Management of change: A case study of DHL

I. Introduction

In this essay, we will make a full analysis on these issue faced by DHL due to its acquiring of Airborne express company. With full analysis of the environmental factors, we figure out the current situation DHL is engaged in and then these problems faced by DHL.

Finally based on the analysis, we come up with some options for DHL to choose to manage its problems.

II. Analysis

PESTL analysis

According to Elliott, Rundle-Thiele and Waller (2010), macro-environment often encompasses factors outside the company or an industry including factors of political, economic, Sociocultural, technological and legal aspects.

) Political factor

The political issue has a huge influence on the performance of DHL and its customers’ spending power (Elliott, Rundle-Thiele & Waller 2010). With reference to the performance of DHL and Airborne in this case, we are able to have the analysis of these political factors influencing its performance and operation.

For one thing, both DHL and Airborne own the same background of born in America, from which we may infer that these favorable policies given by both central government or state government of America can be enjoyed by them. For the other, the political environment or regulations in America are learned relatively well under their background of born in America. Moreover, compared to other competitors such as FedEx and UPS, the policies about taxation and rebate policies from government are the same to DHL and Airborne.

) Economic

Palmer (2009) advocated it is important for marketers to understand economy both in short and long terms. The economy atmosphere for DHL and Airborne is a little bit depressed. For example, DHL’s achievements are more in other market regions such as Hong Kong and the United Kingdom rather than in America. While compared to these competitors including FedEx and UPS, although enough scale has been built in America market, the cost of DHL are still higher than FedEx and UPS while the business achievements are still lag behind than the other two.

) Sociocultural

Griffin and Pustay (2010) mentioned social and cultural influences often own great influence on business. The market of America, where DHL and Airborne plan to focus on, is open and welcome to any special and innovative culture or spirit. And most important, the culture or spirit cherished by DHL or the acquired Airborne are close related to American culture and social essence, which offer DHL and Airborne more chance and developing potential in its future.

) Technological

DHL was founded in 1969 and Airborne was the third largest parcel carrier in American market, which indicates the advanced technology and skills owned by these two companies. Namely, the technological environment for DHL and Airborne are relatively amiable.

) Legal

There is a risk for DHL and Airborne to face is that which staff to retain and which one to let go, because if there is a lack of careful solution to deal with the staff issue, more troubles or even legal issue will involve DHL and Airborne.

F OPS analysis

Referring to the case of the DHL acquisition of Airborne express, we should have a thorough analysis on its current situation on nearly every aspect, and then we can find out the current problems on both DHL and Airborne’s operation to offer them the most practical and effective recommendations to perfect the acquisition.

) Finance analysis

First and foremost, the financial situation for DHL is seemed to become worse and worse which can be inferred from the case. For example, although DHL was founded in 1969, there have been problems for it to keep up with the developing pace of the other two competitors including FedEx and UPS, especially in the development of America market. Secondly, DHL is seemed to continuously bleed money to stop the situation being worse. Thirdly, after Airborne’s acquisition, DHL has more financial issues to deal with. For example, the biggest headache faced by DHL is to decide which staff to stay and which to leave. That is to say, there are two kinds of financial issues asking DHL to deal with. The first one is to design and build a new salary system to the new team after the acquisition, which indicates more money should be invested to a larger human resource scale. The second one is a certain amount of money should also be invested to pay for the bill of some employees’ lay off.

In a word, the inside financial situation for DHL isn’t optimistic which is full of pressure.

) Operation analysis

Before start to analyze the operation situation of DHL and Airborne, let’s review the situation faced by the two companies. DHL is the company majored in Mail, Express, Freight, Logistics, Warehousing and Distribution, which is developed much better in other regions such as Hong Kong and the United Kingdom rather than in the USA. Airborne is the privately owned airline and the third largest express delivery company in the USA. And the new situation for the two companies is that Airborne has been acquired by DHL.

Now, let’s analyze the brand new operation situation for the two companies. At first, DHL has to make a decision on handling out the issue of hub & spoke aircraft network instead of a point to point network, which requires more time and human resource investment. Secondly, the new situation of workforce management is faced with duplication workforce, because the two companies including DHL and Airborne are independent company before which both own its necessary staffs. Thirdly, DHL was major operated in Cincinnati while Airborne mainly developed in Wilmington, which is relatively independent operation system and structure.

) People analysis

On the one hand, workforce operated in Airborne was regarded as quite militant, whole DHL’s workforce is much smaller or weaker both in number and organizing when compared. On the other hand, both companies manage their people into four groups including the couriers or drivers, regional sales staffs, Hub center staffs and the head office staffs.

) System ad structure analysis

The system and structure of both DHL and Airborne is based on Hub & Spoke aircraft network and four major kinds of personnel, which we can get the general information about their organizational system and structure as below (figure 1.0 and figure 2.0).

