cultural integration in m&a - diva...
TRANSCRIPT
J Ö N K Ö P I N G I N T E R N A T I O N A L B U S I N E S S S C H O O L JÖNKÖPING UNIVERSITY
Cultural Integration in M&A A Study of the Acquisition of Andersen by KPMG in Vietnam
Master Thesis within Business Administration
Author: Jing Chen
Vi Nguyen
Tutor: Cecilia Bjursell
Jönköping May 2010
i
Acknowledgements
The authors would like to express their gratitude to all the people involved during the
process of writing this Master Thesis.
To Truc Vo for helping us contact the respondents and distribute the questionnaires.
To all interview and survey respondents for taking their time and sharing their valuable
knowledge and experience.
We would also like to thank our tutor Cecilia Bjursell for her valuable inspiration, great
support and precious feedback.
Jönköping, May 2010
Jing Chen Vi Nguyen
ii
Master Thesis within Business Administration
Title: Cultural Integration in M&A: A Study of the Acquisition of Andersen by KPMG in Vietnam
Authors: Jing Chen, Vi Nguyen
Tutor: Cecilia Bjursell
Date: May 2010
Subject Terms: Cross-border M&A, National Culture, Organizational Culture, Cultural Integration
Abstract
Background: As one of the most important means of globalization for companies around the world, mergers and acquisitions (M&As) have been adopted as a core growth and expansion strategy. M&A integration involves combination in various areas, in which cultural integration has an important role. Nevertheless, the potential positive and negative impact of cultural dimensions on the success of M&A activity is somewhat less acknowledged in the business community.
Problem: Most of the M&A research has focused on the strategic and financial fit
between the acquired and acquirer firms and culture in M&As does not get as such attention while M&As represent a main organizational event to employees since they threaten and interrupt cultures, cause misunderstandings and frequently compel the integration of people who do not share the same reality.
Purpose: To explore problematic cultural issues in order to get an understanding of the characteristics and outcome of cultural integration as influenced by both national culture and organizational culture in M&A.
Method: In order to fulfil the purpose a qualitative case study approach was chosen. Semi-structured phone interviews were made with the top managers who were responsible for the deal and employees that worked for both companies during the transition period. In addition, two survey were conducted among KPMG and Andesen members.
Conclusion: It could be summarized that KPMG and Andersen deal result in a great loss of
ex-Andersen employees, due to the resistence from employees to the new culture after integration. High numbers of employees dropped out of the integrated organization because they were not satisfied with the KPMG culture, and in this case, if KPMG loses the people who are trained and educated, it loses the competence and a lot of the value of the company, and thereby fails to achieve one of its goals for the acquisition. Since many Andersen people left, one interpretation could be it is hard to move from a unified/strong culture to a not so strong/unified culture.
iii
Table of Contents
1 Introduction ............................................................................... 1
1.1 Background ............................................................................................ 1 1.2 Problem .................................................................................................. 3 1.3 Purpose .................................................................................................. 3 1.4 Research Questions ............................................................................... 4
1.5 Definitions ............................................................................................... 4 1.6 Disposition .............................................................................................. 5
2 Frame of Reference ................................................................... 8
2.1 Mergers and Acquisitions ....................................................................... 8
2.1.1 Culture in Mergers and Acquisitions ....................................................... 9
2.2 Culture .................................................................................................. 10 2.2.1 Levels of Culture................................................................................... 10 2.2.2 National Culture for Work-Related Values ............................................ 12 2.2.2.1 Limitation on Hofstede‟s Cultural Dimensions ............................................................. 14 2.2.3 Organizational Culture .......................................................................... 15 2.2.3.1 Limitation on Schein‟s Model on Organizational Culture ............................................. 17 2.2.3.2 Culture Types ............................................................................................................... 18 2.3 Acculturation ......................................................................................... 19 2.4 Theoretical Discussion ......................................................................... 21
3 Methodology ............................................................................ 24
3.1 Methodological Approach ..................................................................... 24
3.2 Research Method ................................................................................. 25 3.3 Research Approach .............................................................................. 25
3.4 Research Design .................................................................................. 26 3.5 Case Study ........................................................................................... 27 3.6 Data Collection ..................................................................................... 28
3.6.1 Interview ............................................................................................... 28 3.6.2 Survey .................................................................................................. 31
3.7 Summary & Reflection .......................................................................... 32
4 Empirical Study ....................................................................... 33
4.1 Case Description .................................................................................. 33 4.1.1 KPMG ................................................................................................... 33 4.1.2 Andersen .............................................................................................. 34
4.1.3 Acquisition ............................................................................................ 37 4.2 Findings ................................................................................................ 37 4.2.1 Theme 1 – Values and Beliefs .............................................................. 37
4.2.2 Theme 2 – Cultural Dimensions ........................................................... 39 4.2.2.1 Employees‟ Perception of Organizational Cultures ..................................................... 42 4.2.3 Theme 3 – Processes ........................................................................... 45
4.3 Summary .............................................................................................. 46
5 Analysis ................................................................................... 47
5.1 Culture Types ....................................................................................... 47 5.2 “Marriage” Types .................................................................................. 48 5.3 National Culture .................................................................................... 50
iv
5.4 Organizational Culture .......................................................................... 52
5.4.1 Artifacts ................................................................................................ 52 5.4.2 Espoused Values and Beliefs ............................................................... 54
5.5 Summary .............................................................................................. 56
6 Conclusions and Discussion ................................................. 58
6.1 Conclusions .......................................................................................... 58 6.2 Implications .......................................................................................... 60 6.2.1 Practical Implications ............................................................................ 60 6.2.2 Implications for Future Research .......................................................... 61 6.3 Reflections ............................................................................................ 61
References ................................................................................... 63
v
Table of Figures
Figure 1: Thesis structure ................................................................................... 7
Figure 2: Levels of culture. Source: Alvesson & Berg (1992, p64) .................... 10
Figure 3: Model of organizational culture. Source: Schein (2004, p.26) ............ 16
Figure 4: The relationship between culture types in terms of the degree of
restraint they place on individuals. Source: Cartwright & Cooper (1996)18
Figure 5: Modes of organizational and individual acculturation in M&A, and its
potential outcomes. Source: Cartwright & Cooper (1996) .................... 20
Figure 6: Cultural Dimensions in M&A Integration ............................................. 22
Figure 7: Survey results of KPMG ..................................................................... 44
Figure 8: Survey results of Andersen ................................................................ 44
Figure 9: Culture type of KPMG and Andersen ................................................. 45
Table of Tables
Table 1: Cultural Dimension Score. Source: Hofstede (2005) ........................... 13
Table 2: List of interviewee................................................................................ 30
Table 3: Comparison of empirical data and Hofstede‟s (2005) cultural
dimensions ........................................................................................... 50
Table 4: Survey results of KPMG (number of responses) ................................. 71
Table 5: Survey results of Andersen (number of responses) ............................ 71
List of Appendices
APPENDIX A: INTERVIEW GUIDE .................................................................. 68
APPENDIX B: ONLINE SURVEY ...................................................................... 69
APPENDIX C: OVERALL SURVEY RESULTS ................................................. 71
APPENDIX D: SURVEY RESULTS FOR EACH QUESTION ........................... 72
1
1 Introduction
In this chapter, the background to the topic of this thesis is presented. Prior research on the definition and general trend of Mergers & Acquisitions (M&As) is introduced. The emphasis of the study is on the cultural integration in the M&A process, through the case study of a local integration process between two Multi-national Corporations‘ (MNCs) subsidiaries in Vietnam. Problems explored from the case studies on the cultural side are discussed, which will guide and fulfil the purpose of this study. Key terminologies are explained to help better understand this thesis.
1.1 Background
Thomas L. Friedman said that the world is flat and globalization has now shifted into warp drive. As one of the most important means of globalization for companies around world, mergers and acquisitions (M&As) have been adopted as a core growth and expansion strategy. M&As are becoming an increasingly popular strategy option for organizations (McEntire and Bentley, 1996). This complex phenomenon which M&As represent has attracted considerable interest from a variety of management disciplines over the past 30 years (Cartwright & Schoenberg, 2006).
During the turbulent 1980s, nearly half of all U.S. companies were restructured, and over 80,000 were acquired or merged. In 1996 alone, there were at least 10,000 mergers and acquisitions. (Sherman, 1998) In the UK, the biggest and most sustained wave of M&A activity occurred in 1990s. (Cartwright and Cooper, 1996) In 1998, mergers were worth US$2.4 trillion worldwide, a 50% increase on 1997, which was itself a record year. In 1999, this figure exceeded US$3.3 trillion and in 2000 US$3.5 trillion. In Europe, a major M&A activity area, the value of M&As rose to $1.2 trillion in 2002. (Ghauri & Buckley, 2003). In 2004, 30,000 acquisitions were completed worldwide, equivalent to one deal every 18 minutes. The total value of these acquisitions was $1,900 billion, exceeding the GDP of some large countries.
As M&As continue to be a highly popular and common form of corporate development, firms are increasingly more engaged in M&As activity to achieve financial and strategic goals. Also, companies from emerging markets have grown rapidly in terms of their international expansion activities (Luo and Tung, 2007). In China, for example, outward foreign direct investment (FDI) amounted to US$21.16 billion in 2006, 40 percent of which was in the form of cross-border M&As (MOFCOM, 2006). Corrigan (1993) stated that the speed and scale of international expansion in the form of M&As has been growing at an exponential rate, which also implies the increasingly important position mergers and acquisition are for companies to become more competitive on a global scale. Large companies seeking expansion overseas are looking for acquisitions which fit strategically with their main business and provide economy of scales which help cope with the strains of operating internationally (Corrigan, 1993). Cartwright (1998) argues that M&As are a remarkable phenomena, not only due to high levels of financial investment engaged but also because of their disappointing results.
Cartwright and Cooper (1996) state that while M&As are increasing in frequency, at least 50% fail to meet financial expectations. Cartwright (2006) argues that financial and strategic factors alone are not sufficient to explain this high rate of M&A failure. Lack of cultural
2
compatibility or poor culture-fit is believed to be one of the reasons for M&A failure (Cartwright & Schoenberg, 2006). Thus, Cartwright (2006) highlights that the successful management of integrating members and their cultures is the key to attaining the desired M&A outcomes. When the number of cross-border transactions increases, many national players are involved, the issues of cultural compatibility occur even more emphasized (Cartwright, 2006). Accordingly, a field of enquiry has emerged to direct at the cultural dynamics of M&As and the behavioral and emotional response of the members involved (Cartwright & Schoenberg, 2006).
National culture and organizational culture play a simultaneous and important role in an organization (Gulev, 2009). Korut and Singh (1988) discovered that differences in national cultures result in dissimilarities in organizational and administrative practices and employee expectations. Johns says that ―national culture constrains variation in organizational cultures‖ (2006, p. 396), while others state that organizational culture ―mirrors‖ national culture (Javidan et al., 2004). Gerhart (2009) argues that ―most of the variance in organization cultures cannot be explained by country and, of that explained by country, only a minority is due to national culture differences‖ (p. 2). Therefore, in order to have a comprehensive understanding of a companies culture, national and organizational culture should be studied thoroughly. In the case of multinational companies (MNCs), there is a need to address the fit of organizational culture with the dissimilar national cultures where the company operates (Silverthorne, 2005).
M&A integration involves combination in various areas, in which cultural integration has an important role. Nevertheless, the potential positive and negative impact of the cultural dimension on the outcome of M&A activity is somewhat less acknowledged (Forstmann, 1998). According to Larsson and Risberg (1998), some questions are raised within the field of cross-border M&A, ―of which organizational and national clashes are the most detrimental to cross-border combinations?‖, ―should differences in organizational culture be given more weight than national differences?‖ (p. 40).
Morosini, Shane & Singh (1998) suggest from their study that scholars should investigate the value of cultural distance to acquisition performance. Moreover, further research should consider the influence of organizational culture, which could be affecting cross-border acquisition outcomes. Besides, those authors recommend scholars to separate the impacts of corporate cultural differences and national cultural differences on cross-border acquisition performance. (Morosini, Shane & Singh, 1998) Furthermore, the scholars are recommended to explore the simultaneous relationships among two or more Hofstede‘s dimensions and management practices (Newman & Nollen, 1996). Research on Hofstede‘s implied interactions may be a significant next step in our understanding of cross-cultural differences in the efficiency of management practices (Newman & Nollen, 1996).
Although it may compound the integration complexity to have many cultural differences in M&As, they are not necessarily a direct threat to the integration outcome (Larsson & Risberg, 1998). Instead of giving up potentially valuable strategic complementarities in the pursuit of cultural similarities, companies can be aware of and learn to deal with the differences in order to gain more benefits (Larsson & Risberg, 1998).
3
1.2 Problem
The complex phenomenon which M&As represent has attracted the interest and research attention of a broad range of management disciplines encompassing the financial, strategic, behavioural, operational and cross-cultural aspects of this challenging and high risk activity. Although the benefits along with M&As become the main motivation, there can be significant challenges , in which culture both organizational and national culture are argued to have a strong influence on the outcome of the merger (Larsson & Risberg, 1998). Whereas research into the human and psychological aspects of M&A has increased recently, the M&A literature continues to be dominated by financial and market studies, with a high focus of interest in the USA and UK (Cartwright, 2005). Most of the M&A research has focused on strategic and financial fit between the acquired and acquirer firms (e.g. Nahavandi & Malekzadeh, 1988; Cartwright and Cooper, 1996) and culture in M&As does not get as such attention (Cartwright and Cooper, 1996) while M&As represent a main organizational event to employees since they threaten and interrupt cultures, cause misunderstandings and frequently compel the integration of people who do not share the same reality (Cartwright, 1998). For example, Krug and Aguilera (2005) discovered from their study that the target firm executives experience substantial acculturative stress and, on average, almost 70% leave the firms in the five years following completion.
As discussed above, national and organizational culture in M&A have been recommended for further study (Morosini, Shane & Singh, 1998). Moreover, Cartwright and Cooper (1993) find that not only the cultural fit matters, but also the extent to which the firms are integrated. Therefore, the authors of this thesis put a focus on the culture side of the spectrum during the M&A process. Through the lenses of national culture and organizational culture, together with the case study of KPMG and Andersen in Vietnam, the characteristics and outcome of cultural integration are discussed. The authors conducted personal interviews with top managers and employees from both sides to explore the issues incurred by the cultural differences in the the attempt to integrate the cultures.
The case study is about a local integration of two global companies with KPMG Vietnam as the acquirer and Andersen Vietnam as the acquired company. KPMG is a global network of professional firms offering audit, tax and advisory services. Andersen was once one of the "Big Five" accounting and consulting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG. Since the demise in 2002, the ―Andersen‖ name disappeared from the world auditing and consulting scene (Cleine, 2002). As one of the affected 23 businesses, Andersen Vietnam was acquired by KPMG. According to KPMG CEO (2010), acquiring Andersen was the fastest way to improve its market position in Vietnam. The acquisition enabled KPMG to increase its competitiveness, access to Andersen‘s strong client network base, methodology and well-trained resources.
1.3 Purpose
The purpose of this thesis is to explore the problematic cultural issues in order to gain an understanding of the characteristics and outcome of cultural integration as influenced by both national culture and organizational culture in M&A.
4
1.4 Research Questions
A local M&A and the subsequent local integration process of two globally merging
multinational corporations‘ subsidiaries have to be implemented in the two subsidiaries‘
host country environment.
- How does the national culture influence the cultural integration of two companies?
- How does the involvement of two companies‘ management based on their goals
for the M&A influence the employees‘ assimilation into the organizational culture
after integration?
- To what extent is the acquired company integrated into the acquiring company?
- What elements from national and organizational culture theory are relevant to
understand the local integration of global companies in the case described?
1.5 Definitions
To help the readers follow the thesis easier, the authors would like to clarify some key terms and concepts.
Merger and Acquisition (M&A)
‗Merger‘ and ‗acquisition‘ are two different transactions. Although ‗merger‘ is informally used for both cases, only ‗acquisition‘ will be applied in this paper because our case study is actually an acquisition. Furthermore, ‗integration‘ or ‗combination‘ can also be used as an alternative.
Merger
A merger typically refers to two companies coming together (usually through the exchange of shares) to become one (Sherman, 1998).
Acquisition
An acquisition typically has one company—the buyer—who purchases the assets or shares of the seller, with the form of payment being cash, the securities of the buyer, or other assets of value to the seller (Sherman, 1998)
Cross-border M&A
According to UNCTAD (2000), cross-border M&As are playing an increasingly significant role in the growth of international production. Beside dominant FDI flows in developed countries, they have begun to take hold as a mode of entry into developing countries and economies in transition.
A cross-border merger can be defined as a transaction in which ―the assets and operations of two firms belonging to two different countries are combined to establish a
new legal entity‖ (UNCTAD, 2000, p. 99).
5
A cross-border acquisition can be defined as a transaction in which ―the control of assets and operations is transferred from a local to a foreign company, the former becoming an
affiliate of the latter‖ (UNCTAD, 2000, p. 99).
Our study focuses on the local acquisition -integration process between two subsidiaries of two globally MNCs in Vietnam. The acquirer, KPMG, is a Swiss entity while the acquired, Andersen, is an American firm. Therefore, this acquisition can be considered as cross-border M&A to some extent.
Managing Partner
BusinessDictionary.com defines ‗managing partner‘ as the highest formal job title given to a senior partner in charge of a company‘s overall practice, management and day-to-day operations. A managing partner is more or less equivalent to a chief executive officer of a firm in terms of duties and responsibilities; yet they manage a partnership and not a corporation. This job title is usually found in law and accounting firms.
Multinational Corporation (MNC)
In World Investment Report 1999, UNCTAD (1999) defines multinational corporations (which it calls transnational corporations) as ―incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates‖. A parent enterprise or firm is defined as ―an enterprise that controls assets of other entities in countries other than its home country, usually by owning a certain equity capital stake‖. A foreign affiliate is defined as ―an incorporated or unincorporated enterprise in which an investor, who is resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise‖. Foreign affiliates may be subsidiaries, associates or branches.
Big Four – Big Five
The Big Four (or the Big 4) are the four largest international accountancy and professional services firms that handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly in auditing large companies. The Big Four firms include PricewaterhouseCoopers (PwC), Deloitte & Touche (Deloitte), Ernst & Young (EY) and KPMG. (NationMaster.com)
This group was once known as the "Big Eight", and was reduced to the "Big Five" by a series of mergers. The Big Five became the Big Four after the demise of Andersen in 2002. (NationMaster.com)
1.6 Disposition
The structure of this thesis is presented in the figure below. The thesis is divided into six chapters:
Chapter 1 – Introduction. In this chapter, the background to the topic of this thesis is presented. Prior research on the definition and general trend of Mergers & Acquisitions (M&As) is introduced. The emphasis of the study is put on the cultural integration in the M&A process, through the case studies of local integration process between two Multi-national Corporations‘ (MNCs) subsidiaries in Vietnam. Problems explored from the case
6
studies on the cultural side are discussed, which will guide and fulfil the purpose of this study. Key terminologies are explained to help better understand this thesis.
Chapter 2 – Frame of Reference. In this chapter, the theoretical basis for the thesis is provided. A background information about M&As and the role of culture in M&As are presented at the beginning, followed by the main theoretical section about culture. Levels of culture are introduced with the focus on the role of national and organizational culture in M&As. Hofstede‘s culture dimensions and Schein‘s model along with their limitations are discussed. Culture type approach and desired mode of acculturation are taken into account as a means to conceptualize and evaluate the culture of the two M&A partners and help to identify the possible outcome of the integration. The authors wrap up the chapter with the theoretical discussion, where all previously discussed theories are connected and our own framework is presented.
Chapter 3 – Methodology. In this chapter, the methodological approach is introduced to explain and motivate our chosen scientific approach, and followed by the research method and approach used to analyse the case study. The research design section explains the overall structure and orientation of our research in detail. Data collection is clarified in the subsequent sections.
Chapter 4 – Empirical Study. In this chapter, the empirical data are collected from primary and secondary sources. Primary data is collected through the interviews with four members and surveys, conducted among KPMG and Andersen employees. The chapter starts with a description of two companies and their own culture. A brief history of two firms and the case are then presented. The empirical presentation consists of three themes: values and beliefs, cultural dimensions and processes. First theme – values and beliefs are expressed in the goals of integration. Second theme – cultural dimensions reflect the views of interviewees on the cultural differences and their influences. Third theme – processes indicate how people participate in the integration process.
Chapter 5 – Analysis. The empirical findings are analysed based on our own framework and the three themes introduced in the Empirical Study. First, the authors make a detailed assessment of the culture types of two companies from the survey results, in attempting to determine the cultural compatibility of KPMG and Andersen. The authors make a holistic view on the empirical data to discern the type(s) of ―marriage‖ KPMG and Andersen are engaged in. More detailed analysis is carried out, by exploring various elements in culture that influence the cultural integration between KPMG and Andersen. The elements are from national cultures (USA, Switzerland and Vietnam), and organizational cultures (artifacts and espoused values and beliefs). In the end, the summary with integrated view on this chapter is made.
Chapter 6 – Conclusions.
It could be summarized that the KPMG and Andersen deal resulted in a great loss of ex-Andersen employees, due to the resistance from employees to the new culture after integration. High numbers of employees dropped out of the integration process because they were not satisfied with the KPMG culture, and in this case, if when KPMG lost the highly trained and educated team members, it lost competence and a lot of the value in the company, and thereby fail to achieve one of the goals for the acquisition. Since Andersen
7
people left, one interpretation could be it is hard to move from a unified/strong culture to a not so strong/unified culture.
.
