MANAGEMENT DISSERTATION PROPOSAL PROFORMA

PROPOSED DISSERTATION TITLE: Leading an organization through a Merger & Acquisition in down market conditions: Case study of a major Oil & gas services company

ETHICAL CHECKLIST COMPLETED:  YES [ X ]                NO [   ]

DEGREE PROGRAMME: MSc. in International Management, Oil & Gas focused

Specialisation Track (Please check as appropriate):   

General [   ]                      Finance   [   ]                    Marketing [   ]

Other [ X ]    (please specify) Oil & Gas

DATE: 27/Jan/2016

MANAGEMENT DISSERTATION PROPOSAL PROFORMA

A.     Aim, objectives and feasibility of the dissertation (first draft required in Week 2 of RM module)

• Background

The oil and gas industry is going through one of the toughest times in a very long time with a huge drop in oil prices from above $100 to below $40 with anticipation that it could hit $20. This pushed most of the oil companies, especially service providers, to cut down it working force drastically to cope with the new market conditions. Managers had to take several counter measures to ensure continuity and profitability. We have seen a lot of people leave, by choice or otherwise, which greatly affected morale and productivity in the workspace; job security is becoming a major concern now to the workforce in the industry.

Moreover; Baker Hughes is currently going through a rough phase after the announcement of Halliburton acquiring the company. The state of uncertainty that revolves around the situation got transferred to the workforce and people are not sure about their future with the company anymore. A lot of great talent left the company seeking a different career with a competitor just to avoid having to live in a worrisome state for months until the deal is sealed. Those who remain behind either hoping for a better career with the new organization, or just passing the days as they lost interest in the company and looking for alternatives.

• Aim

The aim of this dissertation is to investigate the role of change management and leadership during a merger and acquisition in tough market conditions. The dissertation aims to analyze the effectiveness of change management and leadership in ensuring a smooth transition and a productive workforce. It will also analyze employee perceptions of management during this process.

• Draft research questions/hypotheses

The main questions we are trying to answer through this research are:

• How can the management retain talented employees in tough market conditions especially with all the uncertainty surrounding the M&A?
• How can the Change Management, or other leadership styles, help in creating a safe work environment for the employees to maintain their focus and avoid distractions caused by speculations and rumors?
• How do employees perceive their management’s decisions (including cost-cutting, layoffs, and organizational changes) during the market downturn?
• What it take to build trust between the leadership and employees in such situations? And how to maintain transparency without risking a panic between the employees?
• What is management role after a successful M&A to ensure a smooth transaction for the employees within a short period of time to maintain productivity?

• Draft research objectives

The research objectives are to find answers to the above questions.

• Analyze the management role during the market downturn in retaining its most valuable assets, employees, and discuss the effect of media on employees’ morale and how the management can counteract that effect through open-door policy and transparency with the employees.
• Investigate the most suitable management style that can be utilized during such conditions to successfully guide the employees through the ongoing changes to the organization and the market. Change management is one of different styles that are concerned with how to manage people through changes without sacrificing performance.
• Survey employees for their feedback on their managers’ styles and decisions during the M&A and market downturn to find the most suitable leadership style that employees prefer to work with during these conditions.
• Trust is a major concern to both employees and managers. If managers could establish their employees’ trust, they would be able to guide them through the difficult times and ensure their productivity and focus on the organizational goals at the same time. We will investigate what it takes to reach this level of trust through transparency and complete honesty on management’s decisions.
• After the success of an M&A process, employees might feel disoriented being part of a new organizational structure with unfamiliar processes. Management role at this point is essential to ensure a smooth transaction of all ongoing operations and commitments with customers as well as employees welfare in the shortest period of time possible.
• If the M&A process fails for any reason; the management needs to regain lost employees’ focus after a long period of distractions. The organization’s business will also be affected greatly after the sacrifices that the organization had to go through to complete the merger in terms of headcount cuts and restructuring.
• Feasibility of the study

The major challenge for the research is the management availability and comfort against the interviews. The issue is delicate and some information they won’t be able to release to the public. My office is only an hour away from the regional headquarters which makes it feasible to drive there and interview different levels of managers, VPs, and the region president (depending on availability). Regarding the employees survey; the easiest and fastest way to conduct this will be via web-based surveys sent directly to all employees (the organization has mail-groups that include all of the organization’s emails).

