Elektrolux The Acquisition And Essay

This essay has a total of 2122 words and 11 pages.

Elektrolux The Acquisition And

The acquisition of different companies always indicates a change for both the acquiring
and the acquired organisation and the people within. To successfully combine and integrate
Elektrolux and Zanussi it is essential to consider both organisations' formal and informal
structures which are heavily influenced by their culture. Culture develops on the one hand
nationwide but also specifically in an organisation. Building up trust is important to
develop a working informal network, which supports the formal structure. Thus positive
influence is taken on the selected behaviour of people within what Breton and Wintrobe
call 'bureaucracies';. This behaviour is characteristically competitive, especially in
such times of major change.

This change should be managed step-by-step and is described by Quinn as logical
incrementalism. It builds 'the seeds of understanding, identity, and commitment into the
very processes'; (Quinn, p145) and is the underlying strategy which makes integration

After Elektrolux announced the acquisition of Zanussi, both organisations and people
within were confronted with many changes which created tensions or misfits that called for
new visions.(Normann in Quinn, p99)

As a first step, mission values and guiding principles of Zanussi were made public to the
employees in the Mission Statement.(Exhibit 3 in Case Study, p914) From the bottom-up they
should understand step-by-step in a learning process (Normann in Quinn, p99) what
behaviour was generally expected and correct. Bennis and others (in Quinn, p101) also
agree that 'programs to achieve significant change must be phased and largely undertaken
bottom up, but the legitimacy of alternatives must be affirmed by the support of key
people at the top.'; Besides the new Mission Statement, education and training programmes
were undertaken to diffuse the new philosophy and policy.

Thus the rules for building up an effective network are made visible. This network
supports the formal structure. Breton and Wintrobe also assume that 'relationships between
superiors and subordinates in bureaus are generally governed by exchange and trade and not
by the giving of orders and directives.';

Exchange can only take place, if property rights are existing and are supported by 'trust'; (Breton and Wintrobe, p4)

Trust is essential for the functioning of networks and has to be built up incrementally.
One effective way of building up trust is by making 'symbolic moves'; (q,111). In addition
to this, the 'most important changes are often those which signal a change in attitude at
the top of an organisation.'; (Riccardo and Cafiero in Quinn, p112). Elektrolux made
extensive use of these symbolic moves.

One was that Elektrolux took over several prior commitments of Zanussi, although they were
considered as disadvantageous for the joint strategy (Case, p900).

Right after signing the final agreement, the complete Zanussi top-management was released.
Replacing only one senior manager below the top-management, Elektrolux's purpose was to
give a clear signal of the need to change working practices.

To communicate these changes, Mr. Rossignolo was seen as the perfect change agent, because
he is Italian and knows the Swedish organisation culture. But he also had to build up
trust with the Italians, who considered him closer to Sweden than Italy. In respond to
this attitude, an external consultant was brought in. As Mr. Estes says, 'you don't try to
ram your conclusions down people's throats. You try to persuade people what has to be done
and provide confidence and leadership for them.';(Quinn, p136) By this Mr. Rossignolo set
a sign that he does not want to take one party's side, but that he is neutral and
therefore he increased the Italian's trust in his person.

According to the mission statement, Elektrolux central value is 'transparency';, or
openness. To integrate this in Zanussi's culture was one of the major tasks the Swedish
had to achieve. Conflicts were part of the Italian's daily life. Seniority and loyalty to
individuals were seen as more important than competence or commitment to the company. They
were also not convinced of need for change and thought financial problems were due to
former owners mistakes.

The Italians feared loosing their power not only to another company, but even worse to one
from a foreign culture. In response to this attitude, Hans Werthen set a sign to the
Italians when he said:'; We are not buying companies in order to close them down, but to
turn them into profitable ventures... and we are not Vikings, who were Norwegians,
anyway.'; (Case, p901) Impressively, he demonstrated that openness is a practical part of
the new culture.

With the same openness, Elektrolux gained the trust of the important Unions, who have a
high influence in the Italian organisation culture. Without the approval of the Unions, it
would have been difficult to take over Zanussi.

Openness is a general Elektrolux attitude, but as Quinn describes, there are 'sound
political or informational reasons for not announcing a strategy in its full pristine
glory at this early stage.'; Although not very glorious for the workers, it can be assumed
that Elektrolux knew very well that they would have to make redundancies, because no
acquisition can be made without. But as 'effective change managers [they] recognise[d] the
impact their incremental decisions and action patterns have on credibility [...] and tried
to keep in mind the symbolic implications each individual act had.'; (Quinn, p118)

Elektrolux solved the central problem of redundancies incrementally. Their plan was to
gain the trust of the Unions by promising not to make any redundancies to successfully
acquire Zanussi without opposition of the Unions. Having one foot in the door, they could
start making redundancies step-by-step. They took into account that their credibility
would suffer negatively proportional to announced redundancies. Although this strategy was
accompanied by some strikes and heavy re-negotiations, they still had reached their goal,
which was to acquire Zanussi.

Although the problems with the Unions had negative impact on Elektrolux reputation,
generally it can be said that they effectively communicated their openness and in turn
gained trust by the unions and the Italians.

Therefore, building up trust is essential when integrating the two companies.

Breton and Wintrobe suggest that 'selective behaviour'; (p6) is next to trust a second
issue in organisational bureaucracy. The subordinates chose from a range of behaviour
which reaches from always inefficient to always efficient. Therefore, selective behaviour
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