Case-Deloitte and Touche: Integrating Arthur Andersen Integrative Case – Organizational Behaviour: Understanding and Managing Life at Work: Book Guide

TEACHING NOTES FOR THE DELOITTE & TOUCHE: INTEGRATING ARTHUR ANDERSEN INTEGRATIVE CASE The integrative case can be used at various stages of the course. For example, the questions can be used as each chapter is covered; the questions can be answered at the end of each part of the text; or the entire case and questions can be done together at the end of the course. Below are some suggested answers for each question. It is also worth noting that in the teaching note that originally accompanied this case, the integration was highly successful. You might conclude your discussion of the case by asking the class what factors they believe contributed to the success of the integration. This might be a good opportunity to review some of the key issues from the case and in your course (e.g., leadership, culture, communication, organizational change). PART 1 – AN INTRODUCTION Discuss the relevance of organizational behaviour for the issues that Deloitte & Touche are facing. How can organizational behaviour be used to help the integration team ensure that the integration is successful? Chapter 1: Organizational behaviour refers to the attitudes and behaviours of individuals and groups in organizations and the field of organizational behaviour involves the systematic study of these attitudes and behaviours. Deloitte & Touche needs to ensure that the employees of both firms have positive attitudes about the integration as it will have major implications for their behaviour and the success of the firm. As indicated in the case, true integration will require the knowledge, skill, and above all the commitment of the Deloitte people. However, there was an attitude among Deloitte employees that people coming from Andersen were “damaged goods” and that they should be grateful that they have found a home. These attitudes could be a problem for successful integration and the integration team needs to address them. Furthermore, the attitudes of the employees following the merger are also a concern. They want to make sure that all employees have positive attitudes about their jobs following the merger (job satisfaction) and that they will be committed to the firm (organizational commitment). In addition to discussing the importance of attitudes and behaviours for the successful integration, this question can also be answered by discussing the various topics in organizational behaviour that are relevant for this case and the successful integration of the two firms such as: learning, perceptions, motivation, groups, culture, power and politics, communication, conflict and stress, decision-making, and organizational change. Explain how the goals of organizational behaviour can be used by the integration team to ensure that the integration is successful. Describe some of the things that the integration team might want to predict, explain, and manage. Chapter 1: There are three goals of organizational behaviour: prediction, explanation, and management. Through systematic study, the field of organizational behaviour provides a scientific foundation that helps improve predictions of organizational events. Explanation involves understanding why a particular behaviour occurs. The ability to understand behaviour is a necessary prerequisite for effectively managing it. If behaviour can be predicted and explained, it can often be managed. Responding to the information gathered through prediction and explanation helps to influence organizational behaviour. Terry Noble is responsible for developing a company-wide plan to aid in the integration of more than 1,000 people from Arthur Andersen. Noble and the integration team want to predict the response of employees to the integration of the two firms such as the backlash from a number of Deloitte employees. If they can predict this and then explain it, they can then manage it and being able to manage it is key to the successful integration. If the integration is mismanaged, there is much to lose including millions of dollars of potential annual billings. Note also how the Pulse Survey is used to monitor the integration process which allows the integration team to take immediate action if the integration goals are not attained. The Pulse Survey is a good example of how through systematic study, the field of organizational behaviour provides a scientific foundation that helps improve predictions of organizational events. The Pulse Survey was conducted every month with a random sample of people from both organizations. It asked people how they felt about how the integration was proceeding overall as well as more specific things about it. For example, the question about intending to remain with Deloitte one year into the future can provide useful information to predict employee turnover. If a higher than usual level is predicted, it would be useful to try to explain why so many employees do not intend to remain (note the question about perceived fair treatment as an example) and what can be done to manage it. Thus, the goals of organizational behaviour can be used by the integration team to ensure that the integration is successful. By being able to predict things that might derail it, they can better understand potential problems and take action to ensure that the goals are met and the integration is a success. Consider Terry Noble’s role as co-chair of the national integration team in terms of Mintzberg’s managerial roles. What roles does he exhibit and how effective is he in performing each role? What roles are most important and why? Chapter 1: Henry Mintzberg conducted an in-depth study of the behaviour of managers and found a rather complex set of roles played by managers. The relative importance of these roles will vary with management level and organizational technology. Interpersonal roles were those that were used to establish and maintain interpersonal relations. These included the figurehead role, leadership role, and liaison role. Informational roles are concerned with various ways the manager receives and transmits information. Roles in this group included the monitor role, disseminator role, and spokesperson role. Decisional roles deal with managerial decision-making and include the entrepreneur role, the disturbance handler role, the resource allocation role, and the negotiator role. As co-chair of the national integration team, Terry Noble has to perform all of these roles. First, he has to establish and maintain good interpersonal relations with employees from both firms. As indicated in the case, the 12 member