequently, the management team will gain insight on how to manage the change project by incorporating some of the employees’ opinions. According to Lussier (2008), charismatic leadership enables the organisational leader to share their vision with their followers. Adopting the charismatic leadership style will further entrench the concept of employee involvement (Shriberg & Shriberg 2011).
Wittig (2012) argues that employee involvement culminates in the development of a sense of ownership in the change management process. Moreover, employee involvement will foster collaboration and trust amongst the employees. Therefore, in this case, integrating the charismatic leadership style will instil trust amongst employees on the change project. Lussier and Achua (2009) cite trust as a vital element in nurturing a high level of organisational commitment. Consequently, employees become focused on attaining their respective job roles. Therefore, the organisations’ management team will influence an employee to appreciate the desired and valued organisational outcomes.
Supportive approach
The intended change will lead to a significant transformation in the operation of both Freescale and NXP Semiconductors. For example, M&A will lead to the development of new job roles. Some of the new job roles might require special expertise for successful execution. Thus, the firm’s management team should offer employees the necessary support so that they can function optimally. The principal support should involve communicating how the organisations’ top management team will assist employees during the transition process. Moreover, the principal support component is fundamental because employees that are directly affected by the change might not be prepared to adapt (Saunders, Altinay & Riordan 2009). Therefore, the organisations’ top management team must ensure that employees are sufficiently oriented to the change process. Thus, comprehensive job counselling should be undertaken (Mazzei & Quaratino 2013).
The principal support should not be comprised of training only. However, the organisational managers must give employees the necessary moral support to boost their morale (Tsoukas & Chia 2002). For example, the organisation’s top management team should acknowledge employees for their effort at the workplace. Wickramasinghe and Wickramasinghe (2011) argue that moral support should be timely to circumvent a possible negative outcome that might affect the change project adversely.
The process of providing principal support in managing resistance will depend on the leadership strategy. The organisations’ top management team should incorporate transformational leadership strategy. Samnani, Boekhorst, and Harrison (2013, p. 376) emphasise that transformational leadership style entails motivating employees to ‘do more than expected and continuously enrich their capabilities and place the interests of their organisation above their interests’. Furthermore, the firms’ management team must adopt a charismatic leadership style. Sharma (2007) emphasises that the charismatic leadership style is very effective in influencing employees to accept change project. Charismatic leaders are perceived as role models due to their ability to visualise the future. Wittig (2012) affirms that emotional intelligence is fundamental in assisting an organisation’s management team to eliminate the gap that exists between the management team and employees by appreciating the workers’ needs. Wittig (2012) is of the view that emotional intelligence enhances the effectiveness with which managers eliminate cynical attitudes that lead to resistance.
Conclusion
Implementing change initiatives presents a major challenge to most organisations due to the multi-dimensional aspects involved. The available literature highlights numerous cases of failure in implementing change initiatives. One of the major reasons for failure entails the lack of adequate knowledge of aspects that should be integrated into the change process. In most cases, organisations over-emphasise on attaining the economic goal and ignore the human capital dimension. The intended merger and acquisition between NXP Semiconductors and Freescale Semiconductors might be challenging to the firm if the management teams do not adopt a holistic approach in managing the initiative.
One of the issues that the organisations’ top management team should consider entails the culture of the two firms. Before undertaking the merger, the organisations’ top management teams must understand the degree of fit between the two cultures. This move will aid in determining the possible sources of culture clash that might limit the success of the new firm.
Additionally, the top management team must appreciate the fact that the change project might face opposition from employees. The employees might perceive the intended change as a threat to their job due to the uncertainty associated with the process. The incorporation of effective change management practices such as employee involvement, participation, and effective leadership strategy will aid in minimising the change project from failing.
Personal Reflection
This course has been a source of great insight regarding change as a fundamental element in the organisation’s pursuit for long-term excellence. From the course, I have developed sufficient knowledge on the fact that organisational change originates from the internal and the external business environment. Consequently, organisational managers must evaluate the macro and micro business environments continue to identify the possible sources of change. Through continuous environmental evaluation, I will be in a position to understand the potential impact of the change, hence increasing the likelihood of formulating proactive change management practices.
