A.T. Kearney Case Study
Statement of the Problem
The merger of A.T. Kearney and EDS has brought about an infinite number of possibilities as well as challenges. The merger has restructured the entire global management consulting industry by providing end-to-end information and management solutions for companies across the world. This has led to the diversification of the companies’ primary markets and promotion of the new company’s globalization efforts. The pooling of resources between the two companies also means that the new entity has enough financial muscle to venture into previously unchartered territories.
However, the merging of these two distinctly separate entities has the potential to create a lot of conflict amongst the employees. The companies have different cultures and this might result in a culture shock for the employees. Another problem is how to maintain the independence of the two entities. A.T. Kearney has a loyal customer base who would not want to see it as just the ‘front-end’ of another company. There is also the problem of leveraging each other’s strengths without being forced to. Another issue is the competition from other management-consulting firms who have also delved into the integrated service continuum.
Thus, the purpose of this paper is to address these issues and find formidable solutions that can propel the new organization to even greater heights in the global management consulting industry.
Summary of the Facts
A.T. Kearney and Electronic Data Systems are two completely different organizations in every aspect of the word. Each company has its own culture, structure, organizational beliefs, goals, reward systems, and identities. These entities are bringing with them a cesspool of talented employees in their thousands. Each of these employees has his/her own unique attributes and skills including religion, nationality, and creed. It should also not be forgotten that these employees had become used to the culture within their own companies meaning that they have formed a close-knit group with their co-workers from the respective companies. As such, it will be very difficult to transition them into this new culture.
Maintaining the independence of A.T. Kearney is an issue that needs thorough input from all the stakeholders involved especially the highly qualified employees. The company’s ability to attract, maintain, and retain highly skilled professionals may be called into question if the company is perceived to be just the front-end of EDS.
In addition, there is the concern from customers about the independence of the A.T. Kearney Company. The concerns stems from whether the company will still be able to maintain its objectivity in choosing the right suppliers or would the subsidiary simply be pushing EDS’s products down its customers’ throats.
Another issue presented by the case study is the slow pace in which the companies are leveraging each other’s strengths in both the domestic and global markets. Past collaborations between the two factions of the merged entity have been as a response to client demand or to competitive pressures. For instance, EDS only put its management consultation wing, A.T. Kearney, on the table during the tendering process of the Rolls Royce project when its main competitor CSC Index did the same.
Another fact that the company has to contend with is the strong competition both on the domestic and global fronts. Both the global and domestic markets have begun to embrace aggressively the role of information systems and technology in all facets of business. This has created a strong demand for management solutions that put technology at the forefront as companies seek to maximize on information systems to strengthen their competitive advantage. The fact is that the line between information systems, operations, and strategy has disappeared into oblivion. Consultation firms are now fiercely restructuring their own structures and products to include technological solutions.
The main source of competition for A.T. Kearney is divided into four main categories. These categories include the classic IT firms, the Operational and Strategic Firms, the Systems Integrators and System Vendors, and the New Information Technology Entrants. Each of these categories have several firms that can lay stake to the merged entity’s market share if the new A.T. Kearney slips up in one way or another. Intense competition is thus a real threat to the success of the new entity despite all of the resources that it may possess as a unit.
1. Effects of the Merger on Employees
As shown in the case study, consultants usually have a large ego especially when they work for one of the best management-consulting firms (A.T. Kearney). Egos in the workplace can be detrimental to the newly established consulting firm as it might result in constant fights and arguments. Friction between the employees of the two factions as well as constant squabbles can hinder the implementation of viable projects for the merged company (Stafford & Miles, 2013).
There is also the underlying issue of culture shock. A.T. Kearney is one of the premier management-consulting firms in the world. EDS’s acquisition of the firm means that now A.T. Kearney is only a small component of a bigger entity. This shift in stature can be a culture shock for the A.T. Kearney consultants who often pride themselves in working for one of the biggest consultancy firms in the world. This will not be the case for EDS’s employees, as they will remain the top guns in the industry even after the merger. Their company’s logo will be on every transaction undertaken by the merged group thereby re-enforcing their image in the global market.
If A.T. Kearney does not retain its independent image in the long run, then the company might begin to experience an increase in employee turnover. The increase in employee turnover would be as a direct result of loss of image and stature in the corporate realm of management consulting. Loss of valuable skills might endanger the company’s position in EDS and might result in the latter opting to dispose of the firm.
2. Independence of A.T. Kearney
A.T. Kearney has been at the forefront of the global management consultation industry for several decades. Through this impressive position, the company has been able to attract some of the best talent in terms of employees from across the world. Every enterprising management consultant dreams of working for this global company one day. Maintaining its global position has been the root of its success when it comes to employing the very best consultants across the globe.
However, the merger has threatened this position that the company had created for itself. It is no longer the premier entity in management consultancy, but it has become a part of a larger entity. The shift in position downwards might make some highly skilled and ambitious employees to question their loyalty to the institution. These individuals pride themselves in working only for the best and the merger might make them re-think their career plans leading to an increase in the employee turnover rate.
Independence of the company within the merger will also have an effect on customer’s perception about the company, its global position, and its services. Customers would not appreciate the services of a company that seems to be the front-end of another company that they may or may not be familiar with. They would also begin to doubt the credibility and objectivity of such a consulting firm if it happens to be forcing its parent company’s products on to them. There is also the question of whether the customers would still continue to purchase A.T. Kearney products when they are obviously in competition with products from EDS or General Motors.