B.     Literature review (first draft required in Week 3 of RM module)

Throughout the recent history, the oil prices has surged and dropped several times which made it really difficult for experts to predict. These sudden changes raised a lot of questions that left researchers dazzled about the nature of the oil prices curve; has the oil production peaked already? Or will it peak soon? How long will the price drop last? How much higher will it get to when it recovers? Will the oil price ever be predictable? (Alquist, Kilian, & Vigfusson 2011, Geman 2005, Hamilton 2009, and Alquist & Kilian 2010).

Table 1 below shows a historic view of the oil and gas drilling activity globally corresponding to the changes in the oil prices in the past three decades (Baker Hughes 2016). The major surge in the oil prices took place before and after the 2007-08 Great Recession during which the demand for oil increased dramatically causing the price to spike (Gkanoutas-Leventis & Nesvetailova 2015). By the end of 2008 when many countries entered an economic recession and the global banking system was suffering badly, the oil prices started dropping as the demand for oil dropped heavily.

Table 1: A historic view of the oil and gas drilling activity globally and within the United States corresponding to the changes in the oil prices in the past 3 decades (Baker Hughes 2016)

Throughout the history; the industry has witnessed several downturns and managed to recover and maintain its existence. No matter how long the downturn lasts; oil prices always seem to recover after sometime. The main concern is that during these downturns; organizations would have to take hard decision and reduce its workforce to maintain profitability. Giant oil companies are reporting record losses, selling billion dollars in assets, and laying off thousands of workers (Fehrenbacher 2016). How does that affect the morale of those remaining with the organization? How can the management contain the employees and maintain a productive atmosphere? Could the rapid change in oil prices and the uncertainty push the oil workers to find a different field? These questions and more decide how successful an organization in downturn market conditions management.

Understanding the employees’ point of view, particularly during a downturn, is essential for the organization to maintain their engagement (Federman 2010). Employees who stay in the company but have left mentally and emotionally are far more destructive than those who physically leave the company. Federman (2010) discusses how employee engagement, which is based on open-door policy and transparency, will be profitable to the organization as it reduces the turnover, absenteeism, and improve productivity. During a downturn, employees’ vision would be blurry and they would mostly lose faith in senior management especially when they start seeing their peers being laid off and the workload increases; they would feel overwhelmed, stressed and lost.

The author highlights three engagement outcomes that would help maintaining a successful work environment; connections, curiosity, and resourcefulness. Organizations that create an environment for their employees to strengthen their connections with each other and with the organization develop a strong bond with their employees and improve their commitment, loyalty, and enthusiasm for the company. To maintain employees’’ engagement, the organization needs to keep them interested in their work, to fulfill their curiosity by communicating with them about what they are interested to do and what makes them feel satisfied about their job. The organization needs to create a healthy teamwork environment to help the employees be creative and productive, such environment will improve employees’ resourcefulness and output.

Federman’s work is important in understanding the employees, the most valuable assets of any organization, and how to keep them engaged and motivated. Senior leadership has a big responsibility in achieving this and this is one of the main point I would address in my research.

In addition to the current tough market conditions; an extra challenge the organization could have to deal with is a merger and acquisition (M&A) process. With the sophisticated regulations put in place in Europe and North America to avoid market monopoly; organizations planning for an M&A could have to divest a major part of their business to ensure competition continuity. This will add to the assets and workforce the organization would have to sacrifice to service the downturn.

