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Due to the upcoming Padgett-Beale and Island Banking Services (ISB) merger, the Merger & Acquisition (M&A) team, is conducting its due diligence in determining cultural issues that may impede a successful acquisition. As a result, a team of external consultants was hired to conduct standardized cultural surveys to collect data on cultural beliefs/norms and/or cultural barriers. These high-level surveys were conducted as part of interviews to identify cultural expectations, possible communication challenges, potential barriers, and other cultural/conflict management ideals. The surveys yielded useful data, which was broken down into a two-part “Cultural Dimension” model that consisted of “Communication Context” and “Power-Distance” factors that the M&A team chose to be of the utmost importance.
1. What is “communications context” and how could it influence expectations of managers and employees and their relationships with each other at PBI-FS?
Communications Context is used to broadly describe the cultural difference between societies and can be broken down into “high-context” or “low-context” situations, groups or societies (Beer, n.d.). As it pertains to the M&A of IBS, these communication contexts will be used to understand and promote successful inter-cultural communication for the non-US-based ISB acquisition. Moreover, intercultural communication is defined as “a form of communication that shares information across different cultures and social groups” (International Development, 2018).
In particular, High-Context refers to cultures that are close-knit and have established shared norms over long periods of time. On the other hand, low-context refers to cultures that tend to have many associations with more interpersonal connections, but with rule-based short-term interaction (Beer, n.d.). With that being said, understanding the Communications Context can help PBI-FS understand the cultural environment/challenges that its managers will be facing so that they can navigate cultural differences and manage potential conflicts. This will enable the employees to maintain their cultural identities, potentially boost morale and help management foster good relationships, and employ effective change management and conflict management approaches to ensure a successful M&A.
2. What is “power-distance” and how could it influence expectations of managers and employees and their relationships with each other at PBI-FS?
Power-Distance is the “level of acceptance of people, who have no power, of the unequal spread of power in their society” (Smit, 2012). In other words, it describes how a group of people (ISB M&A) or society reacts toward having powers being distributed unequally. It defines the expectations, behaviors and/or attitudes that employees may exhibit based on the Power-Distance Index (PDI). Subsequently, “People in societies exhibiting a large degree of Power-Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalize the distribution of power and demand justification for inequalities of power” (Hofstede Insights, n.d.). Some characteristics of High-Power Distance societies is their dependence on the power holder and accepting their “lot in life” (Smit, 2012). In contrast, Low-Power Distance societies, thrive when they can balance or redistribute the power and need justification for disparities in the equality of power. As the results illustrate, the Island employees were almost on the opposite ends of the spectrum for power distance. See Fig 1 from (CSIA 485) Assignment.
Cultural DimensionPadgett Beale Managers & EmployeesPBI-FS Job Applicants (Islanders)Communications ContextLow ContextHigh ContextPower-DistanceMedium Power DistanceHigh Power Distance
3. How might differences in communications context (low/high) and power-distance contribute to conflicts within the new organization (PBI-FS), e.g. between transferred PBI personnel and newly hired islanders?
With that being said, the Island employees were almost on the opposite ends of the spectrum on the PDI and Communications Context. Taking these results into consideration, the Padgett-Beale managers and employees are Medium Power Distance, depend on structure, expect some power and are relatively independent by nature. They tend to need reasons for the hierarchy and work within the confines of the organization. In contrast, the Island employee prospects are identified as High-Power Distance which means that they accept that they will have no power or unequal power and for the most part will not question the hierarchy. This could create problems with getting the job accomplished as employees with a “Low Power Distance” will make decisions at all levels and if they try to get a “High Power Distance” culture employee to make a quick decision in a high-stress situation, the “High Power Distance” typically will not do anything without the boss’s permission (Rutledge, 2011). This will require effective conflict management skills to make communications effective. In regards to communication context, the Island employees will expect a personal relationship of earned trust over time, detailed information/instructions, more time to process change, body language and some personal interaction in the organization to accomplish the mission. Whereas, the PBI-FS employees and managers will expect immediate results, look to establish a quick relationship, rules oriented and focused on the mission rather than feelings.
4. What best practices should managers and executives follow when conflicts arise between the company (Padgett-Beale) and its new subsidiary (PBI-FS)?
Some best practices that should be practiced when conflicts arise in the M&A of IBS are (HumanMetrics, n.d.):
Win-Win (Collaborating): Confronting the problem or problem-solving. Collaboration involves an attempt to work with the other person to find a win-win solution to the problem at hand – the one that most satisfies the concerns of both parties. This is a no-brainer but will take a Top-down approach because the Island employees tend to listen to the top brass or the boss.
Compromising: Also known as reconciling. Compromising looks for an expedient and mutually acceptable solution that partially satisfies both parties. There may be situations that exist culturally that may require compromise due to the difference in Power Distance. This is a short-term solution and may buy some time for the manager to readdress the concern at a more advantageous time.
Smoothing: Also known as accommodating. Smoothing is accommodating the concerns of other people first, rather than prioritizing one’s own concerns. This may be necessary during the early stages of the forming, storming norming and performing of teams, in addition to when practicing change management conflict resolution. Like Compromising, Smoothing is a short-term solution and may buy some time for the manager to readdress the concern at a more advantageous time.
Due to the seriousness of establishing good interpersonal relationships and understanding the culture of the Island employees, Padgett-Beale’s M&A team set out to lay the foundation for the successful integration of two distinctly different cultures. As a result of external surveys, Communication Context and Power-Distance levels were identified and will be addressed using the recommend conflict management styles to ensure maximum cooperation (See Fig 1). The results were used to prepare the incoming Island employees and PBI-FS employees for a successful merger. Finally, it is important to note that some form of conflict is inevitable and by performing the necessary due diligence, the IBS M&A has the best chance to weather the “tropical” storm.
Beer, J. E. (n.d.). Communicating across cultures. High and low context. Retrieved from http://www.culture-at-work.com/highlow.html
Hofstede Insights. (n.d.). National culture. Retrieved from https://hi.hofstede-insights.com/national-culture
International Development. (2016). Intercultural communication: High-and-low-context cultures. Retrieved from https://online.seu.edu/articles/high-and-low-context-cultures/
HumanMetrics. (n.d.). Conflict management techniques. Retrieved from: https://www.hrpersonality.com/resources/conflict-management-techniques
Rutledge. B. (2011). Cultural differences – The power distance relationship. Retrieved from https://thearticulateceo.typepad.com/my-blog/2011/09/cultural-differences-the-power-distance-relationship.html
Smit, C. (2012). Power distance index; Examples of high power distance culture & low power distance culture. Retrieved from https://culturematters.com/power-distance-index-examples/
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