The leadership response to such a change is evaluated and the effectiveness is critiqued. The value of conceptual frameworks and models are analyses and recommendations are given. In early 2005, the Volvo Trucks and Mack Trucks (VGA) Board met to discuss the issues that were hampering the successful merger of both companies.
The Board identified that the issues related to: Low cost synergies Slow progress on certain change related issues Issues with the integration of the two brands within the retail division The leadership style of Peter Herding is analyses using models such as Fiddler’s Contingency Theory of Leadership, house’s path-goal theory of leadership and leadership mystique which find Peter as a task oriented, directive and a visionary respectively. To analyses the situation, Cotter’s framework is used.
The framework points out to the following key issues- Poor communication Actions were taken too quickly Different ways of working between the two brands Truck sales division located too far away Mack staff struggled with the rigid structure vivo It is recommended that given the limited tenure of Peter at the time of the integration, the communication should be directed from a trusted Mack manager with an existing relationship with the employees.
Efforts should be made to influence naysayer who were resisting the change. The new VGA board should undertake a marketing campaign of sorts, to excite and invigorate the next phase of the integration. This would signal the end of the soloed approach of the two organizations and the start of “one great company, two great brands. ” Introduction A leader, as defined by Robbins et al (2009), “is someone who can influence others and who has managerial authority”.
In its essence, leadership in an organizational role involves “(1) establishing a clear vision, (2) sharing that vision with others so that they will follow willingly, (3) providing the information, knowledge, and methods to realize that vision, and (4) coordinating and balancing the conflicting interests of all members or stakeholders” (Objectifications, 2011 Globalization as defined by the Business Dictionary is the “worldwide movement toward economic, financial, trade and communications integration. It refers to the free transfer of capital, goods and services across national boundaries. In effect of this, companies have realized that in order to maximize their profits, they need to cross their national boundaries. One of the most effective ways to accomplish this is to merge/integrate with another company. In doing this, the market is shared between both companies, technologies are transferred, business plans, structures and strategy are enveloped to form one, and the financial capability of the company is drastically improved.
This may be a very effective strategy, but it does have its pitfalls especially if it is not implemented with care. The purpose of this report is to review and critique the Australian Integration of the Volvo and Mack’s companies. This report starts off with the analysis of the leadership style of Peter Herding who is not only the CEO of VGA but also the change agent driving this integration; several theories are used to identify this. Following this, the key issues of the leadership style are speculated using Cotter’s framework.
The conceptual frameworks used are evaluated. This is followed by the conclusion and recommendations that would be applicable. Background In early 2005, the Volvo Trucks and Mack Trucks (VGA) Board met to discuss the issues that were hampering the successful merger of both companies. The Board identified that the issues related to: Low cost synergies board required that action be taken by the time the next Board meeting was convened. The Board required either resolutions to the issues or a recommended action plan on how the issue would be worked through.
During the initial stages of the integration, Peter identified that he believe the successful integration would take several years and that it would require widespread involvement from relevant stakeholders not only locally but with the two parent companies that are located in Sweden and the United States. Analysis of Leadership Style To successfully understand the issues identified and how they impact on the integration of the two companies, we must firstly understand the leadership style of Peter Herding who is not only the CEO of VGA but also the change agent driving this integration.
Fiddler’s Contingency Theory of Leadership centers on that assumption that “leaders are predisposed to a particular set of leader behaviors. Leaders are either task-oriented or relationship- oriented. ” (Champion peg. 291) Peter Herding appears to adopted elements of a task-oriented leadership style. Task-oriented leaders are “directive, structure tuitions, set deadlines, and make tasks assignments” (Champion peg. 291) At the conclusion of meeting with the Board where they tabled their concerns in relation to the integration, Peter arranged a crisis over the weekend with his management team.
Timeliness were worked out and specific tasks were allocated. Another leadership theory which highlights Peter Herding style is the house’s path-goal theory of leadership which was developed by Robert J House. The house’s path-goal theory of leaderships details four different leader behaviors, which are: Peter Herding leadership behavior tends to be directive, although on occasion t is noted that he does consult with others before making decisions, which would suggest he has an element of being participative as show when setting the strategic goals for the new organization.
The leadership mystique is an alternative view of leadership. Developed by E. E. Jennings, this concept states that there are core set of ideas, value and beliefs that are common to all leaders, they are: A sense of mission A capacity for power A will to survive and to persevere “A leader with the leadership mystique has a sense of mission (vision), can build a rower base for change and has a will to survive and preserve during the stormy periods. ” (Champion peg 462) It is evident that Peter has at least two of these themes.
