One of the world’s largest, well-known and globally amalgamated steelmakers is ArcelorMittal. It is an Indian multinational company with its headquarters in London and Luxembourg. It employs more than 320,000 people over 6 continents in 60 countries (ArcelorMittal, 2016). It leads the global steel market in production of steel necessary for construction, automotive, packaging and household. In research and development in this industry it stands tall as a great innovator.
The present manifestation of ArcelorMittal was created with the momentous merger of 2006. Arcelor was created with mergers of different companies (Arbed, Usinor and Aceralia) placed in Luxembourg, France and Spain. Arcelor, the steel giant merged with Mittal Steel to create the ArcelorMittal. These two giants came together and they complimented each other properly. Arcelor had widespread service centre and distribution operation while Mittal had important raw materials like coal and iron ore.
In June 2006, both the giants came to an agreement as equals in the merger. By September 2006 they announced a new dividend policy that would pay out 30% of net income annually. The revenue generation of 2007 was 105 billion dollars and they became the global leader. The steel production was 10% of total global output. They exhibited some overlapping in their operations. This was not like other usual mergers. A small section of cost was saved in reducing duplicate operations and functions (Friesen , 2013).
This massive global endeavour needed to function at the zenith of efficiency, so the Chairman CEO Lakshmi Mittal understood the need of employees being proficient in a standard language that is used for business. For this case, English was the chosen official language.
The Guy Dolle, chief executive of Arcelor dismissed Mittal as a “company of Indians”. The Spanish, French and Luxembourg government did not support the takeover. The initial fierce French opposition was highly criticised by Indian, American and British media for showing economic nationalism and double standards. Lakshmi Mittal’s Indian nationality was a hindrance for the finalisation of the deal (ArcelorMittal, 2016)
ArcelorMittal had three objectives to achieve with the merger. They are: (1) facilitate rapid integration; (2) effectively manage the daily operations of the new organisation; and (3) speed up profit growth and revenue.
ArcelorMittal provides safe and healthy working environment for its employees. It provides options for both part time and full time working options. They provide excellent pay for the employees who work full time. If someone is efficient enough they have potential to earn a lot here. The working environment is such that employees see each almost every day and become family instead of co-workers.
ArcelorMittal dedicatedly works towards employee safety and achieving zero fatalities, injuries and incidents at their mines. They have gradually progressed in health and safety measures especially in the mining section. The first priority of ArcelorMittal is the people who work for them. With great safety measures at all mining levels zero injuries can be easily achieved in the working environment and thus, an employee joins work every day with a positive attitude. They mainly focus on eliminating all sorts of risky behaviour. The leaders at the mining section are well trained to face challenges with determination and performing the acts of leadership (Chakravarty & Chua, 2012). The leaders have correctly functioning systems, personal skills and necessary tools.
Irrespective of all the progress made to achieve better safety for the employees the LTIFR (lost-time injury frequency rate) dropped to 0.74 in 2014. Thus, it is extremely necessary to continuously keep updating the safety measures, identification of hazards, assessment of risk and encouraging leadership. ArcelorMittal encourages a habit of speaking up in occurrence of risky behaviour and caring for each other in the mining operations (Feldman & Msibi, 2016).
However the management is incompetent. They fail to understand the needs of the employees and act accordingly to them. The management have been moved to different job roles to stop any sort of further damage to the work environment in the organisation. After the merger took place and Mittal became the head, the company did not recruit anyone for audit of the organisation. Those who came were not examined about their skills and capability. The organisation heavily depends on external contractors for providing human resource for imperative roles in the company (Flores, 2013). Choosing managers only based upon their seniority might prove to be taxing for the organisation.
The Central Issue
Following the merger the ArcelorMittal framed three objectives: (1) facilitate rapid integration; (2) effectively manage the daily operations of the new organisation; and (3) speed up profit growth and revenue. The primary impetus for the merger was the third objective. They wanted to heighten their productivity and revenue generation by combining the complementary skills and assets.
