VIETNAM NATIONAL UNIVERSITY, HANOISCHOOL OF BUSINESS ri —=H SB— Vu Thi Thu Ha A STUDY ON CHANGE MANAGEMENT POST MERGER THE CASE OF PV MEDIA Major : Business Administration Code : 60 34 0
THEORETICAL REVIEWS qggaiqtiiaHudauiagsggse 4
Addressing personal issues among staÍÍS che 17
In the initial stages of a merger or acquisition, employees often face uncertainties driven by speculation, primarily related to personal concerns such as job security, salary adjustments, and increased responsibilities This focus on individual impacts can overshadow critical business issues like market share, synergies, and potential growth opportunities Both personnel from the target company and the acquiring firm are affected by these anxieties, which can hinder a productive transition.
Research indicates that during the integration process, both employers and employees struggle to revert to their normal working habits until their concerns are addressed According to Galpin & Herndon (2008, p 129), a significant 61% of employees rated their company's leadership as "average or below average" in handling personal issues during merger integration, while only 39% rated them as "excellent or above average." This disparity highlights the need for effective leadership in managing employee concerns during such transitions.
Figure 1.1 Leadership rating regarding addressing personal issues
_ Rating of leadership regarding addressing acquired employees personal issues during
10 lẻ Rating of leadership regarding addressing
Excellent/ Avove Average Average/ Below Average
(Source: The complete guide to mergers and acquisition, Timothy J Galpin, Mark
Following the finalization of a merger or acquisition, it is crucial for top-level management to communicate the details to middle management and then to employees However, challenges arise when senior managers prioritize other tasks over effectively managing and communicating these changes, leading to unnecessary uncertainty among staff.
Productivity, morale and performance drops at all organizational levels over the course of merger integration Hence, the longer the integration extends, the lower productivity, morale and performance will be.
The integration process is often fraught with uncertainties and constant changes, making direct and frequent communication essential to alleviate doubts and speculations Failing to provide satisfactory answers can undermine confidence in leadership's ability and reliability As Galpin & Herndon (2008, p 119) emphasize, "The most frightening message is silence," highlighting the importance of maintaining open dialogue throughout the integration journey.
Top managers must go beyond presenting facts and figures; they should utilize various communication methods to strengthen relationships, foster trust, encourage collaborative thinking and innovation, and cultivate a shared commitment to the future Additionally, they should leverage all available channels to achieve these goals.
* company presentations: ô formal question and answer sessions: ¢ newsletters: e team briefings; e notice boards: e e-mail communication; e confidential help lines; ô Web sites with questions and answer session; ¢ Conference calls.
Managers must be ready for formal communications by preparing responses to challenging questions ahead of team meetings, anticipating potential negative reactions, and determining effective strategies to address them Additionally, they should be willing to openly acknowledge the limits of their own knowledge.
Constant communication is essential in managing rumors during a company acquisition, as highlighted by Carey (2000, p 158) He emphasizes that employees become highly sensitive to announcements in such situations, urging managers to maintain regular communication to prevent misunderstandings and overreactions to poorly conveyed information.
In company communications, it is very important to be clear on timescales, particularly when it comes to defining the new structure.
M&A experts advise against imposing one culture over another during mergers, emphasizing the importance of integrating local culture into the organization for success The extent of cultural integration required hinges on the merger's objectives; for mergers aimed at achieving economies of scale, comprehensive cultural integration involving all management levels is crucial Conversely, if the merger focuses on economies of scope, only the top management should prioritize cultural considerations.
To tackle cultural issues; Green & Cameron (2004, pg 202) recommend the following steps to fill the cultural gaps:
- Meet and work early with the new merger management team to create a plan;
- Communicate throughout the process In addition, pay attention to audience, timing, mode and message.
- Address and analyze cultural issues focusing on costs, brands, customers and technology by running facilitated “cultural workout” workshop with the new acquisition management team.
- Cascade the process by giving others access to a cultural work out.
Addressing and analyzing cultural issues early is crucial to prevent minor concerns from escalating into major problems Implementing cultural workshops at the initial stages of integration and across all levels is highly recommended.
Figure 1.1 illustrates the significance of cultural differences within a cultural model It is recommended to implement this model during workshop sessions, allowing merger partners to collaboratively identify potential challenges and reshape the emerging organizational culture.