His mission statement is visionary and even though he may have been frustrated at times he still believed he vision was attainable. “Peter believed that successful integration would take at least three to five years and that it would require extensive involvement from all relevant stakeholders” (Eastland 2010 peg. 8) Analysis of issues The amount of significant, and often traumatic, organizational change has grown erroneously over the past two decades (Cotter Leading Change up).
When assessing the effectiveness of any change, one must first ensure that they clearly and fully understand both the change itself as well as the objective(s) driving the change. In many cases the changes are a result of the advancement of technology, in the case of Volvo and Mack the change is a result of globalization in some part, but primarily as a result of a push for better competitive edge and great share of the European truck market. In the case of Volvo and Mack the change was to integrate both brands under the one company banner.
This exulted from Vole’s acquisition of Renault and as a result Mack trucks as a whole owned subsidiary. This report will address the key issues identified as barriers for the leadership group whilst trying to achieve an effective integration. The key issues identified: Vision Communication Employee resistance to change Building a positive organizational culture The objective of the change was to provide Volvo with a strong position in the European market without endangering Vole’s premium position (case study up).
With this information in mind, the next step in critiquing the change is to look or a well-rounded, well established and well regarded framework by which to guide the critique. For this framework we need look no further than the doyen of change management John Cotter. This is not to say that Cotter’s framework is the only frame work, quite the opposite in-fact. There are many, many different change management frameworks out there. These include the revolutionary and evolutionary (Chamois) John Cotter is a professor at Harvard and author, who is regarded as an authority on leadership and change (Wisped 15/04/11).
John Cotter has devised a series of eight steps aimed to help organizations to avoid allure and become adept at change (www. Gastrointestinal. Com 15/04/11 John has listed these steps as; Step One – Acting with urgency In the case of Volvo and Mack there appeared to be a perceived lack of urgency with the integration. (Add reference about urgency from Cotter) There also appeared to be little urgency initially while trying to find agreement with Volvo cars on warehouse related issues. However, one could argue that Volvo did examine the market and competitive realties.
An argument could also be made to say they identified a major opportunity in the European market, hence the season to acquire Mack Trucks and implement the change. Step two – Develop the guiding coalition Organizations often require someone to act as a catalyst and assume responsibility for managing the change process (Robbins, Bergman, Stag and Coulter IPPP). In the case of Volvo the change catalyst was Peter Herding (Volvo CEO). It appears as if Volvo did attempt to build a coalition with the formation vocal Board.
However the VGA Board should have only been one segment of the change coalition. The coalition needed to be added to or at least supported by the overseas Volvo Board. However, “it seemed that the board, with senior executives from both brands, had not properly communicated the reasons behind the integration (case study). Peter initially took steps to ensure he communicated the reasons for this integration; he met 1,250 employees across 53 different sessions. He also held meetings with the top 60 management employees from both companies.
This was a positive step as communicating the process to staff would help to elevate some of the angst/resistance from some of the employees. However, it appeared as if the coalition had failed to make the required impact. In this world of rapid change individuals and weak coalitions rarely have the required information to successful affect a change (Cotter). As key stakeholders of the integration, it was imperative that the board and senior executives were also key members of the change coalition supporting Peter as the change catalyst.
There is “No Leadership without follow ship” (Sets De Varies et al peg. 30) Step three – Develop a change vision “An effective vision is future oriented, compelling, bold, aspiring, and inspiring, yet believable and achievable” (Champion, J. 2011, page 288) Peter did create a vision of “One great company, two strong brands” to aid the integration of Volvo ND Mack. This vision clearly stated what the core purpose of what he wanted to achieve. Volvo also implemented several strategies to achieve the vision.
These included; the establishment of the VGA board as well as the establishment of the Volvo UP organization to manage the achievement of common product platforms. However, it appears as if his enthusiasm and drive was not mirrored by other segments of the organization including the overseas board. Within 12 months of the change process commencing two of the senior-vice presidents (SSP) left the organization as they were dissatisfied with their new roles within he company, as well as the new organizational structure.