Figure 1.0 Organizational system and structure of DHL

b) Figure 2.0 Organizational system and structure of Airborne

I I. Identify problems

We have explored earlier in this essay about the inside and outside environmental factors faced by DHL and Airborne, now we will develop a further analysis based on SWOT analysis and identify the existing problems to assist DHL to carry out suitable recommendations

According to Galbraith, Downey and Kates (2002), SWOT analysis is able to identify the internal and external strengths and weaknesses for organizations to overcome its shortages and catch the opportunities.

SWOT analysis

i) Strengths

The first strength owned by DHL is its background of born in America, which enables this multinational express delivery company have a thorough understanding of the needs, preferences, requirements and more detailed issue from customers on express delivery services. Secondly, Airborne is the third largest express delivery company in American market, which endows DHL higher competitiveness after acquiring Airborne for its future development and expansion in American market with the good understanding of the two big rivals and the comprehensive market knowledge.

ii) Weaknesses

DHL focuses on the development of Cincinnati, while Airborne concentrates on the development of Wilmington. That is to say, after merging whether Cincinnati or Wilmington for some staffs is brand new, this requires more time or energy for them to recover their competitiveness in the new working environment. Hence during the recovering period, DHL may act with lower competitiveness even it has acquired Airborne. Second, the people issue involved in the acquisition may also decrease DHL’s competitiveness. For one thing, people management in the new organization, the merged organization, is a big headache to contribute to a successful strategy including designing and carrying out a satisfactory performance management scheme, designing and carrying out an effective remuneration scheme, and designing and carrying out a satisfactory training and development scheme and so on. Or else, the new organization’s overall competitiveness may be decreased to a certain degree rather than improved as expected.

iii) Opportunities

With reference to the information in this case, there are so many golden opportunities for DHL to catch as well. For one thing, DHL’s developing experience and knowledge in express delivery service management gives the new organization rich and relatively sufficient academic background to support its future expansion in American market. For the other, by acquisition Airborne the third largest express delivery company in American, the comprehensive capability of DHL will be enhanced largely, which offers its great potential to compete with the other two competitors and win a greater market shares from the two competitors and gain more potential customers as well. Moreover, in the international market, DHL with stronger competitiveness will also act more flexibly and confidently to gain a large market share and expand itself in a large market scale to achieve better financial performance.

iv) Threats

Based on information offered by this case, we may also infer some threats faced by DHL and Airborne. At first, there are some strong competitors existing in American market such as FedEx and UPS, give DHL great threats for its future development although it has acquired Airborne. Secondly, the requirement for new entrants to enter the express delivery industry isn’t so strict, which have great market potential to attract new players to come and fight for market shares. Regarding the present situation mention by this case, we may infer that the express delivery industry in American is also full of potential and attractiveness. That is to say, it is possible for more competitors which even strong as DHL to come into this industry to find more profit. And every market owns is principle, which often obeys the rule of supply and demand. Hence, once the supply in the industry which DHL is engaged in has a surplus that supply exceeds demand, which may result in the price decrease and profit loss for this industry, described in figure 3.0 (Welch & Welch 2010). That is to say, under such kind of situation, DHL may also face a loss one day, if it isn’t so outstanding to compete with these competitors in American market.

Figure 3.0 The supply and demand curve for DHL in future

 

III. Problems

i) Operation problem

Based on the above analysis, the first headache faced by DHL after acquiring Airborne is operation problem. In the previous time, what DHL faced with was to manage the single company, which is major developed in the Cincinnati area of America. After the acquisition, DHL has no choice but to management an extra new company Airborne with the new personnel issue, management issue, marketing development and so on, which for DHL is unfamiliar, and calls for time and other kinds of resources’ investment. And this operation of two companies is full of risks, any carelessness and false may finally result in the failure of the entire organization.

Moreover, with reference to the case study, the major achievements made by DHL is in the Hong Kong market, the United Kingdom market and other market regions in the world rather than in the America market. Hence, there is a problem for DHL’s management team to manage the Airborne Company after the acquisition. As we all know, Airborne Express is the third largest parcel carrier in the American market, which may be able to even compete with FedEx and UPS. If acquisition of Airborne indicates the entire management of DHL management towards the Airborne Express instead of the original management team, we may assume the future development of Airborne may be not so optimistic and promising without the instruction of its original management team.

ii) Resistance

The other problems faced by DHL are the resistance from employees in Airborne and even DHL. As the case mentioned, there are about four major workforce including couriers, sales people Hub center staff and head office staff, from which we can infer that there is a great number of employees in both of the two companies. Supposing that if the management of DHL doesn’t work so effectively and manage well every issue related to employees’ benefits such as the new position, salary scheme, developing and training designing and implementation, career designing and other employment benefits, employees in Airborne may feel lacking in the sense of belonging, which may make them producing the emotion of leave. Under this kind of circumstance, DHL may face with the problems of talents losing.