Leadership styles are essential for talent retention especially during and after a merger and acquisition (M&A) phase (Zhang et al 2015). Employees will go through an unstable state during M&As concerned about their job security especially if the two sides of the merger are competing in the same market. The acquiring company would have the upper hand and could replace the other side’s staff with its own or choose to keep it as necessary. In the case we are researching; both organizations compete in several market segments which cause the U.S. department of justice to require either sides to divest some of their business to avoid monopoly and adhere to antitrust laws.

Zhang et al (2015) analysed the leadership role in M&As success which requires special leadership styles that enable organizational and cultural adaptation as well as alignment of expectations between both sides.

Transformational and authentic leadership styles are essential in this situation to improve employee engagement and retain their focus. Their research suggested that employees’ decision to stay with the company was generally related to the leadership style they were exposed to. These styles could be task-focused, relationship-focused, or coaching-focused leadership styles. Each style works well with certain types of employees and the leadership should be smart enough and flexible to his employees’ needs to retain their talents.

Zhang et al (2015) study is very informative. Although mainly focused on Chinese market; their study is applicable on most markets in different locations. Leadership styles are of outmost important to retain talented workforce during M&As.

Just as 2016 started, the three major oil service companies (named: Schlumberger, Halliburton, Baker Hughes) announced they would cut thousands of jobs in the first quarter of 2016 due to the major drops in 2015 revenue as compared to the previous year. The oil & gas market have been suffering from a major drop in prices for over a year now that led to thousands of people losing their jobs and cancellation of projects worth hundreds of billions of dollars. The price of a barrel of oil has hit its lowest in over a decade and it does not seem it would recover any time soon. Price oil volatility is not that uncommon and oil price shocks take place every few years. Employees in the oil field companies and their families often stay mobile with the chance to leave one country for another depending on market conditions.

Herrera & Karaki (2015) analyzed the effect of oil prices on economies and job flows and their direct effect on workers’ reallocation. The authors find in their research that oil prices greatly affects employment in a certain location. However, they concluded that this effect was mainly through cumulative channels (e.g. income transfers from oil importing to oil producing economies, declines in potential output). Due to the recent drop in oil prices; those countries that could not maintain profitability with the low prices stopped drilling and exploration projects which caused workers to migrate to different locations where the activities are still ongoing.

Oil price shocks are one of the main derivative to the current market conditions discussed in this research. The drop in price, although positively affects cost of living, has a negative effect on oil & gas workers with reduced activity and headcount reductions.

Relating to previous empirical work on similar problems could create a solid base for the research to build on and improves credibility and professionalism.

C.     Research methodology and methods (first draft required in Week 4 of RM module)

Management research has always been crucial in the establishment and development of multicultural workforce and the development of the global leadership capabilities (Hardy et al n.d.). It is undeniable, however; that epistemological beliefs and cultural diversity have a great influence on how we perceive management research. Adapting an epistemological perspective to management research will help the researcher evaluate the source of knowledge instead of accepting beliefs as non-negotiable facts. However; it is important to apply pluralism in one’s research by understanding, appreciating and adapting multiple perspectives at the same time (Moses et al 2007). Epistemology defines how we perceive knowledge; how we receive and process this knowledge to drive solutions to problems we face. A constructionist stance is more desirable with this problem as it builds up on the in-depth interviews and organizational wide survey to analyze and answer the research questions.

People management during tough economic times while at the same time the organization is going through a major acquisition is definitely a situation that is worth studying. However; the effectiveness of the study would be governed by whether both sides of the equation are analyzed and involved in the research; employees and managers. For that reason, I believe the case study is the most useful research methodology to examine the problem in-depth and analyze every aspect. The case study will be conducted using interviews with the management of the organization as well as surveys for the employees that ensure anonymity and transparency.