The primary step of integration needed to be achieved within six months. The MIT’s (management integration team) role needed to be decided along with other responsibilities. Both the parties worded in parallel and submitted their own drafts of activities. The selection committee selected the senior managers who later chose their own teams. Progress was checked every week and some plans were implemented even before the whole integration was complete. The top leaders were chosen on the basis how they could manage the cross culture collaboration and handle problems as they sprung up (Cock, Lambert & Fitzgerald, 2013).
An innovative way of recruiting people was taken up and it was called the “road-show”. They published a website along with web TV. There was much confusion and uncertainty among the workers because of the merger and how they would be impacted by it. The managers were directed to speak to the employees about the importance of the merger and the new direction of the organization (Kelly, 2012). The first step of integration ended the next year of the merger during a conference which was attended by more than 500 top managers of the company. The top managers flew out to the major sites of operation. The new ways of functioning was communicated to the local managers (Gaughan, 2013). They took help of media interviews to spread the message to everyone. Journalists were allowed to visit different operation sites to judge the progress of the organization. The customers were also updated about the benefits of the merger that took place.
ArcelorMittal set the target of 1.6 billion dollars for cost savings annually. With optimised operations and the integration objectives helped them to realise the target they had set for themselves the following year.
The central issue of ArcelorMittal is the cultural problems that the new organisation faced after the merger. The first problem they faced in culture differences is communication. Internal communications are extremely important but there was a hindrance because of different time zones and cultures. There was a need for frequent conference calls between the CEOs, employees and management. Second, redundancies needed to be avoided as the merger took place (Ferraro & Brody, 2015). Rotational shifts, early retirements and voluntary retirement schemes were launched to cope with this problem. Third, a lot of people lost their jobs after the merger, which something very normal. They were dealt with as much care possible and the company took responsibility of them. The voluntary salary deduction of the managers was a necessary step.
Hofstede’s cultural dimensions model is a theoretical framework that is developed by Geert Hofstede for cross-cultural communication. Many companies use Hofstede’s theory as a strategic tool for becoming more efficient in strategic management. The world has become a global village. Cross-cultural issues and cultural differences are the aspects that are considered in the model by Geert Hofstede. The theory is applied to different aspects of research apart from companies such as cross-cultural psychology, intercultural communication, and international management. Cross-cultural issues and cultural values are analyzed in the model (Mowday, Porter & Steers, 2013). The model of cultural dimensions consists of six primary dimensions such as individualism, long and short-term orientation, indulgence, power distance, masculinity and uncertainty avoidance.
Power Distance Index: It is defined as the degree of extent in which less powerful organizations expect and accept unequal distribution of power among them. Higher degree in power distance index implies a hierarchy that is established in the society. Lower degree in the index defines that people will question the power or authority.
Individualism vs. Collectivism: The index is characterized by the extent where people are integrated into different groups in society. In this index, society is divided into two categories namely individualistic society and collective society. People of individualistic cultures are loosely attached with one another (Martin, 2016). They emphasize individual needs first rather than collective needs. People of collective societies are related to each other by integrated relationships. They support their family members with loyalty and stand beside them during the time of conflict.
Uncertainty Avoidance Index: It is defined as the tolerance level of society for ambiguity. The index describes nature of the people who behave abruptly or in an unexpected manner. People embrace an event unexpectedly. Higher degree in uncertainty index usually opts for strict codes of ethics, laws, guidelines and behaviour (Minkov & Hofstede, 2014). Lower level in this type of index reflects more acceptances while differentiating various ideas.
Masculinity vs. Femininity: This dimension is defined as the preference of people for assertiveness, heroism, achievement, etc. These are known as characteristics of masculine societies. Feminine societies represent caring, modest attitude, etc (Wang & Bansal, 2012).
Long-term orientation and indulgence are another two dimensions of the cultural model of Hofstede.
Comparison Between Hofstede Model with Shein Model
Many theoretical models of organizational culture describe various aspects of ideal culture followed by organizations in real life. The theoretical frameworks suggest companies to follow the culture that will help in smooth flow of operations. The report will discuss about another model of organization culture. Schein model of organization culture will be described along with pointing comparison with Hofstede’s model.
