Unit VI Case Study OT&B

BBA 3451, Organizational Theory and Behavior 1

Course Learning Outcomes for Unit VI Upon completion of this unit, students should be able to:

6. Evaluate techniques used to manage conflict. 6.1 Identify the sources of conflict in a given situation. 6.2 Explain ways to improve interactions and conflict management in a given situation.

7. Evaluate the role of leadership in achieving performance goals.

7.1 Explain ways that leadership can help employees improve their interactions and conflict management skills.

Course/Unit Learning Outcomes

Learning Activity

6.1

Unit Lesson Chapter 11: Conflict and Negotiation in the Workplace Unit VI Case Study

6.2

Unit Lesson Chapter 11: Conflict and Negotiation in the Workplace Chapter 12: Leadership in Organizational Settings, pp. 336–342, 355–356 Unit VI Case Study

7.1

Unit Lesson Chapter 11: Conflict and Negotiation in the Workplace Chapter 12: Leadership in Organizational Settings, pp. 336–342, 355–356 Unit VI Case Study

Reading Assignment Chapter 11: Conflict and Negotiation in the Workplace Chapter 12: Leadership in Organizational Settings, pp. 336–342, 355–356

Unit Lesson Conflict: What It Is and What It Looks Like Conflict, according to McShane and Von Glinow (2018), occurs when a party feels ignored by another or that its interests are being misrepresented. This can occur by ignoring the other party’s perspectives on an issue or simply obstructing the other party’s interests by incorporating a change that blocks their request. The most obvious example in today’s society is the U.S. Congress and passing legislation. Think about the composition of Congress; it is similar to the composition of an organization (e.g., multiple backgrounds and experiences from senators and representatives; multiple cultures, races, and genders). Congress is made up of many political parties, all with diverse ideas, interests, and agendas regarding what they see as best for their constituents. John Tower (1981), in his article “Congress Versus the President: The Formulation and Implementation of American Foreign Policy” noted that foreign policy has been one of the oldest conflicts as both the president and Congress want the power to shape policy. It is easy to see how conflict can occur. Pros and Cons of Functional Conflict and Dysfunctional Conflict Certainly not all conflict is bad, right? Conflict has multiple outcomes, depending on what side you are on. You either win, lose, compromise, or walk away. However, before we get to these stages, let’s look at the impact of negative and positive consequences of conflict (McShane & Von Glinow, 2018).

UNIT VI STUDY GUIDE

Handling Conflict and Transformational Leadership

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Positive Consequences Negative Consequences

Potential for stronger outcomes as decisions can be made with better logic

Potential for wasted time and resources

Potential for increased flexibility Potential for heightened stress and frustration

Potential for stronger communication between the parties

Potential for communication issues

Both the positive and negative consequences challenge the status quo of a solution by either reinforcing the negative (an adversaries position) or accepting positive outcomes that improve the status quo. Therefore, the benefits of conflict include change in efficiencies, which could mean improved profit margins, improved market share, better communication between leaders and employees, and challenges to outdated laws or legislation.

Reflect back to the start of this course—the organism and the organization have analogical ties. Our bodies go through conflict, right? Think about influenza, viruses, and infections. These all cause conflict with our immune system. The body produces antibodies that try to fight off the infection; sometimes the body fights off the infection, and sometimes it requires medicine to overcome (the conflict). The same situation occurs with corporate America. There is conflict in a hostile takeover from Company A (the acquiring company) to Company B (the target company). Company A wants to acquire Company B and take over its operations by acquiring all of the outstanding shares of stock, hence gaining voting control. Company B wants to fight off the conflict and remain independent, so it seeks help from Company C (known as a white knight). Niden (1993) explains the white knight as the individual who tries to solve the conflict in a friendly manner. Without getting too deep into financial analysis, you can appreciate that there will be a bidding war for Company B. Possibly to the extent that the price is driven up so high that when Company C acquires Company B by winning the “conflict,” the shareholders and board of directors with Company C realize they overbid. These actions open up another set of challenges and internal conflict on cost.

The classic example of conflict and failure between two companies is the merger of America Online (AOL) and Time Warner in 2001. The conflict arose and caused a divide that could not be repaired. According to Malone and Turner (2010), the main reasons were due to corporate compatibility, a lack of execution of combined growth strategies, a lack of combined corporate synergies, financial stress synergy in a stock-for- stock deal with stretched valuations due to the dot-com stock bubble, and cultural differences between the two companies. The bottom line is that all these issues could not be resolved. With the challenges of cultural conflict, there was mutual disrespect between the two companies as the AOL CEO, Stephen Case, and Vice Chairman, Ted Turner, wanted to relieve the Time Warner CEO, Gerald Levine, from his position (Malone & Turner, 2010).