integration team was made up of equal numbers of Deloitte and Andersen personnel. He seems to have done a good job establishing relations with the Andersen people. Second, he has to receive information about how the integration is going as well as transmit information to members of the organization about the integration process. As indicated in the case, the integration team monitors the integration process through the Pulse Survey. Terry Noble seems to have done a good job informing people of the integration plan and process and in monitoring the process through the Pulse Survey. And third, Noble has to make decisions about how to proceed with the integration and where to allocate resources. The main goal of the integration team was to put together a company-wide plan for integration and to create support materials to aid the Deloitte people in integrating their new colleagues into their organization. Noble seems to have effectively planned the integration and the use of resources. Thus, overall all three roles seem to be important and key to the successful integration of the two firms. To what extent are some of the contemporary management concerns described in Chapter 1 relevant for the integration team? What does the integration team need to be most concerned about and what should they do to be successful in managing the contemporary management concerns? Chapter 1: The contemporary management concerns described in Chapter 1 include: diversity, a positive work environment and employee well-being, talent management and employee engagement, and a focus on corporate social responsibility. All of these concerns are important to some extent, but the ones that seem to be most important for the integration team are a positive work environment and employee well-being and talent management and employee engagement. First, the integration team has to make sure that the new Andersen employees feel welcomed and accepted by Deloitte. At the same time, they have to carefully manage Deloitte employees who feel they are being forgotten about in the haste to welcome the Andersen employees. Thus, they need to create a positive work environment that will be accepting to all organizational members and contribute to the health and well-being of all employees. This can be achieved in part by creating a workplace that provides employees with meaning, purpose, a sense of community, and a connection to others or workplace spirituality. Employee well-being can also be facilitated by developing their psychological capital. This is especially important for the Andersen employees who are facing a great deal of uncertainty and challenges as new members of the organization. However, the Deloitte employees also have concerns about themselves and the future of the organization. Therefore, efforts should be made to develop the hope, optimism, self-efficacy, and resilience of all employees. Second, there is a concern about being able to integrate and retain the Andersen talent. As Noble indicates in the case, Andersen had the best litigation record of any professional services firm in Canada and their link to a global network of consultants with expertise in a multitude of areas and which could be accessed at any given time was unparalleled. It was a talent play for them as they have 1,000 of the best fully trained professionals in the industry coming into the organization. Thus, it was important that they effectively utilize and retain this important new talent. Furthermore, it will also be important to engage all employees in the integration and in their role as members of the organization. Therefore, talent management and employee engagement are very important to the successful integration and future of the organization. Also important is diversity as the integration team must ensure the integration of a diverse group of employees from two firms and corporate social responsibility with respect to the fair treatment of all employees. The integration team needs to be sure that employees from both firms are treated fairly. Thus, all of the contemporary management concerns are important for the integration team but they need to be especially concerned about creating a positive work environment and employee well-being, and talent management and employee engagement. These concerns are going to be directly relevant for the successful integration of the two firms. PART 2 – INDIVIDUAL BEHAVIOUR How important is learning for the successful integration of the two firms? What do employees need to learn and what organizational learning practices should be used? Be sure to consider the use and application of each of the organizational learning practices described in Chapter 2. Chapter 2: Learning is very important for the successful integration of the two firms as employees from both firms have much to learn in the new integrated firm. As indicated in the case, the Andersen people will have to get used to their new titles, new surroundings, and new colleagues. They will have to learn about their new roles and responsibilities and all employees will have to learn the new culture. The Deloitte employees will have to get to know their new co-workers from Andersen as well as the Andersen clients. Employees at both firms must learn about each other and how to work together. Among the various learning practices described in Chapter 2, training and development would be especially important for all employees. Also important would be employee recognition programs which can be used to celebrate important achievements that are consistent with the new organization values and culture. Career development will also be important given the increased number of employees in the organization as well as the potential for new business initiatives and new clients. Consider the perceptions held by employees of both firms. To what extent are person perception biases affecting these perceptions? What are the implications of these perceptions for the integration of the two firms and what does the integration team need to do? Chapter 3: Employees of both firms have perceptions of each other. For example, some employees in Deloitte perceive the Andersen employees as “damaged goods.” The Andersen people have a perception that they will be taken over and their identity and sense of value will be lost. Some possible perceptual biases that might explain these perceptions include the primacy effect (tendency for perceivers to rely on early cues or first impressions in forming judgments of members of the other firm), reliance on central traits (organizing perceptions around central traits), and implicit personality theories (personal theories that people have about which