Furthermore, leaving the position may be the mildest risk faced by DHL after the acquisition, there may be fiercer resistance such as some illegitimate political behaviors may occur including bad mouth the reputation of DHL, instigating job hopping, leaking important information or documents to competitors and other illegitimate politics, which may result in the great loss of DHL both in profit and reputation.

ii) Human resource management problem

The first problems faced by DHL after the acquisition is how to design and implement a practical and effective compensation scheme to meet needs from both original DHL employees and Airborne employees. On the one hand, it is said from the case that DHL is major in the business of Cincinnati while Airborne operates its business mainly in Wilmington. That is to say, if there isn’t some attractive enough compensation schemes to attract talents from the both sides, talents in both of the two companies may be attracted to other competitors’ companies instead of staying at DHL (Shyni 2005). This kind of talents loss may decrease the competitiveness of DHL to a large extent.

As we have already analyzed the possibility of talents to leave DHL after the acquisition, another new problem faced by DHL is to recruit talents which may involve series of problems including how to post the vacant job position to the society to attract potential candidates, how to improve the effectiveness of job interview process to assist DHL find the right talents, how to define the actual job content and necessary developing scheme for these old and new employees to motivate their working enthusiasm to pursuit good performance and so on.

By and large, these problems faced by DHL after acquisition are serious which require DHL to carefully deal with.

IV. Recommendations

Diversity workforce management

Cascio (2010) supported the importance of managing diversity workforce in the trend of globalization. For DHL after acquiring Airborne, we suggest to recruit the diversity workforce to support the operation and development of its business.

According to Robbins and Coulter (2004), there are so many factors to promote the popularity of diversity workforce described in figure 4.0.

Figure 4.0 Factors to promote diversity workforce

For DHL to manage the workforce in new situation after acquiring Airborne to meet the needs of talents recruitment, recruiting diversity workforce is the right choice. For one thing, American market is a diversity market with so many races of different requirements on the service industry (Guest 2001). The express delivery industry which DHL is engaged in belongs to the service industry, hence to meet the diversity needs from customers, diversity workforce recruitment and management strategy can be employed in this origination to further improve its future performance and competitiveness after acquisition. For the other, when regarding to the importance of teamwork, diversity workforce may support DHL to provide innovative and attractive strategy and business plans to gain more market share from the two strong competitors such as FedEx and UPS and other competitors (Ghoshal 2007).

Workforce planning strategy

According to Boudreau and Ramstad (2007), it is important for organizations to parallel the workforce plan with the business as a whole. In the situation faced by DHL after acquisition, one task faced by DHL is to manage the workforce as a whole to meet the needs of the entire business, namely express delivery services in both American market and other market regions which DHL has been engaged in. To make the workforce working more effectively to achieve the expected business results, DHL had better design the workforce plans to be consistent with the boarder HR strategy and the overall strategy of the business.

In figure 5.0, it shows the focuses of the workforce plan should response to including the business needs including both internal needs and external needs, forecasting requirements in the staffing level, job design issue, and other net requirements as well as the action plans for DHL to operate such as recruitment, promotion and transfers, training and developing programs and so on.

Figure 5.0

 

With the support of the effective workforce plan, the problems on how to manage both of the two organizations including DHL and Airborne as a whole in an effective way can be solved without too many obstacles.

Training and development strategy

Aguinis and Kraiger (2006) recommended the importance of a suitable training needs analysis to support employees to figure out the real needs on training and development for employees. Figure 6.0 shows the training assessment model to assist organizations’ training needs assessment.

Figure 6.0 The training assessment model for DHL

 

Source: Cascio, W. F. 2010, Managing human resource, 8th edn, McGraw-Hill Irwin, New York,

Based on the above model, DHL is recommended to employ this model into its new organization to ensure the necessity of training (Cullen & Turnbull 2005). As DHL has acquired Airborne for only a short period, which makes this organization lacking in the familiarity to the training and developing needs of people in Airborne, hence this training need assessing proposal is very important. At first, DHL is advised to develop the analysis of four broad areas including the organizational analysis, demographic analysis, operations analysis and individual analysis. Secondly, DHL is advised to relate the training needs to the achievements of some important strategic business objectives. And then the training needs should be designed in a more detailed manner to fit various needs of employees in both DHL and Airborne. And then, these training needs of employees should be finally fulfilled in the training and developing programs in the future. (Cullen & Turnbull 2005)

Downsizing

Another relatively radical means suggested by us is downsizing to reduce the overstaff situation of DHL after acquiring Airborne. As the case mentioned, one headache for DHL is to decide which staffs should be retained and which one should leave. It indicates there is the problem of overstaff. As downsizing often works as the most common and effective means for modern organizations to manage the overstaff dilemma, DHL is also recommended to downsize after its acquiring Airborne (Buchanan & Badham 2008).

