Read the case of the merger between Dime Savings Bank and Anchor (below). It was evident from the beginning that employees were positive about the merger yet confused about how things would work. While it seems that the Banks were able to work out a strategy, Figure 5.3 Detailed Scores, 1998 Predictive Model for Dime showed a few lower than average ratings (-). Considering the merger of the two banks, what would you attribute the lower than average ratings to?
1. Select 3 low scores (-) and explain what you believe to be the reason for the scores.
2. What external and internal factors would you have focused on pre-merger and post-merger?
It is expected that through research and critical analysis, your answers to each question will be more than two paragraphs. A paragraph in this course is 5+ well-structured sentences.
The class textbook and mandatory source is:
Burke, W. W. (2017). Organization Change: Theory and Practice (5th ed.). Sage Publications, Inc.
Please cite all sources in accordance with APA 7th edition.
CASE STUDY:
Dime Bancorp, Inc.
Dime Bancorp was the holding company for the Dime Savings Bank of New York, a regional financial enterprise serving customers and businesses through 120 branches or more, primarily in the greater New York City metropolitan area. Due to an acquisition in 1997, Dime also provided financial services and mortgage banking via more than 260 offices throughout the United States. The Dime case to be described was the result of a merger between the Dime Savings Bank and Anchor Savings Bank in January 1995. Our case begins with this merger. First, a little history.
Background
Dime was founded in 1859 as the Dime Savings Bank of Brooklyn. With a minimum deposit of a dime, the founder, William Edwards, encouraged all New Yorkers, even the most humble, to save. In 1862, the Dime was the first bank to offer banking by mail, permitting depositors fighting in the Civil War to send money to their families in the North.
It is interesting that Anchor was founded at about the same time, also in Brooklyn. Anchor also encouraged savings and focused on the local community as its primary market. Over the years, both Anchor and Dime grew by way of mergers and acquisitions that led to regional expansion and a broader range of services to individual customers and businesses.
With the merger of Dime and Anchor, a “merger of equals” as the deal was called in January 1995, it seemed at the time that with such similar histories and resemblances in size, revenues, customer base, and so on, one might assume that the two organizational cultures would be alike. In fact, the opposite was true: The two cultures were highly dissimilar! This conundrum was in part explained, however, by the idea of attractors, referred to later in the brief coverage of nonlinear complex systems theory in Chapter 7. Attractors are patterns of behavior with the dual characteristics of “sensitivity to initial conditions” and “stability.” The former characteristic suggests that the early history and founding of an organization is highly significant; that is, initial behaviors in the organization’s start-up phase that receive positive feedback become reinforced and stabilize quickly. These initial behaviors are quite specific, if not unique, to the situation at the time; therefore, they are distinct in nature, are likely to be undetectable at the time, and become entrenched over time as a consequence of consistent reinforcement. These small, undetectable behaviors loom large later and account for highly differentiated cultures, even though on the surface, judging on more macro similarities, one would assume likeness, not dissimilarity. Apparently, early in the development and growth of the Anchor Bank, attention to detail was rewarded. Their culture some 150 years later reflected this emphasis. Dime, on the other hand, was more concerned with the bigger picture and becoming a presence in the greater New York City area. This difference between the two banks, though perhaps minor over a century before, was highly significant at the time of the merger.
The respective CEOs of Dime and Anchor were quite aware of the differences in culture and therefore sought consultative help with the merger. The merger occurred because the two CEOs and their respective boards of directors realized that their pieces of the financial services pie were shrinking and that proceeding alone, as in the past, was probably not wise to ensure a successful future for their businesses and for their stakeholders. Commercial banks were dominant (and still are), whereas savings banks were fighting hard for new business. Thus, an intent of the merger was to become less savings and more commercial.