Figure 1: Thesis structure
8
2 Frame of Reference
To fulfill the purpose and answer the research questions of this thesis, the structure of
this chapter is formulated as follows. A background information about M&As and the
role of culture in M&As are presented at the beginning, followed by the main
theoretical section about culture. Levels of culture are introduced with the focus on the
role of national and organizational culture in M&As. Hofstede’s culture dimensions
and Schein’s model along with their limitations are discussed. Culture type approach
and desired mode of acculturation are taken into account as a means to conceptualize
and evaluate the culture of the two M&A partners and help to identify the possible
outcome of the integration. The authors wrap up the chapter with the theoretical
discussion, where all previously discussed theories are connected and our own
framework is presented.
2.1 Mergers and Acquisitions
The terms merger and acquisition are often confused. On the surface, the distinction in meaning may not really matter, since the net result is often the same: two companies (or more) that had separate ownership are now operating under the same roof. Yet the strategic, financial, tax and even cultural impact of a deal may be very different, depending on which transaction is made. (Sherman, 1998) A merger typically refers to two companies coming together (usually through the exchange of shares) to become one. An acquisition typically has one company—the buyer—who purchases the assets or shares of the seller, with the form of payment being cash, the securities of the buyer, or other assets of value to the seller. (Sherman, 1998) Potential merger and acquisition partners are typically identified pursuant to some type of strategic fit. Strategic fit is broadly characterized as similarities between organizational strategies or complementary organizational strategies setting the stage for potential strategic synergy. (Schraeder and Self, 2003)
Mergers and Acquisitions can be divided into ―friendly‖ and ―Hostile‖ activities. In a friendly M&A, the Board of the target firm agrees to the transaction (this may be after a period of opposition to it). Hostile M&As, on the contrary, are undertaken against the wishes of the target firm‘s owners. (Ghauri & Buckley, 2003) Mergers and Acquisitions can be categorized into four main types: (a) Vertical, those of vertical type involve the combination of two organizations from successive processes within the same industry; (b) Horizontal, horizontal mergers and acquisitions involve combinations of two similar organizations in the same industry; (c) Conglomerate, conglomerate refers to the situation where the acquired organization is in a completely unrelated field of business activity; (d) Concentric, in concentric mergers, the organization acquired is in an unfamiliar but related field into which the acquiring company wishes to expand. (Cartwright and Cooper, 1996)
When an organization acquires or merges with another, three possible forms of the ―marriage‖ may occur, based on the motive, objective and power dynamics of the combination (Cartwright & Cooper, 1996):
The Open Marriage: in an open marriage the acquirer sees its own role primarily as supporting its acquisition and further facilitating its development and growth, perhaps by providing increased investment (Cartwright & Cooper, 1996). Cartwright & Cooper (1996) note that the essence of the open marriage is that of non-interference, whereby the acquirer is quite happy to allow the acquired
9
organization to operate as an autonomous business unit and maintain its existing culture. In open marriage, the acquirer keeps the acquired organization intact and culture type matters little (Cartwright & Cooper, 1996).
The Traditional Marriage: in a traditional marriage, Cartwright & Cooper (1996) claim that the acquirer sees its own role as primarily being to redesign the acquired organization. The essence of the traditional marriage is that of radical and wide-scale change, whereby the acquired or ―the other‖ merger partner totally adopts the practices, procedures, philosophy and culture of the acquirer (Cartwright & Cooper, 1996). For the traditional marriage, success depends on the ability of the acquirer to change the culture of the acquired (Cartwright & Cooper, 1996).
The Collaborative Marriage: in collaborative marriage, it is not the case of the ―successful‖ organization taking over the ―unsuccessful‖, but a combination of different but complementary forces, wherein both parties have a contribution to make (Cartwright & Cooper, 1996). The essence of the collaborative marriage is shared learning (Cartwright & Cooper, 1996). In the collaborative marriage success depends on the degree to which the cultures can work together and integrate to create a ―best of both worlds‖ (Cartwright & Cooper, 1996)
2.1.1 Culture in Mergers and Acquisitions
Mergers and Acquisitions have been a significant means for corporate growth, and an important way for international diversification and expansion without incurring extensive start-up costs and delays associated with learning about new markets (Nahavandi & Malekzadeh, 1988) , however, most of the research on M&As has focused on strategic and financial fit between the acquired and acquirer firms (e.g. Nahavandi & Malekzadeh, 1988; Cartwright and Cooper, 1996) and culture in M&As becomes an under-researched area (Cartwright and Cooper, 1996). It is discovered that culture plays a very important role in the outcome of M&As (Cartwright and Cooper, 1996).
Forstmann (1998) mentions that culture, at both the national and organizational levels, is a complicated phenomenon extensively shaping employees‘ practices, beliefs, systems and procedures. It is also true for M&As, where the cultures of two separate organizations are required to interact.
In most M&A context, cultural integration means the successful imposition of the existing culture of acquirer or dominant merger partner on the other rather than the blending of the two (Cartwright, 1998). Companies need to address culture differences early in the M&A process. When cultural differences are not managed, misunderstandings happen and arise between two companies involved, which may endanger the cooperation (Hall, 1995).
Unlike mergers and acquisition involving companies in the same countries, other than organizational culture, cross-border mergers and acquisitions have the challenges of coping with national culture. In cross-border M&A, culture is even more difficult to integrate since the two partners are forced to combine not only dissimilar organizational cultures but also different national cultures. Cross-border M&As are more complex because of long distances, different languages, values and traditions which can cause many unpredicted problems. Therefore, it is of critical importance to probe into the definition of culture, different level and types of cultures in order to solve the problems incurred during the cultural integration of cross-border M&As.
10
2.2 Culture
The concept of culture is very difficult to define in a way that gives a delimited and unambiguous meaning. Culture is defined in many different ways, which cover everything from culture as ―common systems of values, beliefs and norms‖ to the view of cultures as ―shared social knowledge‖ (Alvesson & Berg, 1992). There are wide variations in the combinations of elements included in the definitions of culture. For example, according to Deal and Kennedy (1982), culture is ―the concepts, habits, skills, art, instruments, institutions, etc. of a given person in a given period‖. The most popular definition of culture is probably offered by Hofstede (1991, p.5): ―Culture is a collective programming of the mind that distinguishes the members of one group or category of people from another.‖
In the following sections, the authors will introduce different levels and types of culture, mainly focus on national culture and organizational culture, and the implications of culture in M&As.
2.2.1 Levels of Culture
There is more than one culture that can affect a company. It is important to identify and distinguish culture inside the organization and culture on a broader level, such as the industry, region or nation. Alvesson and Berg (1992) mention six levels of culture which are illustrated in Figure 2 below.
Organizational culture
Regional and Industrial culture
National culture
Professional culture
Department culture
Worker culture
Figure 2: Levels of culture. Source: Alvesson & Berg (1992, p64)
11
The authors will briefly introduce the different cultural levels:
National culture: is defined as shared values, preferences and behaviors that are specific to the manner people of a nation interact with each other or with an external factor (e.g. doing business or managing companies) (Very, Lubatkin & Calori, 1996; Alvesson & Berg, 1992). Details on national culture will be presented in the next section 2.2.2
Regional culture: the cultures that is built in ―a certain geographical (territory), administrative (jurisdiction), commercial (market) or ethnic (country) area‖ (Alvesson & Berg, 1992, p.67). In their studies regarding this culture, Gustafsson and Gregory both have a basic assumption that a particular region, district or city develops a sense of identity or a special way of thinking or acting in its geographic area (as cited in Alvesson & Berg, 1992, p. 66). They introduce one example of regional culture, which is the high degree of entrepreneurship in Gnosjö (Sweden) and Silicon Valley (California, US) where entrepreneurial value is the basis of the cultural setting (as cited in Alvesson & Berg, 1992, p. 66).
Industrial culture: is a macro-culture from an organizational viewpoint. Many companies in the same industry or sector have much in common when the authors see them from a cultural perspective (Alvesson & Berg, 1992). People within an industrial culture have a shared set of fundamental assumptions, values and beliefs behind the industry‘s institutional logic.
Organization culture: ―basic assumptions and beliefs that are shared by members of an organization‖ (Schein, 1985, p.8). Organizational culture will be described later in section 2.2.3
Subcultures at the Organizational Level:
Though it is often mentioned as if organizations have a monolithic culture, companies are not homogeneous and do not have unequivocal organizational cultures. Most of the firms have more than one set of beliefs that impact employees‘ behaviors, which are called subcultures (Sathe, 1985).
Sathe (1985) mentioned that these different subcultures within an organization may be divided based on occupational, functional, product or geographical lines. Although a company may have a dominant culture, such subcultures may coexist and interplay. Consequently, understanding the culture of any company involves identifying the various subcultures and gaining insight into how they interact to influence organizational behavior and decision making (Malekzadeh & Nahavandi, 1988). Examples of subcultures are Professional culture and Department culture.
Social groups in the Organization: Social groups are those which are set up informally in the organizations. Cultural characteristics of social groups are considered as worker culture. It is believed that the cultural patterns attain the form and character as a result of the opposing interests in worker-management relation (Alvesson & Berg, 1992). Therefore, the social conflicts form the values and ideas of worker culture, lead to or at least have a strong effect on the creation and development of the worker culture (Alvesson & Berg, 1992).
12
2.2.2 National Culture for Work-Related Values
As introduced by Alvesson & Berg‘s ―level of culture‖, the first and overarching cultural level is national culture. National culture is defined as shared values, preferences and behaviors that are specific to the manner people of a nation interact with each other or with an external factor (Very, Lubatkin & Calori, 1996; Alvesson & Berg, 1992).
Hofstede (1991) has presented perhaps the most comprehensive means to dimensionalize national culture. His IBM research revealed four dimensions of differences among national value systems: Low vs. High Power Distance, Individualism vs. collectivism, Masculinity vs. femininity, Uncertainty avoidance. Michael Harris Bond and his colleagues found a new dimension which was initially named Confucian dynamism. Hofstede then incorporated this into his framework as the fifth dimension: Long vs. short term orientation
European and US cultures as defined as Western culture in general is perceived to be less distant comparing with Western versus Asian culture like Vietnam. In this case, the national cultures of US and Switzerland are compared in three out of five dimensions as illustrated by Hofstede (1980), which have assumably influenced the people‘s behavior at workplace.
The reasons of selecting the following dimensions over others as a benchmark are 1) relevance; the material provided during the interview and survey are in line with the functions of these three dimensions, therefore, the dimensions used are the appropriate tool to gauge the cultural difference of KPMG and Andersen through the lens of managers and employees. The other two dimensions, i.e. masculinity and uncertainty avoidance, have little relevance with the purpose of this thesis and information provided (the definition is provided below); 2) cultural representation; when talking about national culture, US tops the list of individualism (Hofstede, 2005, Hampden-Turner and Trompenaars, 1993), while Asia has a higher record in both power distance and long-term orientation than that of the west like US and Switzerland. Sine Vietnamese culture plays a major part in the two MNCs, it is important to consider the influence of those traits that Asian countries like Vietnam represents in culture; 3) empirical data; the managers from the two companies the authors interviewed specifically point out that the difference in management style and strategy like long-term orientation and relationship with employees, related to their respective organizational cultures, lead to some problems during integration. Some of the descriptions, even though targeted at their respective organizational culture, are in line with the Hofstede dimensions, specifically those three dimensions.
The other two dimensions from Hofstede the authors choose not to cover are Masculinity versus Femininity and uncertainty avoidance. Hofstede (1997) argues that masculinity ―pertains to societies in which social gender roles are clearly distinct‖ and femininity ―pertains to societies in which social gender roles overlap.‖ In the workplace, Jandt (2004) states that in masculine cultures, managers are expected to be decisive and assertive; in feminine cultures, managers use intuition and strive for consensus. Whereas Hofstede‘s (1980) dimension of uncertainty avoidance means the extent to which people in a culture feel threatened by uncertain or unknown situations. Jandt (2004) argues that cultures strong in uncertainty avoidance are active, aggressive, emotional, compulsive, security seeking, and intolerant; cultures weak in uncertainty avoidance are contemplative, less aggressive, unemotional, relaxed, accepting personal risks, and relatively tolerant.
13
Cultural Dimension Score
Country Individualism Power Distance Long-term Orientation
Switzerland Individualism 68 Low 34 Not Available
United States Individualism 91 Low 40 Short-term 29
Vietnam Collectivism 20 High 70 Long-term 80
Table 1: Cultural Dimension Score. Source: Hofstede (2005)
Individualism versus Collectivism
According to Hofstede (1997.p51), individualism refers to the extent to which everyone is expected to look after himself and his immediate family; Collectivism, however, refers to societies in which people from birth and onwards are integrated into strong, cohesive in groups, which throughout people‘s lifetime continue to protect the in exchange for unquestioned loyalty. In a collectivist culture, the interest of the group prevails over the interest of the individual. People are integrated into strong, cohesive in-groups that continue throughout a lifetime to protect in exchange for unquestioning loyalty (Hofstede, 1997). One difference is reflected in who is taken into account when you set goals. In individualist cultures, goals are set with minimal consideration given to groups. In collectivist cultures, other groups are taken into account in a major way when goals are set. Individualist cultures are loosely integrated; collectivist cultures are tightly integrated. (Jandt, 2004)
In the workplace, in individualist cultures, the employer-employee relationship tends to be established by contract, and hiring and promotion decisions are based on skills and rules; in collectivist cultures, the employer-employee relationship is perceived in moral terms, like family link, and hiring and promotion decisions take employee‘s in-group into account.
Individualism and collectivism have been associated with direct and indirect styles of communication. In the direct style, associated with individualism, the wants, needs, and desires of the speaker are embodied in the spoken message. In the indirect style, associated with collectivism, the wants, needs and goals of the speaker are not obvious in the spoken message. (Jandt, 2004)
More collectivist societies call for greater emotional dependence of members on their organizations; in a society in equilibrium, the organizations should in return assume a broad responsibility for their members. The level of individualism/collectivism in society will affect the organization‘s members‘ reasons for complying with organizational requirements. The level of individualism/collectivism in society will also affect what type of persons will be admitted into positions of special influence in organizations. (Hofstede, 1980)
US scores 91 ranks first among all countries in terms of individualism. Hofstede (1989) argues that in the US, there is a strong feeling that individualism is good and collectivism bad. Although Switzerland is relatively lower than US. Both countries have a high level of individualism. Vietnam scores very low in individualism, which suggests that Vietnam is a collectivist country with a huge highlight on group decisions and family relationships. Family and community concerns will come before business or individual needs. People are unified in groups, have close ties with family and community, responsible for each other.
14
Power Distance
Hofstede (1997) defines power distance as ―the extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed equally‖ Power distance also refers to the extent to which power, prestige, and wealth are distributed within a culture. Cultures with high power distance have power and influence concentrated in the hands of a few rather than distributed throughout the population. These countries tend to be more authoritarian and may communicate in away to limit interaction and reinforce the differences between people. In the high power distance workplace, superiors and subordinates consider each other existentially unequal. Power is centralized. (Jandt, 2004)
According to Mulder‘s Power Distance Reduction theory, subordinates will try to reduce the power distance between themselves and their bosses and bosses will try to maintain or enlarge it.
Luhmann feels that power in organizations is mainly exercised through influence on people‘s careers, but this may be more true in societies and groups in which careers are more important. (Hofstede, 1980)
As can be seen in the table, US has a lower power distance than Switzerland. This is also in accordance with Hofstede‘s theory (1997) that countries with a Romance Language (Switzerland) score medium to high, whereas countries with a Germanic language (English) score low.
Long-term versus short-term orientation
Hofstede (2001.p.359) notes that Long Term Orientation stands for the fostering of virtues oriented towards future rewards, in particular perseverance and thrift, while Short Term Orientation stands for the fostering of virtues related to the past and present, in particular, respect for tradition, preservation of ‗face‘ and fulfilling social obligations. Normally countries with the influence of Confucianism like China, Japan, South Korea and Vietnam has a higher long-term orientation level.
Hofstede (1980) scores US 29 and Vietnam 80 in this dimension, while the data for Switzerland in the regard is not available. It means that Vietnam has a long-term orientation. Considering the influence of Confucianism, it could be assumed that both the US and Switzerland have relatively shorter term orientation.
2.2.2.1 Limitation on Hofstede’s Cultural Dimensions
The theory of Hofstede‘s Cultural Dimensions is a great tool to gauge the national culture in each country. Nevertheless, it can be argued that Hofstede‘s cultural dimensions are not universally valid (Gertsen & Søderberg, 1998). It is argued that the five dimensions are offered as tools for comparing important aspects of culture (Hofstede, 1997), aspects that can be of particular importance for management in M&A.
Some researchers argue that national culture, in all its complexity, cannot be captured quantitatively and reduced to four variables. Others may be uneasy with Hofstede's use of a single multinational corporation as a basis for his conclusions about national culture. And still others may point out that national culture is changeable and, even if understood at any single point in time, it is heterogeneous within any given country. (Sivakumar & Nakata, 2001) For example, in a hypothetical case by Sivakumar and Nakata (2001), Mexico and the
15
U.S. are chosen to represent low and high individualism, respectively. When it is found that Mexican managers are more apt to use participatory management techniques than their American counterparts, collectivism is said to engender this effect.
All these views suggest that Hofstede's theory and findings fall short of being perfect. However, in this paper, Hofstede‘s cultural dimensions are used as a basis to analyze the perceived cultural differences that will result in cultural clashes and exert influence in cultural integration in M&A. Although the topic of our thesis is about cultural integration, the main focus is put on the integration of organizational cultures between KPMG and Andersen. Hofstede‘s cultural dimensions, despite of its limitations, have provided enough back information for linking the influence of national culture on the organizational culture respectively. In addition, the case the authors use in this thesis is with regard to the local integration between two globally merging MNCs‘ subsidiaries. The newly-merged company in Vietnam has been influenced to a certain degree by the Vietnamese culture through the Vietnamese employees, and to a great extent by the Swiss and American professional cultures in the accounting industry, which is perceived as a culture of its own apart from the national culture.
2.2.3 Organizational Culture
Definitions of ―organizational culture‖ are more or less as abundant as those of ―culture‖. Organizational culture is a significant factor in determining an individual‘s commitment, satisfaction, productivity and longevity with an organization (O‘Reilly et al., 1991).
Bate (1984) contends that a ―key feature of culture is that it is shared-it refers to ideas, meanings and values people hold in common‖. Therefore, organizational culture is a means to designate the organization as a collective entity that cannot easily be broken into smaller pieces (Alvesson & Berg, 1992). It is considered as a kind of social or normative glue that holds the organization together.
In this research, the authors have used the concept of Schein, one of the most prominent theorists of organizational culture. He defines organizational culture as the "the basic tacit assumptions about how the world is and ought to be that a group of people share and that determines their perceptions, thoughts, feelings, and, their overt behavior" (Schein, 1996, p.11).
Schein (2004) developed a model to explain the elements of organizational culture (Figure 3). Schein‘s model contains three distinct levels: artifacts, the espoused values, and the basic underlying assumptions. Those levels need to be distinguished to avoid conceptual confusion.
16
Figure 3: Model of organizational culture. Source: Schein (2004, p.26)
Artifacts
The most visible level of culture is its artifacts, which include visible, tangible or verbally identifiable elements in the organization. Artifacts can be architecture of its physical environment, furniture, dress codes, working environment, level of formality in authority relationships, technology, products, rites, rituals, myths and stories (Schein, 2004). While observing the artifacts is easy, it is very difficult to decipher them, i.e. fully understand what the artifacts mean, why they have been established, how they interconnect and what deeper patterns they reflect (Schein, 2004). The meanings of artifacts will progressively become obvious if the observer lives in the organization long enough. However, to achieve that understanding level more quickly, ―one can attempt to analyze the central values that provide day-to-day operating principles by which the members of the culture guide their behavior‖ (Schein, 1992, p.27).
Espoused Values
When a group faces a new task or issue, the first solution proposed to deal with it which reflects some individual‘s own assumptions is not yet a shared basis among the group members. That individual, usually the founder or leader, may consider the proposed solution as a value or belief based on facts (Schein, 2004). The group may not feel the same degree of conviction until it has taken some cooperative actions and collectively observed the outcome of that action. If the solution succeeds and continues to work in the group‘s subsequent problems, the value will be transformed first into a shared value or belief, and ultimately into a shared assumption (Schein, 2004).
Beliefs and values at this level can predict much of the behavior observed at the artifactual level. According to Argyris and Schön (1978), those values may only be regarded as ―espoused values‖ if they are not based on prior learning. Espoused values predict what
17
people say in various situations, but which may be out of line with what they will actually do in situations where those beliefs and values should be functioning (Argyris & Schön, 1978).
Espoused values can be found in such places as organizational vision, mission, core values, strategy descriptions, performance standards and expectations, and new employee orientation programs (Schein, 2004).
Basic Underlying Assumptions
In order to fully understand a culture, one has to come to the deepest level, the level of underlying assumptions. The essence of culture is represented by the basic underlying assumptions, which are difficult to determine since they exist at an unconscious level. When a solution to a problem, suggested by a leader or a core group of members, works repetitively, the shared assumptions are reinforced and, gradually become taken for granted, drop out of awareness and be treated as a reality (Schein, 2004). The assumptions are not necessarily correlated to the espoused values, and the espoused values may have no root in the underlying assumptions of the culture (Schein, 2004).