Schein’s model of organization culture illustrates three different types of organization culture. They are espoused values, behaviours and artifacts and shared basic assumptions. Dimension of behaviour and artifacts refer to tangible, verbal and overt elements of an enterprise. Artifacts of a company include official jokes, dress code and furniture. Stated values and rules of behaviour are included in the espoused values of the organization. According to the theory of Schein, employees of a particular company highlight the organizational culture to the world and to themselves. The dimension of espoused values is illustrated in terms of official philosophies and public statements. Organizations will face problem if the espoused values is not aligned with the deeper tacit of organization culture. Employees are the assets of a company. They can be the initiator of organizational culture of a particular enterprise. Assumed values and shared values are very important dimension of the model. Mindset of people associated with a company can be influenced by organization culture. There are certain beliefs and facts that cannot be measured. These are the intangible elements of the model. Hidden factors of the employees of people create an impact on the organizational culture. Sometimes, employees assume few values of their own that may not align with the culture practised in the company. Inner aspects of nature of human beings are not controlled by organization itself. Apart from that, Schein model also supports cultural change in a company. A third level organization culture is created for the sake of changed mindset of employees in a company. Cultural change is possible only when workers of the enterprise will accept changes required for development. A process includes transformation of behaviour. According to Schein, culture is not developed in a single day in an organization. Employees adapt changes in the culture of the company in due course of time. Both changes in external and internal environment are mandatory in terms of adapting new organization culture.
However, Hofstede’s cultural model is implemented in this study rather than Schein’s cultural model. Both models are different from one another. Two models illustrate different aspects of culture practised in organizations. Six dimensions of Hofstede’s model perfectly describe the issues faced by the company ArcelorMittal in different parts of the world. For instance, ArcelorMittal is mainly facing issues in communication that is explained by the dimensions of Hofstede’s model. Power distance, uncertainty index, individualism, indulgence, etc. are present in Hofstede’s model but are absent in Schein’s model. The cultural issues are formed due to the diverse nature of people that are illustrated using the dimension of power distance. It is the reason of choosing Hofstede’s model over Schein model for relating the cultural issues of ArcelorMittal in the study. Lack of training module is the cause of miscommunication in the company that results in individualistic mindset instead of collectivism. Apart from that, it also creates employees short-term oriented which is a drawback for the company.
Cultural Issues of ArcelorMittal After Merger
The two steel giant companies Mittal and Arcelor merged in the year of 2006. The merger of the two companies led to several problems that are grouped into several categories. Cultural issues are the areas of discussion in the article. After the merger, the new company is one of the largest steel-making company in the world. The newly merged company ArcelorMittal is facing cultural issues like accessibility, integration, exact problems, personalization, defective training of the employees, etc. Previously the company has provided classroom training to all its vendors and employees (De Mooij, 2013). However, after the merger, the company is operating in multiple countries such as Brazil, Argentina, and other European countries. Classroom training is not feasible for this type of setup of the enterprise. The facilities, vendors that are located in the countries of Brazil and Argentina, are very scattered in nature. Multiple vendors of the company are located in numerous locations (Bakir, Blodgett, Vitell & Rose, 2015). It is the reason of incurring massive losses in the field of training provided to the employees and the vendors. Classroom training for each employee incurs a huge cost per worker while providing training by the company. It is becoming next to impossible for the company for providing training to vendors located at scattered locations (Parry, 2013). Apart from that, the company is facing difficulties in measuring the Return on Investment (ROI) across the whole organization.
Integration management along with its accessibility is a cultural problem encountered by the company. The communication problem is the core issue that gives birth to different cultural and operational problem of the organization. The main issue arises due to lack of knowledge of English language of the vendors. Vendors are not able to communicate with their supervisors that lead to problems in organizational culture and operational issues. English is a universal language, but local people of South America prefer local languages to the English language (Birat, 2013). However, due to deep functional integration, the training provided to the vendors is not correct all time. Moreover, the employees of the organization are not provided with right training about the usage of proper tools and equipment that would help them in improving their English language skills (Friesen, 2013). Due to the above issues, the employee relations of the company with its workforce are at stake. Co-ordination among the employees is almost nil in many countries that results to decentralization of authority among teams. Usually, these problems are evident in underdeveloped countries, which have people of short-term oriented (Leblanc & Normand, 2015).