And most important, DHL carries out the decisions on which one to leave and which one to retain should be based on the situation of employees’ previous performance. And then the tactics used to mollify the conflicts and resistance from these laid off employees and remained employees should also be skillful which should be based on the principle of fairness, reasonability and rational compensation to make the downsizing activity in DHL implemented in a low key style so as to reduce the side effects as much as possible (Buchanan & Badham 2008).

Compensation strategy

According to White (2006) and Cascio (2010), the pay policies and practices are critically important because their influences are so powerful to impact every single employee, from janitor to the CEO. And for DHL after acquisition, we recommend it to first take full considerations on the four elements including the economic and legal factors, relationship between compensation strategy and general business strategy, pay structure development and importance of some key policy issues, when making up the compensation strategy in the new working environment (see figure 7.0)

Figure 7.0 Four key elements in planning and designing a compensation system

Source: Cascio, W. F. 2010, Managing human resource, 8th edn, McGraw-Hill Irwin, New York,

On the one hand, DHL is recommended to take the above four elements into consideration when determining the compensation systems for people who are the original employees of DHL or the people who are from Airborne. With the full considerations on the requirements of environment, the design and implementation of employees’ pay system may be more suitable for the environmental condition.

On the other hand, according to the hierarchy of needs theory, there are different levels of employees’ needs working as the reasons for them to work including the basic needs named Physiological need such as the needs for breathing, food, water, sex, sleep, and so on, the safety need such as the needs of employment, resources, morality, property and so on, the belonging need such as the needs of friendship, family and so on, the esteem need such as the needs of self-esteem, confidence, achievement, respect of others and respect by others as well as the self-actualization need including the needs of morality, creativity, spontaneity, problem solving, lack of prejudice and acceptance of facts (Cascio 2010). When designing the compensation planning and administrations, DHL should all take these needs of employees from both DHL and Airborne in to consideration. At first, the basic needs such as employment safety should be ensured by DHL for the future employment relationship between DHL and its employees. Although there may be some changes in personnel management such as downsizing some unnecessary positions after merging with Airborne, the future employment safety should be ensured by DHL. Second, some upper level needs including the needs of esteem and self actualization for some talents people especially management talents should also be ensured to retain as many talents as DHL can during the transitional time.

Figure 8.0 Maslow’s hierarchy of needs

figure 8.0

Source: Maslow, A. F. 1943, A theory of human motivation, Psychological Review, vol. 50,

Finally, with the full consideration of both environmental needs and employees’ needs in DHL, compensation strategy and plan in DHL should also be developed with both financial and nonfinancial elements with full consideration of American economy and competitors’ situation, which should be designed based on the components showed in figure 9.0.

Figure 9.0 Organizational reward systems for DHL

 

Source: Cascio, W. F. 2010, Managing human resource, 8th edn, McGraw-Hill Irwin, New York,

V. Final decision and conclusion

With reference to the above analysis, we advise the above mentioned compensation strategy should be the primary concern for DHL to manage its current issue to retain talents and manage their performance.

On the one hand, suitable and reasonable compensation strategy is able to mollify employees’ emotion during the transitional period. On the other hand, suitable compensation strategy is able to assist DHL to solve the layoff issue to offer these lay off workers suitable and fair compensation and solution and reduce the risks of illegitimate political behaviors to destroy the reputation and interest of DHL in the future.

By and large, the suggested compensation strategy should be adopted by DHL at first.

 

Reference

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Boudreau, J. W. & Ramstad, P. M. 2007, Beyond HR: The new science of human capital, Harvard Business School Publishing, Boston,

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Cullen, J. & Turnbull, S. 2005, A meta-review of the management development literature, Human Resource Development Review, vol. 4,

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Lewis, D. (2002), The place of organizational politics in strategic change, John Wiley & Sons, New York,

Palmer, A. 2009, Introduction to marketing theory and practice, 2nd edn, Oxford University Press, New York,

Palmer, I., Dunford, R. & Akin, G. 2009, Managing Organizational Change, 2nd edn, Mc Graw Hill, New York,

Robbins, S. P. & Coulter, M. 2004, People, organization and management, Prentice Hall, New Jersey,

Shyni, K. V. K. 2005, Change Management Vis–Vis Human Resource Management, Discovery Publishing House, New Delhi,

Welch. P. J. & Welch. G. F. 2010, Economics: Theory & Practices, 9th edn, John Wiley & Sons, Hoboken,

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