Once the merger became official and the two companies were one enterprise, three major initiatives were undertaken. First, a strategic planning process was launched to better understand how the resources of the two former companies could now be deployed to gain market share rather than losing share, which had been true for each of the two prior to the merger. Second, an organization-wide opinion survey was conducted (1) to determine the state of morale; (2) to assess employee understanding of the company’s strategy, its new culture, leadership, organizational structure, and so on; and (3) to establish an internal benchmark for future survey comparisons and to track trends and progress. The third early initiative was to draft a new mission statement for the merged organization. Each of the two companies had a mission statement, but these were discarded, and a task force consisting of 15 employees who represented the two merged banks and composed a cross-section of the organization was formed to draft the new mission statement. This task force tapped another 100 or so employees to get opinions and suggestions about what the mission content should be. After many drafts, they presented their statement to the top executive team and got further feedback and suggestions. The final version was then presented to the board of directors and was unanimously approved. This third initiative highly involved many people in the organization and consequently led to strong commitment to the new mission statement. Moreover, when the task force presented its final draft of the mission statement, it was given a standing ovation by the board.
Organizational Survey
The initial organizational survey, designed according to the Burke–Litwin model (see Chapter 10), revealed that most employees at all levels were positive about the merger, supported leaders at the very top of the organization, believed in the mission statement, and understood the overall business strategy, but they were not very clear about the newly merged organizational culture and structure and were critical in general of several system elements (such as information systems and compensation) and of leadership and management. As a consequence of these survey outcomes, a number of actions were taken. Changes were made to strengthen the information system (new management, updated software, etc.), the reward system was improved, some of the organization’s structure was changed, and a major initiative was launched to improve leadership and management, starting with the top 125 executives and managers.
The CEO was highly supportive of these change efforts deriving from the survey and served as a role model for leadership and change. Working closely with an external consultant who had been involved from the beginning, the CEO and the head of human resources authorized, planned, and implemented a major effort to clarify the organization’s culture and to develop and train managers in both leadership and management skills. Using the mission statement as a primary source, five values were extracted that seemed to represent the desired culture. In other words, corporate values were implicit within the mission statement. These values were then tested throughout the organization, and eventually, a sixth one was added. The six values served as content guides for determining a set of practices that were behavioral manifestations of these values. These 36 practices, 6 per value, were then used in a questionnaire for the purpose of providing feedback for the top 125 people in the company. A 2½-day leadership program was conducted for these top managers, and this feedback was the central element. Before the program, participants rated themselves on the 36 practices and simultaneously were rated by their respective bosses, peers, and subordinates. Other questionnaires were used as prework as well. During the program, all participants received this multirater feedback and could compare how they viewed themselves with how the other three rating sources perceived them on the same set of behavioral practices, the primary content of which was leadership. Six months later, these 125 top people participated in another 2½-day program, but this time the focus was on performance and project management. Multirater feedback was integral to this second program as well, coupled with a “Time 2” assessment of the earlier 36 leadership practices to see how these top managers were doing. The 125 also received intensive coaching on the feedback they received.
At about the same time that the leadership development program was launched, a second organization-wide survey was conducted using about 90% of the questions asked at Time 1, so comparisons could be made and trends determined. The ratings via a 5-point Likert-type scale showed that out of 125 questions asked at both Time 1 and Time 2 (about two years later), except for two items, which remained about the same, all ratings were higher at Time 2. Significant improvements had been made over the 2-year period, at least in the eyes of the employees (see Figure 5.1).
Combining data from the second survey and these multirater norms in summary form—that is, no individual was identified—trends and further problem areas could be discerned. For example, it became clear from these data that further work had to be done with helping managers do a better job in coaching and developing their subordinates. A further next step in this organization change effort was to cascade down to the next levels of management in the 2½-day programs on leadership and management.
Figure 5.1 1996/1998 Burke–Litwin Model Summary Scores for Dime
As can be seen from Figure 5.1, the survey items of both Time 1 and Time 2 and the results reported to the managers and employees of the bank were organized according to the Burke–Litwin model. Further statistical analyses within the framework of the model were conducted. For example, a regression analysis performed using the Time 2 results (1998) appeared to be associated with the respondents’ perceptions of organization performance. To be clear, the performance category was assessed by survey questions such as, “To what extent does the bank provide high quality customer service?” and “To what extent is the bank currently achieving the highest level of employee performance of which it is capable, given its existing resources and technology?” So their responses are perceptions of organizational performance, not performance measurements per se. Referring to Figure 5.2, it can be seen that employees’ responses to questions in the four model categories of business environment, mission and strategy, individual needs and values, and motivation had the strongest statistical relations with perceived organizational performance. Figure 5.3 provides a more detailed picture.