2.2.3.1 Limitation on Schein’s Model on Organizational Culture
Researchers at different time have commented on drawback for the study of organizational culture. Meek (1988) points out that researchers tend to presume that there exists in a real and tangible sense a collective organizational culture that can be created, measured and manipulated in order to enhance organizational effectiveness. A more recent study by Martin (1992) shows cultures are reified as having an objective reality that can be accurately assessed as fitting one of the social scientific perspectives more than the others. Edgar Schein‘s model (2004) is based on the assumption that culture is unitary and can be structured. Therefore, some researchers have challenged Schein‘s model; for example, Hatch (1993) argues that subculture researchers have disputed Schein‘s assumption that organizational cultures are unitary (e.g. Barley, 1983; Borum & Pedersen, 1992; Gregory, 1983; Louis, 1983; Martin & Siehl, 1983; Riley, 1983; Van Maanen & Barley, 1985; Young, 1989, cited in Hatch, 1993). Others argue that the conceptual models of organizational culture have been made on the grounds that they oversimplify complex phenomena (Hatch, 1993)
Schein‘s model of organizational culture is a great tool to analyze the culture of KPMG and Andersen. However, the limitations of his theory should also be considered. In relation to this thesis, for example, the level of basic underlying assumptions that includes unconscious, taken-for-granted beliefs, perceptions, thoughts, and feelings is abstract and intangible, and cannot be utilized as a whole, because everyone especially within the same organization has different perceptions, thoughts, and feelings, which makes the concept of ―culture‖ impossible to gauge. In addition, cautions and limitations in model use are suggested, because appropriate use for a particular purpose depends on whether the model complexity is appropriate to the question being asked (Boote & Jones & Pickering, 1996). According to purpose of this thesis, the concept of basic underlying assumptions is too general, complex and hard to gauge in practice.
In summary, all the views above suggest that Schein‘ model on organizational culture could not form a perfect representation of organizational cultural analysis, as far as the nature of
18
model is concerned, and especially for the level of basic underlying assumptions. Owing to the reasons stated above and considering the purpose of the thesis as well as the empirical data provided by KPMG and Andersen, the authors of this thesis choose not to include the level of basic underlying assumptions when analyzing the organizational culture of both companies.
2.2.3.2 Culture Types
According to Harrison (1972), there are four basic culture types (i.e. power culture, role culture, task/achievement culture, person/support culture) for organization, and one must consider the degree of similarity/dissimilarity between them. Therefore, in order to discern the differences, the relationship between culture types is established in terms of the degree of restraint they place on individuals. (Figure 4)
Power culture
Autocratic-patriarchal
Role culture
Closed-open
Task/achievement
culture
Person/support
culture
„The employee does what
she/he is told
„The employee acts within
the parameters of his/her
job description‟
„The employee acts in
the way he/she
considers suitable for
the task‟
„The employee/person
does his/her own thing‟
Increased constraint Increasing autonomyHigh
individual
constraints
Low/no
individual
constraints
Figure 4: The relationship between culture types in terms of the degree of restraint they place on individuals. Source: Cartwright & Cooper (1996)
It is not so much the distance between the two parties that was important, but the direction in which the other culture has to move. Cultural similarity is therefore not a prerequisite to the success of the traditional marriage (Cartwright & Cooper, 1996).
Power Cultures
In this culture type, employees tend to ―attend‖ the organization out of financial necessity, rather than any deeper feelings of attachment arising from any sense of active involvement or deeper organizational attachment (Cartwright & Cooper, 1996). It is said that in power cultures, employees are expected to accept that ―the boss knows best‖; they impose a high level of constraint on the individual, and therefore they tend to invoke a superficial compliance-based level of organizational commitment from their members (Cartwright & Cooper, 1996). In M&As, Cartwright & Cooper (1996) again argue that power cultures are potentially more easily displaced than any other culture type, and are likely to be willing partners to any traditional marriage with an acquiring/dominant merger partner of another culture type.
Role Cultures
Comparing with power cultures, role cultures impose less constraint on the individual. Therefore, role cultures are generally experienced as being more satisfying and are less likely to be relinquished (Cartwright & Cooper, 1996). In M&As, if a traditional marriage involves the acquisition of a role culture by a power culture, the acquirer/dominant partner
19
is likely to encounter considerable resistance to change, argued Cartwright & Cooper (1996). Conversely, role cultures are likely to be willing partners to any traditional marriage with an acquirer or dominant merger partner with a less constraining task or person/support culture, according to (Cartwright & Cooper, 1996).
Task/achievement Cultures
In M&As, because task cultures are generally experienced by their members to be highly satisfying and invoke a high degree of commitment, they do not make ―ideal‖ or acquiescent partners to traditional marriage involving power or role cultures (Cartwright & Cooper, 1996).
Person/support Cultures
According to Cartwright & Cooper (1996), because person/support cultures offer the individual the opportunity for self-actualization, their members are likely to resist any culture change. Besides, person/support cultures are more difficult to displace than any other culture type, and are likely to be unwilling partners to any traditional marriage with an acquiring/dominant merger partner of another culture type.
2.3 Acculturation
As two firms engaged in the M&As share different organizational cultures, influenced by their respective national culture, histories and different goals and objectives, it is unlikely that two firms will totally fit, therefore, some authors argue that it is not a question about whether the firms fit or not, but merely whether they want to have a cultural fit (Teerinkangas & Very, 2006). If firms want to have this cultural fit, cross-border M&As pose a higher challenge towards this integration process, since the international character is very likely to bring people, with different values and beliefs about the work place and behaviour, together due to the influence of national culture (Salama et al. 2003).
Considering the purpose of this thesis, the acculturation process in M&As is introduced. ―Acculturation‖ is defined as changes induced in (two cultural) systems as a result of the diffusion of cultural elements in both directions (Nahavandi & Malekzadeh, 1988). It is argued in Nahavandi & Malekzadeh (1988) that acculturation acts as an adaptation process through which conflicts between two cultures are reduced either by integration, separation, assimilation or deculturation. This process also means that, due to interaction between the merging or acquiring parties, out of two cultures one joint culture will arise. (Salama et al. 2003; Larsson & Lubatkin, 2001)
In this thesis, the authors choose and present Cartwright & Cooper (1996) model of modes of organizational and individual acculturation in M&As, adapted from Nahavandi and Malekzadeh‘s (1988).
According to Cartwright & Cooper (1996), to anticipate whether the combination is likely a good culture match, people have to consider the likely wider response of the employees of the acquired firm. Many M&As face serious problems because one of the partners holds a very dissimilar perception of the other‘s culture (Cartwright & Cooper, 1996). It is extremely important that in an integration situation, organizational members should make assessments and draw conclusions about the ―other culture‖ (Cartwright & Cooper, 1996).
20
In order to assess the cultures of ―the other‖ party, two factors will be taken into account (Cartwright & Cooper, 1996):
- The extent to which employees experience their own culture as worth preserving.
- The extent to which employees perceive the cultures of ―the other‖ to be attractive.
The implications of this cultural evaluation process in terms of potential outcomes for the firm are presented in Figure 5
Willingness of employees to abandon their old culture
Very willing Not at all willing
Very attractive
Perception of the
attractiveness of
KPMG culture
Not at all
attractive
Assimilation
Potentially
smooth transition
Deculturation
Alienation
Integration
Satisfactory
integration/
fusion
Culture v
collision
Separation
Satisfactory
tolerance of
multi-culturalism
Culture v
collision
Figure 5: Modes of organizational and individual acculturation in M&A, and its potential outcomes. Source: Cartwright & Cooper (1996)
As per model above, individual is likely to decide:
That he/she prefers the ―other‖ culture to his/her existing culture, and thus is willing to abandon his/her own culture and absorbed completely into the culture of ―the other‖. If the majority of members of one partner have this evaluation, assimilation will occur. (Cartwright & Cooper, 1996)
That he/she has a strong desire to preserve his/her own culture and identity while perceiving the ―the other‖ culture attractive. As a result, he/she would like to maintain many of the basic assumptions, beliefs, cultural elements, and organizational practices and systems that make them unique, and at the same time and is willing to incorporate some aspects into his/her existing culture. If the majority of members of one partner have shared this evaluation, integration will occur. Nevertheless, integration has a high potential for culture collisions because successful integration requires change and balance between two cultural groups which rarely happens in reality. (Cartwright & Cooper, 1996)
That he/she wants to preserve own culture and refuses to become assimilated with ―the other‖ culture and would not wish to change. If ―the other‖ partner is not ready to respect this desire and is intolerant of multiculturalism, any effort to change that culture
21
will face substantial resistance. If the majority of members of one partner have shared this evaluation, separation will happen. If the separation is accepted by the other party, culture collisions would unavoidably happen. (Cartwright & Cooper, 1996)
That he/she does not value his/her own culture, and they do not perceive ―the other‖ culture as attractive at all. If the majority of members of one partner have the same evaluation, deculturation will take place. (Cartwright & Cooper, 1996)
Cartwright & Cooper (1996) stated that deculturation, unsanctioned separation and unsatisfactory integration leading to culture collisions and fragmentation had a negative effect on M&A outcomes.
Nahavandi & Malekzadeh (1988) argued that integration at the cultural level requires contact between employees of the two firms. The M&A integration may affect the members of the acquired firm most strongly since they are often expected to adapt to the culture and practices of the acquirer (Jemison & Sitkin, 1986; Sales & Mirvis, 1984). Besides, according to Lubatkin (1983), employees' willingness to adapt to the culture and practices of the other merging partner has been suggested to be one of possible obstacles for achieving the desired synergies in any integration. Therefore, the authors applied this model in order to understand the integration in terms of its potential outcomes and how members of the acquired company would like to acculturate to the acquirer.
2.4 Theoretical Discussion
The theories have been chosen in order to enable the authors to work on the cultural integration in M&As and achieve the research purpose. Along with a background information to the study such as introduction of M&A concept and possible forms of ―marriage‖, in order to answer the research questions, the authors focus mainly on the theories of culture and cultural integration, including levels of culture, national culture, organizational culture, culture types and acculturation process.
Based on the discussed theories, the authors developed a framework which would help to assess and analyze the cultural dimensions in M&A integrations (See Figure 6).
22
National Culture
Organizational Culture
Low vs High Power Distance
Individualism vs Collectivism
Long-term vs Short-term orientation
Espoused Beliefs
and Values
Artifacts
Figure 6: Cultural Dimensions in M&A Integration
The framework illustrates two different levels which have a great influence on the organizations: national culture and organizational culture. Among six levels of culture introduced by Alvesson and Berg (1992), two are chosen because they match the purpose of the study which is primarily connected to national culture and organizational culture. Furthermore, those cultures are two of the corporate areas which have rapidly gained tremendous attention, popularity and academic respectability (Alvesson and Berg, 1992). In terms of national culture, the authors apply three out of five dimensions presented by Hofstede (1991), including Individualism versus Collectivism, Power Distance and Long-term versus short-term orientation. As discussed above, the reasons for choosing these three dimensions are the relevance of collected data and these dimensions‘ functions, cultural representation with high ranking of relevant countries in three dimensions, and specific empirical data indicating the need for analysis.
Silverthorne (2005) states that national culture and organizational culture play a simultaneous and important role in an organization. Gulev (2009) mentions that culture of a country where an organization is founded impacts its organizational culture. However, since ―most of the variance in organization cultures cannot be explained by country‖ (Gerhart, 2009, p.2), the authors take organizational culture into consideration by including ‗artifacts‘ and ‗espoused beliefs and values‘ in our framework. ‗Artifacts‘ and ‗espoused beliefs and values‘ are two out of three levels of organizational culture suggested by Schein (2004). The third one, ‗underlying assumptions‘, is not applied since it represents a deep level of culture that is hard to capture with the methods used.
In M&As, the existing pre-combination cultures of the two partners has a major role in determining M&A outcomes (Cartwright & Cooper, 1993). There is a complex interaction between the two existing types of culture during the integration process. Cartwright and Cooper (1993) affirm that different cultural types generate different psychological
23
environments for their members. However, ―certain culture types are generally experienced as being more satisfying and invoke a deeper level of organizational commitment from their members‖ (Cartwright & Cooper, 1996, p. 86). Therefore, the authors adopt Cartwright and Cooper‘s approach (1996) as a means of assessing pre- and post- combination cultures. This approach was adapted from Harrison‘s type typology (1972) in which four main types of organizational culture includes power, role, task/achievement and person/support.
Cartwright & Cooper (1993) argue that in M&As, it is critically important that there is consensus between the two partners and their employees as to the desired mode of acculturation because success of the integration in traditional, collaborative or modern marriages depends on ―the speed and extent to which an unambiguous and coherent culture is established‖ (p. 65). The cculturation process occurs through four different modes (assimilation, integration, separation and deculturation) based on the extent to which employees experience their own culture as worth preserving and the extent to which employees perceive the other culture to be attractive. Consequently, the acculturation model can be applied to the M&A situation to accommodate different cultural dynamics and outcomes.
In cross-border M&As, culture is even more difficult to integrate compared to domestic M&As since the combining organizations are forced to combine not only different organizational cultures but also dissimilar national cultures. In summary, the authors believe that both national culture and corporate culture should be taken into consideration in cross-border M&As. Furthermore, Cartwright and Cooper‘s culture type approach (1996) and the acculturation model can be adapted to the M&A situations to conceptualize the culture of each partner and determine the potential integration outcomes.
Goals and motives for integration play an important role in any M&A. The goals and motives vary from company to company. Kleppesto (1993) says that the main motive for an acquisition is finance related in order to create values and strengthen its market position. There are other goals beside financial goals (Larsson, 1990), such as reputation, knowledge exchange and elimination of competition. The authors consider the goals of integration as one illustration of ‗values and beliefs‘, one level of organizational culture in the framework. Cultural dimension may cause positive or negative impact on integration performance (Forstmann, 1998). The combining companies should be alert to differences in national and organizational culture in order to learn how to manage the differences (Larsson & Risberg, 1998). Furthermore, management efforts and employee involvement are the illustrations of process that is closely linked to the ‗artifact‘ level. Goals of integration, cultural dimensions and processes will be discussed later in the Analysis chapter.
24
3 Methodology
In this chapter, the methodological approach is introduced to explain and motivate the
chosen scientific approach, and followed by the research method and approach the
authors use to analyse the case study. The research design section explains the overall
structure and orientation of our research in detail. Data collection is clarified in the
subsequent sections.
3.1 Methodological Approach
Johnson and Clark (2006) note that as business and management researchers the authors need to be aware of the philosophical commitments we make through our choice of research strategy since this has significant impact not only on what we do but how we understand what it is we are investigating. Therefore, it is of great importance to explain what strategy we chose to use to understand the subject we are investigating.
Previous research on organizational culture reifies cultures as having an objective reality that can be accurately assessed as fitting one of the social scientific perspective more than the others (Martin, 1992) The evidence of its phenomenon is reflected in Hofstede‘s (2005) national cultural dimensions, in which Hofstede frames and distincts the national culture with five criteria, and Schein‘s (1992) organizational culture, where the culture is regarded as being unitary and can be structured. However, it can be argued that a social scientific perspective is an interpretive framework that is subjectively imposed on the process of collecting and analyzing cultural data, and a social scientific perspective is not considered to be an objective description of empirical facts (Martin, 1992).
That ―Culture‖ is a broad and intangible entity which is subject to the personal opinion and preconceptions of the researchers. There is no definite model to observe culture, and the authors realize that the measurement, collection and interpretation of the data on culture are affected by subjective factors, whether the judgement is based on quantitative or qualitative data (Martin, 1992). The authors aim to explore problematic cultural issues in order to get an understanding of the characteristics and outcome of cultural integration. Yet, the authors do not exclude themselves completely from being ―subjective‖ in conducting the cultural research, neither do they strictly follow the ―dimension‖ and ―modelling‖ of cultures. In this thesis, the research is done on the exploratory basis. An exploratory study is a valuable means of finding out what is happening, to seek new insights and to ask questions and to assess phenomena in a new light (Robson 2001.p.59, cited in Saunders Mark & Lewis Phillip& Thornhill Adrian, 2007). The advantage of exploratory study being flexible and adaptable to change (Saunders et al., 2007) is conductive and appropriate in the changing nature of culture. The authors conducted a case study with qualitative approach to explore cultural issues from the perspectives of both management and employees, and want to gain an all-around view on culture from different levels of the two companies (KPMG & Andersen) respectively, with the combination of scientific principles (deductive) and empirical data (inductive)
In the following sections, the detailed explanation on the application of research method research approach, research design and how the authors collect and analyze the data on the case study are described.
25
3.2 Research Method
A qualitative approach is chosen because of the exploratory nature of this study. This qualitative approach enables us to facilitate an exploration of the cultural integration process and the impacts of cultural issues on M&A integration. Rather than collecting large data for statistical and generalization purpose, the authors conduct a qualitative study to include some more empirical investigation where they investigate the settings and assignment from real life experience and consequently search for an understanding (Saunders et al., 2007).
Cronbach (1975) argues that quantitative research may not be capable of taking full account of the interaction effects that take place in social settings. As many complicated interactions are involved, quantitative approach will not provide the essential in-depth information for our exploration.
Denzin and Lincoln (2000) claim that qualitative methods can be used to describe and interpret complex phenomena that do not lend themselves to quantitative methods of formal hypothesis testing. Qualitative research aims to help one understand the social and cultural phenomena in natural settings, with emphasis on meanings, experiences, and views of participants (Pope & Mays, 1995), explore areas of limited knowledge, and suggest potential research topics. Holloway (1997) advocated qualitative research for its focus on the way people interpret and make sense of their experiences and the environment. In this case, the authors seek to understand the experience, understanding and perception of the key managers involved in the KPMG-Andersen merger case. Therefore, the authors decided to employ qualitative approach in this study to obtain insights about culture-related issues of KPMG and Andersen during and after the merger. Several methods are used to achieve qualitative method. The authors conducted four detailed telephone interviews to four different managers respectively, three from KPMG, including ex-KPMG employee, and one from Andersen. The rationale is to explore the experiences and views of people involved and affected by the merger to the deepest possible level, and from various sources, so that the qualitative method will be applied to interpret the case in the best possible way.
3.3 Research Approach
Considering the case for this thesis involving the local integration of two globally merging MNCs‘ subsidiaries in Vietnam, the authors have selected our research strategy neither based on a deductive approach nor on an inductive approach. Deduction owes more to positivism and induction to interpretivism. (Saunders et al., 2009)
In deductive research, the emphasis is on the scientific principles, moving from theory to data, the collection of data, and the application of controls to ensure validity of data (Lewis, et al, 2009). It is a highly structured approached and requires researchers to select samples of sufficient size in order to generalize conclusions (Saunders et al., 2009). In induction research, the emphasis is placed on building theory, gaining an understanding of the meanings humans attach to events, the collection of qualitative data, and a more flexible structure to permit changes of research emphasis as the research progresses (Saunders, et al., 2009). As the research is an interaction between theory and reality (i.e. empirical data), it is possible to mix deduction and induction within a study, which is often advantageous (Saunders et al., 2007)
26
This thesis employs an abductive research approach, which Denzin (1978) describes as an approach that combines the deductive and inductive models of proposition development and theory construction (Schweizer, 2005). In other words, the authors adopt the combination of deductive and inductive approaches to explore the problematic cultural issues by using existing theories as basis and a starting point, upon which the case is analysized and compared. A detailed study of prior theories within culture and M&A is presented, which is interplayed with the collection of empirical data from two companies prior to and after M&A. In this paper, the existing theories on M&As, cultures and the interrelation of the two are drawn in the frame of references. The authors summarize the frame of references with a conceptual framework which explains the ―role‖ that cultures (national and organizational) play in M&As from existing theoretical point of view.
The empirical material is prepared after the related frame of references is set. The process of gathering empirical study is very much like that of deductive research, in which the emphasis is put on the collection and validity of the data, while, in the same time, the case material is controlled and limited within the frame of references, or in other words, it relies on the previous research as background information to build the theoretical framework, upon which the empirical studies are filled within the framework. The combination of both deductive and inductive is of great importance in our case, because the previous research focused to a greater extent on the cultural differences that two or more parties involved in the M&A deal experience. The case the authors try to explore is pertaining to the local integration process between two globally merging MNCs‘ subsidiaries. The magnitude is extended to a higher level, as a newly merged company between KPMG and Andersen is not only influenced by the Swiss and American cultures, but also the Vietnamese culture that employees working there exert upon. From the characteristics of the case, there appears to be more problematic areas when two subsidiaries are integrated, because the cultural issues consist not only in the national culture of the three countries (Switzerland, USA and Vietnam), but also in the distinctive organizational culture of the two companies. Yin (2003) argues that empirical observations are not to be considered in themselves as results of the research. In addition, Dubois and Gadde (2002) argue that theory might improve the explanatory power of studies. The authors will refer back to the theoretical information in order to interpret the case, and from that point draw conclusions and add pieces to the existing building of M&As research.
In summary, the existing research is applied as a foundation upon which the house of empirical study is built and polished. And the analysis of empirical data by means of case analysis will contribute to the theoretical basis. Considering the purpose of this thesis, the abductive research approach is claimed to be the appropriate choice.
In the following section, the way and overall structure of how the authors collect, measure and analyze the data are provided.
3.4 Research Design
Since data needed for this research is of qualitative nature, the interview method was selected as a major means of data collection. Bryman and Bell (2007) argued that the interview is the most popular method in qualitative approach. As the authors undertake an exploratory study, it is likely that the authors include interviews in order to be able to understand the reasons for research participants‘ decisions, attitudes and opinions (e.g. how does national culture influence the organizational culture during integration, and how does the involvement of management influence employees‘ assimilation into the new
27
organizational culture), and to ―infer causal relationships between variables‖ (e.g. the elements of national culture and organizational culture in our case) (Saunders et al, 2007). The authors want to obtain a holistic view on the culture-related issues of KPMG and Andersen deal; therefore, the interviews conducted cover people from different hierarchies of both companies, and to infer the relevance and consequences of cultural integration as influenced by national culture of the three countries and their respective organizational cultures.
Since culture is as significant and complex as it is difficult to understand and use in a thoughtful way (Alvesson, 2002, p.1), the authors utilized a semi-structured model to conduct the interviews in order to be flexible to the topic explored and allow the interviewees to reflect and elaborate on the answers, while still keeping the central theme in focus. As Saunders et al (2007) explain that the semi-structured interview offers the researchers an opportunity to look into the answers by asking the interviewees to explain, elaborate or build on their responses, as a consequence, significance and profundity will be added to the collected data. Besides, it may possibly lead the discussion into essential areas that the researchers had not taken into account before.
