Organization Behavior Analysis of an Acquisition

In the midst of the multitude scandals of corporate corruption around the turn of the century, including those of Enron’s accounting fraud, Halliburton’s overcharging of government contracts, and the Compass Group’s bribery of the United Nations to win business (Corporate scandal, 2006), there have been a variety of financial ramifications. On one end of this spectrum, organizations ceased operations, while others have become bait for acquisition.

In this essay, the organizational behavior (OB) strategy related to the buyout of Adelphia Communications Corporation is examined. Included in the discussion is the evaluation of the overall organizational design approach, an assessment of the short and long term effectiveness of the design strategy, the anticipated internal and external environmental, political, sociological, psychological, and fiscal changes (positive and negative), and the anticipated impact of change on the business’ organizational behavior and structure. Recommendations for a future business of this nature will also be made.

Company Background

Adelphia Communications Corporation, founded in 1952, provides a variety of services under the umbrella of telecommunications, including cable television, high speed Internet, and media services, to over 5 million customers in over 30 states and Puerto Rico. Adelphia filed for Chapter 11 bankruptcy protection in 2002, after it became known that “John Rigas and his family [then majority shareholders]… fraudulently used the company's funds for personal loans, manipulated financial figures to conform with analysts' expectations, funded non-corporate projects using Adelphia's line-of-credit for personal purchases, creation of fictitious companies and sham transactions for inflating the company's earnings and concealed increasing debts” (Adelphia Communications Corporation, 2006, par 34). The organization filed five restructuring plans with the bankruptcy court, with its most recent amendment in August, 2006 (Adelphia Files Fifth Amended Plan of Reorganization and Related Disclosure Statement Supplement, 2006). On July 31, 2006, the entity announced that it closed a deal on July 31, 2006 with Comcast and Time Warner Cable (Adelphia Closes Asset Sale to Time Warner Cable and Comcast, 2006) to sell its assets for $12.7 billion (Adelphia Communications Corporation, 2006, par. 16).

Organizational behavior strategy evaluation

Current OB strategy

Now that the acquisition deal is closed, and Adelphia has been sold to Time Warner Cable and Comcast, the post-transactional transition begins. Much needs to be thought of during this period of time, including infrastructure, technology integration, and the decision as to whether retain Adelphia employees. To ease the transition from the closing of the deal to actual implementation of the buyout, teams were established by representatives of each involved party.

It is estimated that close to 13,000 Adelphia employees will be transferred to the buying companies (Adelphia Closes Asset Sale to Time Warner Cable and Comcast, 2006). No specifics can be found as to which jobs or job types will be sustained. The former Adelphia employees will need to be introduced to a new way of doing things, and it is presumed that Time Warner Cable and Comcast will conduct some form of orientation for the newly acquired human resources.

Strategy Assessment

Organizational Design

Being in the same industry, the buyers and the seller have similar organizational structures. The current organizational design for both Time Warner Cable and Comcast is that of a traditional bureaucracy as defined by Weber, comprised of executive leadership who fill well defined roles (cmcsk.com). The same can be said of the former Adelphia. Weber spoke about a rational-legal authority, and positions based upon merit of individuals; thus, Weber clearly distinguished a separation between the person, who may enter and leave a position, versus the position, who’s function remains in the bureaucracy (Jones, G. R., 2004). Because the companies are structured similar to each other, the transition from Adelphia to the buying companies’ structures should be relatively smooth as far as becoming accustomed to the human resource infrastructure, with the only short-term setback being the orientation of the former Adelphia employees to new policies and procedures. Upon successful hurdle of the learning curve, these employees should become accustomed to the changes and new environment. At the same time, though, management of the acquiring companies must work on maintaining a satisfactory level of retention among the Adelphia employees, as job security becomes a lingering thought among newly acquired employees.

The key difference between Adelphia and its acquirers is that the latter never entered the Voice Over IP telephone service market, which proved to be profitable for Comcast and Time Warner (Adelphia Buyout Boosts Cable in Bundling War with Satellite and Telcos; Acquisition Will Spur Cable VOIP Availability and Adoption, 2006). This could pose training challenges for the former Adelphia employees in the areas of training and technical competency. A successful training program, through mentoring and/or formal training, should ensure a knowledgeable staff among former Adelphia employees over the long run.

One key area to examine is that of the customer service personnel and technical training personnel, as the former Adelphia had a “poor record for retaining customers” (Adelphia Buyout Boosts Cable in Bundling War with Satellite and Telcos; Acquisition Will Spur Cable VOIP Availability and Adoption, 2006, par. 1). The length of time it takes for Adelphia emploees to improve on their retention is dependent on several factors, including the strength of the training programs and leadership capabilities of Comcast and Time Warner Cable, willingness of Adelphia employees to embrace change, and successful infusion of organizational philosophies.

Anticipated Changes in OB and Structure

The obvious change in the organizational structure of Adelphia deals with the fact that when transition is complete, the company will no longer exist. The structure of the company will transform from a traditional bureaucracy to nonexistence. Those human resources which will be transferred to Comcast or Time Warner Cable will still be employed, but by a different firm with similar organizational structure. Typical changes in employees when faced with an acquisition include job security and motivation.