The merger of ArcelorMittal faced many problems apart from cultural aspects. The company faces problems in its operations, finances, management, employee relations, etc. The main problem is surrounded on integration aspect. However, the success of the merger had not met the expectations that was set previously. A lot of goals and objectives are set at the time of formation of merger. Apart from facing many problems, the merger is recognised as one of the greatest merger in the industry (Vitell, Nwachukwu & Barnes, 2013). The issues faced by the company are mainly failure of the existing strategies in the sphere of operations. The existing methods of training and development used by the companies for the development of the employees and vendors are not sufficient for meeting the rate of productivity. Due to the issue of communication, the managers of many countries are not linked with one another that result in decreased level of productivity.
However, the junior level managers and vendors are the group of employees who are associated with one another for business operations. It is already mentioned earlier that the module of classroom training is not up to the mark for meeting the requirements of the employees. It is the reason of loss the company is making due to internal aspects. Cross-cultural communication among the senior level of employees is a cultural issue that is a vital cause of miscommunication in the company (Chan, 2015). Sometimes it also causes misunderstanding among different executives that result in reduced level of productivity along with less profitability.
Relation of the Problem with the Theoretical Model
There are many challenges faced by the merger company that is discussed above. The cultural issues are pointed out in the study that is related to the cultural model of Hofstede. Hofstede's model describes national culture along with organizational culture. Using Hofstede's model, the problems of ArcelorMittal can be discussed in the light of various dimensions of the above model. Problems in training, integration, communication, etc. are linked to the dimension of uncertainty avoidance, short-term vs. long-term orientation, restraint vs. indulgence, etc. The linguistic problem faced by the vendors and employees results in various internal problems within the company.
Uncertainty avoidance is the problem that is faced by the enterprise due to the wrong training program (Hill, Jones & Schilling, 2014). Employees of the organization are suffering from uncertainty in many countries due to the communication problem. People will react in an abrupt manner if they find that there is any difference in the organization culture. This will lead to negative impact on the mind of the workers and vendors of the company (Kinloch & Metge, 2014).
Again, the changed mindset of the people will give rise to a short-term oriented mindset of individuals. It has both positive and adverse effects on the profitability of the company. The numbers of long-term oriented people in the company are gradually decreasing due to the cultural issues and problems.
According to Hofstede's model, countries have varied level of tolerance in the society. The difference in the varying nature of organization culture with the national culture will lead to lower level of power index (Feldman & Msibi, 2016). The lower level of power index of the employees will question the authority of power.
Employees of the company behave differently belonging to different categories of societies such as restrained societies and indulgent societies. Linguistic problem among the employees are responsible for creating a distance among them. Hence, people of restrained societies are suffering the most.
The culture of collectivism is usually followed by the employees of the company in countries like India, Argentina, Brazil, etc. They maintain integrated relationships. However, problem in communication is responsible of delayed productivity as well as poor employee relations.
In the masculinity and femininity index, there are no such issues faced by ArcelorMittal in its operating countries. However, the cultures of masculine societies are followed in most of the operating countries. Female employees in some cases faced problem for the strong admiration.
The study discusses the company background of the merger company ArcelorMittal along with its competitive environment. The business environment of the company is healthy in the perspective of the employees. However, the management of the organization is not so much competent enough to solve the issues of the employees and vendors in different countries. Before the merger, the two steel manufacturing companies have different organization culture which clashes after the merger. The enterprise failed to solve the cross-cultural issues faced by different levels of managers in different countries. After pointing the cultural issues, it is the responsibility of the HR managers of the company to solve various cultural problems. The steel manufacturing company is making losses for meeting the return on investment within a stipulated time. Recently, the merger enterprise is focusing on mitigating the problems faced by it. To solve problems, it is necessary to know the core reasons of the issue. By detecting the core causes of the problems, strategies are to be formulated which will improve the current situation of the company.
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