Beside the information obtained at the interviews, the authors apply a questionnaire introduced by Cartwright and Cooper (1996) to carry out a survey in order to assess the organizational culture of the acquiring and acquired companies from employee‘s perspective. According to Saunders et al. (2007), survey is a common and popular medium in business and management research since it allows the gathering of a large amount of data from a significant population in a highly economical way, while questionnaire is made within the survey strategy (Scholz et al., 2006). Since employees are those who understand and experience the culture the most within the company, they are the key sources for researchers to evaluate the culture. Accordingly, the best approach is conducting a survey among the employees through questionnaire. In this study, the authors use surveys as a way to find the descriptive material among the employees.
Although either interview or survey may be used as the only data collection technique, the authors choose to combine the two since they will provide better chances to answer the research questions. In this mixed-method research, the survey is used to discover the organizational culture of both companies, and it can be complemented by semi-structured interviews to explore the problematic cultural issues in our case. The rationale behind the choice of case study is elaborated in the following section.
3.5 Case Study
Scholz et al. (2006) argued that the more complex and contextualized the objects of research, the more valuable the case study approach is considered to be. Eisenhardt (1989) suggested case studies as a productive approach to offer a deep insight into conflicting literature, as well as developing the ability to generalize from various theoretical stances, which is an important goal of this thesis. Furthermore, since this thesis focuses on the problematic cultural issues in M&As and in-depth information is required, case study satisfies the exploratory purpose of this thesis, and thus an appropriate choice.
The case study strategy will be of particular interest if the authors want to acquire ‗a rich understanding of the context of the research and the processes being enacted (Morris &
28
Wood, 1991). The case studies differ from other qualitative approaches due to their specific focus and the investigation of individual cases (Holloway, 1997). This study is based on qualitative research within the context of a single case study, providing an opportunity to observe and analyze a phenomenon and keep a holistic perspective. It gives the authors room to dig deeper into the subject concerned. A well-constructed case study strategy can enable the research to challenge an existing theory and offer a source of new research questions (Saunders et al., 2007).
In this research, a local M&A case and the subsequent local integration process of two globally merging MNCs‘ subsidiaries is chosen. The study concentrates on the Andersen acquisition by KPMG in Vietnam and its problematic cultural issues in the integration process. The way the authors approach the case study is through interview and survey. Four employees were interviewed and surveys were conducted to investigate how KPMG dealt with culture-related issues during and after the acquisition in 2002. The data collection that includes our ―way‖ of using interview and survey is further explained as follows.
3.6 Data Collection
This research is based on both primary and secondary data. The primary data were collected through intensive interviews with those involved in the acquisition and through culture survey among ex-Andersen staff and current KPMG employees. Although this research was mainly based on primary data, secondary data were utilized to gain a deeper understanding of the related issues and make the research more reliable and diversified. The secondary sources included company website, internal documents, journals, newspapers and other published materials within the area.
Since the acquisition occurred eight years ago, the authors are aware that information collected from the interviewees and Andersen culture survey is mainly based on their memory. Although the culture survey conducted in KPMG in 2010 (eight years after the integration) and its culture has changed overtime, the data is still relevant to this research.
3.6.1 Interview
It was impractical to carry out the interviews on a face-to-face basis due to the distance, cost involved and time required. As a result, the authors conducted telephone interviews which offer the potential advantages regarding access, speed and lower cost (Saunders et al, 2007). It is ideal for overcoming time and distance issues. It allows the authors to finalize the interview schedules quickly since it is less time consuming compared to field interviews. The respondents could be interviewed anywhere in the world that is accessible by phone. Despite the time difference of six hours between Vietnam and Sweden, ten hours between Australia and Sweden, the authors managed to set up convenient appointments for both sides.
Interview guide was designed based on the key topics the authors want to ask about when keeping in mind unambiguousness, conciseness and logical order and flow of questions. The questions fall into four categories, including Background, M&A motives and integration, Organizational Culture, and Learning from M&A. The interview guide was revised several times upon consultation with our supervisor. The interview guide is provided in APPENDIX A.
29
In the early stage of the research, the authors contacted the target people who were most likely to be appropriate for the research and sent them an introductory email in which our research purpose and interview requests were clearly stated. After getting a positive response, interview time would be arranged between the interviewers and interviewees. Questionnaire was sent to interviewees in advance, and several days later the authors conducted the telephone interviews. During the interviews, a list of themes and questions in the interview guide was covered and might vary from interview to interview. Since the interview is semi-structured, the authors stick to the questions prepared, while still maintaining the flexibility to have interviewees reflect on their responses. The order of questions also varied based on the flow of the conversation. The interviews were recorded and then transcribed for later use.
Respondents
The authors conducted four interviews with the details provided in Table 2 below. The authors ensured that all interviewees have relevant experience to contribute to the research topic. The interviewees were actively involved in the Andersen acquisition by KPMG in Vietnam in 2002. The authors interviewed the top managers who were responsible for the deal and employees that worked for both companies during the transition period to gain different perspectives on the same phenomenon. One employee (Truc Vo) from Andersen worked in KPMG for a year after the acquisition. The rationale behind the selection is that Truc Vo representing the lower-level employee at Andersen has gained ample experiences to articulate his perspective on culture at Andersen before acquisition, and compare that perspective with his experience of culture at KPMG after acquisition. In addition, Truc Vo left KPMG within one year after acquisition, owing to his ―resistance‖ to the culture at KPMG. Considering the purpose of this thesis, i.e. to explore the problematic cultural issues, it is important to diagnose the problems derived from the resistance of lower-level employee like Truc Vo to the new culture.
30
Name Before
Merger 2002
Role in Acquisition 2002
Experience with Andersen Vietnam
Experience with KPMG Vietnam
Current Position
Interview Time
Warrick Cleine
KPMG
-Head of KPMG
-Initiating the deal
N/A 12 years
Chief Executive of Cambodia and Vietnam
11th March 10
40 minutes
Phong Le
Andersen
-Assistant Manager
-Normal staff
5 years 8 years
Director of Audit Department, KPMG, Vietnam
11th March 10
40 minutes
Brook Taylor
Andersen
-Managing Partner
-Andersen side‘s person-in-charge
5 years 2 years
Chief Operating Officer, VinaCapital, Vietnam
19th March 10
70 minutes
Truc Vo Andersen -Audit Senior
-Normal staff 5 years 1 year
Finance Manager, Ettamogah Entertainment, Australia
19th March 10
25 minutes
Table 2: List of interviewee
In this research, the authors are two females conducting the interview with four male participants. Although Lee (1997) affirms that male interviewees are likely either to respond to female researchers with aggression, or to be unforthcoming, the interviewees were very thoughtful, courteous, and willing to support us. During our interview with men, the authors did not have the unpleasant experiences as Lee (1997) went through. Instead, the authors obtained much useful and important information during the interviews.
Interview Limitations
In the phone interview, the authors did not see the person they were interviewing and vice versa. The authors could not be aware of non-verbal behaviors of the interviewees, which might influence on the interpretation. However, with the ‗live‘ interaction during the interview, misunderstandings could be clarified and cues might possibly be picked up from intonation, tone of voice or hesitation. Bryman and Bell (2007) suggest that it is essential for the interviewer to achieve rapport with the respondent. Lack of rapport may lead to interviewee‘s reluctance to disclose information. In telephone interview, because the interviewer is unable to offer visual cues of friendliness, such as smiling or good eye contact, it is more difficult to build a rapport or feeling of confidentiality with the respondents. Yet the authors did gain and maintain a good relationship with the interviewees as a result of nice introductory emails and subsequent emails / phone calls
31
after the interviews. The participants were willing to answer and explain all of our concerns.
Being critical is an indispensable part of conducting research, therefore, bias that affects the interview results cannot be neglected. The first type of interview bias is related to interviewer, in which non-verbal behaviors of the interviewer create bias in the way that the respondents answer the questions asked (Saunders et al., 2007). It is also possible that the interviewers will demonstrate bias in the way they interpret response (Easterby-Smith et al, 2008). Another type is interviewee/response bias where interviewee may want to evade questions, give a partial answer or respond dishonestly. Venue and timing for an interview may also lead to bias. With telephone interviewing in this study, interview bias is usually reduced because of no face-to-face contact between interviewer and interviewee. Interview guide was applied to offer a basis for all questions, so that the authors asked and presented each questions in the same way to the respondents in order to minimize bias. As Bowden (2005) recommends, the authors did not start the analysis of data until all interviews had been completed to avoid the risk of interview bias.
3.6.2 Survey
A survey was conducted to assess the organizational culture of KPMG and Andersen Vietnam. The questionnaire was delivered and returned electronically using the Internet. The authors employed the culture questionnaire introduced by Cartwright and Cooper (1996), developed the survey using the website www.surveygizmo.com and distributed among the respondents through emails. This eight question survey can be answered in two minutes. The survey is provided in APPENDIX B.
In this research, the authors are using self-administered questionnaires. With this type of questionnaire, respondents answer questions by completing the questionnaire themselves, at their own convenience. Nowadays, internet-based surveys are very popular thanks to the emergence of the Internet. Compared to other survey techniques, internet surveys offer the promise of faster data collection, lower cost and error-free data entry (Simsek et al., 2005). Furthermore, the internet survey is extremely advantageous in this study where the sample population is mobile or lives in multiple locations.
One survey was sent to an ex-Andersen employee, who used to work in Andersen Vietnam, and the other one was distributed among current staff of KPMG Vietnam.
According to Bryman and Bell (2007), one of the most damaging limitations of a survey is the low response rates, which the authors also came across during the research. The authors sent our questionnaire to 92 KPMG employees, and got 20 answers, response rate was 21.74%. The questionnaire was also distributed to 59 ex-Andersen staff and 16 responses were collected, response rate is 27.12%. The survey for KPMG staff has a much lower response rate than Andersen survey. It might be because of the sensitive topic of organizational culture. While Andersen went down eight years ago, KPMG was presently a flourishing business. The KPMG respondents may feel it is not appropriate to give sensitive information of their current company to someone that they have never met. Although the authors explain clearly about the anonymity of respondents and our research purpose in the survey request email, the participants do not entirely trust the way how the data they provide will be used. To deal with the low response problem, the authors tried other possible ways to contact target respondents, such as chat messenger and internet social network. The authors did find survey respondents online and sent them individual
32
messages asking to complete the survey. As a result, the response rate was improved. As the participants were selected randomly, the results would give us a more accurate picture of culture in both Andersen and KPMG.
In order to study and assess the existing culture of KPMG and Andersen, the authors have applied a short culture questionnaire which Cartwright and Cooper (1996) adapted from an instrument designed by Roger Harrison and Herb Stokes (1990). This questionnaire contains only a small sample of items; it is not good for diagnosis, but rather to give a general feeling for the culture of the two organizations (Cartwright & Cooper, 1996).
3.7 Summary & Reflection
As described in the introduction section, the purpose of this thesis is to explore the problematic cultural issues in order to get an understanding of the characteristics and outcome of cultural integration as influenced by both national culture and organizational culture in M&As. To fulfill the purpose of this thesis, the research is done on the exploratory basis.
This chapter deals with the methodological and research approach the authors use to analyse the case study. The case study is analysed with qualitative approach to explore cultural issues from the perspectives of both management and employees, gaining an all-around view on culture from different levels of the two companies (KPMG & Andersen) respectively, with the combination of scientific principles (deductive) and empirical data (inductive). Two methods are applied to collect data for the case study. One is interview and the other one survey.
When reflecting back on our chosen methodology, there are both strengths and weaknesses. The negative side of our chosen approach is the limitation of information gathering from both interview and survey, which is due to two main reasons: first, the confidentiality of the information; in the consulting firms like KPMG, any corporate information is kept with strict confidentiality. Employees are monitored at the workplace, which sets a roadblock to the feedback from employees; second, the subjectivity of information; since the deal was conducted in 2002, about eight years ago, the memories of interviewees on the selected questions are questionable. In addition, the answers are based on the personal feeling of the interviewees, which vary from person to person according to their own experiences to the deal. The positive side is the multi-perspective view on cultural issues we explored. As Alvesson (2002) regards culture being not primarily ―inside‖ people‘s heads, but somewhere ―between‖ the heads of a group of people where symbols and meanings are publicly expressed, we reach out to different groups of people representing various hierarchies from the two companies, the group of managers, who see culture from a different perspective than the group of lower-level employees that sees culture differently. From this point, the discrepancies and similarities can be detected. While similarities are compared, discrepancies can be analysed and contribute further to the existing theories.
33
4 Empirical Study
In this chapter, the empirical data are collected from primary and secondary sources.
Primary data is collected through the interviews with four members and surveys,
conducted among KPMG and Andersen employees. The chapter starts with a
description of two companies and their own culture. A brief history of two firms and the
case are then presented. The empirical presentation consists of three themes: values
and beliefs, cultural dimensions and processes. First theme – values and beliefs are
expressed in the goals of integration. Second theme – cultural dimensions reflect the
views of interviewees on the cultural differences and their influences. Third theme –
processes indicate how people participate in the integration process.
4.1 Case Description
4.1.1 KPMG
KPMG is a global network of professional firms offering audit, tax and advisory services. It is one of the Big Four auditors – the four largest international accountancy and professional services firms. With over 140,000 outstanding professionals operating in 146 countries worldwide, KPMG works closely with its clients, helping them to mitigate risks and seize opportunities (KPMG website). KPMG itself is a merger of four companies, including Klynveld Kraayenhof & Co. (Netherlands), Thomson McLintock (United States), Deutsche Treuhandgesellschaft (Germany) and Peat Marwick (UK) (KPMG UK Website). KPMG also experienced other M&As during its development.
KPMG Vietnam, a member of KPMG Worldwide, was established in 1994 to provide services mainly to foreign invested companies in Vietnam. At the beginning, there were only a few Vietnamese staff and many expatriates from other offices around the world to help the firm operate in the same standards of KPMG Worldwide. However, local staffs have been increased over time and replace expatriates in providing professional services for clients. Nowadays, with over 800 professionals, KPMG is one of the largest professional services firms in Vietnam with a balanced mix of international and local clients.
To talk about culture in KPMG, it is important to pinpoint the values that are placed as a core component in organizational culture of KPMG (Thornbury, 1999). In KPMG, people believe that organizations with a clearly-defined purpose and a strong set of shared values do better than their peers in all respects. They exhibit vastly superior financial performance, better reputations, superior endurance records, and resilience to changes in leadership (Collins and Porras 1994, used in Thornbury, 1999).
The culture of KPMG, despite some of its highly appraised values, is also embedded with flaws. Thornbury (1999) studies KPMG‘s culture in detail and argue there are mainly four types of culture that need to be rectified in KPMG. First, the remnants of a federalist culture: the individual operation of partnership-based subsidiary; Second, the ―not invented here syndrome‖: it means the international initiative at KPMG is met with resistance from the subsidiaries as if it has nothing to do with them; Third, Client focus: KPMG treat clients above anything else, and even at expense of losing employees; Fourth, A tradition of intellectualism: In KPMG, there are more ideas than actions. ―Long-term internal projects often run out of momentum.‖ (Thornbury, 1999)
34
The bright side of KPMG culture is also worth mentioning. The mission statement of KPMG is ―KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We have 140,000 outstanding professionals working together to deliver value in 146 countries worldwide‖, which embodies the core assets of KPMG: clients, people and knowledge. Therefore, the culture of KPMG is built up and shaped by its core assets. KPMG has a culture of trust and collaboration, flexibility and diversity (KPMG website). It encourages employees to explore and share knowledge. As a global firm that emphasizes the importance of clients, people and knowledge, KPMG is passionate about the working with clients to deliver exceptional value, which means being passionate about client service, robust, lasting relationships, and being committed to adding value; raises people flourishing and realizing their full potential, which means respect, support and trust, adding value to KPMG people by providing varied, challenging and rewarding work and planned career development, and teamwork; continuously extends the frontiers of shared knowledge, which means openness of mind and continuous learning treating knowledge as a highly valued asset (Thornbury, 1999).
4.1.2 Andersen
Andersen (formerly known as Arthur Andersen), based in Chicago, was once one of the "Big Five" accounting and consulting firms. It delivered auditing, tax, and consulting services to selected corporations. Andersen had never gone through M&As since Arthur E. Andersen, founder of Andersen Co, did not want to expand his company through mergers and acquisitions (Arthur Andersen & Co, 1988). Instead, he felt expansion should be from within the firm. (as cited in Crampton & Moore, 2000, p.83).
Enron Corporation, an American energy corporation based in Texas, was one of Andersen‘s biggest clients. In October 2001, Enron revealed Securities and Exchange Commission (SEC) inquiry into possible conflict of interest related to company's dealings with partnerships. In November 2001, Enron revised its financial statements for previous five years to account for 586 million dollars in losses. Enron‘s bankruptcy consequently led to the collapse of Andersen – Enron‘s auditor. Andersen was found guilty of obstruction of justice for shredding documents related to its audit of Enron. Since convicted felons are not allowed to audit public companies, Andersen agreed to surrender its licenses to practice as Certified Public Accountants in the United States on August 31, 2001 - effectively putting the company out of business. Although the verdict was overturned by the Supreme Court of the United States in 2005, it is highly unlikely Andersen will return as a viable business (Clarke, 2007).
At the time of its collapse, Andersen had around 85,000 employees and US$9 billion in revenue (Cleine, 2002).
Andersen Vietnam, set up in 1997, was the smallest among the Big Five audit firms operating in Vietnam. It had 100 employees working together to deliver value in three divisions, including Assurance, Tax & Corporate Services, Business Consulting. Andersen Vietnam was owned and funded by Andersen in the US.
Andersen culture is believed to be unique (Crampton & Moore, 2000). In the company, people treated each other with respect and friendliness. Andersen gained its world-class status and influence during the course of its 89-year history. As one of the top accounting firms in the world, Andersen had won a reputation as a tough, competent, and honest organization. (Squires, Smith, McDougal & Yeack, 2003).
35
People credited Arthur E. Andersen, the firm‘s founder, with the establishment of Andersen‘s reputation (Squires et al, 2003). Since the start of Arthur Andersen & Co., the firm used the founder‘s experience, reputation, and vision as the foundation of its competitive advantage (Squires et al, 2003). ―Think straight/talk straight‖ was the principle on which Arthur E. Andersen built his accounting practice. It became the company‘s motto and remains the hallmark of The Andersen Worldwide. His vision for the firm focused on quality and value of services offered and provided (Crampton & Moore, 2000). The commitment to honesty, integrity and a systematic approach became the trademarks of Andersen and his accounting firm. For example, Andersen resigned from a large railroad engagement because the firm disagreed with a particular accounting principle that was accepted in that industry (Wyatt, 2004). Another story tells how Arthur faced up to a profitable steamship company client (Squires et al, 2003). The steamship company asked Andersen to certify its financial statement as of the earlier date to camouflage the company‘s loss and help attract investors. As the camouflage would misrepresent the actual financial assets of the steamboat client to potential investors, Andersen refused to certify the financial statement.
Niece and Trompeter (2004) affirm that one-firm concept is the attribute that distinguished Andersen Worldwide Organization from its competitors throughout its history. Andersen‘s one-firm concept emphasized ―a united organization across the world to provide clients with consistent service while maintaining the firm‘s independence‖ (Niece & Trompeter, 2004: 183). Crampton and Moore (2000) mention that Andersen maintained a single organizational structure and acted globally as one firm speaking with a unified voice. All partners, regardless of nationality, would have an equal voice in partnership issues. As the company expanded, each overseas office was considered as a part of the whole firm rather than an independent operation loosely tied to the larger organization. (Crampton & Moore, 2000)
In an issue published for the firm's 75th anniversary (Arthur Andersen & Co, 1988), Andersen did not want to expand his company through mergers and acquisitions. Instead, he felt that expansion should be from within the firm. (as cited in Crampton & Moore, 2000, p.83). He explained that merger led to acquiring staff that did not apply to Andersen‘s standards, and thus the acquired staff had to be replaced. Andersen realized that his employees were his most valuable assets. He did take radical steps to take care of his own people, including initiating the five-day work week with overtime pay in the accounting job (Crampton & Moore, 2000).
Founders create or have a strong influence on the firm‘s culture and Andersen was not an exception. Arthur E. Andersen became a mythical stature, in which his personal life, experience, principles and values were still reflected and clearly observable to Andersen staff more than 50 years after his death (Squires et al, 2003).
36
BRIEF HISTORY of ANDERSEN and KPMG
1867: Robert Fletcher establishes accountancy
firm which later becomes Peat Marwick Mitchell
1870: William Barclay Peat joins firm
1877: Thomson McLintock opens office in
Glasgow
1897: Marwick Mitchell & Co establishes in New
York
1913: Arthur Andersen starts his own accounting
firm, Andersen, DeLany & Company.
1900
1918: After the departure of DeLany, Andersen's
firm changes its name to Arthur Andersen & Co. 1925: Peat and Marwick Mitchell & Co. join to
create a transatlantic firm
1947: Arthur Andersen's death passes leadership to
Leonard Spacek
1970s: Arthur Andersen & Co. becomes increasingly
involved in providing consulting services.
1980 1979: Thomson McLintock forms KMG, a
grouping of independent national practices
1988: Arthur Andersen & Co. becomes the largest
consulting firm in the world, deriving 40 percent of its revenues from the consulting side of its business.
1989: The firm is split into two companies, Arthur
Andersen & Company (accounting services) and Andersen Consulting (consulting services)
1987: The two firms merge worldwide to create
one firm, KPMG; in April in the UK, Peat Marwick McLintock is born
1990 1990: January, name amended to highlight the
international strength of the firm: KPMG Peat Marwick McLintock
1991: October, McLintock name is dropped to
create KPMG Peat Marwick
1994: Arthur Andersen & Co. begins to develop its
own consulting business.