personality characteristics go together). Perhaps most likely is stereotyping – the tendency to generalize about people in a certain social category and ignore variations among them. Members of the each firm are likely to have stereotypes of those in the other firm. Most apparent is the perception that Andersen employees are damaged goods. There is also the perception of “acquirer and acquired” which also needs to be addressed. These perceptions can make the integration more difficult to the extent that members of each firm perceive the others in a negative manner. Use social identity theory to explain the perceptions that employees at each firm have of themselves and those at the other firm. According to social identity theory, what does the integration team need to understand and what should they do? Chapter 3: According to social identity theory, people form perceptions of themselves based on their characteristics and memberships in social categories. Our sense of self is composed of a personal identity and a social identity. Our personal identity is based on our unique personal characteristics, such as our interests, abilities, and traits. Social identity is based on our perception that we belong to various social groups, such as our gender, nationality, religion, occupation, and so on. Personal and social identities help us answer the question, “Who am I?” We categorize ourselves and others to make sense of and understand the social environment. Once a category is chosen, we tend to see members of that category as embodying the most typical attributes of that category, or what are called “prototypes.” Further, people tend to perceive members of their own social categories in more positive and favourable ways than those who are different and belong to other categories. Therefore, members of each firm are likely to perceive members of the other firm as embodying certain attributes (e.g., damaged goods) and to see them in a negative way. In other words, members of each firm will see themselves in a more positive way than those of the other firm. This would make it much more difficult to integrate the two firms. As a result, the integration team needs to be aware of this tendency and take steps to prevent members from categorizing members of the other firm in a negative and less favourable manner. The focus should be on how everyone is part of a new firm and this should be emphasized and presented in the most positive way. Consider the role of trust and perceived organizational support (POS) in the case. How important are they for the successful integration of the two firms and to what extent do employees at each firm have positive perceptions of trust and organizational support? What should the integration team and management do to create positive perceptions of trust and organizational support? Chapter 3: Trust and perceived organizational support are very important to the successful integration of the two firms. Trust refers to a willingness to be vulnerable and to take risks with respect to the actions of another party. Trust perceptions toward management are based on perceptions of ability, benevolence, and integrity. Ability refers to employee perceptions regarding management’s competence and skills. Benevolence refers to the extent that employees perceive management as caring and concerned for their interests. Integrity refers to employee perceptions that management adheres to and behaves according to a set of values and principles. The combination of these three factors influences perceptions of trust. Members of both firms might have concerns about trust given the changes that they are experiencing. Andersen employees might be concerned about being treated fairly and that management will be as concerned about them and their interests as they are about Deloitte employees. On the other hand, some Deloitte employees feel they are being forgotten about in the haste to welcome the Andersen employees which suggests that they perceive management as less caring and concerned for their interests. Perceived organizational support (POS) refers to employees’ general belief that their organization values their contribution and cares about their well-being. According to organizational support theory, employees who have strong perceptions of organizational support feel an obligation to care about the organization’s welfare and to help the organization achieve its objectives. They feel a greater sense of purpose and meaning and a strong sense of belonging to the organization. As a result, employees incorporate their membership and role within the organization into their social identity and employees feel obligated to reciprocate the organization’s care and support. POS is related to job satisfaction, organizational commitment, a positive mood, performance, reduced strains, and lower absenteeism and turnover. Members of both firms might be unsure of the support they are receiving from the organization. As new members to the organization, Andersen employees might question how much they will be cared for by Deloitte management. At the same time, Deloitte employees are feeling less cared for as the Andersen employees are being welcomed. Thus, it is important for the integration team to ensure that all employees are being cared for and that management is aware of their needs and concerns. The main factors that contribute to POS are perceived supervisor support, fairness, organizational rewards, and job conditions. Thus, it is important that employees from both firms receive support from their supervisors and that they are treated fairly. Low perceptions of POS will have a number of negative consequences and potentially derail the integration. Discuss in detail how issues of fairness are relevant to this case. Do you expect that distributive, procedural, or interactional fairness is most important here? Please be sure to consider both the current Deloitte personnel and the incoming Andersen personnel. Chapter 4: There is not much evidence in the case to implicate procedural or interactional problems. However, distributive justice problems are indicated for Deloitte personnel and might be inferred for Andersen personnel. Deloitte employees are being asked to accommodate as equals Andersen personnel who are perceived by some as “damaged goods” and who have not paid their dues at Deloitte. This perceived deficit of inputs is grist for distributive unfairness. On the other hand, Andersen people may feel that they are being thrust into a new setting and culture through no fault of their own—after all, they were not the unit that audited Enron, and now they are being asked to go begging for respect. Speculate