Unlike other search methodologies, case study can be based on a mix of quantitative and qualitative data on the studied case. This helps build a comprehensive picture of the situation to reach a deep understanding of the problem and how the management technique adapted is working towards the solution. Achieving deep understanding requires utilizing multiple research methods across various time periods; often referred to as triangulation (Woodside 2010). Triangulation includes direct observation from the researcher within the environment of the case, as well as, asking questions to the case participants for further explanation and interpretations of the observed data. This way the researcher own opinions will not be the only derivative to the research and better subjectivity and fairness will be achieved. The author will conduct interviews with 10 middle-tier to upper-tier managers to discuss the current market situation and the organization’s path with the ongoing M&A process and how it affected the workplace and the employees. We will also conduct a company-wide online survey to get as much responses as possible from employees in different functions and locations to understand the employees’ point of view of the situation and how they perceive their managers handling the situation.

For the data collection; I believe a triangulation approach mixing both qualitative and quantitative methods will result in more accurate results. The qualitative method will be mostly used for the interviews as the questions will mostly be open-ended and more questions could rise on the spot in order to achieve a complete picture on management stance on the current conditions. On the other hand, the quantitative method will be used for surveys and questionnaire that will gather as much responses as possible to a few questions designed to get employees feedback on the current situation of the organization and the market. The author’s aim is to gain the below from these multiple methods data collection approach:

1. Interviews: The interviews will focus on the management level; middle and upper management. The main focus would be on their approaches in tackling the current market conditions and how they maintain the workspace and workforce with the current uncertainty. The interviews will be either recorded, with the consent of the interviewee, or the questions previously prepared and taking notes of the responses. Comparing interviewee responses and analysing the management style most effective within the organization by relating the interview with the employees’ responses to the surveys. Kwasnicka et al (2015) highlights a good approach by gathering relative data about the subject prior to the interview. In this manner; the author will conduct a separate research on the media coverage of the current market conditions and use this data to drive the interview. This method will make it easier to unify the interview flow among the different interviewees and make it easier to analyze the interview results.

1. Questionnaires: Online surveys are the easiest and cheapest option that will collect the most data. Data can then be analysed demographically to identify how different locations, job functions, and levels react to the questions. The questions would revolve around how they perceive their supervisors management style and how it relates to the current market conditions. The point of the survey is to complete the other part of the equation and understand the employees’ stance in this process. Hunter (2012) explored the advantages and disadvantages of online surveys against paper surveys and came up with a few guidelines to improve responsiveness and data quality such as; targeted audience, clear explanation of the survey purpose, attractive headers, the survey request to be sent from a trusted e-mail address, and clear questions that require direct answers.

The reason for choosing multiple methods is that no single method will be able to overcome all the challenges a researcher might face in collecting data (Amy et al. 2010). Using different methods could be in tackling different research questions, or they could guide different stages within the same research (Lieberman 2005). It adds different angles that the research can cover and could lead to more depth in the analysis. Interviews will add depth to the problem analysis while the surveys will add breadth in terms of coverage as samples for the interviews will be very few compared to those of the survey method. Web-based surveys is probably the easiest, cheapest and fastest methods to collect and process quantitative data, and can reach different demographics and functions within the organization (Dex & Gumy 2011).

4. Timing mileposts

NB: You must reach Stage 8 at least 4 weeks before your deadline. A 30-day contingency provision is also advisable to allow for potential slippages. This will enable your DA to give you sufficient feedback on your final draft.

You should produce a final Proposal for submission to the DA for approval within 1 to 2 months from your module start date. However, please aim for 7 weeks from your start date at the latest, to ensure time for any necessary revisions and final approval by the 8 week cut-off.

References:

Alquist, R, & Kilian, L 2010, ‘What Do We Learn From The Price Of Crude Oil Futures?’, Journal of Applied Econometrics, 4, p. 539, JSTOR Journals, EBSCOhost, viewed 14 March 2016.

Alquist, R, Kilian, L, & Vigfusson, R 2011, ‘Forecasting the Price of Oil’, Working Papers — U.S. Federal Reserve Board’s International Finance Discussion Papers, 1022-1024, pp. 1-116, Business Source Complete, EBSCOhost, viewed 14 March 2016.