These also had a negative impact on the organizational culture and reducing the resistance among the employees to the change. Real power of vision is unleashed only when most of those involved in the change have a common understanding of its goals and directions (Cotter) Step four – Communication of the vision buy-in This step appears to one of the major stumbling blocks during the integration. A potential reason why employees resisted the change was that the communication around the actions was not transparent (Volvo case study). Dividend is likely to resist change for the following reasons: uncertainty, habit, concern over personal loss, and the belief that change is not he organizations best interest” (Management 5, peg 476) Irrespective, many employees within any organization often resist change, even if the change is planned. In the Mark’s and Volvo case the explanation for some of the resistance could be attributed to the lack of ongoing communication. If the reason for the change is not fully explained to all parties involved then staff can become confused. One way to reduce resistance to change is to communicate.
The reason for he change should be communicated at all levels of staff. The key topics that should be covered in these discussions are why the changes are occurring, when and how it will happen and most importantly the effects it will have on the individuals within the organization. Attempts were made to meet with a portion of the VGA employees to communicate about the integration. This is evidenced by Pewter’s meetings with 1250 staff to communicate the vision. However, this seems almost insignificant when you consider that the Volvo group employees over 74,000 people world-wide (http//www. CD. Com. U/PDF/Volvo/ sews/Volvo_restructure. PDF). Communication needs to explain the reasons for the change, how it will happen and the affects it will have on the organization (Champion IPPP). Efforts also should have been made to influence naysayer who were resisting the change. Step five – Empower Broad-based Action Peter was fully aware of ‘the need to improve the corporate culture and to foster a team orientation” (Eastland 2010 peg. 9) as a toxic environment had developed where discussions were occurring behind Pewter’s back which were clearly designed to destabilize the changes that need to occur.
Hence, this step would eave been made all the more harder with the naysayer working behind Pewter’s back to undermine the integration. Many obstacles appeared to slow the integration, these were: Poor communication All of these obstacles and possibly many more were working against Peter, to minimize the impact of these issues Peter needed to have conducted a risk assessment to fully gauge the impact these issues were on the integration. These obstacles clearly added to the frustrations of many employees. It was imperative that Volvo ensured the organizational structure did not impede the integration efforts (Cotter).
However, there appeared to be very little evidence that any of these obstacles were removed. Instead the integration continued to move forward and the resistance continued to grow. Step six – Generate short- term wins This step also appears to have been overlooked in the haste of the integration. Again there were no signs of celebration of any short term wins. Peter could have taken the opportunity to recognize and celebrate, firstly the past achievements of the Mack employees; this may have given them a sense of closure and a new beginning. He then could have celebrated the launch of the ewe organization.
This may have helped to break down the resistance from the ground level Mack employees. A good short term win has at least three characteristics: It’s visible It’s unambiguous It’s clearly related to the change (Cotter) Peter going around and talking to the employees about the new vision was simply not enough of short term-win to assist the integration. The majority of Mack employees saw was short term loss, e. G. Redundancies, closure of their warehouse etc. , the list goes on. Step seven – Don’t let up An attempt was made by Volvo to launch new projects and themes.
This as done with the creation of the VGA organization. However, the clear lack of transparent communication may have meant that this could have been interrupted quite differently by Mack staff. The launch of the VGA organization was a perfect opportunity to reinvigorate the integration. Though, this was only part of the integration; there was no time for back patting or compliance. This should have signaled a major milestone in the integration but certainly not the end by any stretch of the imagination. This was possibly a short term win to celebrate, to leverage off for the next phase of the integration.
Step eight – Make Change stick Evidence based articulation of the SUccess the integration was having may have helped break down some the resistance. Pewter’s biggest issue was that the Mack staff still felt some trepidation about the integration, part of these stems from previous integration activities where it was decided that Mack Trucks warehouse and parts distribution center would move to the Volvo warehouse. This may have eased somewhat if they saw the evidence that their input was helping the success of the integration. “All employees, down to the shop floor, must feel part of the global team. Sets De Varies et al peg. 30) The VGA not only needed to adopt the new culture, they needed to live it. If Peter alone was the sole proponent of this new culture and change then it was destined to live a possibly successful but very short life. Peter needed to implement strategies that made all employees regardless of position feel a part of something positive. It appears that the lack of reassurance and ongoing communication during the initial stages of the integration has impacted on the organizational culture in a negative way. Strategies to assist in creating a positive culture: Robbins et al 2010 peg. 81) The new approach, processes and culture needed to be ingrained in the newly emerging organization. The employees needed to feel excited by the integration, enough so that they were not tempted to return to their old ways of Mack or Volvo prior to the integration. However, it appears as if many had failed to embrace the integration initially, which made on-going adoption almost impossible. Conceptual frameworks and Models that used to analyses and evaluate the findings It is very important for us to understand Peter Herring’s leadership behavior fore attempting to critique the case.