about how mood and emotion might have figured in the case events. Was there a need for emotional regulation? Chapter 4: Anxiety and fear play a role in the case in that the Deloitte personnel fear that their status quo is threatened and the Andersen personnel fear being branded as outsiders. One suspects that these emotions were suppressed in day-to-day interactions (they are not “professional”). This constitutes emotional regulation. Consider the job satisfaction and organizational commitment of the Andersen employees. What should the integration team focus on if they want the Andersen employees to be satisfied with their new jobs, committed to their new organization, and willing to stay rather than quit? What about the Deloitte & Touche employees? Chapter 4: The integration team must be concerned about the job satisfaction and organizational commitment of all employees following the integration. A decline in either of these attitudes could result in an increase in the rate of turnover. As Noble states in the case, they must figure out how to get the commitment of the Andersen people and to be proud of their new organization. In addition, they need to be concerned about maintaining the commitment of the Deloitte employees who might feel that they are no longer cared for given the attention being paid to the Andersen employees. Either way, failure to address the needs and concerns of employees from both firms could result in a decline in job satisfaction and organizational commitment which could mean that there is a risk of employees from both firms quitting. The main factors that predict job satisfaction are mentally challenging work, adequate compensation, career opportunities, and people. Assuming that the work is mentally challenging and that it will not change much and the compensation is adequate and fair, then it would make sense to focus on career opportunities and people. Career opportunities are likely to be on the minds of the Andersen employees whose future in the new firm might be questionable. At the same, the Deloitte employees might also be wondering about their career opportunities now that there are 1000 more employees in the firm. Careful attention to the assignment of people to teams should help ensure that the employees work with people who they like and who can help them attain job outcomes. As for commitment, interesting, satisfying work, role clarity, and having one’s expectations met after hiring are good predictors of affective commitment. Thus, it will be important to ensure that employees are doing the type of work that they desire and that the expectations of the Andersen employees are met. Continuance commitment increases with the length of time an employee spends in an organization and when leaving an organization will result in personal sacrifice or the perception that good alternative employment is lacking. This will depend on the opportunities that employees have in other firms. Normative commitment is strongest when a sense of obligation or loyalty to the organization can be fostered. This is something that the integration team should keep in mind and focus on as it will be important to get all employees to buy into and accept the new culture and organization. Discuss the relevance of motivation in the case. How important is motivation and describe what employees need to be motivated to do and how to motivate them to do it? Explain how each of the theories of motivation can be used to motivate employees. Chapter 5: Motivation is very important for a number of reasons. For starters, Andersen employees need to be motivated to become a part of the new firm and then motivated to stay. Deloitte employees must be motivated to welcome and accept the Andersen employees and to stay in the firm. Each of the theories of motivation provides suggestions for how to motivate employees. First, need theory indicates the importance of need fulfillment. Thus, the integration team should understand the needs of Andersen and Deloitte employees and focus on making sure they are fulfilled. For Andersen employees it might be important to focus on their relatedness/belongingness and safety needs as they are new members of the organization and might be most concerned about being accepted and fitting in. Expectancy theory suggests that employees should be assigned tasks and provided with the necessary resources to perform at a high level (expectancy) and that doing so will result in outcomes that they value (high instrumentality). Equity theory is particularly important as there is the potential for employees of both firms to perceive some inequity and they will probably be sensitive to any inequities during and following the integration. Thus, it will be important to ensure that all employees are treated fairly when it comes to task assignments and outcomes. Finally, goal setting is important for the successful integration of the two firms and setting goals for employees that are aligned with the goals of the integration team will help to ensure that the integration is successful. Do you think the integration team should consider using money to motivate employees? What kind of pay plan would you recommend and why? What other motivational practices would you recommend for the successful integration of the two firms? Explain your answer. Chapter 6: Money might be an effective means to motivate employees but you need to first consider what is being motivated. The second issue is what kind of pay plan to implement. Given the focus on integrating the two firms and the need to address any negative perceptions or perceived inequities, it would probably be best to implement a team-based pay strategy in which all employees can benefit. Along these lines, some form of profit sharing or employee stock ownership program would make the most sense. Given the potential for the firm to be much more profitable, it might be worthwhile to share the new profits with all members of the firm. This might also help to speed up and improve the integration process as all employees would stand to gain from the realization of higher profits as a result of the successful integration of the two firms. As indicated in the case, essential to the long-term success of the integration was that individuals would see that investing significant resources in the transaction was worth it. Another motivational program that might be worthwhile is management by objectives in which the goals of the new firm are aligned with those of organizational members. This might be especially important to the extent that the new culture needs to be linked to employee goals and development. In addition, alternative working schedules