A Comparative Analysis (OB) Of 2 Merging Organizations

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British Airways & Iberia

Que.1 What ‘contribution' does each culture make to the apparent success, or otherwise, of each organization?

Ans.1 “The organizational culture consists of the deep fundamental assumptions, beliefs, values and norms which are shared by the members of an organization arise from the organization's history and tradition and are modified by contemporary events. It can more simply synthesize as the assumptions about how people do things around here”.

“The culture of an organization is fundamental because the mission, the strategies and the way they will be accomplished will spread from this core of key assumptions, how it is managed and how effectively it is communicated and shared throughout the organization. The culture will be affected from and will affect leadership and the style of management and will play a major role in customer satisfaction especially in the service industry where the absence of physical evidences must be replaced by a strong culture.”

British Airways culture

British Airways could be easily defined as a Role culture reflecting functional differentiation in its structure, but it's not that easy. One organization often harbors two or more contrasting cultures, posing more difficulties in order to remain successful. “There are two cultures in British Airways, one high in the sky at 30,000 feet which is highly co-operative, service oriented focused on passengers and the other one on the ground highly competitive, politicized head-to-head with the external world, where it seems that fiercely adversarial values reigned. Middle management, which is key to the implementation of any strategy and the outcome of cultural change, is still ruled by separate functions and at the top all the weight still goes on the individualist functions of high finance and take-over.”

Iberia culture

Iberia culture could be defined as a Task culture where power resides at the intersection of responsibilities. Employees tend to hold joint or multiple responsibilities and work relatively autonomously. Operations can be made quickly, making the organization more flexible than those characterized by a role culture and they can react to changing markets. The employees are more job and project oriented so they need very less motivation to do their work. The team work is performed very well in this kind of organization, and the organization can survive well in the changing competitive market.

Hofsted's theory on culture

Hofsted theory was perhaps the most comprehensive study of how the values in the workplace are influenced by culture. Comparison can be done on the basis of this theory between two different cultures of organizations of two different nationalities. So the table below provides information regarding cultural contrast of both British airways and Iberia.

Que.2 How would you describe the prevailing leadership styles employed by each organization?

Ans.2 “Leadership is the capacity to translate vision into reality” (Warren G Bennis 1995; cited by K Aswathappa, 2004). Leadership style is the typical approach a particular person uses to lead people. Stated differently, the behavior the leader exhibits during supervision of subordinates is known as leadership style.

Prevailing leadership style employed by British Airways is Transactional leadership. In this kind of leadership the emphasis is based on clarification of goals and objectives, work tasks, and outcomes, and organizational rewards and punishment. In this kind of leadership job performance is linked to rewards, so the employees are well motivated and perform their task well. The transactional leadership is said to be most appropriate in stable conditions.

Prevailing leadership style employed by Iberia Airlines is Transformational leadership. In this kind of leadership the emphasis is on generating a vision for the organization. In this the organization transforms the performance or fortunes of the business. This kind of leadership is said to be most appropriate in times of significant organizational change. Leaders transform and motivate followers by :( Bass, 1994)

  1. Generating greater awareness of the importance of organization goals.
  2. Motivating them to reduce their own self interest for the growth and development of the organization.

The four characteristics of the transformational leader are:

  • Charisma.
  • Vision.
  • Novel approaches to solve the problems.
  • Sensitivity & consideration.

Que.3 How have situational variables influenced leadership style?

Ans.3 To describe how the situational variables influence leadership style, there are various contingencies theories, here I am using Path-goal Theory of leadership proposed by House (1971).”In House's view effective leadership consists of selecting the most appropriate style of behaviour for a given situation. Path-goal theory defines an appropriate style one which achieve two important outcomes:

  • Tasks are successfully completed.
  • Followers achieve other valued outcomes for completing the task”.

Path Goal Leadership Style:

  1. Directive: In this style the leader provides direction and subordinate have to follow the directions.
  2. Supportive: In this style leader works very friendly with their subordinates and also works for social activity for subordinates.
  3. Participative: In this leader consults with all team members and takes suggestion for improvement of the organization.
  4. Achievement-oriented: In this leader set the challenging role for subordinates and checking improvement continuously and showing confidence on subordinates.

Leadership styles at British Airways

Prevailing Leadership style employed by British airways is Supportive. “The traditional style at BA had been bureaucratic, distancing, highly segmented between functions and characterised by low personal feedback, neglect of subordinates, depersonalisation and hierarchy means earlier they were very directive in their leadership style. Now it has been changed to a supportive style where coaching, training and supporting are keys to employee's empowerment. Manager learns how to trust employees developing a vision and then letting employees use judgement and discretion while responsibility remains with them. Managers are shown how to build a support system, so that they can get help from one another outside the formal structure and across functions. Subordinates need to be shown how their job contributes to the larger whole. People are asked to make decisions, they are providing with a vision or framework in which they are then empowered to take action to respond to non standard situations.”

Leadership style at Iberia

Leadership style employed by Iberia is Participative. In this kind of leadership employee are encouraged to involve in decision making beyond their normal work activities. Iberia leaders Consult with their employees and take their ideas into account when making decisions and taking particular actions.

The Hersey and Blanchard contingency Theory

“In contingency theory of leadership, the success of the leader is a function of various contingencies in the form of sub-ordinate, task, and group variables. The effectiveness of a given pattern of leader behavior is contingent upon the demands imposed by the situation. These theory stress using different styles of leadership appropriate to the needs created by different organizational situations”.

An approach which is well used to explain the various situational approach of a leader is “The Hersey and Blanchard contingency Approach. According to this approach the manager's style should be adjusted according to the readiness of the followers to take responsibility for directing their own actions”. Using the basic framework they define four basic categories of overall readiness:

  1. Low readiness of the followers.
  2. Low/ moderate readiness of the followers.
  3. Moderate/ high readiness of the followers.
  4. High readiness of the followers.

Hersey and Blanchard Model

“This model represents four basic leadership styles:

  1. S1 (Telling)
  2. S2 (Selling)
  3. S3 (Participating)
  4. S4 (Delegating)

British Airways follows the Telling (S1) dimension of leadership in the organization, means they are high on task behavior and low on relationship behavior, which involves a high degree of guidance. While Iberia is more Participating (S3) having a low degree of task orientation so that followers decide for themselves how to do things, but a high degree of relationship-oriented so that they receive encouragement to do so.

Que.4 What are the challenges facing each organization in order to make a success of the merger?

Ans.4 “British airways and Iberia are in merger talks from July 2008. The merger would allow both companies to still operate as separate brands. However, both brands would be united under a new main operating company.”

“Although there deal was hopefully going to be reached before summer, but now the reports say that this is unlikely. There turned out to be many more problems that had yet to be resolved for the merger than what the heads of the company revealed”.

“Willie Walsh, the British Airways chief executive, had said that the main block in the road was to clear up who has the financial control over the parent company for both airlines. However, now the number of challenges stands firm at twelve”. Among these the main challenges are:

  • Management positions.
  • Main location of the company's headquarters.
  • British Airways pension deficit.
  • Governance.
  • The level of synergies.
  • Valuation.

“Many issues have been complicating the talks between the Spanish and British airlines since they started talking of a merger in July. One issue in particular is the value of the pound declining against the euro, which has decreased the market value of British Airways. This may result in the British carrier having a smaller stake in the merged company than originally hoped”.

“When the deal was announced, BA's shareholders would have owned nearly 70 per cent of the combined group, based on the respective market capitalisations of the airlines. This has fallen substantially as BA's share price has collapsed and speculation in Spain has suggested that the deal will be done at a split of 55-45 in BA's favour”.


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