In our attempt to better understand the leadership style, as well as triangulate our research, we have taken into consideration three different leadership theories namely; Fiddler’s Contingency Theory of Leadership, House’s Path-coal Leadership Theory and Jennings’ Leadership Mystique. It must be noted that these theories are considered in order to understand the qualities, capabilities and potential of Peter as a leader as well as an agent of change. Also it enables us to look at his leadership practices from different perspectives.
To further analyze the issues involved in the organizational change we have applied John Cotter’s Eight-Stage Change Process. Fiddles Theory gives us an insight in behavioral pattern of the leader which enables us to be able to match the theory with Pewter’s leadership behavior. Assessing the case study we realize that Peter is more bent towards being a Task- Oriented leader as opposed to Relationship-Oriented. Also it shed light on his employment relationship with Volvo which is highly process driven. This however is one way of evaluating leadership in the organization.
Another attempt we made was with House’s Path-Goal Theory of Leadership. There are two hypothesis in this theory, ‘the first concerns the acceptability of the leaders behavior to the subordinates” and ‘the second concerns the motivational function of the leader” (John Cotter 1996). This theory clarifies our understanding of Pewter’s way of working and how he gets things done, how he relates with his team and his subordinates in order to communicate the vision and overall benefits involved for the employees in future.
To further triangulate our research we have also considered Leadership Mystique which gives us an insight about Pewter’s capacity to be able to ‘Think Big’ and long-term (in future years) which is one of the vital qualities of a leader in a globalizes world. It also points out that even in uncertain times, and situations that he is faced with during the change process, he believes in the vision and is prepared to do the needful to achieve his goal(s). He clearly displays qualities of a visionary.
One of the many reasons to assess organizational change in Mack and Volvo case based on John Cotter’s The Eight-Stage Change Process was that it allows us to look holistically at the organization. It allows us to look in the areas such as organizational culture, internal politics, level of trust, communication, employee and management reactions to change, its effect on customers, management and leadership in the organization and the synergies between all of the above.
John Cotter (1996) “The first four steps in the transformation process help defrost a hardened status quo”. Cotter further explains that “phases five to seven then introduce many new practices. The last stage grounds the change in the corporate culture and helps make them stick”. Here Cotter emphasizes on the importance of following the sequence and that getting too far ahead of one’s self without a strong base “almost always creates problems”. Cotters Eight-Stage Change Process also sheds light on the distinction between management and leadership in an organization.
According to Cotter Management is more focused on the aspects of planning, organizing, staffing, controlling and problem solving where as leadership “aligns people with that vision and inspires them to make it happen despite the obstacles” John Cotter 1996 . Based on this understanding, throughout our assessment, we are able to ask vital questions about the adhering within the organization, the processes in place that aids in alignment of people with the vision and inspire them to support the vision.
Conclusion The key issues identified in this case are vision, employee resistance to change, building a positive organizational culture and mainly communication. There were many obstacles that came in the way of successful integration of the two companies namely- Poor communication The leadership style of Peter Herding is one that is task oriented and that of a visionary. In today’s globalizes environment, it is important for a leader to hind in ‘sustainable’ terms and Peter does just that. He is able to think big and long term.
The main reason why employees resisted the change was that the communication around the actions was not transparent. The Mack staff still felt some trepidation about the integration, part of these stems from previous integration activities where it was decided that Mack Trucks warehouse and parts distribution centre would move to the Volvo warehouse. Therefore, it is important that the employees feel excited by the integration, enough so that they will not be tempted to return to their old ways of Mack or Volvo prior to the integration. The new approach, processes and culture needed to be ingrained in the newly emerging organization.
Recommendations Communication- One way to reduce resistance to change is to communicate. Given the limited tenure of Peter at the time of the integration, the communication should be directed from a trusted Mack manager with an existing relationship with the employees. Efforts should be made to influence naysayer who were resisting the change. The new VGA board should undertake a marketing campaign of sorts, to excite and invigorate the next phase of the integration. This would signal the end of the oiled approach of the two organizations and the start of “one great company, two great brands.