1995 1995: the name was reduced again to KPMG
2000: The International Court of Arbitration in Paris
rules that Andersen Consulting can separate itself completely from Arthur Andersen & Co. and Andersen Worldwide.
2000
2001: Andersen Consulting changes its name to
Accenture Ltd.
2002
As one of the affected 23 businesses, Andersen Vietnam was acquired by KPMG.
37
4.1.3 Acquisition
Since the downfall in 2002, the ―Andersen‖ name disappeared from the world auditing and consulting scene (Cleine, 2002). During the following months, Andersen Worldwide member firms in many countries announced combinations with other ―Big 5‖ firms. In May 2002, KPMG signed an agreement to pay as much as $284 million for 23 units of Andersen Worldwide consulting businesses in the United States, Europe, Asia and Latin America (Glater, 2002).
As one of the affected 23 businesses, Andersen Vietnam was acquired by KPMG. This acquisition would help KPMG improve its market position in Vietnam with instant access to well-trained resources and strong business networks built by Andersen Vietnam. According to Cleine (2010), KPMG‘s goal of integration is more than just market position, it is also services, expertise and clients Andersen had that KPMG wanted at that time.
The contract assured employments for all Andersen‘s staff after the acquisition (Taylor, 2010). At the acquisition time, Andersen operated in Vietnam with 100 employees (80 in Ho Chi Minh City and 20 in Hanoi) (Cleine, 2002). Around 98-99% of Andersen employees moved to KPMG (Taylor, 2010). This resulted in the increase of KPMG position in terms of staff number from 4th to 2nd in Vietnam Audit Industry in 2002.
4.2 Findings
The followings present the structure of empirical material. The empirical presentation is comprised of three themes derived from the primary and secondary sources. The three themes are value and beliefs, cultural dimensions, and processes. The first theme—value and beliefs is expressed in the goals from the perspectives of both KPMG and Andersen, the verbal statement of what they want for the organization respectively, and what are deemed with utmost importance by them within each firm. The second theme—cultural dimensions reflects the views of interviewees on the differences in both national culture and organizational culture, and their influence on the performance, management and structures of each firm; The third theme---processes talks about how people (both the management and employees) from two companies participate in the integration process. The discussion and analysis on the empirical materials are presented in the following chapter.
4.2.1 Theme 1 – Values and Beliefs
We started the personal interviews with a discussion with people from both companies about goals and motives of KPMG – Andersen integration.
What are the goals of KPMG?
All respondents agreed that the supreme goal of KPMG in acquiring Andersen Vietnam is to improve their market position in Vietnam (Personal Interview, March 11, 2010). Before the acquisition in 2002, KPMG was No.4 among the Big-Five accounting and consulting firms in Vietnam. In the interview, CEO of KPMG in Vietnam and Cambodia - said, ―Everywhere around world, we don’t want to be No.4, we want to be No.1 or No.2, and Andersen opportunity gives us a chance to be No.2‖. He also mentioned it is very difficult for KPMG to grow its business in terms of new staff and new clients without doing an acquisition. The
38
CEO emphasized that the opportunity of Andersen is a very unique acquisition opportunity because it is very rare to have an opportunity to take over another accounting firm in his industry (KPMG CEO, 2010).
Andersen Vietnam was part of the global firm, so it was a very well-run firm and the staff was well-trained. They had good clients and a good reputation in the market in Vietnam. Even though Andersen had got into trouble in the US, in Vietnam they were a good business to take over (KPMG CEO, 2010). The CEO affirmed that KPMG‘s most important objective was to become bigger, to improve its market position, and to prevent its competitors to take over Andersen as well. ―If they take over Andersen, it will become harder for KPMG to become No.1 or No.2 in Vietnam‖, he explained (KPMG CEO, 2010). KPMG‘s motive is to increase their number of people and clients so that they can improve the position in the market place.
The goal of KPMG is more than just market position, it is also services, expertise and clients that Andersen had KPMG wanted to acquire at that time (KPMG CEO, 2010). For example, Andersen had a good order practice that KPMG would like to combine with its order practice in Vietnam; Andersen also had some tax people KPMG would like to acquire. Furthermore, Andersen had certain market areas that KPMG wanted to exploit (e.g. Taiwanese business).
What are the goals of Andersen?
On the contrary, Andersen‘s goals and motives of integration are not related to any of those items mentioned above. When Andersen was disintegrating, Taylor, Managing Partner of Andersen, began the negotiation with the other Big Four accounting firms, PwC, KPMG, Ernst & Young and Deloitte. Taylor made the decision to merge the business with KPMG. He emphasized that the most important thing to his decision was to make sure its entire staff have good jobs and their career would not be destroyed (Andersen managing partner, 2010). The interest of Andersen staff was the primary focus. Andersen managing partner explained (2010), ―When I met with the heads of big four firms, I had to look for what will be the role of my staff in that company, and to be honest, the opportunity for my staff in other companies were not as good when they explained.‖ Four alternatives were considered and evaluated carefully. The Andersen managing partner (2010) considered and evaluated four alternatives carefully:
―PwC is the market leader. They did not really need any more staff. They are the largest already. PwC didn’t really need us. Deloitte wanted us definitely, but the problem with Deloitte was that it was actually owned by Vietnam Ministry of Finance at that time, and none of my Andersen staff wanted to work for the ministry of finance, the state-owned enterprise. Ernst & Young had some serious management problems, all the partners were frightened. I wouldn’t personally want to join in that fight and I knew if I did merge with Ernst & Young, my staff will be brought into that argument. And the only firm left is KPMG‖.
It is not difficult to find reasons for Andersen to merge with KPMG. Both Andersen and KPMG at that time were losing money, but when the two combined together, that made a much more economy of scale, because they can run the business more efficiently, they had more revenue therefore it would be better business (Andersen managing partner, 2010). Another merging motive is regarding Japanese clients. ―After KPMG Japan merged with Andersen Japan, 30% of our clients in Vietnam were Japanese companies. If we merged with KPMG, we kept those clients.‖, Andersen managing partner explained.
39
4.2.2 Theme 2 – Cultural Dimensions
The high turnover rate at KPMG and losing of certain clients along with the resignation of some senior managers from Andersen described by the manager as ―a big challenge‖ (Andersen manager, 2010) and employee as ―being difficult and problematic‖ (Andersen employee, 2010) are due to the cultural difference between KPMG and Andersen. The descriptions of cultures seem to be based on the notion of two distinctly different managerial styles, structure, values and histories.
According to the Andersen manager (2010), KPMG and Andersen do not require employees to wear uniforms at work, but do expect a business style dress code which enables the companies to have a professional image and gain customers trust. Both companies apply ―casual Fridays‖ meaning that the employees can wear anything apart from obvious inappropriates.
What makes Andersen different?
The cultural differences between KPMG and Andersen are clearly picked up by both employees and management from both sides during the merging process. Andersen‘s culture is expressed as being open, friendly, family-like, and democratic. One employee having worked there since its inception comments: ―I was with Andersen since it first started in Vietnam, in 1994. It was very open, friendly. Andersen Vietnam was considered as a big family.‖ (Andersen employee, 2010) This idea is shared by another employee we interviewed: ―Andersen is friendly and open; the employees feel free to express their opinions and they can make a lot of decisions at their level.‖ ―In Andersen, it’s easy to talk to your managers about what you’re concerning, and how to improve the work. Andersen staff often stays together.‖ (Andersen employee, 2010) Similar comment from one senior manager shows that ―Andersen was unique‖ (Andersen managing partner, 2010) and the value of it attracting talents from around world to work toward the common interest and goal of the company. He depicts Andersen as ―a big exclusive club‖ and the reason is that ―around the world, Andersen was the company that the best and the brightest joined. It was very much an exclusive club. That is why when I meet people that used to work for Andersen, I have more of an affinity with them, they share in my experience, and they understand the culture of the company which is very unique.‖ ―It is not the same in other accounting firms.‖ (Andersen managing partner, 2010) Employees have established close relationship in Andersen, and with upper levels. One manager in Andersen confirms it by saying: ―If I resign, many people will follow me and resign from the company as well. The same things happened even after the acquisition with ex-Andersen staff.‖ (Andersen manager, 2010)
The understanding of Andersen culture is different from the perspective of KPMG CEO, whom regards the Andersen culture as less democratic, and employees have less authority in management like decision-making and instructions, because as the CEO comments that ―the Andersen culture is more centralized and more directive, so people are used to getting instructions from Chicago where Andersen is headquartered and following their instructions.‖ (KPMG CEO, 2010) This quote presents a general idea as to how the corporate managerial style influences its culture, how employees behave and think, and ultimately influences the value within that culture. When mentioning about the uniqueness of Andersen culture, the CEO of KPMG agrees on ―Andersen being different to other accounting firms‖, particularly that of KPMG. ―The other big four are probably more similar. It has different history, and it was founded in US. They bolstered on the back of US business, consulting, and advisory, little bit different to the other firms.‖ (KPMG CEO, 2010)
40
The ―uniqueness‖ of Andersen can be traced back to its saga. A saga of a company can be explained as an historical narrative describing the unique accomplishments of a group and its leaders. The founder of Andersen Mr. Arthur Andersen created its culture with his charisma and characteristics that has been shared and recognized throughout the whole company by everyone and any one until today. The managing partner of Andersen contributes its positive cultural influence to the Andersen‘s founder; he comments: ―I never met a company that lived and breathed its founders so much. Arthur Andersen was one person who started his company in 1916. Everybody in Andersen knew the history about Andersen.‖ (Andersen managing partner, 2010) The strong influence of Andersen‘s culture lays a solid foundation for its friendly, open and family-style working environment that is highly appraised during our interview to the Andersen employees.
Besides the founder‘s influence on Andersen‘s culture, what also makes Andersen‘s culture unique and different from other big fours is the company development being a part of its history. All the other firms (KPMG, Deloitte, PWC and E&Y) have merged with other companies, as the managing partner of Andersen explains: ―what makes it (Andersen) different then all the other accounting firms is they (other firms) all merged. It used to be the BIG 9 or Big 10 and is now come down to the Big 4.‖ (Andersen managing partner, 2010) The other firms use external alliances as their corporate strategies to become the biggest and grab market share; conversely, the firms merged with others dilute their organizational cultures, and give way to some extent to the assimilation of other firms. Andersen is the one that has never merged with any other firms, and is still the biggest. ―It shows how strong it was and how fast I grew. Everyone else needed to merge to grow and Andersen kept growing through its own internal strength‖ (Andersen managing partner, 2010). That is why the culture in Andersen is ―you being part of a very special club‖ (Andersen managing partner, 2010)
In addition, Andersen formulates a very standardized and structured business process that enables its employees to feel ―oneness‖ as a part of Andersen family. To illustrate it, the Andersen managing partner cites an example of his own:
―The reason I came to Vietnam in 1995 was to teach the new staff that joined and they were not allowed to leave Vietnam is those days because the country had just opened up. It was very important to Andersen that the new staff in Vietnam had exactly the same training as the staff in America, UK, Australia, New Zealand, India, and Japan. It was so important that I had to come from New Zealand with other trainers from other countries and teach. There was only a small staff but I had to teach them the Arthur Andersen way. I am absolutely sure none of the other accounting firms would have done that. Anyone who joined Andersen had to go through the same training. That was the rules of the way we did business.‖ (Andersen managing partner, 2010)
Andersen managing partner also added:
―Andersen did not employ a lot of people. It always emphasized that it was employing the best. You always felt like you are the best. We always believed in Andersen that our management is the best, our methodology is the best‖ (2010)
What makes KPMG different?
Unlike Andersen, KPMG‘s culture is more consensus-based and collaborative. Therefore, ―we didn’t get the same direction from the center, it is more up to the local management to operate the business, slightly different management structure that lead to different culture.‖ (KPMG CEO, 2010) When the existing KPMG employee from Andersen is interviewed, the answer concerning KPMG culture is slightly different. It seems that from the perspective of an entry-level
41
employee, KPMG is not consensus-based, but hierarchical. He says: ―KPMG has so many levels of management – high hierarchy. Only people in high level of management can make the decision. Usually the employees can’t make the decision by themselves.‖ (Andersen Employee, 2010) The culture in KPMG is stifled according to him: ―in KPMG, it’s more sensitive and they’re afraid to express the ideas.‖ (Andersen Employee, 2010) And ―in KPMG, it was not that open. Decisions were made by a very small group of people.‖ (Andersen Manager, 2010) the situation sounds true also from the high-up managerial level personnel.
What sets KPMG different from Andersen is mostly the structural side of things. Andersen managing partner explains when asking about his opinion on KPMG culture since after merger, he spends quite a lot of time working in KPMG: ―If I had a problem with someone, I took it to my boss (in Andersen). In KPMG, you have nobody to take it to because you have to address it internally.‖ (Andersen managing partner, 2010) Besides, KPMG culture is shaped by the fact that in KPMG, every office around world has a separate practice, which means the partner of KPMG in Vietnam does not share his profit with the partner in Thailand and the partner in Hong Kong. It is evolved so much as that there is a conflict between each office. Instead of viewing each office as a part of the same company, they see each office as a client. Consequently, ―if KPMG, Vietnam wants KPMG, Hong Kong to do something, KPMG, Vietnam will treat them as a client. It is a very different mindset. There is cooperation in training and other things, but when it comes to fees and revenue and profit sharing it's very separate and distinct. They cooperate because it is good for them but they don't like sharing their profits. And that has an impact on the way the officers work together. There is also no central leadership.‖ (Andersen managing partner, 2010) The difference in this respect between KPMG and Andersen is that in KPMG, if one has a problem with another office, he/she has to go to Switzerland where the head office is and that is very difficult .In Andersen, if one has a problem with another office, he/she would address it at another level. ―It (KPMG) was different working arrangement and structure.‖ (Andersen managing partner, 2010)
His further comments on KPMG culture explains employee‘s general feeling of not having a say within KPMG, and working under a directive, not autonomous management structure.
―They (KPMG) don’t value the individuals. KPMG is like an umbrella, it tries to keep everyone move in the same direction, but too many individuals within the company, and it hold KPMG that from achieving the full potential‖ (Andersen managing partner, 2010)
How does national culture affect the organizational culture?
Any company is influenced by the national culture in the country which it does business. The Vietnamese culture shall also be taken into consideration in KPMG and Andersen because the majority of their employees are Vietnamese. It certainly influences any companies in the country they operated in because it is the people who work there that matters. In KPMG here, 95% of employees are Vietnamese, ―of course we have been heavily influenced by the Vietnamese culture nonewithoutstanding.‖ (KPMG CEO, 2010) Besides, both KPMG and Andersen are global big firms. Therefore, they are the combination of global culture and global values and local culture and value as well.
As it is emphasized that ―The culture in overseas office is influenced by the office and influenced by the country. None has an exclusive deniability of it. It is the way it is.‖ (KPMG CEO, 2010)
Vietnamese culture also influences the way KPMG conduct its business. ―KPMG has to modify the business to succeed in Vietnam. That is for sure what we have to do. Any companies wanting to
42
succeed have to adapt to the local environment, and also in order to succeed have to protect its brand and its business foreign values and reputation and so on, it is the combination of the two that make you successful.‖ (KPMG CEO, 2010)
One big cultural difference is because of the cultures they come from. Andersen was very American-centric. All of the operating procedures, all of the auditing practices all came from America and were a lot more detailed and strict. ―In America everything must be documented. What is documented you can and cannot do. If it is not documented you can probably do it. In KPMG and Europe, it is very substance over form. They give you the general principles and you have to interpret them in the spirit of the rules.‖ (Andersen managing partner, 2010) In KPMG's culture, that made it much more flexible in certain areas whereas Andersen was a lot more strict with rules and regulations.
While former Andersen manager thinks organizational culture has nothing to do with national culture, because ―it depends on the people who run the business. It's related to leadership.‖ (Andersen manager, 2010) The employee interviewed shares the same standpoint on the management‘s role in shaping the organizational culture, especially in MNCs that are in the same industry.
Andersen employee also thinks differently. He thinks that leadership has more impact on organizational culture than national culture, especially in the case of two MNFs. ―Since both are global consulting firms. I think it depends on the top management. The top management usually defines the culture of the firm. There are many factors that influence the firm culture, but to me, the most important is the management and leadership.‖ (Andersen Employee, 2010)
4.2.2.1 Employees’ Perception of Organizational Cultures
We follow the survey suggested by Cartwright and Cooper (1996). Respondents consider the eight questions and choose the one response which most applies to either KPMG or Andersen in its heyday. The outcome of all eight questions is presented below.
Seven out of twenty KPMG respondents (35%) said they were expected to give their first priority to meeting the challenges of the individual task in which they are involved. The same number of responses voted for following the instructions of their supervisors as their expected priority at work. Acting within the parameters of their job description and Cooperating with and attending to the needs of their fellow workers were respectively chosen by four and two employees, 20% and 10% in percentage. In Andersen, 11 out of 16 respondents (68.75%) agreed that their first priority is meeting the challenges of the individual task in which they are involved. Few Andersen people considered the other options (such as cooperating with and attending to the needs of their fellow workers; following the instructions of their supervisors; and acting within the parameters of their job description) as their priority.
40% of people (8 out of 20) believe KPMG responded to its members as if they were associates or colleagues. Family or friends, contracted people and hired help were respectively selected by 5, 4 and 3 respondents, 25%, 20% and 15% in percentage. Almost all responses indicated that Andersen staff was treated as family or friends (8 out of 16; 50%) and associates or colleagues (7 out of 16; 43.75%). Only one response went for contracted employees, and no one chose hired help as the answer.
When being asked about their motivation and influence at work, among KPMG members, 7 out of 20 (35%) picked the prospect of rewards or fear of punishment as the answer while 6 out of 20 (30%) chose their own commitment to the task. Five people said they were most
43
influenced by the respect and commitment which they have for their co-workers. Two considered company ―Bible‖ or rule book as their motivation. In Andersen, there were only 2 options preferred. The Andersen responses were distributed evenly on 2 options (50% each): their own commitment to the task and the respect and commitment which they have for their co-workers.
According to 50% of KPMG respondents, a ―good‖ employee is considered to be one who gets along well with others and is interested in their self-development. The other five employees (25%) thought that a ―good‖ employee had to be self-motivated and willing to take risks and be innovative if the task demands it. 10% chose ―always does what his/her boss tells him/her to do without question‖ as a criterion of a good employee, while being relied upon to stick to the company rules was picked by 15%. In contrast, 68.75% of Andersen respondents (11 out of 16) agreed that to be a ―good‖ employee, one should be self-motivated and willing to take risks and be innovative if the task demands it. In order to become good personnel, four Andersen staff chose to get along well with others and is interested in their self-development. Only one person considered a good employee as the one who can be relied upon to stick to the company rules.
Most respondents in KPMG (60%) and Andersen (68.75%) both agreed that the relationships between work units or inter-departmentally in their companies are generally cooperative. 20% of KPMG people said ―friendly‖ and another 20% said ―competitive‖. The remaining 31.25% of Andersen responses believed the relationships are friendly.
A question was raised regarding the decision-making in two companies. 45% of KPMG responses indicate that decisions tend to be made by the people on the spot who are close to the problem and have the appropriate task expertise. 30% of people (6 out of 20) thought the decisions were referred up the line to the person who has the most formal authority while 20% (4 out of 20) said they were made after considerable discussion and with the consensus of all those involved regardless of their position in the organizational hierarchy. Only one response from KPMG shows that the company‘s decisions were made by resort to established precedents. 50% of responses from Andersen indicate that decisions were made after considerable discussion and with the consensus of all those involved regardless of their position in the organizational hierarchy. Andersen‘s decisions were believed to be made by the people on the spot who are close to the problem and have the appropriate task expertise by five Andersen people and be referred up the line to the person who has the most formal authority by three Andersen staff.
40% of KPMG employees believed it is most important for a new member of this organization to learn to use his/her initiative to get the task completed. According to KPMG responses, 5 out of 20 (25%) thought the new member should learn the formal rules and regulations while 4 out of 20 (20%) felt how to get on with his/her fellow workers is the most critical. Three employees (15%) suggested the new member to discover who really counts in this organization and be aware of the political coalitions. The majority of Andersen responses (81.25%) indicate that it is very crucial for a new member to learn to use his/her initiative to get the task completed. One person (6.25%) said how to get on with his/her fellow workers is the most important and two (12.5%) recommended newcomer to study the formal rules and regulations.
The last question was mentioned to discover about managerial style in KPMG and Andersen. Most of the respondents from KPMG agreed that dominant managerial style of KPMG is supportive and responsive to individual needs and idiosyncrasies. ―Authoritarian‖ and ―democratic and open‖ were ranked in the second and third places, respectively voted by 6 and 2 employees, 30% and 10% in percentage. On the contrary, there were only two options chosen by Andersen employees. Dominant managerial style of Andersen is believed by
44
56.25% people to be supportive and responsive to individual needs and idiosyncrasies. 43.75% of employees said Andersen had a democratic and open managerial style.
We have summarized the answers from the surveys in the following graphs. The number in each pie chart represents the total percentage of responses for all eight questions. For the exact statistics, please see APPENDIX C and APPENDIX D.
Figure 7: Survey results of KPMG
Figure 8: Survey results of Andersen
Those charts are used to visualize the distribution of survey answers. They are the illustration of the dominant culture in each company. According to Cartwright and Cooper (1996), if mostly (a)s are scored, the dominant culture of the organization perceived is ―task/achievement‖; mostly (b)s – is likely to ―person/support‖; mostly (c)s – ―power‖;
45
and mostly (d)s – ―role‖. Therefore, we can say that culture type of both KPMG and Andersen is ―task/achievement‖ (See Figure 9).