Table 1 2 Trompenaars and Hampden-Turner's cultural dimensions
(Source: Trompenaars and Hampden-Turner, 1997 cited in Green & Cameron,
Universalist Particularist Rule versus relationshi :
P Focus on rules _ lancer Focus on
The group versus Individualism Communitarianism the individual More use of “We”
The range of Neutral Affective feelings expressed Do not reveal thoughts | - Reveal thoughts and and feelings feelings
The range of Specific Direct Diffuse Indirect involvement
[ How status is Achievement oriented Ascription oriented acco ;
: i Ì ccorded Use titles only when Extensive use of relevant to task , titles
Organizational change necessitates a shift in focus towards introspection, moving away from ongoing deals to the outcomes of mergers This integration can often become a scapegoat for negative results, particularly impacting sales and customer service departments shortly after a merger The consequences include decreased sales and an increase in customer complaints, leading to employee dissatisfaction and customer disappointment Unsettled employees may question the merger's viability, while dissatisfied customers may turn to competitors for better service.
After a merger, customers become a vulnerable area for the combined company, requiring immediate attention to strengthen connections, whether old or new Effective communication is essential to protect customer rights and reassure them of service benefits Managers must focus on maintaining and expanding customer contacts by enhancing sales and service standards This includes implementing short-term sales incentives, training new customer service staff, and launching advertisements to reaffirm the company’s commitment to service To enhance sales and services, detailed strategic plans are necessary.
In any M&A process, the pre-merger negotiations and deal closures mark only the beginning of the change management challenges The integration phase introduces significant changes, characterized by high complexity at individual, team, and organizational levels within both merging companies Effective change management is essential to navigate these dynamic shifts, necessitating a well-planned approach to address ongoing disruptions in product and service markets.
Petrovietnam Media Joint Stock Company - PV Media is a merged company of Petrovietnam Media Joint Stock Company and Petrovietnam Media Finance Joint
Stock Company (PVFC Media) under Merger Contract dated 7” June, 2008,
(merger date was 3IŸ May, 2008) PV Media is issued the Registration Certificate
No 0103025929 on 9" October, 2008 by Hanoi Department of Planning and
PV Media has eight shareholders including:
1 Petrovietnam (Biggest shareholder) to Petrovietnam Finance Joint Stock Corporation
3 Organizational Capacity Development Co., Ltd
4 Petrol Securities Company a) Hanoi Import- Export and Investment Joint Stock Company
6 Hoang Nhat Quang Joint Stock Company
7 Vietba Media Joint Stock Company
PV Media holds the distinction of having the largest registered capital among media companies in Vietnam, with a total of 130 billion VND, as reported by the Ministry of Planning and Investment at the end of 2008.
Petrovietnam Media Finance Joint Stock Company (PVEC Media), established in July 2007, specializes in advertising, public relations, event organization, brand development, films, and TV services The company is primarily owned by Petrovietnam Finance Joint Stock Company (PVFC) and excels in event management, serving a clientele largely composed of Petrovietnam corporations.
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2.4.2.1 Official leader and his leadership
Figure 2.6 PV Media leader’s assignment
Post merger the former General Director of PVFC Media became the
The Chairman of the newly formed PV Media, who previously served as the General Director of the former PV Media, has now taken on the role of General Director for the new entity This leadership transition has significantly impacted the organization as a whole The upcoming section on change management post-merger will explore the reasons behind this influence.
Mr A, the Chairman, is a 44-year-old former renowned artist with over 20 years of experience in the art and media industry His ambition drives him to leverage his extensive network of connections with singers, writers, and actresses to further his endeavors.
New General Director (Mr B): 39 year old manager New General Director has working experience in Television industry, was former manager in TVC channel.
In an organization, the Chairman holds greater leadership responsibilities compared to a manager, while the General Director is more focused on management than leadership A recent survey conducted among 30 employees during the merger period revealed varying perspectives on leadership and management approaches at PV Media The survey, which aimed to evaluate PV Media’s leadership in addressing staff's personal issues during merger integration, found that only 33% of employees rated the leadership as “above average” on a scale of 1 to 10 This indicates a need for improvement in leadership effectiveness during times of organizational change, as illustrated in Chart 2.3.