Job security

Job security refers to being able to work within an organization for an indefinite period without worrying about being terminated. When some organizations are acquired, fewer positions are made available. Also some positions within the organization will be duplicated and many positions may be eliminated. This may cause various departments to downsize, in which employees may be moved around to other areas or possibly laid off of their jobs. The futures of the employees may become uncertain and many employees will become scared.

Motivation

Reinforcement theory argues that “reinforcement conditions behavior… Significant research indicates that people will exert more effort on tasks that are reinforced than on tasks that are not. Reinforcement is undoubtedly an important influence on work behavior. What people do on their jobs and the amount of effort they allocate to various tasks are affected by the consequences of their behavior” (Robbins, 2000, 115). By positively reinforcing model behavior and negatively reinforcing inappropriate workplace behavior through the use of feedback and other tools, managers can mold employees to increase performance, efficiency, and raise production. In order to improve on one’s performance, an individual must know where the areas of improvement lie. Robbins suggests that “[t]oo much information as well as too little can lay the foundation for conflict” (2000, p. 265) Hence, it is management’s responsibility to determine how much feedback is to be provided and whether to provide less feedback to those who wish to receive less. Alternately, management may wish to find out what other motivations theories may assist in motivating these two employees so as to not disturb the status quo, especially if the potential for conflict is considered high.

The Equity theory states “that employees weigh what they put into a job situation (input) against what they get from it (outcome) and then compare their input-outcome ratio with the input-outcome ratio of relevant others. If they perceive their ratio to be equal to that of the relevant others with whom they compare themselves, a state of equity is said to exist. They feel that their situation is fair, that justice prevails. If the ratios are unequal, inequity exists; that is, the employees tend to view themselves as under-rewarded or over-rewarded. When inequities occur, employees will attempt to correct them” (Robbins, 2000, p. 116).

The inequities can also be referred to as tension. The tension that is created usually affects employees in a number of ways. The under-rewarded employee has two options. First, their efforts may decrease resulting in lower productivity or poorer quality of out put, because they feel that they are not being paid adequately for the work they do. Secondly, the under-rewarded employee may produce a higher quantity of output, because they want to increase their equity or input. The latter statement is most important to this research. Although the under-rewarded employee is being paid less than his colleague for doing the same job, the tension that exists will make the employee change his work habits, thus motivating him to perform and possibly increasing his output. The same principle holds true for the over-rewarded employee. The over-rewarded employee will increase their output to justify the input side of the equation. This employee is motivated by the positive tension created by his inflated salary, thus the employee does not want to jeopardize losing his job or any portion of his salary, so he will consistently perform at a higher level of production. There are some unanswered questions in the equity theory, but researchers have proven that this theory has been used to motivate employees.

In the 1960’s, Victor Vroom developed the expectancy theory of motivation. It refers to the “the strength of a tendency to act in a certain way depends on the strength of an expectation that the act will be followed by a given outcome” and depending on how appealing the outcome is to the individual (Robbins, 2001). There are three variables of the expectancy theory. The possible reward that can be gained on the job is significant to the employee. This is known as attractiveness. Performance-reward linkage is the belief that performing on a certain level will allow the employee to gain a desirable outcome. When the employee believes that the more effort put forth leads to performance, this is referred as effort-performance linkage. According to Richard Scholl, a professor at the University of Rhode Island, there are three additional variables that affect the expectancy perception, self-efficacy, goal difficulty, and perceived control over performance (2002). Self-efficacy is the employee’s belief regarding his or her skills and goals required to perform in a satisfactory manner. In situations where the employee believes goals are set too high and the performance level is too difficult, expectancy perceptions and motivation become low. This is goal difficulty within an organization. Under the “perceived control over performance” theory, expectancy is high when the employee thinks they have some type of control over the outcome. If the employee perceives that he or she cannot control a given situation, motivation is low.

As management informs employees of their progress while working on a task within an organization, many become motivated if the progress is positive. If the progress is negative, it gives the employee a chance to discuss the situation with management and make an effort to improve before the task is complete. Scholl suggests that these types of individuals believe that they have control over the outcome; therefore expectancy is high within the organization. But when employees feel they have not control of the outcome of a situation, expectancy and motivation is low (2001).

In terms of this acquisition, it is important to note that Adelphia employees who do not receive enough communication, too much communication, or feel substandard when compared to Time Warner or Comcast employees may be less motivated in their new work environments.

Additional Analysis

Several questions remain including:

Did the organization conduct appropriate research in developing its organizational behavior strategy?

Did the organization effectively analyze environmental impacts?

At the time this essay was written, no data could be found to answer these questions. However, one can assume, based on the analysis written by Strategy Analytics, Inc. that the acquisition was well thought out and carefully planned by all three parties. Time will be a determining factor in determining the effectiveness of the acquiring companies’ research.

Implications and Recommendations for Further Analysis

As of the time that this essay was written, the acquisition has closed and the post-transactional phase of implementation began. Therefore, an analysis of the post-implementation period could not be conducted.

Upon successful transition, additional research should be conducted to determine the OBOB theory should be applied to determine if any theories will be applicable, whether they were properly incorporated, and whether theories were omitted. Second, an analysis should be conducted to determine how the use (or misuse) of design strategy and OB principles affected the implementation. Finally, an objective analysis should be conducted to determine whether any of the arguments and theories presented herein appear to be supported upon the outcome of the transition.
References and design implications of the buyout. First, Swiderski’s taxonomy of

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