Power Role Task/achievement Support
X
X
Increased constraint Increasing autonomyHigh
individual
constraints
Low/no
individual
constraintsAndersen
KPMG
Figure 9: Culture type of KPMG and Andersen
4.2.3 Theme 3 – Processes
In order to achieve successful integration, the top management of both sides has mapped out a detailed plan from brainstorming to final execution, on the aspects of clients and employees‘ transfer, and to the minimum impact of the turnover and losses.
What is the role of Andersen management?
For Andersen side, they start with brainstorming on ―what has to be done, and looking at the structuring of the different companies, looking at the constraints of certain structuring‖, said Andersen managing partner (2010). When asked what the role Andersen management like he himself plays in the merger, he further explains ―I represented Andersen in negotiations. When Andersen was disintegrating, my boss in Singapore said to me to begin the negotiation with the other four accounting firms. They relied entirely to me to make the decision on which company we partner with. So I actually met with the senior partners of all accounting firms, PwC, KPMG, Earnest and Young, and Deloitte, and I made the decision to merge the business with KPMG.‖(Andersen managing partner, 2010) The key to the negotiation again has something to do with the goal of Andersen, which is to make sure employees have good job to go to, and it has nothing to do with the profit. Therefore, the role and action of Andersen management is aligning with its goal, from which the choice of merger partner is made.
What is the role of KPMG management?
To KPMG, the deal with Andersen is different from many other M&A deals where the acquirer will buy the target company. KPMG does not buy the target company. They hire people, and then the people from Andersen would resign and join KPMG. As KPMG CEO comments ―That (the re-hiring model) for us made a much simpler deal, because we did not have to deal with Andersen liabilities or the old company. So that was the model we used. It was people and clients transfer, not a legal merger.‖
What KPMG does to initiate the deal is to firstly establish a team which is led by the CEO and the Andersen management. The management from two sides together set up a project team which have work plan which covers all various issues like HR, IT, clients, marketing, media and so on. ―The team is responsible for working through for a period about a month all of the things we have to do to transfer Andersen successfully, Andersen’s business, people and clients into KPMG. That is what we do.‖ Explains Cleine (KPMG CEO, 2010)
The most important thing to KPMG and Andersen management is not merely transferring the people and clients, but keeping people from Andersen, and making them feel that they could have good career with KPMG. ―While we can take over Andersen and tell everyone we are taking over Andersen, those people could receive offer to join KPMG and so on. The reality is they are free to join anybody; they could join PWC and other firms. So it is important for us to keep people from
46
Andersen, and to make sure they knew that they will have a good career within KPMG, good opportunity.‖ KPMG CEO explains.
In order to achieve post-merger success, KPMG after merging with Andersen conducts various activities and measures toward ―new employees‖ to make sure they can assimilate into KPMG‘s culture. An employee from Andersen who later joins KPMG after merger says ―they provide training to make people comfortable in the new environment and new methodology. They organize many social activities like travelling and parties. KPMG offers the same benefits, such as the salary structure to the new employees.‖(Andersen manager, 2010) KPMG CEO cites some examples on this aspect by saying ―we have to do things like organize a lot of dinners and KTV nights and so on, and organize that sitting plan so that they all split up and do not form little groups within the firm and make sure they really share knowledge and share their lives together, and we do not allow pockets of people to stay un-integrated, integration means really you have to integrate totally.‖ (KPMG CEO, 2010)
Besides, KPMG touches on individual employee to make sure they do not experience ―culture shock‖ at KPMG, and help them to be a part of KPMG culture quickly. The management from KPMG takes time to communicate with and convince people that problems they encounter are not really problems. They take people‘s opinions from time to time to make them feel comfortable. ―We are a win-win headcount. We want our people to be better off; we want Andersen people to be better off. Anything that is not win-win is bad for us, so we have to put in time and efforts into talking and communicating.‖ (KPMG CEO, 2010) ----core value of KPMG
4.3 Summary
In accordance with the research purpose, beside the case description, the collected primary data is presented in three particular themes (values and beliefs, cultural dimensions and processes) which are closely connected to our theoretical framework: the goals of integration as one illustration of ‗values and beliefs‘; cultural dimensions reflect the differences in national and organizational culture; management efforts and employee involvement are the illustrations of process that is closely linked to the ‗artifact‘ level.
The goals of integration of the two companies are very different. KPMG‘s goal is to improve its market position in Vietnam while Andersen‘s goal is the welfare of its people. As Andersen was disintegrating, Andersen staff is the primary focus. Despite dissimilar goals, the combination was good for both firms in achieving economy of scales and more revenue (Andersen managing partner, 2010). Culture dimensions have a significant impact on both companies. Except KPMG CEO, all respondents agreed that Andersen is friendly, open with ―one-firm concept‖ while KPMG is hierarchical, not consensus-based with federalist culture. The respondents said their organizational culture was affected by either Swiss (KPMG) or Andersen (US), and Vietnamese culture as well. Furthermore, ‗leadership‘ was mentioned as one of the effects on company culture. This case study is a combination of three national cultures, thus the integration was impacted by those national cultures. According to KPMG CEO, management team from both sides involved before, during and after the integration. KPMG wants to make sure Andersen people do not experience culture shock after the integration.
As explained above, the empirical data is presented in three particular themes which are closely connected to our theoretical framework. The authors will apply those themes in the following chapter to analyse the cultural integration.
47
5 Analysis
In this chapter, the authors identify the culture type of KPMG and Andersen, and then
analyse the elements in organizational and national cultures that influence the outcome
of integration.
In the last chapter, the empirical data are collected from primary and secondary sources. The empirical presentation is comprised of three themes: value and beliefs, cultural dimensions and processes. The three themes elaborate on the goals of two companies for the acquisition, the efforts of the managers, involvement of employees, and the differences of organizational culture of KPMG and Andersen, influenced by the value and beliefs, and national cultures.
Therefore, this chapter is structured on the basis of the empirical data presented in the previous chapter. First, the authors make a detailed assessment of the culture types of two companies from the survey results, in attempting to determine the cultural compatibility of KPMG and Andersen (Cartwright & Cooper, 1996), because the issue of cultural compatibility is related to the type and implicit terms of the organizational ―marriage‖ contract (Cartwright & Cooper, 1996:77). Second, the authors make a holistic view on the empirical data to discern the type(s) of ―marriage‖ KPMG and Andersen are engaged in. The reason is the very type of marriage will reveal the intention of the acquirer (KPMG) in terms of integrating or remaining or separating the culture of the acquired party (Andersen). Third, the authors move into a more detailed analysis, by exploring various elements in culture that influence the cultural integration between KPMG and Andersen. The elements are from national cultures (USA, Switzerland and Vietnam), and organizational cultures (artifacts and espoused values and beliefs). In the end, the summary with integrated view on this chapter is made.
5.1 Culture Types
According to the survey results, it seems that KPMG and Andersen belong to the same culture type, ―task/achievement‖, which is characterized by its flexibility and high levels of worker autonomy, leading to potential innovation and satisfaction in the working environment (Cartwright & Cooper, 1996). Both KPMG and Andersen focused on accomplishing the task and energizing the individuals. In spite of similar culture type, the authors found that the responses were distributed differently in the two firms. In KPMG, 36% of the responses scored (a), i.e. task/achievement culture; 28% chose (b), i.e. person/support culture; 24% said (c), i.e. power culture; and 12% of answers were (d), i.e. role culture. In Andersen, 57% of the answers were (a), i.e. task/achievement culture; 36% scored (b), i.e. person/support culture; 3% said (c), i.e. power culture; and 4% of the responses were (d), i.e. role culture. The above figures indicate dissimilar trends under the same culture type. KPMG‘s responses are illustrated by four portions whilst there are only two main pieces for task/achievement and person/support culture in Andersen since the other two are so small (3% and 4%).
KPMG‘s answers are more scattered than Andersen‘s. Andersen‘s responses are in line with the company values which are conveyed as open, friendly, family-like and democratic (Andersen employee, 2010). Besides, in Andersen, people were encouraged to express their opinions and they can make decisions at their level (Andersen employee, 2010). The conflicts among the interviewees could explain the scattering of KPMG‘s answers. People
48
had different views of the company, for example, KPMG CEO said ―KPMG is consensus-based and collaborative‖ while other employees affirmed that it is hierarchical and not consensus-based. Moreover, only people in high management levels could make the decisions (Andersen employee, 2010). The unlike scattering of the survey answers implies the unified view in Andersen (so called ―strong culture‖) and a not-so-unified view in KPMG (or ―less strong culture‖), which might cause difficulties for the integration.
Cartwright and Cooper (1996) emphasize it is more appropriate to see the culture types as ranging on a continuum in terms of the degree of constraint they place on individuals. In the Andersen acquisition, KPMG, the acquirer, would maintain its own culture and impose more individual constraint on Andersen members. That might be one of the contributing factors inhibiting the cultural integration.
Despite possible difficulties, the integration of KPMG and Andersen had some advantages as well. Having ―task/achievement‖ as their culture type, both are generally experienced by their associates to be ―highly satisfying and invoke a high degree of commitment‖ (Cartwright & Cooper, 1996, p.89). Therefore, the combination of KPMG and Andersen was a potentially ‗good‘ integration.
In summary, according to the culture type, despite some difficulties, KPMG-Andersen integration was likely to work well. However, when discussing about culture, there are other indications. Thus, the authors bring out other dimensions which are more important to understand the cultural integration of the acquisition. The following sections will go further to the analysis of national culture and organizational culture.
5.2 “Marriage” Types
To make a successful integration, compatibility is regarded as the most important aspect, be it culturally, strategically or structurally. The issue of cultural compatibility is related to the type, and implicit terms of the organizational ―marriage‖ contract or partnership agreement (Cartwright & Cooper, 1996).
Among three types of ―marriage‖ put forward by Cartwright & Cooper (1996), KPMG-Andersen deal obviously does not fall into the first type---open marriage, the reason is KPMG does not support Andersen, and not facilitate its development and growth after the merger. Rather, the supreme goal of KPMG in acquiring Andersen Vietnam is ―to improve their (KPMG) market position in Vietnam.‖ (KPMG CEO, 2010) instead of assisting Andersen develop further. Besides, Andersen case is unique in a sense that ―the headquarters of KPMG is involved in the legal problem and they collapse.‖ (KPMG CEO, 2010) It is legally impossible to have Andersen grow further. In addition, Cartwright & Cooper (1996) note that the essence of the open marriage is that of non-interference, whereby the acquirer is quite happy to allow the acquired organization to operate as an autonomous business unit and maintain its existing culture. In our case, Andersen is ―forced‖ (KPMG CEO, 2010) into merger, and KPMG is definitely not happy to allow Andersen to operate as an autonomous business unit. Consequently, it could be claimed that KPMG-Andersen deal is not an open marriage.
KPMG-Andersen could be the traditional marriage, where according to Cartwright & Cooper (1996) in traditional marriage the acquirer sees its own role as primarily being to redesign the acquired organization. In our case, the goal of KPMG when taking over Andersen is ―to become bigger, to improve its market position, and to prevent its competitors to take over
49
Andersen as well.‖ (KPMG CEO, 2010) Besides, the essence of its goal is ―to increase their number of people and clients so that they can improve the position in the market place.‖ (KPMG CEO, 2010) The action plan set up by KPMG management after merger therefore is in line with their goals. KPMG CEO explicitly claim that KPMG only wants Andersen people and clients, not their culture, and ―before merger, their firm (Andersen) collapses and their size is quite small, so we (KPMG) do not really take them (Andersen culture) on board, and take KPMG culture.‖ (KPMG CEO, 2010) In addition, KPMG has to convince new employees from Andersen that KPMG culture is different, and ―we (KPMG) want to make sure that people understand the culture of KPMG is a good one, and they will do well here, trying and learning and measuring out and feeling good working here, which is our (KPMG) mission more than preserving Andersen’s culture.‖ (KPMG CEO, 2010) Various measures and activities have been taken within KPMG after merger to help Andersen employees quickly adapted and assimilated into the new culture by revising the way they do things in Andersen. KPMG CEO confirms that ―we have to also be very firm that Andersen people change their way and follow KPMG systems and KPMG culture. Because if we don’t do that, we won’t succeed. We had to invest a lot of time in making sure Andersen people understood what KPMG systems were and if they tried to stay in the old ways, the Andersen ways, we had to work to correct them because that was not the way we do business.‖ (KPMG CEO, 2010) The above exemplifies the essence of traditional marriage that the acquired or ―the other‖ merger partner totally adopts the practices, procedures, philosophy and culture of the acquirer, and the success depends on the ability of the acquirer to change the culture of the acquired. (Cartwright & Cooper, 1996).
KPMG-Andersen could also be interpreted as the collaborative marriage. In collaborative marriage, it is not the case of the ―successful‖ organization taking over the ―unsuccessful‖, but a combination of different but complementary forces, wherein both parties have a contribution to make (Cartwright & Cooper, 1996). Andersen is not an unsuccessful company. They are ―forced‖ into the merger because of the legal issues they had in US. When looking back, KPMG CEO says ―Andersen was owned in Vietnam by or part of it by the global firms, so it was the very well-run firm and the staff was well-trained. They have good clients and good reputation in the market in Vietnam. Even though they had got into trouble in the US, they were a good business to take over.‖ (KPMG CEO, 2010) Therefore, the words ―successful‖ and ―unsuccessful‖ are not really applied in our case, because before the merger, Andersen is one of ―big five‖ around world, with good record of performance, employees, and knowledge. The merge to some extent is about the combination of different but complementary forces, wherein Andersen contributes to the growth and development of KPMG. KPMG CEO admits that ―Andersen opportunity gives us a chance to be No.2. It is very difficult for us to grow our business in terms of new staff and new clients without doing an acquisition.‖ Besides, KPMG has the shared culture with Andersen after merger. Former Andersen manager thinks that the culture in KPMG now is combined, and the transition of KPMG culture from being ―not open‖, and ―not valuing individuals‖ to being ―open and friendly‖ (Andersen manager, 2010) are shown through the integration after merger. The above also exemplifies the essence of the collaborative marriage, which is shared learning (Cartwright & Cooper, 1996).
50
5.3 National Culture
As MNCs‘ subsidiaries in Vietnam, both KPMG and Andersen have grown into multi-cultural entities with the influence of their respective national cultures and local Vietnamese culture, since the majority of their employees are Vietnamese. It certainly influences any companies in the country they operated in because it is the people who work there that matters. In KPMG here, 95% of employees are Vietnamese, ―of course we have been heavily influenced by the Vietnamese culture.‖ (KPMG CEO, 2010) Besides, both KPMG and Andersen are global big firms. Therefore, they are the combination of global culture and global values and local culture and value as well.
The following table compares three cultural dimensions as put forward by Hofstede (2005) on KPMG and Andersen in terms of their respective national culture from the perspective of empirical data and theories.
Company Individualism Power Distance Long-term Orientation
KPMG Individualism High Short-term
Andersen Collectivism Low Not Available
Table 3: Comparison of empirical data and Hofstede‘s (2005) cultural dimensions
Individualism versus Collectivism
According to Hofstede (1997, p.51), individualism refers to the extent to which everyone is expected to look after himself and his immediate family; Collectivism, however, refers to societies in which people from birth and onwards are integrated into strong, cohesive in groups, which throughout people‘s lifetime continue to protect the in exchange for unquestioned loyalty. According to the theory, Hostede (1989) argues that in the US, there is a strong feeling that individualism is good and collectivism bad. Although Switzerland is relatively lower than US. Both countries have a high level of individualism. Vietnam scores very low in individualism, which suggests that Vietnam is a collectivist country with a huge highlight on group decisions and family relationships. However, in reality, as an American company, Andersen has a relatively lower level of individualism than KPMG, and could be claimed as ―collectivism‖ according to the definition of Hofstede (2005), because both managers and employees interviewed share the idea that ―it (Andersen) was very open, friendly. Andersen Vietnam was considered as a big family.‖ (Andersen manager, 2010), and ―In Andersen, it’s easy to talk to your managers about what you’re concerning, and how to improve the work. Andersen staff often stays together.‖ (Andersen employee, 2010) Andersen managing partner depicts Andersen as ―a big exclusive club‖. When negotiating the deals with other ―big four‖, the supreme goal of Andersen is ―to make sure its entire staff have good jobs and their career would not be destroyed‖, and ―the interest of Andersen staff is the primary focus.‖ (Andersen managing partner, 2010) The goals and action of Andersen toward their employees show a great level of collectivism.
Whereas KPMG has a high level of individualism, from the way their conduct business, communicating with employees, structures and the overall culture employees feel. KPMG‘s culture is more consensus-based and collaborative. According to an entry-level employee, KPMG is not consensus-based, but hierarchical. He says: ―KPMG has so many level of
51
management – high hierarchy. Only people in high level of management can make the decision. Usually the employees can’t make the decision by themselves.‖ (Andersen Employee, 2010) The culture in KPMG is stifled according to him ―in KPMG, it’s more sensitive and they’re afraid to express the ideas.‖ (Andersen Employee, 2010) And ―in KPMG, it was not that open. Decisions were made by a very small group of people.‖ (Andersen Manager, 2010) the situation sounds true also from the high-up managerial level personnel. Andersen managing partner thinks ―they (KPMG) don’t value the individuals.‖ However according to the CEO of KPMG, the answer is slightly different; he thinks KPMG‘s culture is more consensus-based and collaborative. Therefore, ―we didn’t get the same direction from the center, it is more up to the local management to operate the business, slight different management structure that lead to different culture.‖ (KPMG CEO, 2010) This difference could be that the consensus is made on the top management level, and has nothing to do with other managerial personnel as well as entry-level employees. Therefore, the CEO evaluates the situation from the different perspective. The general actions of KPMG toward employees show its high level of individualism according to the theory of Hofstede (2005).
Power Distance
Hofstede (1997.p.28) defines power distance as ―the extent to which less powerful members of institutions and organizations within a country expect and accept that power is distributed equally‖. Cultures with high power distance have power and influence concentrated in the hands of a few rather than distributed throughout the population (Jandt, 2004). Both Switzerland and the US have low level of power distance, and US has a lower power distance than Switzerland. The findings from the case are in line with Hofstede‘s research result on this dimension. ―In Andersen, it’s easy to talk to your managers about what you’re concerning, and how to improve the work. Andersen staff often stays together.‖ (Andersen employee, 2010), however in KPMG, ―it has so many level of management – high hierarchy. Only people in high level of management can make the decision. Usually the employees can’t make the decision by themselves.‖ (Andersen Employee, 2010)
Long-term versus short-term orientation
Hofstede (2001.p.359) notes that long Term Orientation stands for the fostering of virtues oriented towards future rewards, in particular perseverance and thrift, while Short Term Orientation stands for the fostering of virtues related to the past and present, in particular, respect for tradition, preservation of ‗face‘ and fulfilling social obligations. Andersen managing partner explicitly points out that ―I don’t think that they do a long term business. The business is built on partner’s profit and personal gain, and partners have a view of making as much as income as they can while working for KPMG. And when I leave KPMG, I do not care what I leave behind.‖ (Andersen managing partner, 2010) Besides, ―they (KPMG) don’t value the individuals.‖ (Andersen managing partner, 2010), consequently, ―the percentage (for turnover in KPMG) is quite high, about 30% from both KPMG and Andersen (after the merger). Many people were dissatisfied.‖ (Andersen employee, 2010)
The information on Andersen in this dimension is unknown, as many people left both KPMG after merger. However, from the interview, it is evident that people who used to work in Andersen appreciate and value Andersen‘s culture. It can be argued that Andersen is not without a sense of long-term orientation, even though Andersen collapsed and was ―forced‖ into acquisition, because the collapse was due to Andersen having been found
52
guilty of obstruction of justice for shredding documents related to its audit of Enron (Squires et al, 2003), instead of Andersen operating business on the basis of a short-term orientation.
The difference in practice and theory in the cultural dimensions could attribute to the following reasons:
First, Structure; Andersen is led by the headquarters in US, and the clients as well as profits are shared among all subsidiaries, while KPMG is partnership-based, where each subsidiary operates its business individually from each other.
Second, Management; As an Andersen manager mentions ―organizational culture has nothing to do with national culture; it depends on the people who run the business. It's related to leadership.‖ The Andersen employee also thinks that leadership has more impact on organizational culture than national culture, especially in the case of two MNFs. ―Since both are global consulting firms. I think it depends on the top management. The top management usually defines the culture of the firm. There are many factors that influence the firm culture, but to me, the most important is the management and leadership.‖ (Andersen Employee, 2010)
Third, Vietnamese Culture; It could be said that since the majority of employees are Vietnamese, the culture of both companies‘ local offices is to some extent influenced by the local culture. Besides, the managers and employees interviewed in KPMG are Vietnamese, and they will see its organizational culture from ―their perspective‖.
5.4 Organizational Culture
In this section, culture of the two companies will be analyzed at different levels, with ―level‖ meaning the degree to which the cultural phenomenon is visible to the observer (Schein, 2004). As described in the theoretical framework, the authors are going to look at artifacts and espoused beliefs and values.
5.4.1 Artifacts
Level of artifacts at the surface includes all items that people see, hear and feel (Schein, 2004). KPMG and Andersen do not require employees to wear uniforms at work, but do expect a business style dress code which enables the companies to have a professional image and gain trust of customers. Both firms apply ―casual Fridays‖ meaning that the employees can wear anything apart from obvious inappropriates. (Andersen manager, 2010) Physical working environments are pretty much similar since after the acquisition, KPMG has moved to the office building where Andersen was located.
Besides the similar artifacts, the two partners involved in the acquisition have differences as well. Andersen culture is believed to be unique (Crampton & Moore, 2000). Employees felt like they were part of a special club (Andersen managing partner, 2010) in which people treated each other with respect and friendliness (Squires et al, 2003). The Andersen managing partner explained, ―Andersen did not employ many people. Anyone who joined Andersen had to go through the same training. Andersen always emphasized that it was employing the best. Thus the employees always felt they were the best.‖ (2010). He also mentioned that Andersen people always believed that their management is the best, their methodology is the best (Andersen managing partner, 2010). Its uniqueness most likely stems from its history and myths in
53
which Arthur E. Andersen, the founder, plays a very important role (more about the founder‘s established values will be discussed in the next section). In Andersen, all of the operating procedures and auditing practices must be documented in a much more detailed and stricter form, compared to KPMG, in which they providethe general principles and the staff are allowed to interpret them in the spirit of the rules (Andersen managing partner, 2010).