Amy R., P, Marco A., J, & Elinor, O 2010, ‘Chapter One Overcoming Methodological Challenges’, Working Together : Collective Action, the Commons, and Multiple Methods in Practice p. 3 Princeton: Princeton University Press Project MUSE, EBSCOhost, viewed 30 January 2016.

Baker Hughes 2016, Rig Count: Historic View of Rig counts against oil prices, Baker Hughes

Dex, S, & Gumy, J 2011, ‘On the experience and evidence about mixing modes of data collection in large-scale surveys where the web is used as one of the modes in data collection’, OAIster, EBSCOhost, viewed 30 January 2016.

Federman, B 2010, ‘Reengaging the workforce during tough times’, Employment Relations Today (Wiley), 37, 1, pp. 27-34, Business Source Complete, EBSCOhost, viewed 27 January 2016.

Fehrenbacher, K 2016, ‘For Oil Companies, It’s a Year of Slashing Costs and Jobs’, Fortune, 2 February, Fortune.com [Online].

Geman, H 2005, ‘Energy Commodity Prices: Is Mean-Reversion Dead?’, Journal Of Alternative Investments, 8, 2, pp. 31-45, Business Source Complete, EBSCOhost, viewed 14 March 2016.

Gkanoutas-Leventis, A, & Nesvetailova, A 2015, ‘Financialisation, Oil and the Great Recession’, Energy Policy, 86, pp. 891-902, EconLit, EBSCOhost, viewed 14 March 2016.

Hamilton, JD 2009, ‘Understanding Crude Oil Prices’, The Energy Journal, 2, p. 179, JSTOR Journals, EBSCOhost, viewed 14 March 2016.

Hardy, C, & Tolhurst, D n.d., ‘Epistemological Beliefs and Cultural Diversity Matters in Management Education and Learning: A Critical Review and Future Directions’, Academy Of Management Learning & Education, 13, 2, pp. 265-289, Social Sciences Citation Index, EBSCOhost, viewed 9 January 2016.

Herrera, A, & Karaki, M 2015, ‘The effects of oil price shocks on job reallocation’, Journal Of Economic Dynamics And Control, 61, pp. 95-113, ScienceDirect, EBSCOhost, viewed 27 January 2016.

Hunter, L 2012, ‘Challenging the reported disadvantages of e-questionnaires and addressing methodological issues of online data collection’, Nurse Researcher, 20, 1, pp. 11-20, Academic Search Complete, EBSCOhost, viewed 29 March 2016.

Kwasnicka, D, Dombrowski, S, White, M, & Sniehotta, F 2015, ‘Data-prompted interviews: Using individual ecological data to stimulate narratives and explore meanings’, Health Psychology, 34, 12, pp. 1191-1194, PsycARTICLES, EBSCOhost, viewed 29 March 2016.

Lieberman, ES 2005, ‘Nested Analysis as a Mixed-Method Strategy for Comparative Research’, The American Political Science Review, 3, p. 435, JSTOR Journals, EBSCOhost, viewed 30 January 2016.

Moses, J. & Knutsen, T. (2007) Ways of knowing: competing methodologies in social and political research. Basingstoke, UK: Palgrave Macmillan, viewed 9 January 2016.

Zhang, J, Ahammad, M, Tarba, S, Cooper, C, Glaister, K, & Wang, J 2015, ‘The effect of leadership style on talent retention during merger and acquisition integration: Evidence from China’, The International Journal Of Human Resource Management, 26, 7, pp. 1021-1050, PsycINFO, EBSCOhost, viewed 27 January 2016.

Woodside, AG 2010, Case Study Research. [Electronic Book] : Theory, Methods, Practice, n.p.: Bingley, U.K. : Emerald Group Pub. Ltd., 2010., University of Liverpool Catalogue, EBSCOhost, viewed 23 January 2016.

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