might also be an effective means to address the needs of a more diverse workforce. It might help to retain employees from both firms. PART 3 – SOCIAL BEHAVIOUR AND ORGANIZATIONAL PROCESSES Given that employees from the two firms will be working together in groups, what are the implications for group development and group cohesiveness? What advice would you give the integration team for designing effective work teams? Chapter 7: To the extent that employees from the two firms will be working together, there will be a need for them to develop and become cohesive. The integration team should understand the group development process and provide new groups the time and resources they will need to develop. Groups develop through a series of stages over time. Forming is the early stage of group development during which time group members try to orient themselves by “testing the waters.” Storming is the second stage where conflict often emerges. Sorting out roles and responsibilities is often at issue here. Norming is the stage where group members resolve issues that are provoked in the second stage and develop norms for interaction. Performing is the stage where the group devotes its energy toward task accomplishment. Adjourning is the fifth and final stage of group development where the group disperses. Members often exhibit emotional support for each other. Not all groups go through these stages of development. The process applies mainly to new members that have never met before which means that it will be especially important for groups with team members from both firms to go through these stages. Group cohesiveness refers to the degree to which a group is especially attractive to its members. Members are especially desirous of staying in the group and tend to describe the group in favourable terms. Cohesiveness is a relative property of groups and is an informal, emergent group process. The integration team should focus on how to make new groups especially attractive to its members. Some of the factors that contribute to cohesiveness include threat, competition, success, member diversity, group size, and toughness of initiation. Thus, when forming new groups, the integration team should focus on the size of the group and its diversity. Groups whose members have similar attitudes or background characteristics are likely to be cohesive to the extent that their primary goal is to create a friendly interpersonal climate. Groups that are diverse have a harder time becoming cohesive. However, if a group is in agreement about how to accomplish some particular task, its success in performing the task will often outweigh surface dissimilarity in determining cohesiveness. In addition, large groups generally have a more difficult time becoming and staying cohesive. They have a more difficult time agreeing on goals and more problems with communication and coordination. Thus, a focus on group diversity and size will help to ensure that the new groups become cohesive. Is organizational socialization relevant for the integration of Arthur Andersen employees? What would you tell the integration team about organizational socialization and how it can be helpful for the integration process? Chapter 8: Socialization is the process by which people learn the attitudes, knowledge, and behaviours that are necessary to function in a group or organization. Socialization is also the primary means by which organizations communicate the organization’s culture and values to new members. Therefore, it is important for the Andersen employees to learn how to function in their new organization and to learn about their new roles within it. In addition, socialization also can help the Andersen employees develop high perceptions of PJ and PO fit, both of which will be important for their socialization and retention. All employees will need to learn about the new organizational culture and so socialization will be important for the Deloitte employees as well to the extent that they too must learn the values, beliefs, and expectations of the new culture. The integration team should consider socialization programs and activities to help communicate and reinforce the new values and culture. The involvement of the Deloitte employees in the integration process is worth noting. As indicated in the case, one of the goals of the integration team was to create support materials to aid the Deloitte people in integrating their new colleagues into the organization. Thus, they have an important role to play in the socialization of Andersen employees and will need some guidance and instruction on how to do this and their role. What methods of organizational socialization can be used to integrate the Arthur Andersen employees? Be sure to explain how you would use each of the methods described in Chapter 8 and indicate what you think would be most effective for the successful integration of Arthur Andersen employees. Chapter 8: Realistic job previews provide a balanced, realistic picture of the positive and negative aspects of a job to applicants. They help to create realistic expectations that are associated with high job satisfaction and lower turnover. Thus, it would be a good idea to provide realistic job previews to all employees about the new organization. Employee orientation programs are designed to introduce new employees to their job, the people they will be working with, and the organization. The main content of most orientation programs consists of health and safety issues, terms and conditions of employment, and information about the organization, such as its history and traditions. Another purpose of new employee orientation programs is to begin conveying and forming the psychological contract and to teach newcomers how to cope with stressful work situations. Therefore, an orientation program should be provided to the Andersen employees to help them learn about the organization and its procedures. As indicated in the case, human resources was responsible for communicating the Deloitte policies, explaining administrative items such as compensation, the incentive plan, pensions and benefits, and promotion policies. Socialization tactics refer to the manner in which organizations structure the early work experiences of newcomers and individuals who are in transition from one role to another. There are six socialization tactics that vary on a bipolar continuum. They include collective versus individual socialization; formal versus informal; sequential versus random; fixed versus variable; serial versus disjunctive; and investiture versus divestiture. The six socialization tactics can be grouped into two separate patterns of