3. Leveraging of both firms in the market
As the leader in the merger, EDS has the mandate of strengthening its core business as well as its subsidiary’s (A.T. Kearney) business. Using A.T. Kearney’s strengths as only an afterthought like what happened during the Rolls Royce negotiations will result in the ultimate collapse of the merger and huge losses for both entities.
In the Rolls Royce scenario, the inclusion of A.T. Kearney was merely an afterthought and the company was used primarily as a bargaining chip. However, when acquiring the company, EDS maintained that A.T. Kearney would be an independent subsidiary. In negotiations such as these, A.T. Kearney needs to be treated as a partner with much more to offer than a few unimportant management consultation packages. Otherwise, the sales of A.T. Kearney would begin to decline, as it is no longer competitive in the market due to constant overshadowing by EDS.
In regards to this issue, the merged entity is failing to take advantage of the unique opportunities that the merger has presented it by not producing new products entirely. As mentioned above, most collaborative ventures between A.T. Kearney and EDS have been as a response to demand or competition. This should not be the only reason why the two entities collaborate. The lack of new products after the merger points to a clear lack of streamlining of operations, and sales’ efforts. It also indicates that there is little if any research going into the development of new products and markets. It has also demonstrated that the once independent entities have not merged their product development strategies to form a synergy in product development, production, and marketing.
The main reason behind the merger of A.T. Kearney into EDS was to provide an integrated service continuum of technologically oriented management consultancy solutions to customers globally. The new entity is not the only management consultancy solutions provider to have noticed the growing need for integrated service. Other firms have realized this need as well and are aggressively looking towards ways of diversifying their services portfolio by including technology in every element of their products.
The greatest competition to A.T. Kearney comes from the new information technology entrants. Companies such as Oracle and AT&T have already established themselves as the leader in outsourcing as well as system integration skills. These companies saw the opportunity to provide a one-stop shop for customers by offering consulting services to their customers in an integrated package. Many customers would choose these new entrants solely because they are the authority when it comes to system development and integration. The inclusion of ‘upstream’ consultancy services is a value addition to the products already on offer making the companies’ products even more attractive to customers.
The new A.T. Kearney has to contend with such companies who have already dominated a lucrative niche in the market, the system development and integration market. Even with the backing of a classical IT firm such as EDS, these companies still have a formidable share of the integrated service continuum market. Therefore, the company needs to look for ways of breaking into this market and acquiring some of the market if is to succeed in the new business environment.
The new entity should begin to invest heavily in the creation of a new culture so as to accommodate employees from both factions. The culture should be representative of the new entity’s beliefs and goals. The entity should borrow a leaf from itself by completely re-engineering its organizational structure to eliminate any causes of friction or conflict amongst the employees.
Another recommendation is to outline a new sales strategy that does not pit A.T. Kearney against EDS or General Motors. Independently, the three companies have management consultancy services that are in competition with each other. With the merger, the new sales management team needs to re-align all the products offered independently into unique brand packages to avoid confusing the customer and consequently loss of sales and revenues for the companies involved.
In addition, the selling process in every venture in the future needs to be initiated with both companies’ products in mind. This way, both companies will become a formidable force in the information system and management consultancy industry as they have more to offer than their competitors (Spiro, Rich, & Stanton, 2008). Leveraging their corporate strengths as a united front is what will give them an edge in the market. Through leveraging and combining each other’s strengths, they are also able to provide to the customer, a one stop-shop for all their information system and management consultation needs.
The merged entity has to re-consider seriously its product development plan. It needs to take advantage of the resources and the opportunities that the merger has created. The best way of taking advantage of its new capabilities is to be proactive and develop new products. Their combined talent pool backed by their enormous financial resources is able to come up with products that can command a huge demand in the market. These products can also lead to the development or the discovery of previously unchartered markets.
The merged entity is facing serious competition from the traditional consultancy firms, new information technology entrants, and systems integrators and system vendors. Some of these companies have dominated the management consultancy markets for decades meaning that they enjoy a loyal customer base. The merger has thus brought in new and former competitors into the mix. The new company has to use its main resource, its youthful, skilled, and highly talented and ambitious employees to achieve a competitive advantage. These individuals will be instrumental in the development of new products and spearhead the company’s growth and expansion into new markets.
The merger of the companies has brought forth a new flurry of opportunities and challenges that A.T. Kearney has to utilize effectively in order to consolidate more market share. The issues brought forth by the merger include culture shock for most of A.T. Kearney’s employees, which could possibly lead to employee turnover. There is also the problem of nearsightedness where the companies are not leveraging each other’s strengths in the market. The merged entity is also not fully utilizing the enormous resources at its disposal to develop and promote new products into the market. Another important issue to be addressed is the independence of A.T. Kearney presently and in future ventures. If these issues are addressed comprehensively as recommended above, then the merger will prove successful to all stakeholders. The company will experience rapid growth in the integrated management solutions continuum as well as a steady increase in its global market share.
Spiro, R.L., Rich, G., & Stanton, W.J. (2008). Management of a Sales Force 12th Ed. New York, NY: McGraw-Hill Irwin.
Stafford, D. & Miles, L. (2013, Dec 11). Integrating Cultures after a Merger. Bain & Company. Retrieved on 7/2/2016 from http://www.bain.com/publications/articles/integrating-cultures-after-a-merger.aspx