As Schein stated, organizational structures is also an artifact (2004). The main difference between the two global companies is the structure. KPMG International is a coordinating entity for a global network of independent firms, each of which is separate and legally distinct. Every KPMG member takes responsibility for its management, its operations and the quality of its work (including fees, revenues and profit sharing) (KPMG website). While KPMG has no central leadership, Andersen was a single organizational structure and acted globally as one firm speaking with a unified voice (Crampton & Moore, 2000). The Andersen employee said that in Andersen, ―it’s easy to talk to the managers about what they are concerning, and how to improve the work‖ (2010). The KPMG CEO (2010) mentioned that their culture is consensus-based and collaborative while others stated that KPMG is not consensus-based, but hierarchical (Andersen employee, 2010). It was said to be high hierarchical with so many levels of management; only people in high levels of management can make the decision (Andersen employee, 2010). The conflict in responses regarding KPMG most likely results from dissimilar perspectives from different hierarchical levels. KPMG CEO‘s idea is possibly the espoused values while what others perceive reflects the actual values of KPMG culture.
According to Schein (2004), the ―climate‖ of the company is also an artifact, as is the visible behavior of its members. In terms of the integration of KPMG and Andersen, management efforts and employee involvement are the illustration of processes in the companies from two hierarchical levels. Processes are closely connected to the artifact level (Schein, 2004). In order to achieve successful integration, managers, responsible for the deal from both sides, set up a detailed plan regarding clients and employees‘ transfer, and solutions to minimize the acquisition‘s influence on the turnover and losses, and the employees. The Andersen staff was significantly taken into account during and after the negotiation process to ensure that they would have a good career and not encounter culture shock in KPMG. Training and social activities were organized to help Andersen people feel comfortable with the new environment and new methodology. The same benefit system applied to all KPMG and Andersen employees.
To summarize , KPMG and Andersen possessed similar and diverse artifacts. In spite of different organizational structures at the global and local levels, both firms shared the same physical working environment and made a great effort to boost the integration. According to Schein (2004), this artifact level of culture is both easy to observe and difficult to decipher. We can describe the above artifacts based on interviewees‘ responses concerning what they see and feel, but cannot easily comprehend what those things mean in the companies, or whether they even reflect important underlying assumptions. It is unwise to make judgments about the culture of KPMG and Andersen on the basis of the artifacts alone. Therefore, if one wants to understand the artifacts‘ meaning quickly, one can attempt to analyze the espoused values, norms and rules that provide the day-to-day operating principles.
54
5.4.2 Espoused Values and Beliefs
In M&As, the goal of integration is an important dimension because it is something that the management works with to express the values and beliefs, and to set the goals in line with how they want the company to perform in the future. Thus, we have considered the goals of integration as one illustration of values and beliefs. KPMG wanted to increase their number of employees and clients in order to improve their position in the Vietnamese market place. Furthermore, the goal of KPMG is more than just the market position, it is also services, expertise and clients that Andersen had KPMG wanted to acquire at that time. (KPMG CEO, 2010) In contrast, because Andersen was disintegrating, the most important thing to Andersen was to make sure its entire staff have good jobs and their career would not be destroyed (Andersen managing partner, 2010). The interest of Andersen staff was the primary focus.
It is argued that one‘s own response to physical artifacts can lead to the identification of major images and root metaphors reflecting the deeper levels of the culture (Gagliardi, 1990). KPMG‘s global values include being passionate about working with clients to deliver exceptional value, developing people able to realize their full potential, and continuously extending the frontiers of shared knowledge (Thornbury, 1999). Moreover, in her journal paper, Thornbury (1999), Director at KPMG, affirmed that it had the core values in client focus, individualism (autonomy and freedom), technical excellence and high professional standards; and integrity. Again, as we mentioned above, what the interviewees (except for the KPMG CEO) perceived was slightly different. According to Schein (2004), values and beliefs at this level can predict many of behaviors observed at the artifact level. However, if those values and beliefs are not built on prior learning, they reflect only ―espoused theories‖, i.e. the actual values. Therefore, we can argue that KPMG has written values as the CEO and Thornbury mentioned (so called ―espoused values‖), but its records in that regard may contradict what it said as perceived by others. On the contrary, it seems there is no such conflict in Andersen. The interview participants agreed that Andersen‘s culture was open and democratic. Andersen focuses on quality and value of services offered and employees felt they were part of a special club in which people treated each other with respect and friendliness (Andersen managing partner, 2010; Crampton & Moore, 2000; Squires et al, 2003). Both firms emphasize the individualism which facilitates creation and entrepreneurial behaviors, but the meaning of the word ―individualism‖ was quite different in each culture. At KPMG, when the authority was more respected and conflict tended to be avoided, the assumption was that the individual was given areas of autonomy and freedom then was respected in those areas. At Andersen, the significant assumption was that individuals were encouraged to express opinions even to higher management levels and make decisions at their level, which means individuals somehow had a higher extent of autonomy and freedom.
According to Schein (2004), when a group is first built or faces a new task or issue, the first solution proposed to deal with it which reflects some individual‘s own assumptions is not yet a shared basis among the group members. If that individual, usually the founder or leader, can convinces the group to act on his/her beliefs, if the solutions work and if the group shares the perception of that success, the perceived value gradually becomes transformed, first to a shared value / belief, and then into a shared assumption. (Schein, 2004) Within this study, Arthur E. Andersen, founder of Andersen Co, succeeded in creating the shared values/beliefs and the assumptions, such as growth strategy and one-firm concept mentioned in the following discussion.
55
M&A is considered as one of the most important strategy for growth and expansion. It is becoming an increasingly popular strategy option for organizations. (McEntire & Bentley, 1996). While KPMG itself is a merger of four companies and also did experience other M&As during its development, Andersen did not apply M&A as its growth strategy. Arthur E. Andersen, founder of Andersen Co, felt expansion should be from within the firm. (as cited in Crampton & Moore, 2000, p.83). He explained that merger led to acquiring staff that did not apply to Andersen‘s standards, and thus the acquired staff had to be replaced. The founder‘s principles and values were still reflected and clearly observable to Andersen staff until its collapse. For example, Andersen managing partner (2010) felt so proud to tell us that everyone else needed to merge to grow and Andersen kept growing through its own internal strengths.
Last but not least, we want to emphasize the philosophies behind the difference in global organizational structure of the two companies previously described in the artifact level: Andersen‘s one-firm concept and KPMG‘s federalist culture. Andersen‘s one-firm concept emphasized ―a united organization across the world to provide clients with consistent service while maintaining the firm‘s independence‖ (Niece & Trompeter, 2004: 183). Each overseas office was considered as a part of the whole firm rather than an independent operation loosely tied to the larger organization (Crampton & Moore, 2000). In Andersen, profit was shared across the whole world, i.e. the profit generated over the countries contributed to the income of every partner. In the opposite, in the federalist culture, local practices operate with a great deal of autonomy, thus issuing directives from the centre would not work (Thornbury, 1999). KPMG International is a cooperative that serves as a coordinating entity for a network of independent member firms. Each KPMG firm is a legally distinct and separate entity that takes responsibility for its management, operations, and its work quality (KPMG website). Each member firm views other as a client, not as part of the same company.
Schein (2004) asserts certain values are confirmed only by the shared social experience of a group, which is called ―Social validation‖. If people reinforce each others‘ beliefs and values, they will be taken for granted. Those who fail to accept such beliefs and values encounter a risk of discomfort, anxiety, ostracism and eventually excommunication, i.e. being thrown out of the group. The fact is many ex-Andersen left KPMG after a short period of time due to the resistance to merge to KPMG culture. There was an invisible boundary between KPMG employees and Andersen employees after the integration (Andersen employee, 2010). Ex-Andersen staff always stayed together and did not feel comfortable with the new culture.
In sum, as an illustration of values and beliefs, the goals of integration in KPMG and Andersen are not the same because of their different situations at the time of acquisition. KPMG focused on its market position while Andersen's concern is people. The espoused values in KPMG are slightly different from the actual ones perceived by the employees. In contrast, there was no such clash in Andersen. Dissimilar organizational structures in the two companies come from two distinct philosophies: one-firm concept in Andersen and federalist concept in KPMG. Although espoused values and beliefs help a lot in clarifying the artifacts, they still leave large areas of behaviors unexplained. To gain a deeper level of insight, we need to understand the level of underlying assumptions. However, as mentioned earlier, because the method we have used does not capture this underlying assumptions dimension, we are not going further to the deepest level.
56
5.5 Summary
From the foregoing, it can be summed up that KPMG and Andersen deal is a combination of ―traditional marriage‖ and ―collaborative marriage‖ (as defined by Cartwright & Cooper, 1996). The reasons are stemmed from the unique organizational structures (artifacts), and different goals of two companies (espoused values & beliefs). The goals of integration in KPMG and Andersen are not the same because of their different situations at the time of acquisition. From the perspective of KPMG, it focused on its market position, therefore, KPMG only wants Andersen people and clients, not their culture, and ―before merger, their firm (Andersen) collapses and their size is quite small, so we (KPMG) do not really take them (Andersen culture) on board, and take KPMG culture.‖ (KPMG CEO, 2010). KPMG treats the deal as a ―traditional marriage‖, and KPMG could do so because of the legal issues Andersen headquarters got into at that time. From the perspective of Andersen, its major concern is people. The motivation of Andersen going into the deal with KPMG is more toward collaborative purposes, i.e. ―to make sure its entire staff have good jobs and their career would not be destroyed‖ (Andersen managing partner, 2010). Besides, KPMG is a coordinating entity for a global network of independent firms with no central leadership, while Andersen is a single organizational structure. The variation of structures reflected in their artifacts influence the organizational culture of each firm (Andersen‘s one-firm concept and KPMG‘s federalist culture), which in turn result in KPMG being authoritarian and directive (―only people in high level of management can make the decision. Usually the employees can’t make the decision by themselves.‖ --Andersen Employee, 2010), and Andersen being open and democratic (―Andersen is friendly and open; the employees feel free to express their opinions and they can make a lot of decisions at their level.‖--Andersen employee, 2010), thereby the variation in their organizational cultures influence the way KPMG and Andersen treat the deal.
Moreover, the differences in their organizational cultures are consolidated by the characteristics of three national cultures, i.e. USA, Switzerland and Vietnam. Contrary to the theories, Andersen, being an American company, has a lower individualism than KPMG (A Swiss company); KPMG has a relatively higher power distance than Andersen; and KPMG is explicitly pointed out as ―not having a long term business‖, because ―the business is built on partner’s profit and personal gain, and partners have a view of making as much as income as they can while working for KPMG.‖ (Andersen managing partner, 2010)
On the other hand, As being in the same industry, both companies do share such similarities as the value of independence, integrity, and objectivity (PCAOB 2003, cited in Jenkins, et al., 2008), and similar artifacts (dress code and physical settings) and climates (management efforts to enhance integration and employee involvement). Furthermore, from the survey results, KPMG and Andersen both belong to the task/achievement culture type, although the scattering pattern of the survey answers implies the unified view in Andersen (so called ―strong culture‖) and a not-so-unified view in KPMG (or ―less strong culture‖).
The transition from a strong culture of Andersen to a less strong culture of KPMG present great challenges to the management, because employees from Andersen value and appreciate the ―oneness‖ and ―family-style‖ culture of Andersen. The difficulties and challenges are further forged by the differences in the organizational culture that is to an extent influenced by three different national cultures, which result in a high turnover rate in KPMG after integration. Cartwright & Cooper (1996) point out that many acquisitions fail or encounter serious problems because one of the partners holds very different perceptions of the culture of the other. Before the integration, both KPMG and Andersen had a pretty
57
good preparation, for example, ―We established a project team which was led by me and also Andersen people. The project team managed the acquisition and the subsequent integration of Andersen’s business, people and clients into KPMG.‖ (KPMG CEO, 2010). However, when two companies are combined, the resultant contact regularly generated some forms of culture shock. The effects might be slightly unpleasant or extremely upseting, depending on how the individuals evaluate the attractiveness of the other culture in comparison with their own. (Cartwright & Cooper, 1996)
Using all information gathered from the interviews and secondary sources, it can be found that Andersen people do not see KPMG culture as attractive, and at the same time have a strong desire to preserve their own culture. According to Cartwright & Cooper (1996), if KPMG is not prepared to respect this wish and is intolerant of multiculturalism, any effort to change Andersen culture will face significant resistance. ―Separation‖ would occur. (Cartwright & Cooper, 1996) Per discussions with the interviewees (Andersen managing partner & manager, 2010), the authors discovered that many ex-Andersen employees left KPMG after a short period of time. The reason they left was probably this ―Separation‖.
It could be summarized that the KPMG and Andersen deal resulted in a great loss of ex-Andersen employees, due to the resistance from employees to the new culture after integration. High numbers of employees dropped out of the integration because they were not satisfied with the KPMG culture, and in this case, if KPMG loses the people who are trained and educated, it loses the competence and a lot of the value in the company, and thereby fails to achieve one of the goals for the acquisition. Since Andersen people left, one interpretation could be it is hard to move from a unified/strong culture to a not so strong/unified culture.
58
6 Conclusions and Discussion
This chapter presents a summary for the conclusions of this thesis. The research
questions are answered to align with the purpose of this thesis. The authors then discuss
the implication and suggestions for future studies in both practical and theoretical
fields. Reflections on this research are discussed in the end.
6.1 Conclusions
The purpose of this thesis is to explore the problematic cultural issues in order to get an understanding of the characteristics and outcome of cultural integration as influenced by both national culture and organizational culture in M&As.
The research questions put forward in the introduction section can be answered after the study of the case of KPMG and Andersen. The answers provided fulfill the purpose of this thesis.
A local M&A and the subsequent local integration process of two globally merging MNCs‘ subsidiaries has to be implemented in the two subsidiaries‘ host country environment.
Research Question 1: How does the national culture influence the cultural integration of two companies?
In Hostede‘s (2005) theories, national culture consists of five dimensions, which characterize each country and separate them from one another in five different directions. For cultural integration of two companies in M&As, as indicated in our case, the level of integration is seemingly related to the organizational culture only, as two companies (in our case KPMG and Andersen) are the targets for integration. When taking a step back and looking at the whole picture, it is not hard to see that the organizational culture is within the ―circle‖ of national culture, as put forward by Alvesson and Berg (1992). The value and beliefs of the people in the organization are shaped to a great extent by the macro-environment of the country. In the analysis of KPMG and Andersen, accounting firms are basically the same (they share the same industrial culture). However, in this case, they actually have different organizational cultures. The stronger influences have an impact on their organizational culture other than industrial culture. KPMG is influenced by the Swiss culture, while Andersen is by US culture. What is worth noting in our case is the element of the Vietnamese culture that makes the combination of three national cultures possible. The Vietnamese employees working there undoubtedly hold different values that local subsidiaries need to adapt to, for example, during the interview with KPMG CEO, he mentioned ―to make Vietnamese employees transferred to another city is extremely difficult, because they would rather quit than move to another city.‖ Therefore, the elements of Vietnamese, US and Swiss cultures influence the organizational cultures of KPMG and Andersen, and thereby influence the culture integration of two companies.
Research Question 2: How does the involvement of two companies’ management based on their goals for
the M&A influence the employees’ assimilation into the organizational culture after integration?
The goals of two companies‘ management for the M&A reflect their values in the organizations. The interest of Andersen staff was the primary focus for the management of Andersen, while KPMG‘s motive was to increase their number of people and clients so
59
that they can improve thier position in the market place. It can be then explained as to why Andersen‘s culture was unanimously regarded as being ―friendly‖, ―open‖, ―democratic‖, ―unique‖ and ―family-style‖ by the employees interviewed, because Andersen‘s ultimate goal of integration was for the employees, and why KPMG‘s culture was noted as ―not valuing employees‖, and ―not having a say in the company‖ by the employees interviewed, because KPMG‘s ultimate goal of integration was for improving the position in the market place. The differences in goals highlights the different cultures in KPMG and Andersen. After integration, despite the measures taken by KPMG to help ex-Andersen employees assimilated into KPMG, like social activities and training, a great number of ex-Andersen employees resigned, because it is found that Andersen employees do not see KPMG culture as attractive, and at the same time have a strong desire to preserve their own culture. From the analysis, the outcome of acculturation for Andersen employees is ―Separation‖ (Cartwright & Cooper, 1996).
Research Question 3: To what extent is the acquired company integrated into the acquiring company?
Regarding the extent to which the acquired company (Andersen) is culturally integrated into the acquiring company (KPMG), the findings show that there was a high resistance from ex-Andersen employees to KPMG culture after integration, which also resulted in the high turnover rate. Andersen employees tended to preserve their own culture, and ―stayed together‖ as a group in KPMG. In addition, from KPMG side, ―we (KPMG) did not really take Andersen culture on board‖ (KPMG CEO, 2010). It could be argued that the extent of cultural integration is very low to a degree that it reaches ―Separation‖ (Cartwright & Cooper, 1996). However, it is worth noting that culture is only one dimension of M&As, and cannot represent the whole picture of M&As. KPMG took the clients from Andersen on board to improve their market position in the final analysis.
Research Question 4: What elements from national and organizational culture theory are relevant to
understand the local integration of global companies in the case described?
The authors apply two theories of culture to the case described, i.e. Hofstede‘s national cultural dimensions (1980. 1991, 1997, 2005), and Schein‘s model of organizational culture (1992). Since organizational culture is embedded deeply in everyday life and forms strong value systems among their members (Hofstede, 1991), organizational culture is within the circle of national culture (Alvesson & Berg, 1992), they are closely related. In national culture theory, three out of five dimensions are used in the case, i.e. individualism, power distance and long-term orientation. They are important and relevant to analyse this case, since the case involves three countries with distinctive characteristics. According to Hofstede‘s theory (2005), US tops the dimension of individualism, while Asian cultures influenced by the Confucianism like Vietnam have long-term orientation, differing from short-term orientation of the western cultures like US. It is interesting to put their distinctive characteristics of those three countries together and see the effects they have on the integrated culture. In organizational culture theory, two out of three levels of Schein‘s model are applied, i.e. artifacts and espoused beliefs and values. They are of great importance in this case, because the goals of the two companies for the deal lead to the discovery of their core values in their own organization, which make up the essence of their organizational cultures. To understand the organizational culture of KPMG and Andersen, it is important to know the artifacts, and espoused beliefs and values. The level of basic underlying assumptions that includes unconscious, taken-for-granted beliefs, perceptions, thoughts, and feelings are not applied in the case, because this level is abstract and intangible, and cannot be utilized as a whole. Everyone especially within the same
60
organization has different perceptions, thoughts, and feelings, which makes the concept of ―culture‖ impossible to gauge in the case.
One element related to organizational culture theory is not mentioned in Schein‘s model while important to understand the local integration of global companies is leadership related to the overall concept of the firm, and is different from artifacts and espoused values and beliefs that include organizational vision, mission and strategy descriptions, etc. The overall concept of the firm refers to the emphasis put into company that creates a certain kind of atmosphere. In our case, the overall concept created by Andersen is ―family‖, in addition to their core values of integrity, excellence and professionalism. It then explains why being both accounting firms, and being both operating in Vietnam, two subsidiaries of MNCs have two completely different organizational cultures. From the case, the authors believe it is other stronger influences like ―leadership related to the overall concept of the firm‖ that makes the difference.
6.2 Implications
The following sections will describe the implications for managers involved in cultural integration in M&As, and implications for future research.
6.2.1 Practical Implications
The ideas presented in this chapter have important implications for managers from both acquiring company and acquired company in M&As. To integrate two or more cultures in M&As, it is recommended to study the possible problematic cultural areas, especially in the areas of national and organizational cultural differences. This study reveals that cultural integration is to a surface level the integration of organizational culture, however, to a deeper level, it is the integration of national culture where the company is established and also located, and organizational culture that is influenced by the people working there and management who lead the company, and industrial culture if the parties in the M&As are from two or more different industries. This research provides managers with a basis to understand the elements that influence cultural integration. By drawing out the conceptual framework, managers are able to see which elements at what level are the determinants for the acculturation process.
In addition, it is recommended that managers at upper level of the company create a ―concept‖ for the firm. The authors find that the ―concept‖ generates stronger emotional bond from the employees to the company, thus enhancing employees‘ loyalty.
Last but not least, this study indicates that there are great difficulties of moving from a strong (unified) culture to a not so strong (less unified) culture. Managers need to be aware of the consequences of ―forced‖ integration in this situation, as employees from a strong culture are less willing to abandon their old culture and accept the culture of the acquiring company. Traditional marriage will end up generating a high level of turnover from the acquired company, and become a potential for a―separation‖ environment. In this situation, open marriage and collaborative marriage work best.
61
6.2.2 Implications for Future Research
Although numerous researchers have been engaged in the study of culture(s), more work needs to be done to explore the ―software‖ for M&As. The study of the case enables the authors open up more (revenues)?? Avenues ? for future research in the area of cultural integration in M&As.
To begin with, in our case, many Andersen employees left shortly after integration. One interpretation could be it is difficult to move from a strong (unified) culture to a not strong (less unified) culture. The consequence is that KPMG lost the skilled people who were trained and educated. It means KPMG lost a lot of the value in the company. However, it remains unknown if it is harder or less difficult to move from a not strong culture to a strong culture in M&As. The authors therefore suggest conducting further research on integration of the unified culture and diversified culture.
