Introduction
OfficeMax Inc. is an American office supplies retailer. The company was founded in 1988 by Michael Feuer and Bob Hurwitz in 1988 in Cleveland. In 1991, Kmart Corp acquired a majority stake in the company but spun it off in 1995 to establish a publicly traded entity (OfficeMax.com, 2014).
On the other hand, Office Depot Inc. is an office supply Company. The company was established by the late F. Patrick Sher in 1986. It was reported on 2013 that OfficeMax and Office Depot will merge in an all-stock deal that will establish the largest U.S office supplies chain. The deal was completed on 2013 with OfficeMax name continuing to serve as a brand of the newly created Office Deport, Inc. (OfficeDepot.com, 2014).
This paper aims to discuss the merger between these two companies under the following sub-sections.
The circumstances that resulted in the merger between the two companies
Some of the reasons that resulted to the merger between OfficeMax Company and Office Depot Company include:
- Reducing Competition.
There was a high competition level in the market. Therefore, the two companies opted to combine together under the name Office Depot Inc. in order to have a competitive edge and even gain a larger market share in their products’ market (OfficeDepot.com, 2014).
- Creating Synergy
The two companies anticipated that a merger between them would result into synergy. This is the idea combining business activities will result into a decrease in costs and performance will increase. The two companies merge because they had complementary strengths and weakness that were going to work for their advantage (OfficeDepot.com, 2014).
The Effects of the Merger
The merger between the two companies resulted into both positive and negative effects such as follows:
- Improved Management talent and expertise
The merger between OfficeMax Company and Office Depot Company presented an opportunity for team of experts from both companies to bring their management, vision and technical know-how together. The ability to leverage management capabilities is a skill and an asset to newly formed Office Depot Inc. since it led to improved productivity of the company.
- Growth in New Markets
The merger between the two companies also resulted into the growth in new markets of the newly formed Office Depot Inc. The merger provided the opportunity for the company to boost its market share and spread into new regions and sectors. Consequently, there is a surge in the profits levels of the company.
- Layoffs of some employees
The merger resulted into some employees from both OfficeMax Company and Office Deport Company losing their employment. For instance, the CEO of OfficeMax Mr. Ravi Saligram lost his job as a CEO when the two companies merged. The newly formed Office Depot Inc. required less number of employees, and this left the company with no option but to downsize its labor force. The company, therefore, lost some workers who were skillful and would have helped it in attaining its goals (OfficeDepot.com, 2014).
The Organizational Structure that resulted from the Merger
The organizational structure that resulted from the merger between OfficeMax Company and Office Depot Company is a new one that focuses on streamlined decision making and accountability. The new organizational structure provides the best foundation to implement the merger synergies and transformation strategy for long-term growth (OfficeDepot.com, 2014). The resultant management organizational structure was as follows:
- The C.E.O/Chairman
At the peak of the organizational structure is the C.E.O, also referred to as chairman. He is in charge of all the Company departments, makes the essential decisions in the framework set out in the Company’s legislation.
- Executive Committee
The executive committee is the second from top in the organizational structure of the newly formed Office Depot Company. The executive committee reports to the C.E.O and is composed of the following positions:
- President, North America. The position is responsible for managing contract sales, retail, E-Commerce, Marketing and supply chain and merchandising.
- President, international. The position that is based in Europe manages the international business of the company in Europe, Australia, Asia, Mexico and New Zealand.
- Executive Vice President and Chief Financial Officer. The position is in charge of the management of all financial prospects of the company, including accounting, financial planning and control.
- Executive Vice President and Chief People Officer. The position has a responsibility for managing global human resource functions, including compensation, talent management, benefits, training and organizational development.
- Executive Vice President and Chief Legal Officer. The position is responsible for managing legal, compliance, government affairs and regulatory worldwide, as well as the loss prevention function.
- Leadership Team
The leadership team is the third from top in the organizational structure, and it includes members of the Executive committee who report to the chief financial officer and the President of North America. They include Executive Vice President of Retail, Executive Vice President of Contract Sales, Executive Vice President of E-Commerce, Executive Vice President of Merchandising and Executive Vice President of Marketing (OfficeDepot.com, 2014).
The organizational structure of the newly formed Office Depot Company does not differ so much from the organizational structures of OfficeMax Company and Office Depot Company. However, there were some positions that were created especially in the leadership team and were not present in the organizational structures of both companies before their merger. Most of these positions fall only under executive committee for both the companies.
The Human Management Practices of the Company
The human resources management practices of the newly formed Office Depot Company were not modified to reflect the outcome of the merger between OfficeMax Company and Office Depot Company. Some of the reasons that may have resulted to this situation include:
- Stress of Employees
Organizations mergers are usually known to come with different types of change. Change is usually difficult for employees, particularly if they were not candidly involved in decisions that affect their jobs. During mergers, change can be especially difficult and may lead to stress that can have a negative effect on morale of employees if not handled effectively (Olatunji and Uwalomwa, 2009).
- Fear of Job loss
When two organizations merge, culture clash is imminent. Hardly do two organizations have the identical culture. As the employees get to know each other well, there will be certainly conflict and real or perceived losses on both sides (Risberg, 2013). Due to this reason, many organizations fear modifying the management of human resources practices. The modification of the management of human resources practices can sometimes negatively affect productivity and may even lead to employees leaving the company to seek jobs elsewhere (Young, 2013).
References
About.officemax.com,. (2014). OfficeMax. Retrieved 15 November 2014, from http://about.officemax.com
Office Depot, Inc. Announces its Organizational Structure,. (2014). Office Depot, Inc. Retrieved 15 November 2014, from http://www.marketwatch.com//office-depot-inc-announces-org
Officedepot.com,. (2014). Office Supplies: Office Products & Office Furniture at Office Depot. Retrieved 15 November 2014, from http://www.officedepot.com/
Olatunji, O., & Uwalomwa, U. (2009). Psychological effects of mergers and acquisition on employees: case study of some selected banks in Nigeria. World Review of Entrepreneurship, Management and Sustainable Development, 5(1), 102. doi:10.1504/wremsd.2009.021703
Risberg, A. (2013). Mergers & Acquisitions. Hoboken: Taylor and Francis.
Young, G. (2013). Mergers and Aquisitions. Hoboken: Taylor and Francis.