The specific items in Figure 5.3 that have a plus sign (+) in parentheses after the abbreviated survey statement indicate an above-average score on the survey (3.5 or greater); those that have a minus sign (−) indicate a below-average score (2.9 or less). All items listed in each of the four boxes (individual needs and values, motivation, mission and strategy, and the business environment) were positively correlated with perceived performance.
The message to the client went something like this:
The parts of the model that appear to be most positively related to employees’ perceptions of how well the Dime is performing include their views of the bank’s external business environment and their understanding of and commitment to the bank’s mission and strategy.
In other words, these transformational factors relate significantly and positively to perceived performance. These related perceptions could perhaps be reinforced even more so that a self-fulfilling prophecy could have more effect; that is, assuming that clarity about environment and mission and strategy relates positively to perceived performance, strengthening these perceptions might eventually influence organizational performance positively. The categories related to morale are problematic, however. Lower-than-average ratings on individual needs and values, especially work–personal life balance and motivation (e.g., employees’ perceptions of morale, empowerment, and control), may be contributing to a negative view of organizational performance and could be affecting performance adversely. It is therefore suggested that a thorough examination of people’s jobs in the bank be undertaken. This examination would include consideration of the following:
Figure 5.2 1998 Predictive Model for Dime
Degree of workload: Are some employees overloaded in their jobs and others not, or is it true that most people are overworked and an increase in hiring is warranted?
Feelings of empowerment and a related sense of having little control over changes in the bank: These need to be examined further; that is, do people have too much responsibility with too little authority?
Figure 5.3 Detailed Scores, 1998 Predictive Model for Dime
Working on these morale issues should improve motivation and, in turn, performance.
These exact words were not actually said to Dime employees, but the above statement does capture the message that was given. Of course, all the other items in the survey and the model categories were covered and explained. The regression analysis was conducted on the Time 2 results only. The important and exciting news was the increase from Time 1 to Time 2 in 123 of the 125 total survey items. Although it was not scientific proof that the desired changes at Dime were successful, the executives, managers, and employees believed nevertheless that positive change had occurred.
What has been briefly described—that is, from the original merger to these later action steps—spanned a period of more than four years. The financial services company continued to focus on organization change and improvement and sought growth of market share primarily by acquiring other, similar businesses.
In summary, it should be clear that this case represents organization change that is more revolutionary than evolutionary in nature, because the emphasis of change was mission and strategy and culture. A compelling case for change as a consequence of the merger was made by the respective leaders of both companies, and a disruption ensued as a consequence. The organization’s initial and continuing change process had been effective because of many factors; the main ones are as follows:
The CEO’s leadership, support for change, and modeling behavior
Change initiatives carefully planned and driven by data
An enlightened human resource leader and staff
Strategic change expertise provided by external consultants
Key changes made among the top 20 executives
Significant acquisitions of additional businesses
Significant change over the four-plus years described in this case had clearly been made. The fundamental nature of the business changed somewhat in that the organization made a deliberate effort to become more of a commercial and less of a savings bank. The merged culture was a bit more representative of one of the previous organizations than of the other, but it became a new culture nevertheless. Systems were significantly improved with the introduction of new technology. Moreover, shifting demographics caused changes in managers’ behavior; that is, they became more attuned and sensitive to individual differences.
The main objective of presenting the Dime case was to demonstrate how revolutionary change can be implemented and managed. Another objective was to provide an overview of the entire change effort at Dime so our major theme of organization change can be continued. In the case of Dime, the initial change was transformational, and as shown by the survey data, the transformational factors in the model were the primary levers for change: external environment, mission and strategy, leadership, and more gradually, culture. A business strategy for Dime at the time was to expand its business beyond the New York City metropolitan area. This expansion was to be via an acquisition either by Dime or of Dime by a larger company. The latter occurred in 2002 when Washington Mutual acquired Dime. A few years later Washington Mutual unfortunately experienced serious business problems and was gobbled up by bigger players. Perhaps if it had adopted more of Dime’s culture, leadership, and ways of doing business, it would have survived.
References
Burke, W. W. (2017). Organization Change: Theory and Practice (5th ed.). Sage Publications, Inc.
