Running head: DAIMLER-CHRYSLER BUSINESS FAILURE 1

Examining a Business Failure

Alexandra Dunda

LDR/531

October 3, 2010

Eric Heard
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Daimler-Chrysler Business Failure

In 1998 Daimler-Benz paid $37 billion for Chrysler, changing the name to Daimler-

Chrysler. In 2007 Daimler then sold Chrysler for $7.4 billion to Cerberus Capital Management.

What happened?

Partnerships, of any form be such as mergers, acquisitions or joint ventures, are a viable

strategic option to achieve the objectives of growth, diversification, economics of scale, synergy

or a global presence The typical reason for failure was the partnership was based only on

financial and economic information or what is more commonly called "hard " data and rarely

involved data to support the meshing of the organizational cultures or the "soft" and "mushy"

issues (Badrtalei & Bates, 2007) The cultural compatibility was the big failure of this merger.

Daimler-Chrysler failed to understand the organizational culture, which involves organizational

environments, and differences between national cultures.

The most often cited reason for the failures is the total lack of understanding between the

two parties of the culture, personalities, nationality and technological systems. In a matter of two

years, all the top American executives have either retired, left, or were fired, and were replaced

by German employees. The morale among the American employees was at its lowest, causing

anxiety and low productivity. There was not partnership of equals in the combination of

domestic and international corporate. One member of the partnership will be dominant based on

financially or market position. Both parties come to the partnership table with difference

perceptions and contributions to the merge (Badrtalei & Bates, 2007). All these factors have

generated a poor job satisfaction, which is the core of subsequences turnover, absenteeism,

deviant workplace and organizational citizenship behavior (COB). These Organizational

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Behaviors can be explained using different variables of how individual perceive the environment

and culture, and what motivate them.

The expectations in individuals are elaborated according to the trust in the system

organization. To drive expectations is necessary from organization that managers have a clear

big picture of what teams and employees need to accomplish for the success of the teams and

employees in relation with the company’s goals. To do so, the organization must implement a

company strategic planning that define objectives, an adequate process that include evaluation

and feedback in which the employees can recognize what they are doing with the purpose of to

manage their own careers and improve themselves, the communication process needs to carry a

complete information about cultural environment goals as well the rewards to gain after the

performance evaluation is done.

Chrysler failed to detect the conception of individual equity and how it impacts team

performance because individual perception of fairness affects the team performance. Each

member provides different theories. Is not theory that shows for sure how the impact of

individual on team performance, but is clear that the contribution of individual affect the team

performance. Is very important from the organization to provide individuals with a trusting

environment that make them fell fairness from all the members in the organization. The equity

from individuals has too many perceptions, therefore is essential to develop an equity plan after

fair evaluation of each employee.

Chrysler did not use Strategies to discourage social loafing. Individual contributions

must be evaluated in order to discourage social loafing. One strategy for discouraging social

loafing is simply peer pressure. Offering some kind of incentive to the individual avoids social

loafing. Managers need to correct any kind of bad behavior associated with social loafing right

away.
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An excellent evaluation opens the path to a good and positive feedback. Chrysler failed

to use behavior modeling and the practice model evaluation methods. “Behavior modeling tends

to increase when the model is rewarded for behavior and when the rewards (Cascio, 2005). The

practice makes perfect, and the inappropriate behaviors can be corrected immediately, before

they become ingrained in the trainee’s behavior. As part of any performance appraisal is

necessary to correct right away with an adequate feedback. Chrysler did not study the behavior

to see if matched the standards to improve performance, encouraging the team members and all

the people involved in the evaluation process to participate.

Chrysler failed to blend his mission and goals by attracting, motivate and retain the

most talent people because the philosophy that motivate employees attract satisfied customers is

the base to succeed in business mergers. Daimler’s philosophy that Chrysler didn’t need separate

dealerships for Dodge and Chrysler products was a big reason for the continuous dealerships

alienated owners and confused buyers. Consumers interested in a Jeep Wrangler didn’t need to

consider or view Chrysler 300s on the same lot.

Managing Diversity requires a systemic approach and long term commitment, So

Chrysler failed because did not use an adequate measure to success in this learning culture.