socialization. Institutionalized socialization consists of collective, formal, sequential, fixed, serial, and investiture tactics. Individualized socialization consists of individual, informal, random, variable, disjunctive, and divestiture tactics. Institutionalized socialization reflects a more formal and structured program of socialization, and as a result, will reduce newcomers’ feelings of uncertainty. Individualized socialization reflects a relative absence of structure, and as a result, the early work experiences of newcomers will remain somewhat uncertain. The tactics can also been distinguished in terms of the context in which information is presented to new hires, the content provided to new hires, and the social aspects of socialization. Given the high uncertainty facing the Andersen employees and their need for information, guidance, and structure, the integration team should ensure that their early socialization is institutionalized. Institutionalized socialization tactics are effective in promoting organizational loyalty, esprit de corps, and uniformity of behaviour among those being socialized. When socialization is individualized, new members are more likely to take on the particular characteristics and style of those who are socializing them. Institutionalized socialization is always followed up by some individualized socialization as the member joins his or her regular work unit. Given the need for the integration team to get all employees committed to the new culture and firm, institutionalized socialization is clearly called for in this case. It would also be a good idea to have a formal mentoring program in place as this will also help in the socialization and career development of all employees. Good examples from the case on special events to aid orientation and socialization include the welcome breakfast and the “Making a Difference Together” vision for the integrated organization. Review the results of the cultural assessment of the two firms and then compare and contrast their cultures. How are they similar and different and what are the implications for the successful integration of the two firms? Chapter 8: As indicated in the case, the people from Deloitte and Andersen were different from an organizational culture point of view. The culture of Andersen involves a strong drive to focus on clients’ needs above everything else. Deloitte acknowledges the importance of commitment of quality and client needs but there is also a focus on employee issues. The results of the cultural assessment indicate that there is a high degree of alignment or cultural synergies (similarities) on a number of factors: commitment to quality, client orientation, teamwork, communication, openness, integrity, external competitiveness, results orientation, risk propensity, and vision and mission. There is a low degree of cultural alignment or cultural gaps (differences) on the following dimensions: bureaucracy, market orientation, diversity, action orientation and accountability, learning and development, reward and recognition, organizational values, work lifestyle balance, management support, and goal definition and alignment. In terms of integration, ten out of the twenty dimensions show a high degree of cultural alignment which will help with the integration. However, there could be some difficulty with the other ten dimensions given the lack of alignment. However, for seven of the 10 dimensions that are low on alignment, they are at a moderate level which means that it should not be too difficult to achieve greater alignment, especially on dimensions such as reward and recognition and work lifestyle balance. The most difficult issues will be addressing the three lowest dimensions of alignment which are bureaucracy, market orientation, and diversity. However, a focus on the dimensions where there is greater alignment and potential for alignment should make it somewhat easier to work with the three dimensions where the gap is greatest. What should the integration team do about the cultural differences between the two firms? Should they integrate the Arthur Andersen employees into the existing Deloitte & Touche culture or should they create a new culture? What do you think the integration team should do and how should they proceed? Chapter 8: Culture was a critical factor in the integration of the two firms. As indicated in the case, cultural misalignment and subsequent conflict were major risk factors that threatened to derail the success of the integration. The cultural gaps between members of the two organizations represented critical issues that required special attention from the integration teams. As Noble indicates, “Addressing the differences between the two cultures was essential to successfully guiding the integration.” Clearly, giving preference to the culture of one of the firms is going to be met with resistance from the other. There has to be a move to form a new culture out of the two existing firms. As indicated in response to the previous questions, there is a good deal of similarity between the two firms so there is much to work with. The integration team should focus on those issues where there is agreement and similarities and then work towards defining the new culture in those areas where there are gaps. It might be possible to adopt the best of both cultures in those areas where there is a lack of alignment. For example, it should not be too difficult to establish a new reward and recognition program as part of the new culture or to make diversity an important part of the culture along with greater work-life balance. Some of the other issues might be more difficult (i.e., bureaucracy, market orientation) but having addressed the other dimensions should make it easier to find consensus on these two dimensions. Simply integrating the Andersen employees into the existing Deloitte culture is clearly not the way to go. A new culture that is developed and accepted by all employees is required for the successful integration of the two firms. A good example of how this was done was the “Making a Difference” vision for the integrated organization which represented the vision for the integrated organization and the company’s commitment to its clients and each other. The new logo symbolized the conviction that the new firm which would be the number one professional services firm in Canada will be even stronger and more successful. How important is leadership for the successful integration of the two firms? Consider the implications of the different leadership theories described in Chapter 9 (situational theories, leader-member exchange theory, transformational and transactional