Figure2 7 Results of leadership rating concerning addressing personal issues
Others result of the survey in comparison listed in the table
Table 2 2 Survey results concerning leadership performance
Personal charismatic power Influence others to achieve the common goals
Leader’s focus i-ffectiveness Vision (Long-term) Risk taking
He is a former artist, so he has fame and ability to impose good
Seventy-four percent of employees believe that the chairman possesses strong motivational and inspirational skills, rating him above 7 out of 10 However, there are concerns that he occasionally misuses this influence to enhance his public image instead of focusing on shared objectives.
His focus is not on effectiveness and vision 56% of employees think that he has “average and below average” ability in creating vision.
He`s willing to take risk and focused on creativity and new product development
Leaders play a crucial role in establishing strategic orientation and motivating employees during periods of change, such as mergers A significant 40% of employees feel that the chairman has yet to successfully achieve a clear vision during this transitional phase By fostering inspiration and facilitating effective human resource connections, leaders can guide their teams towards a unified goal.
Manager approaches Manager approaches e Formal authority power e He was considered incapable of e Harmonize and coordinate others harmonizing and coordinating to achieve set objectives others to achieve set objectives.
40% of employees consider “not yet successful” achievement of General Director in merging time is lack of skills in project management and project coordination,
The manager's emphasis on short-term objectives at PV Media highlights a lack of consistency in planning According to survey results, 37% of employees believe that the General Director's inability to create a cohesive plan represents a significant failure in leadership.
The survey reveals that 53% of respondents rated their resource planning abilities as average or below average, while only 14% considered their controlling skills to be good or excellent, scoring above 7 on a scale of 10.
The General Director is perceived as competent in organizing and allocating human resources, with only 10% of employees believing that this aspect of his performance is "not yet successful."
2.4.2.2 Undefined, unclear leadership in PV Media
After a merger, employees often feel uncertain about their future, making it crucial for leaders to provide clear direction for the newly formed organization However, achieving effective leadership during significant changes like mergers and acquisitions can be challenging As two distinct groups begin to collaborate, internal politics and divisions among staff can overshadow the focus on organizational leadership, as exemplified by the situation at PV Media.
The merger between PVFC Media and former PV Media aims to create revenue synergies through cross-selling products, yet the leadership under the CHAIRMAN and General Director has been ineffective, leading to poor employee performance Employees feel that the leaders lack the ability to inspire change and foster a collaborative environment The overlapping responsibilities, where both the CHAIRMAN and General Director assigned the event organizing and business departments to contact customers, have resulted in internal competition, departmental conflicts, and confusion for clients This unclear leadership structure ultimately hampers the intended benefits of the merger.
- No clear vision to follow
- Lower team morale: It was very difficult to coordinate two groups within PV
Media There are two reasons:
+ Each group did not know to follow which leader and forced to take side.
+ Even when an employee cooperated with other group, his performance might not be appreciated fairly by other group's leader.
Unwanted uncertainties can arise when former leaders present conflicting directions, leading staff to believe that plans may change unexpectedly For instance, during the "Media Planning for Zero Degree Tea" project for Tan Hiep Phat Group, the team proposed a film series that piqued the customer's interest, showcasing the project's potential for success.
After presenting the idea, the next crucial step is determining the type of film to produce, whether a short film or a feature-length film The two leaders have differing intentions, leading to a lack of a clear procedure for the team, as plans evolved daily.
Incompetent leadership caused significant delays, scheduling issues, and confusion, persisting for six months after the merger Consequently, the board of management decided to replace both leaders Since the leadership change, the results have shown promising improvements.
2.4.2.3 Making tough decisions in PV Media
Following the merger, Petrovietnam has mandated that PV Media complete its organizational restructuring within just one month This tight timeline has led to a mix of sound and poor decision-making, as some managers hesitate to act due to fears of accountability in an unstable environment Consequently, their decisions are often influenced by employee opinions, leadership directives, team dynamics, and internal conflicts The decision-making process at PV Media has become particularly delicate, necessitating critical choices regarding organizational structure, human resources, and business strategy in the post-merger landscape.
PV Media's functional structure enhances economies of scale and reduces personnel duplication Before the merger, salesmen were assigned to specific products from individual departments, such as the Event Organizing department After the merger, salesmen from the Business Development Centre began managing all products across departments, leading to more efficient resource utilization This shift has resulted in increased productivity, as the high specialization within the functional structure allows employees to focus on specific tasks, thereby improving efficiency and overall output.