Adding to this, Chrysler did not use technology to move information that allows sharing

information to get to know each other in this merger. Like a merge company was a need to

create a partnership that spans different corporate cultures because workers and managers on this

new merge need to understand and capitalize on diversity and combine efforts to offer the

product and services to customers in this open market with a changing labor force that needs to

learn the value of different races, ethnic groups, cultures, language, religion, sexual orientation,

levels of physical ability and family structures. It is essential to build trust among members that

create adaptability and acceptance. According to The Ethic Awareness Inventory (EAI) the new
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environment of the 21st century calls us to better understand the dynamics of organizational

ethics and to assess the impact of inconsistencies between corporate policy and individual

thought because the values are based in the perceptions of and individual moral attribute, so is

complex to be generalized. Values are determined by what we think is right or wrong depending

on the own individual experience and belief.

Contributions of Leadership and Management

Managers and leaders failed too, because now managers are being educated to guide,

train, support and teach employees rather than tell them what to do (McHugh, 2008)

The cooperation and integration among companies have increased and was needed from

Chrysler that managers allow freedom. Because the workforce was increasingly diverse, thus

this needs an educated and self-directed employee.

Managers today emphasize teamwork and cooperation rather than discipline. They tend

to be friendly and treat employees as partners making the manager more progressive. Managers

50 years ago can stay in an organization for the whole labor life; in change today’s mangers

move from one company to another as their careers unfold. Managers today are using

empowerment, “giving employees the authority and responsibility to respond quickly to

costumer request. A manager plans, organizes, and controls functions within an organization. A

leader has a vision and inspires others to grasp that vision, establishes corporate values,

emphasizes corporate ethics, and doesn’t fear change (McHugh, 2008). A leader doesn’t need to

be a manager, but managers need to carry out the leadership style vision.

Chrysler failed to use a contingency planning, in which could prepare alternatives

courses of action that may be used it if the primary plans don’t achieve the organization’s

objectives. Managers did not have an open mind at stress situation and did not how to deal with

unexpected situations without losing the vision of goals.

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Organizational structures to the failure

DaimlerChrysler is a model for global mergers, Schrempp accelerated the integration.

To that effect, he reduced the management board from 17 to 13 by removing unwieldy board

members. The resulting board had eight Germans and five Americans. He further created three

vehicle divisions; Chrysler Brands headed by James Holden (Stall Kamp’s replacement),

Mercedes-Benz Division, and the Commercial Truck Division (Muller et. al., 1999).

The merger has a matrix structure that creates dual lines of authority and combines

functional and product departmentalization (Robbins & Judge, 2007) The choice of this design

include the size of the organization; its technical system of production; various characteristic of

its environment, such as stability and complexity; and its power system (Mintzberg et. al., 2003)

In conclusion Managers who adopt a democratic leadership style influence employee’s

perception of their job, so encourage the employ to work and build the skills and competences

for to growth, which allow the employees to be more responsible for their tasks while are being

motivated for the empowerment from managers and the good quality of life. The discrimination

is going to be present while exist a diverse workforce, so the best way to go is implement

policies to avoid any kind of discrimination that attempts to the good work environment. It is

important to have a cosmopolitan perspective to avoid cultural shock and promote a cohesive

work environment that makes possible to melt two families in a merger. Intercultural

communication, training at all levels and cross-cultural marriage commitment must be present to

succeed in mergers with different cultures.

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References

Badrtalei, J., & Bates, D. (2007). Effect of Organizational Cultures on Mergers and

Acquisitions:

The Case of Daimler Chrysler. International Journal of Management, 24(2), 303-317.

Retrieved from Business Source Complete database.

Mucha, J., "Why Chrysler is smiling again," Business, 5(10), 2004. Muller, Joann, "Lessons

from

a casualty of the culture wars," Business Week, November 29, 1999.

Cascio, W.F. (2005). Managing human resources: Productivity, quality of work life, profits.

Retrieved from the University of Phoenix (7th ed.). New York: McGraw-Hill.

Robbins, S. P., & Judge, T. A. (2007). Organizational Behavior. Upper Saddle River: Pearson

Education.

Yukl, G. (2006). Ethical Leadership and Diversity ( 6Th. Ed.). Prentice-Hall, Inc. A

Pearson Education Company.

McHugh, M.F. (2008). Human resources management: Finding and keeping the best employees.
Retrieved from University of Phoenix (8th ed.).New York: McGraw-Hill.

The Williams Institute for Ethic and Management. Retrieved from http://www.ethics-twi.org/