leadership, ethical and authentic leadership, and strategic leadership) for the successful integration of the two firms. What type of leadership do you think is most important and likely to be effective and why? Chapter 9: Leadership is critical for the successful integration of the two firms especially when you consider some of the difficulties noted in the previous questions such as perceptions and attitudes of members of each firm and the cultural differences. Among the different leadership theories, transformational leadership would seem to be especially important given that there is a new vision being promoted along with a new culture. Transformational leadership involves providing followers with a new vision that instills true commitment. Transformational leaders change the beliefs and attitudes of followers to correspond to a new vision (for a project, department, or organization), and motivates them to achieve performance beyond expectations. This is of course exactly what is required for a successful integration. Members from both firms must change their beliefs and attitudes to correspond with the new vision and culture. The four qualities of transformational leaders are intellectual stimulation, individualized consideration, inspirational motivation, and charisma. Intellectual stimulation contributes in part to the “new vision” aspect of transformational leadership. People are stimulated to think about problems, issues, and strategies in new ways. Individualized consideration involves treating employees as distinct individuals, indicating concern for their personal development, and serving as a mentor when appropriate. The emphasis is a one-on-one attempt to meet the needs of the individual in question in the context of the overall goal or mission. Inspirational motivation involves the communication of visions that are appealing and inspiring to followers and stimulates enthusiasm, challenges followers with high standards, communicates optimism about future goal attainment, and provides meaning for the task at hand. Finally, charismatic leaders have personal qualities that give them the potential to have extraordinary influence over others. They tend to command strong loyalty and devotion from followers, and this, in turn, inspires enthusiastic dedication and effort dedicated toward the leader’s chosen mission. Charisma provides the emotional aspect of transformational leadership. Further, transformational leadership is especially effective for organizational change and this is the essence of the case. Other forms of leadership that are also important are strategic, authentic, and participative leadership. Strategic leadership is leadership that involves the ability to anticipate, envision, maintain flexibility, think strategically, and work with others to initiate changes that will create a viable future for the organization. Given that a fundamental objective is the creation of a new viable organization, strategic leadership is very important and key to the future success of the organization. Authentic leadership is a positive form of leadership that involves being true to oneself. Authentic leaders know and act upon their true values, beliefs, and strengths and they help others do the same. Their conduct and behaviour is guided by their internal values. For the integration to be successful, employees must believe in the new vision and have trust in their leaders. If there is any doubt on the part of employees in the values being promoted by their leaders, it can derail the integration. Employees must perceive the values and beliefs being promoted by their leaders as authentic. Finally, participative leadership will also be important given that employees must accept and help implement the new vision and culture and their input and participation in the process will aid in their acceptance of the new culture and vision. Participative leadership means involving employees in making work-related decisions. Participation allows employees to contribute to the establishment of work goals and to decide how these goals can be accomplished. The advantages of participation are motivation (it increases the motivation of employees), quality (it leads to higher quality decisions than the leader could make alone, particularly when employees have special knowledge to contribute to the decision), and acceptance (it increases employees’ acceptance of decisions, especially in issues of fairness). Thus, these are things that are required for the successful integration and participative leadership is very much called for in this case. Identify some challenges or barriers to effective communication in the case. How did Deloitte try to counteract these barriers? Chapter 10: One sure communication barrier was legal limitations on early contact between the parties while the acquisition was under regulatory review. Just when good communication between the parties was so very important, it was prohibited. This damaged both formal and informal communication. Later on, the geographic decentralization of the firm and the nature of the work (employees spend much time on the road and on client premises) did not allow for the advantages of face-to-face communication (contrast this with a situation where a firm with a campus-like environment takes on new employees who have much opportunity for day-to-day interaction with the veteran employees). Rumours are cited in the case as a problem although no details are given. Such rumours are commonplace in mergers and acquisitions. Deloitte used the Pulse Surveys (Chapter 16) to try to understand what was going on. Although there is no evidence of open conflict in the case, there is plenty of potential for it. What are some factors that might cause conflict between the Deloitte and Andersen contingents? Chapter 13: A big possibility is intergroup bias fueled by identification with the respective firms. Professional service firms tend to have strong cultures and their own special policies and procedures. They also compete with each other. All of this fosters identification with the individual employer that can backfire in merger and acquisition situations. There are also culture, power, and status differences. As for culture, Exhibit 4 (“Results of Cultural Assessment”) shows particular divergence in terms of bureaucracy, market orientation, and diversity. As for power and status, Deloitte is bigger and it is the surviving “victor” in the Andersen downfall. Its management is sensitive to this issue and is trying hard to integrate Andersen without emergent conflict. At the moment, scarce resources do not appear to be a problem, but they will be if the melding of the two firms