The case study evaluated above has further increased my insight on the importance of implementing effective change management practices. The approach adopted by an organisation in managing change determined its successful implementation. One of the most important aspects that I have gained from the case study relates to the development of due diligence. The case study between NXP and Freescale have already undertaken due diligence regarding the financial dimension, as evidenced by the quoted cost of the merger, viz. $ 40 billion.
This aspect shows that the two firms have agreed on the cost of the merger. However, there is no evidence of the firms’ commitment to undertaking cultural due diligence. Lussier (2008) affirms that cultural due diligence is a critical element, especially in cross-border mergers. This assertion arises from the fact that it enables organisational managers from gaining insight into the prevailing cultural differences between the firms involved in a merger. Neves (2009) further opines that cultural due diligence is essential in determining the degree of cultural fit between the two firms.
By appreciating the importance of cultural due diligence, I will be in a position to undertake major organisational changes in my future managerial roles. This move will be achieved by appreciating culture as an inseparable element in organisationsâ existence. One of the areas that I will emphasise in undertaking cultural due diligence relates to the human capital dimension. During their employment term, employees develop a strong attachment to various organisational elements that constitute the workplace culture. Change initiatives usually present a threat to such cultural elements. Therefore, employees might resist the intended change, hence limiting the likelihood of attaining the desired change outcome.
Through the case study, I have developed an adequate appreciation of the importance of adopting effective change management practices. One of the most important aspects relates to perceiving resistance as a source of insight into the change implementation process rather than a threat. Therefore, as a manager, I will ensure that I develop a comprehensive understanding of the source of employee resistance. This goal will be achieved by integrating effective management and leadership style. First, I will adopt a participative management approach. This approach will aid in the development of a better understanding of the source of resistance.
In a bid to implement this approach, I will ensure that employees are provided with an opportunity to share their opinions regarding change initiatives with the top management. This goal will be achieved by holding forums whereby employees can share their ideas on the intended change projects. Moreover, the participative approach will further be enhanced by the incorporation of an open communication strategy. Thus, bureaucracies in communicating with the top management team will be eliminated. Through this approach, the employees will feel appreciated. Furthermore, the approach will ensure that employees gain an adequate understanding of the significance of the change project to the organisation.
The case study has further highlighted the importance of adopting effective leadership strategy in implementing change initiative. According to Lussier and Achua (2009), most organisations fail in their change management process due to the lack of effective leadership. As a manager, I will not consider change as a one-off affair, but as a continuous process.
Thus, I will ensure that employees are provided with the necessary support that they require to improve the probability of attaining the desired change outcome. Some of the aspects that I will emphasise as a leader entail providing technical and moral support. The technical support will be offered by undertaking training and counselling that will ensure that employees are acquainted with their new job roles. Conversely, I will focus on providing employees with the necessary moral support to motivate them in their new job roles.
Furthermore, the case study has led to an understanding of the importance of developing charismatic leadership to steer organisations through turbulent business environments. One of the issues that I will focus on in my quest to be an effective charismatic leader entails emotional intelligence. The concept of emotional intelligence will culminate in the development of a strong ability to influence my followers by developing a strong connection and trust with the followers. Moreover, charismatic leadership will ensure that I position myself as a role model within the workplace.
Potential challenges
The process of conducting due diligence will present a major challenge in implementing organisational change. The challenge will arise from the view that culture is comprised of complex aspects. First, changing employees to align with the organisational culture might demand that they dissociate from some of their norms. Several employees might be strongly attached to some cultural elements, hence making it difficult to influence them to accept the change. The strong cultural connection might lead to the development of turnover intention amongst the organisation’s workforce. This aspect might lead to the loss of critical human capital, hence limiting the likelihood of implementing the change successfully.
Managing such occurrences might consume a considerable amount of time, hence limiting the probability of completing the change implementation process within the set period. In an extreme situation, the organisation might not exploit the intended opportunity successfully.
Mazzei and Quaratino (2013) support this view by asserting that opportunities are characterised by a short window, which underscores the importance of effective time management. Despite such issues, I will be committed to positioning myself as a successful change champion. In a bid to achieve this goal, I will integrate the transformational leadership style to influence employees to appreciate the importance of change as a critical element in attaining personal development.
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