Visual of the roles of Companies A, B, and C

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There was differentiation between AOL and Time Warner management. McShane and Von Glinow (2018) explain how differences are generally a factor during negotiations and conflict. For example, younger and more seasoned employees may differ in values, beliefs, and needs. Differentiation causes tension between employees and leadership, which results in cultural issues, and this is the biggest tension between two merged companies (McShane & Von Glinow, 2018). In the end, the AOL-Time Warner merger was a failure because there were too many challenges to overcome. How to Handle Conflict The AOL-Time Warner merger failure provides a great lead into how to handle conflict. How could this have been resolved? Could it have been resolved? Given the problems that were noted, there could have been some integration through assertiveness and cooperation. Compromise could have taken place between the two cultures. Deeper problem-solving was needed to integrate the strategies for growth and market share into the combined companies. Maybe stronger leadership by the acquiring company to “force” decisions would have led to more synergy. As McShane and Von Glinow (2018) noted, problem-solving is one of the most important factors of conflict resolution. To be able to identify the disconnects as well as the “needs and desires” of two parties establishes the actions going forward. Where is the compromise? Who is willing to give up to gain? Unfortunately, the AOL-Time Warner merger was a conflict of cultures. Consider the clash of the young dot-com men and women striving to be the next Google or Yahoo and the mature, well-established culture of a company that has been in place and growing for decades. Also, note that when you combine companies, you have to eliminate duplication. Who stays? Who goes? What will be the policies adopted from the executive level to new hires? In the case of the AOL-Time Warner merger, not all challenges could be resolved. The Impact of Transactional Leadership Let’s continue with the analysis of the AOL-Time Warner failed merger from a leadership perspective. Review the graphic below, and make note of the elements of transformational leadership, which is comprised of four major components; these components include developing and communicating a strategic vision, modeling the vision, encouraging experimentation, and building a commitment to the vision (McShane & Von Glinow, 2018).

Visual of the AOL-Time Warner merger

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Now, let’s apply the elements of transformational leadership to the AOL-Time Warner merger. Build commitment to the vision: In transformational leadership, leaders strive to bring people together. To have a centralized core of employees who are focused and committed to the vision, execution of the strategy is necessary. McShane and Von Glinow (2018) noted that commitment is consistent with employees who embrace the vision as their own. Again, we can see from the AOL-Time Warner merger that this did not occur. Develop a strategic vision: AOL and Time Warner were unable to identify a shared vision. The organizations were just too different. AOL was a fast-growing, online media company with an established media and print company while Time Warner was more established and comfortable with its practices. For the merger to be successful, the content, which includes online shopping, chat rooms, magazines, and television shows, would need to be on the same page. Model the vision: According to McShane and Von Glinow (2018), transformational leaders model the vision by doing things that symbolize their vision. The AOL-Time Warner merger was certainly a transformational change for its time when Steve Case and Ted Turner made the acquisition bid for Time Warner in a multibillion dollar stock deal. Certainly, the AOL CEO saw the potential in combining the nation’s number one online portal with the nation’s number one old-school publishing and media content company. Encourage experimentation: Experimentation means change. Experimentation means taking on risk. Experimentation leads to growth, improvements, and new standards. Certainly, Steve Case, AOL CEO, had a central idea of combining the two biggest media powers from both sides of the street into a juggernaut conglomerate; however, this was not an easy task given cultural differences, content differences, leadership perspectives, and strategy divisions. In 2009, Time Warner spun off AOL after 9 years of failed integrated experimentation, accounting, hiring, culture integration, debt consolidation, and strategic differences, which all ended up contributing to the separation.

Elements of transformational leadership (McShane & Von Glinow, 2018)

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A very simple analogy of mixing oil and water summarizes the AOL-Time Warner merger and ultimate failure. All we have to do is look back at our grade school science experiment of emulsion. What happens when you mix oil and water? They disperse from each other. The oil mixture bonds together and moves away from the water. From a science perspective, the molecules are different and attract to their own molecule base (emulsion). They never fully integrate into a solid mixture of one, no matter how many times you stir or shake it (leadership actions, policies, programs). They break apart and then reform but never integrate as a whole. So, now think about AOL and Time Warner. One is oil and the other one is water. No matter how hard the integration was during the merger, the cultures (molecules) were too different, and the unity never occurred.

Reflect on transformational leadership and AOL. Even with the best vision, dynamic leadership, and ability to stretch experimentation beyond the established markets, it was hard for AOL’s CEO to successfully make it work for the long-term with so many internal differences. Conclusion In this unit, you were exposed to what conflict is, what it looks like, and how to come to an agreed-upon solution when it does exist. The AOL-Time Warner merger provided a great example of all the challenges of a merger by integrating all the theory and processes of conflict, conflict solution, and transformational leadership.

References Malone, D., & Turner, J. (2010). The merger of AOL and Time Warner: A case study. Journal Of The

International Academy For Case Studies, 16(8), 151–156. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=87724449&site=ehost-live&scope=site

McShane, S. L., & Von Glinow, M. A. (2018). Organizational behavior: Emerging knowledge, global reality

(8th ed.). New York, NY: McGraw-Hill Education. Niden, C. M. (1993). An empirical examination of white knight corporate takeovers: Synergy and overbidding.

The Journal Of The Financial Management Association, 22(4), 28. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=9412050558&site=ehost-live&scope=site

Onegumas. (2011). Simple emulsion [Image]. Retrieved from

https://commons.wikimedia.org/wiki/File:Simple_emulsion.jpg Ray, S. (2012). Cultural dimension analysis of AOL-Time Warner merger. Journal of Applied Library and

Information Science, 39(1). Retrieved from http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0ahUKEwi- spmzhrvTAhVBQyYKHcLpDbQQFgguMAE&url=http%3A%2F%2Fworldsciencepublisher.org%2Fjour nals%2Findex.php%2FJALIS%2Farticle%2Fdownload%2F1127%2F862&usg=AFQjCNEuhF7tHR9m HCA9X5vZAMpB2opHTA

Tower, J. G. (1981). Congress versus the president: The formulation and implementation of American foreign

policy. Foreign Affairs, 60(2), 229–246. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=4854421&site=ehost-live&scope=site

Simple emulsion (Onegumas, 2011)