falters and the client base that Andersen is expected to bring defects elsewhere. Consider the potential for stress among the employees of both firms. What stressors are employees most likely to experience and why? What can the integration team do to minimize these stressors and help employees cope with stress? Chapter 13: Stress is an issue of employees at both firms who are affected by the merger and integration. As indicated in the case, numerous rumours contributed to the anxiety of employees at both firms. Further, as Noble stated when commenting on the integration, the Andersen people probably have a fear that they will be taken over and their identity and sense value will be lost. At the same time, the Deloitte employees feared that management might forget about them in the haste to integrate the Andersen employees. In fact, the Pulse Survey indicated that a number of Deloitte employees feared that Deloitte management in its haste to consummate the deal was forgetting about its own people. Thus, some general stressors that are likely at work here are interpersonal conflict, job insecurity and change, and role ambiguity. The integration team should be aware of these stressors and consider programs to help employees manage their stress. Stress management programs would probably be a good idea to help employees cope during the integration process. Failure to help employees cope and manage the stress could result in behavioural reactions such as lower performance and withdrawal as well as psychological and physiological reactions. PART 4 – THE TOTAL ORGANIZATION How would you classify the organizational structures of Deloitte and Andersen? Why is Deloitte structured the way it is? Chapter 14: Deloitte has a hybrid structure based on products (i.e., services: audits, financial advisory, consulting, tax) and geography (offices in major cities). HR, IT and finance are centralized. Andersen had more of a network structure but offered similar services. The Deloitte structure groups the centralized functions such as HR to avoid duplication and inefficiency. It has offices spread across Canada to maintain a local presence and put the functional experts close to the customer. Discuss the role that the external environment played in the integration of the two firms. What constraints and opportunities led to the integration? Do you think that the integration of the two firms was an effective strategic response for each firm? Explain your answer and in doing so consider other forms of strategic responses. Chapter 15: The external environment contributed greatly to the integration of the two firms. The downfall of Enron also meant the end of Andersen. The Andersen name was a huge liability as a result of the Enron scandal as Andersen in the United States faced a felony charge of obstruction of justice. Even though the company argued that the action taken against it by the U.S. Department of Justice was baseless, Andersen faced a crisis that it could not recover from. The collapse of Enron and allegations of illegal activity by Andersen destroyed the Andersen brand. Thus, the crisis that occurred in the United States created the opportunity for the two firms to merge. It would seem that the merger between the two firms was an effective strategic response. Mergers and acquisitions involve the joining of two organizations and the acquiring of one organization by another. Attempts to improve economies of scale or to diversify an organization’s portfolio are common motives for mergers and acquisitions. For Andersen, it was the best possible response as they needed a new home and could no longer operate under the Andersen name. For Deloitte, they obtained talented employees whose tools, skills, marketing, and knowledge management capabilities were among the best in the industry. Further, the new organization would become the country’s largest professional services organization with the potential to be much more profitable and successful. Thus, as a strategic response, the merger provided many advantages to both firms. The only other option for Andersen would have been to merge with another firm. There seems to be some resistance to change coming from Deloitte staff. What might account for this? Chapter 16: Feelings of distributive unfairness (see Part 2) are probably relevant. Also, some politics, self-interest, and misunderstanding might be contributing to resistance. There is much uncertainty at play, and such uncertainty does not contribute to a willingness to change. Deloitte has been using Pulse Surveys during the change, and at the end of the case Noble muses about taking employees “to an offsite location” to deal with cultural differences. This latter strategy suggests the possibility of team building. Discuss the merits of surveys and team building to enhance integration. What would you recommend and why? Chapter 16: Surveys can be an invaluable tool both in more steady-state conditions and when more substantial change is occurring. Thus, the use of surveys here is most appropriate. One caveat, however: Noble is using the surveys, but twice in the case it is implied that he is unsure what the results really mean (“were these the concerns of a few vocal people?”). First, using surveys is much more scientific than relying on gut impressions or the grapevine. Thus, he should be ready to put credence in survey results. Next, it is possible to understand both the average opinion and the distribution of opinion. That is, it is easy to estimate if averages are being skewed by “a few vocal people.” Team building might be a good idea to build trust between the two camps. The structure of the work means that problems could fester without being confronted because consultants spend much time out of the office. The physical proximity that team building requires might be necessary for the two sides to get to know each other. FOLLOW-UP In a teaching note provided by the case authors, it states that the integration was highly successful and some people within the Deloitte organization called it a miracle. The authors provide a list of some of the factors that contributed to the success of the integration including the structure created to oversee and lead the integration; the creation of objectives and measures; critical activities that contributed to success; and cultural assessment (orientation and monthly pulse survey). Source: Richard Ivey School of Business. Teaching Note 8B04C04 by Ken Mark and Gerard Seijts, 2004. Deloitte & Touche: Integration Arthur Andersen. Solution Manual Case for Organizational Behaviour: Understanding and Managing Life at Work Gary Johns, Alan M. Saks 9780133347500, 9780133951622