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Organizational Behavior – AOL and Times Warner Merger

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 Introduction10th January 2000 was a historical day in media world when AOL planned to acquire Times Warner for around $182 billion in stock and debt. It was a marriage of old-and new media-titans It is one of the largest deals in corporate history of USA, and this combines the USA’s top internet service provider with the world’s top media conglomerate. The new company was worth $350 billion and represents an unprecedented media powerhouse.

The other side of the story is it is even the merger of two very different corporate cultures and methodologies.

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 AOL Culture versus Times Warner CultureThere are significant difference in culture of AOL and Time Warner. The major reason for a cultural difference is the generation gap among the people working in both the organization. AOL has young employees while Times Warner has employee’s can act as fatherly figure to AOL employees.

  The cultural differences broaden as AOL take over Times Warner and the reporting authority changes.

 As the article Columbia Journalism Review states that AOL is a company which is bottom line -target oriented and there is absence of journalism in its pedigree. In contrast Time Warner is a company which has journalism running in its vein and Times Warne target as been only related to better journalism. This reflects that AOL is a new generation company while Times Warner is a traditional company with opposite thought process.

  Time Warner’s culture promotes freedom and allows experimentation. It is more about individual freedom and its creativity. AOL on the other hand acts as an organization which is streamlined and works on a common organization goal. There are different aspects of culture which has to be observed in both the organizations.

The aspect includes the goals, the approach to the work, the freedom available, compensation packages and the ultimate goal to be achieved.The AspectsTimes Warner has a decentralized organization. .  Each division has operated like a city-state, with an unquestioned leader who did not always cooperate with colleagues in other departments.

The creativity and introduction of new titles has been the primary duty of Times Warner. Division heads are used to running their own operations, with concern for their own bottom-line, and not necessarily the performance of the company as a whole. While AOL is a stream lined organization who work on a common goal. AOL introduced cost cutting measures which also results in lay off also.

On the other hand Times was not willing to let it team of talented editors to be laid off but buckled under the pressure from AOL. Therefore it reflects Times Warner people oriented organization and AOL’s profit oriented organization..As AOL is target oriented company and also having majority of its employees in its twenties has an aggressive nature.

Introduction of technology as a common tool is a part of aggressive culture of AOL and trying to get the customer base under one large roof. AOL follows concept of target marketing and the same has to be followed by Times Warner which may lead to creation of new titles and stoppage of some old ones. The aggressive culture also results in limited authority and limited zone to work in the organization. Times Warner concept was not to dedicate its editor to a particular title or magazine and where allowed to work on different titles which will not be so in the merged organization.

The atmosphere itself presents the though process of the company’s as an individual – AOL is more risk taking one and Times Warner seeking for more stability.The compensation provided to employees reflects this nature.  Time compensation was based on profit sharing model.  A part of basic salaries of employees was put aside and it was compounded and during the time of retirement it would give benefit.

While AOL provided stock options to its employees. Which in first case is not stable and it is capital market oriented which may not reap benefits in long term. Therefore surety is replaced by aggressive culture and risk taking ability. It replaces very dependable old-line compensation system with this new Internet compensation.

Pros of such compensation is only that if the company stocks are doing well in the market the return would be much higher than previous system but it brings in the component of risk in the compensation which did not exist before. As the times employee are on average 40 plus would not like such a risk factor in their compensation.   This may even be AOL’s method of over powering Times Culture and imposing its own. The change in reporting authority also reflects so.

There would even be reporting problem which would lead to hierarchy and ego issue within the merged organization. The Times editor-in-chief had to report to Times Warner C.E.O.

rather than Boar of Directors. But after merger Time’s C.E.O has to report to AOL Time Warner’s co- chief operating officer.

Which reflects AOL would play the bigger role. The budgetary cuts across the organization which resulted in top editors like Steve Lovelady, a prize-winning former Philadelphia Inquirer editor, along with columnist Steve Lopez and former Texas Monthly editor Gregory Curtis have resigned from the organization.This brings us to the point the short term and long term goals. As AOL as acquired Time Inc, it is like a small fish eating the big fish.

Therefore the short term goal would be dictated by AOL in order to get the long term goal stream lined. The organization would be stream lined with restrictive authorities. The compensation redesigning also reflects the change in management policy and making it common through out the organization. The target marketing and introduction of new titles and discontinuation of old one also substantiates the short term goal as planned by AOL.

Therefore the short term goal would be based on AOL strategies which would define the long term policies of the merged entity. ConclusionThe culture integration would be a tough challenge for both the organization. As AOL has taken over Time Warner its policies would shape the future of the organization. AOL has stated before would bring in stream line policies and restrict authorities of editors and executives at Time.

The Time Warner would become a target and bottom line oriented organization. This as we see lot of talented people from Time would leave the organization.In order to avoid major integration failure both the organizations have to be given there space. The compensation and reporting has to be streamlined as per AOL because it would bring better control and accountability which is required for such a mammoth organization.

The Time editors should be allowed   the freedom of experimentation and introduction of new titles as it has been a successful strategy in past. Linkage of profitability with every section should be avoided. But a common goal should be the leading force of the organization.The cultural integration and creating a cordial atmosphere is the toughest challenge of an organization.

Lot of mergers have failed in past due to lack of cultural integration. Only financial and market synergy cannot bring success to the merger. The cultural integration results in change in culture of both the entities resulting in a common culture in order to achieve long term goals. So AOL and Times Warner have to work on it in order to be a stronger and bigger media house in the future.

 Works CitedØ  Houston, Frank. AOL/TW spells big. Columbia Journalism Review, July/Aug 2001Ø  Kuczynski, Alex .Time Inc.

staff adjusts warily to life within AOL, New York Times, April 23, 2001Ø  All for one, one for AOL”, Newsweek, Dec. 25, 2000Ø  Borrus, Amy.  “AOL Time Warner:  Who’s Laughing Now?”  Business Week Online.March 19, 2001.

Ø  Charron, Christopher.  “A Look at the AOL Deal:  Anything, Anywhere, for Anyone. ”The Washington Post.  January 16, 2000.  

Cite this Organizational Behavior – AOL and Times Warner Merger

Organizational Behavior – AOL and Times Warner Merger. (2017, Mar 13). Retrieved from https://graduateway.com/organizational-behavior-aol-and-times-warner-merger/

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