Furthermore, both are in the same industry, and in the description of industrial culture, accounting firms are basically the same. However, in this case, KPMG and Andersen actually have very different organizational cultures, even though the two local subsidiaries are both located in Vietnam. The differences to some degree are from the national cultures (USA vs. Switzerland). The authors believe that from this case there are other influences besides national culture which are stronger than industrial culture. It is recommended that the future research could be done on the key elements in culture that influence the outcome of cultural integration for companies in the same industry yet engaged in the global M&As
Last, in the case, the management of KPMG organized social activities and communicated with ex-Andersen employees on various occasion to ease their transition phase and help them assimilate into the new culture, yet despite this effort, a great number of ex-Andersen employees resigned. Czerniawsk (1997) argues we are making the assumption that the relationship between language and action is a straightforward one. It shows that in the same culture where people speak the same language, and there remains a barrier to communication. For future research, it is suggested to study the relationship between language/communication and the outcome of cultural integration in M&As.
6.3 Reflections
When reflecting back on the empirical presentations and analysis, a couple of points are worth mentioning. First, In Cartwright and Cooper‘s (1996) culture types, the authors realize from the case the relationship between the culture type and outcome of cultural integration is quite weak. Although both KPMG and Andersen are Task/Achievement culture type, Andersen appears to possess higher level of autonomy than that of KPMG, and that is one of the important reasons that ex-Andersen employees feel less willingly to abandon their old culture. Besides, the discrepancies are also detected in Hofstede‘s (2005) cultural dimensions in which USA has the notoriously highest ranking in individualism. However, in our case, Andersen, being an US company, has demonstrated the features of collectivism.
In addition, as the authors are non-native speakers in English, the interviews, conducted in English, may not convey the exact ―meaning‖ the authors have intended, or the
62
interviewees make sense of it in a different way, especially two of the interviewees are Vietnamese, which could result in the deviation of translation in the empirical presentations.
Finally, the culture of KPMG and Andersen subsidiaries are greatly influenced by the local Vietnamese culture, however, in this thesis, the authors have made a low level of connection to the features of Vietnamese culture. Instead, the authors focus mostly on the detailed analysis on the elements of organizational culture in both companies, which deserves criticism.
63
References
Alvesson, M. & Berg, P.O. (1992). Corporate Culture and Organizational Symbolism. Berlin/New York: de Gruyter
Alvesson, M. & Sköldberg, K. (1994). Tolkning och Reflektion: Vetenskapsfilosofi och kvalitativ metod. Lund: Studentlitteratur.
Arthur Andersen & Co. (1988). A Vision of Grandeur. Chicago: Arthur Andersen & Co.
Argyris, C. & Schön, D. A. (1978). Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley.
Bate, P. (1984). The Impact of Organizational Culture on Approaches to Organizational Problem Solving. Organization Studies. 5(1), 43-66.
Beck, B.E.F. & Moore, L.F. (1985). Linking the host culture to organizational variables. In Frost, P. J., Moore, L.F., Louis, M.R., Lundberg, C.C. & Martin, J. (Eds.), Organizational Culture (pp. 335-354). Beverly Hills: Sage.
Berry, J.W. (1980). Acculturation as Varieties of Adaptation. In Padilla, A.M. (Ed.), Acculturation. Theory, Models and Some New Findings (pp. 9-25 ) . Boulder, Colorado: Westview Press.
Bowden, J. (2005). Reflections on the phenomenographic team research process. In J. Bowden, J., & Green, P. (Eds), Doing Developmental Phenomenography (pp. 11-31). Melbourne: RMIT University Press.
Bryman, A. & Bell E. (2007). Business Research Methods (2ed.). Oxford: Oxford University Press
Buckley, P. J., & Ghauri, P. N. (2002). International Mergers and Acquisitions: A Reader. London: Thompson.
BusinessDictionary.com. (2010) Managing Partner Definition. Retrieved 2010-05-20, from http://www.businessdictionary.com/definition/managing-partner.html
Cartwright, S (1998). International mergers and acquisitions: the issues and challenges. In Gertson, M.C, Soderberg, A.M, & Torp, J.E (Eds), Cultural dimensions of international mergers and acquisitions (p. 57–83). Berlin: Walter de Gruyter, Inc.
Cartwright, S. (2006). Why Mergers Fail and How to prevent it. In Business the Ultimate Resource (edited), Cambridge: A and C Black Publishers Limited.
Cartwright, S. & Cooper, C. L. (1993). The Role of Culture Compatibility in Successful Organizational Marriage. The Academy of Management Executive (1993-2005). 7(2), 57-70
Cartwright, S. & Cooper, C. L. (1996). Managing Mergers, Acquisitions and Strategic Alliances: Integrating People and Cultures (2nded.). Oxford: Butterworth-Heinemann.
Cartwright, S., & Price, F. (2003). Managerial preferences in international mergers and acquisition partners revisited: how are they influenced?. Advances in Mergers and Acquisitions. 2, 81–95.
64
Cartwright, S., & Schoenberg, R. (2006). Thirty years of mergers and acquisitions research: Recent advances and future opportunities. British Journal of Management. 17(S1), S1-S5
Cleine, W. (2002). The Combination of KPMG and Andersen in Vietnam. Retrieved 2010-04-30, from http://www.fetp.edu.vn/events/theFilename/E021209.pdf
Cohen C., Birkin S., Murray, C. & Garfield, M., & Harold, W. (2006). Conflict Resolution Quarterly. Wiley Periodicals, Inc., A Wiley Company, 317-331
Corrigan, T. (1993, September 17). International mergers and acquisitions. Financial Times.
Crampton, J. & Moore, M. V. (2000). Arthur Andersen: Challenging the Status Quo. The Journal of Business Leadership. 11(3), 71–89
Cronbach, L. J. (1975). Beyond the two disciplines of scientific psychology. American Psychologist. 30(2), 116-127.
Czerniawska F., (1997). Corporate-speak, the use of language in business. Macmillan Press Ltd.
Deal, T.E. & Kennedy, A.A. (1982) Corporate Culture. Reading: Addison-Wesley.
Denzin, N.K. (1978). The Logic of Naturalistic inquiry. In Denzin N. K. (ed.), Sociological Methods—A Sourcebook (p. 54-73). McGraw-Hill, New York.
Dubois, A., & Gadde, L-E. (2002). Systematic Combining: An Abductive Approach to Case research. Journal of Business Research. 55(7), 553-560.
Easterby-Smith, M., Thorpe, R., Jackson, P. & Lowe, A. (2008). Management Research (3ed). London: Sage.
Eisenhardt, K.M. (1989). Building theories from case study research. Academic Management Review. 14(4), 532–550.
Forstmann, S. (1998). Managing cultural differences in cross-cultural mergers and acquisitions. In. Torp, J.E., Gertsen, M.C., & Soderberg, A.M. (Eds.), Cultural dimensions of international mergers and acquisitions (p. 57–83). Berlin: Walter de Gruyter, Inc.
Gerhart, B. (2009). How Much Does National Culture Constrain Organizational Culture? Management and Organization Review, 5(2), 241-259.
Gertsen, M.C., Søderberg, A.M. & Torp, J.E. (Eds). (1998) Cultural Dimensions of International Acquisitions. Berlin & New York: de Gruyter
Ghauri, P.N., & Buckley, P.J. (2003). International mergers and acquisitions: past, present, and future. Advances in Mergers and Acquisitions. 2, 207–229.
Gulev, R. E. (2009). Are National and Organizational Cultures Isomorphic? Evidence from a Four Country Comparative Study. Managing Global Transitions. 7 (3), 259–279
Hall, W. (1995). Managing Cultures: Making Strategic Relationships Work. Chichester: John Wiley and Sons.
Harrison, R. & Stokes, H.(1990). Diagnosing Organization Culture. Berkeley, California: Harrison & Associates Inc.
Hofstede, G. (1980). Culture Consequences: International Differences in Work-Related Values. Beverly Hills.
65
Hofstede, G. (1991). Cultures and Organizations. Software of the Mind. New York: McGraw Hill.
Hofstede, G. (1997). Cultures and Organizations: Software of the Mind, Intercultural Cooperation and its Importance for Survival. New York: McGraw-Hill.
Jandt, F. (2004). An Introduction to Intercultural Communication, (4th Ed). Sage Publications, Inc.
Javidan, M., House, R.J., Dorfman, P.W., Gupta, V., Hanges, P.J. & de Luque, M.S. (2004). Conclusions and future directions. In R. J. House, P.J. Hanges, M. Javidan, P.W. Dorfman, & V. Gupta (Eds.), Culture, leadership, and organizations: The GLOBE study of 62 cultures, (pp. 723 – 732). Thousand Oaks, CA: Sage Publications.
Jemison, D. B., & Sitkin, K. (1986). Corporate acquisitions: A process perspective. Academy of Management Review. 11, 145-163.
Jenkins, J.G., Deis, D.R., Bedard, J.C. & Bedard, J.C. (2008). Accounting Firm Culture and Governance: A Research Synthesis. Behavioral Research In Accounting. 20(1), 45–74
Johns, G. (2006). The essential impact of context on organizational behavior. Academy of Management Review. 31, 386-408.
Johnson, P. & Clark, M. (2006). Mapping the terrain: an overview of business and management research methodologies. In P. Johnson & M. Clark. (Eds), Business and Management Research Methodologies. London: Sage.
Johnson, P., & Duberly, J. (2000). Understanding Management Research. London: SAGE Publications Limited.
KPMG UK (2010). KPMG History. Retrieved 2010-05-15, from http://rd.kpmg.co.uk/WhoWeAre/16532.htm
KPMG (2010). KPMG Home. Retrieved 2010-05-15, from http://www.kpmg.com
Larsson, R. & Risberg, A. (1998). Cultural awareness and national versus corporate barriers to acculturation. In. Torp, J.E., Gertsen, M.C., & Soderberg, A.M. (Eds.), Cultural dimensions of international mergers and acquisitions (p.). Berlin: Walter de Gruyter, Inc.
Larsson, R. & Lubatkin, M., (2001). Achieving acculturation in mergers and acquisitions: an international case survey. Human Relations. 54(12), 1573-1608
Lubatkin, M. (1983). Merger and the performance of the acquiring firm. Academy of Management Review. 8, 218-225.
Lundahl, U., & Skärvald, P-H.(1999).Utredningsmetodik för samhällsvetare och ekonomer (4ed.). Lund: Studentlitteratur.
Luo, Y. & Tung, R. (2007). International expansion of emerging market enterprises: a springboard perspective. Journal of International Business Studies. 38( 4), 481-98.
Malekzadeh, P. & Nahavandi, A. (1988). Acculturation in Mergers and Acquisitions. Acedemy of Management Review. 13(1), 79-90.
Martin, J. (1992). Cultures in Organizations: Three Perspective. Oxford: Oxford University Press.
Masakazu, Y. (1994). Individualism and the Japanese: An alternative approach to cultural comparison. Tokyo: Japan Echo
66
McEntire, M.H. & Bentley, J.C. (1996). When rivals become partners: acculturation in a newly-merged organization. International Journal of Organizational Analysis. 4(2), 154-174.
MOFCOM (2006). 2006 Statistical Bulletin of China’s Outward Foreign Direct Investment, Ministry of Commerce, Beijing. Retrieved 2010-05-21 from http://hzs.mofcom.gov.cn/accessory/200709/1190343657984.pdf
Morosini, P., Shane, S. & Singh, H. (1998). National Cultural Distance and Cross-Border Acquisition Performance. Journal of International Business Studies. 29(1), 137-158
NationMaster.com. (2003) Encyclopedia: Big Four auditors. Retrieved 2010-05-21 from http://www.statemaster.com/encyclopedia/Big-Four-auditors#Big_5_.281998-2002.29
Newman, K. L. & Nollen, S. D. (1996). Culture and Congruence: The Fit between Management Practices and National Culture. Journal of International Business Studies. 27(4), 753-779
Niece, J., & Trompeter, G. (2004). The Demise of Arthur Andersen's One-Firm Concept: A Case Study in Corporate Governance. Business & Society Review, 109(2), 183-207.
O‘Reilly, C.A., Chatman, J., & Caldwell, D. (1991) People an Organizational Culture: A profile Comparison Approach to Assessing Person-Organization Fit. Academy of Management Journal . 34(3), 487-516
Pope, C. & Mays, N. (1995). Qualitative Research: Reaching the parts other methods cannot reach: an introduction to qualitative methods in health and health services research. British Medical Journal 311: 42-45
Salama, A., Holland, W., & Vinten, G. (2003). Challenges and Opportuniteis in mergers and acquisitions: three international case studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo. Journal of European Industrial Training. 27(6), 313-321
Sales, A. L., & Mirvis, P. H. (1984) When cultures collide: Issues of acquisition. In J. R. Kimberly & R. E. Quinn (Eds.), Managing organizational transition, (pp. 107-133). Homewood, IL: Irwin
Sathe, V. (1985). How to decipher and change organizational culture. In Kilmann, R.H., Saxton, M.J. & Serpa, R. (Eds), Gaining Control of the Corporate Culture (pp. 230-261). San Francisco: Jossey-Bass
Saunders, M., Lewis, P., and Thornhil, P. (2007). Research Methods for Business Students (4ed.). Harlow, UK: Prentice Hall
Schein, E.H. (1996). Three cultures of management: the key to organizational learning. Sloan Management Review, 38(1), 9-20.
Schein, E.H. (2004). Organizational culture and leadership (3rd ed.). San Francisco: Jossey-Bass Publishers.
Scholz, R.W., Lang, D., Walter, A.I., Wiek, A., & Stauffacher, M. (2006). Transdisciplinary case studies as a means of sustainability learning: historical framework and theory, International Journal of Sustainability in Higher Education. 7(3), 226–251
Schraeder, M., & Self, D.R., (2003). Enhancing the success of mergers and acquisitions: an organizational culture perspective. Management Decision. 41(5), 511-522
67
Schweizer, R. (2005). An Arranged Marriage under Institutional Duality: the local integration process between two globally merging MNCs’ Subsidiaries. Göteborg: BAS Publishing
Sherman, A.J. (1998). Mergers and acquisitions from A to Z: strategic and practical guidance for small and middle market buyers and sellers. AMACOM, 1-7
SHRM, (2009). Effective organizational communication: a competitive advantage. Society for Human Resource Management.
Silverthorne, C.P. (2005). Organizational Psychology in Cross-Cultural Perspective. New York: New York University Press.
Simsek, Z., Veiga, J. & Lubatkin, M. (2005). Challenges and guidelines for conducting internet-based surveys in strategic management research. Research Methodology in Strategy and Management, 2.
Sivakumar, K. & Nakata, C. (2001). The Stampede toward Hofstede‘s Framework: avoiding the sample Design pit in cross-cultural research. Journal of International Business Studies.
Squires, S., Smith, C., McDougal, L. & Yeack, W. (2003). Inside Arthur Andersen: Shifting values, unexpected consequences. Upper Saddle River, NJ: Prentice-Hall
Teerinkangas, S. & Very, P. (2006). The Culture-Performance Relationship in M&A: From Yes/No to How. British Journal of Management. 17, 31-48
United Nations Conference on Trade and Development (UNCTAD) (1999). World Investment Report: Foreign Direct Investment and the Challenge of Development. New York: United Nations.
United Nations Conference on Trade and Development (UNCTAD) (2000). World Investment Report: Cross-Border Mergers and Acquisitions and Development. New York and Geneva.
Very, P., Lubatkin, M. & Calori, R. (1996). A Cross-national Assessment of Acculturative Stress in Recent European Mergers. In Gertson, M.C, Soderberg, A.M, Torp, J.E (Eds), Cultural dimensions of international mergers and acquisitions (p. 85–110). Berlin: Walter de Gruyter, Inc.
Weaver, G. R., (1999). American Culture Values. Kokusai Bunka Kenshu (Intercultural Training).9-15.
Wyatt, A. (2004). Accounting Professionalism - They Just Don't Get It! Accounting Horizons. 18(1), 45-53.
Yin, R. K. (2003). Case Study research: Design and Methods (3rd ed.). Thousand Oaks: SAGE Publications Limited.
68
APPENDIX A: INTERVIEW GUIDE
Background
What is your position in the company? How many years have you worked for your current organization? Do you have any experience regarding M&A? If yes: do you have experience of
international M&A? Which M&As cases have you been involved in? What was your role? Did your role in the company change in the M&A? What do you see as the major challenge when two companies merge?
M&A motives and integration
What were the motives for M&A? What were the main goals of integration? How did you work to achieve your goals? Did you use an integration model for M&A? How did you set up the integration? What where the main challenges to work with during the integration process? What has worked as expected? Why? What did not work as expected? Why?
Corporate Culture
How would you describe your corporate culture? How would you describe the culture of the merging/acquired partner? Give examples of cultural similarities/differences that you encountered during
integration? How do you perceive that the company‘s history is affecting the work today? Do you think national culture influence your own corporate culture and your partners?
If so, can you give examples of in what way? How did you work with areas that was problematic? Are you personally satisfied with the results of integration? Why?
Learning from M&A
What worked well in the integration? What do you regards to be the main challenges of M&A? If you can do it all over again, what would be doing differently to achieve best
integration? What is your recommendation for other companies involved in cross-national M&A? Do you have any other comments concerning M&A?
69
APPENDIX B: ONLINE SURVEY
Consider the following items, and choose the one response which most applies to your organization:
1. In this organization, individuals are expected to give first priority to: (a) Meeting the challenges of the individual task in which they are involved. (b) Cooperating with and attending to the needs of their fellow workers. (c) Following the instructions of their superiors. (d) Acting within the parameters of their job description.
2. The organization responds to its members as if they are: (a) Associates or colleagues. (b) Family or friends. (c) Hired help. (d) Contracted employees.
3. In this organization, people are motivated and influenced most by: (a) Their own commitment to the task. (b) The respect and commitment which they have for their co-workers. (c) The prospect of rewards or fear of punishment. (d) The company ―Bible‖ or rule book.
4. A ―good‖ employee is considered to be one who: (a) Is self-motivated and willing to take risks and be innovative if the task demands it. (b) Gets along well with others and is interested in their self-development. (c) Always does what his/her boss tells him/her to do without question. (d) Can be relied upon to stick to the company rules.
5. Relationships between work units or inter-departmentally are generally: (a) Cooperative (b) Friendly. (c) Competitive. (d) Indifferent.
6. In this organization, decisions tend to be: (a) Made by the people on the spot who are close to the problem and have the appropriate
task expertise. (b) Made after considerable discussion and with the consensus of all those involved
regardless of their position in the organizational hierarchy. (c) Referred up the line to the person who has the most formal authority. (d) Made by resort to established precedents.
70
7. It is most important for a new member of this organization to learn: (a) To use his/her initiative to get the task completed. (b) How to get on with his/her fellow workers. (c) Who really counts in this organization and be aware of the political coalitions. (d) The formal rules and regulations.
8. The dominant managerial style of this organization is: (a) Democratic and open (b) Supportive and responsive to individual needs and idiosyncrasies. (c) Authoritarian (d) Impersonal and remote Source: Cartwright & Cooper (1996, p. 72)
71
APPENDIX C: OVERALL SURVEY RESULTS a b c d
Question 1 7 2 7 4
Question 2 8 5 3 4
Question 3 6 5 7 2
Question 4 5 10 2 3
Question 5 12 4 4 0
Question 6 9 4 6 1
Question 7 8 4 3 5
Question 8 2 11 6 1
Total 57 45 38 20
Table 4: Survey results of KPMG (number of responses)
a b c d
Question 1 11 3 1 1
Question 2 7 8 0 1
Question 3 8 8 0 0
Question 4 11 4 0 1
Question 5 11 5 0 0
Question 6 5 8 3 0
Question 7 13 1 0 2
Question 8 7 9 0 0
Total 73 46 4 5
Table 5: Survey results of Andersen (number of responses)
72
APPENDIX D: SURVEY RESULTS FOR EACH QUESTION
The authors follow the survey suggested by Cartwright and Cooper (1996). Respondents consider the eight questions and choose the one response which most applies to either KPMG or Andersen in its heyday. The results for all eight questions, along with questions themselves, are presented below. The number in each pie chart represents the number of responses for the specific question.
1. In this organization, individuals are expected to give first priority to: (e) Meeting the challenges of the individual task in which they are involved. (f) Cooperating with and attending to the needs of their fellow workers. (g) Following the instructions of their superiors. (h) Acting within the parameters of their job description.
2. The organization responds to its members as if they are: (e) Associates or colleagues. (f) Family or friends. (g) Hired help. (h) Contracted employees.
73
3. In this organization, people are motivated and influenced most by: (e) Their own commitment to the task. (f) The respect and commitment which they have for their co-workers. (g) The prospect of rewards or fear of punishment. (h) The company ―Bible‖ or rule book.
4. A “good” employee is considered to be one who: (e) Is self-motivated and willing to take risks and be innovative if the task demands it. (f) Gets along well with others and is interested in their self-development. (g) Always does what his/her boss tells him/her to do without question. (h) Can be relied upon to stick to the company rules.
5. Relationships between work units or inter-departmentally are generally: (e) Cooperative (f) Friendly. (g) Competitive. (h) Indifferent.
74
6. In this organization, decisions tend to be: (e) Made by the people on the spot who are close to the problem and have the appropriate
task expertise. (f) Made after considerable discussion and with the consensus of all those involved
regardless of their position in the organizational hierarchy. (g) Referred up the line to the person who has the most formal authority. (h) Made by resort to established precedents.
7. It is most important for a new member of this organization to learn: (e) To use his/her initiative to get the task completed. (f) How to get on with his/her fellow workers. (g) Who really counts in this organization and be aware of the political coalitions. (h) The formal rules and regulations.
75
8. The dominant managerial style of this organization is: (e) Democratic and open (f) Supportive and responsive to individual needs and idiosyncrasies. (g) Authoritarian (h) Impersonal and remote