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Merger Integration Report 1
Brian Nossokoff
MBA-699-Q2843 Strategic Opportunity Mgmt 23TW2
9-1 Project Submission: Merger Integration Report
February 5, 2024
Dr. Robert Shindell
Merger Integration Report 2
Merger Integration Report
Guiding Coalition Recommendations
If a guiding coalition is formed carefully during the transitional stage, it can help an
organization escape a potentially volatile time without any damage. The individuals comprised on this team must be highly skilled in unique areas of the organization, as well as influential and persuasive to help affect the proposed changes and address any opposition within a diverse organization. This will ensure that the innovation within the organization allows the most unique
ideas and perspectives to shine to help long-term sustainability in the organization.
There is a select group of people that have a wide enough effect on day-to-day operations
that should be included in this guiding coalition. These individuals should be well-rounded in many different facets of the organization, not least of which being leadership ability, but arguably
as important is the authenticity within the company as well as the management skills to facilitate change. Strong leadership, however, is the most crucial because it helps keep staff engaged and will help build a sense of accountability among the staff in the organization (Farris, et al
, 2009).
With all that said, the first member of the guiding coalition which seems to hold a wide reach in the organization, overseeing 580 employees among twelve manufacturing plants, is Omar Mattsson, the manufacturing director of the firm. He is responsible for ensuring safety and
production goals are met accordingly, in addition to any long-term goals of the company, a role that would involve interaction with many different departments. Additionally, even though he started with the organization through an acquisition, he has been able to set the standards in the organization and is quite pleased in his role. Furthermore, he has helped in new market expansion, as the company was able to expand to meet the demands in the Middle East. He might not always be the most liked in the organization, as he commonly rubs people the wrong
Merger Integration Report 3
way; however, with his 3-years of tenure within the organization, he is a results-driven performer.
The next individual that should be a part of this guiding coalition is Elaine Hartwick, acting director, who has been in her position for the past two years. Even only with a short tenure, Elaine has the drive and skill to address volatility in any industry. She currently oversees 18 senior managers within the organization, which shows the power that she wields within the company. Similar to Omar, she is well-known for not being the easiest to work within the organization; however, in her ten-year tenure in the organization, she has developed the creativity
and imagination to help take the organization to new heights. Elaine would be a highly beneficial person to have on the guiding coalition due to the fact that volatility can present new obstacles to an organization. As Elaine has been in this position for ten years, she can help persuade staff to stay-the-course for any changes that the organization is pursuing.
The third individual that should be a part of this guiding coalition is John Martensson, Research Director, who has been in this position for fifteen years. John provides the tenacity required to help the organization expand its reach and satisfy its long-term obligations. He has been behind the company's most notable oncology medication, and though he has been a part of the organization since its onset where more mergers have failed than been successful, he does not
let those deter him. Currently, John oversees the company's research labs in three countries, overseeing more than 100 scientists. John's 22-year tenure has subjected him to a variety of experiences that can aid him in meeting the production standards of any organization. It is important to have John be a part of the coalition to show others in the company that it is important to never give up even if things do not go entirely to plan. These individuals exemplify exactly what is needed to run a guiding coalition as they are high quality results driven managers
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that though may not have the friendliest demeanor, are able to give the attention and support needed for the organization to thrive.
One highly crucial aspect to consider when establishing a guiding coalition is addressing any opposition within an organization. One reason for opposition may include front-line staff being afraid of losing something valuable as a result. But arguably more important than that is lack of trust. Often, front-line staff feels as though supervisors can be highly individualistic in nature, when that may not always be the case (Kotter & Schlesinger, 2008). This is where Hofstede's cultural dimensions may come into play, and though it helps in addressing diversity in
a global workforce, it has concepts that are translatable to any organization. Notably, where individualism vs. collectivism is concerned. In individualistic cultures, people will look out for themselves and their families first and foremost, but collectivist cultures look out for all, and everyone is expected to take care of each other accordingly (Hofstede, 2011).
As a result, it is important to ask what kind of culture is contained within the organization. If the culture is individualistic in nature, it is important to initiate a massive culture
change to help the proposed changes stick accordingly. The first strategy to help the members align with the change initiative of the organization is to ensure that trust has not been lost or misplaced between frontline staff and supervisors in the organization.
Additionally, to establish a sense of urgency within the team, it's going to be important to utilize visual evidence of the need for change. Persuasiveness, and a wide array of experience coupled with the enthusiasm and strong support for the change as well as visual evidence on why
the change needs to occur will help solidify why it needs to occur. Regular, timely, effective communication is crucial in this process. Hold town hall meetings to ensure staff members are
Merger Integration Report 5
kept up to date on what is occurring in the organization, such as town-hall meetings to ensure staff members can respond to the proposed changes.
These activities help build trust because staff members may not feel that their voices are being heard and addressed during times of change. With effective, timely communication, is entirely possible that staff may buy into these proposed changes as they will appreciate that they are finally being heard. Employee Attrition Analysis
Employees exiting the company can start a negative trend of massive proportions. As a baseline, it is estimated that the financial burden that companies face per employee is over $10,000 dollars (Rollag, et al
, 2005) when they must replace staff. Many factors can play a role in employees leaving a company, such as training, lack of growth opportunities, poor work-life balance, general dissatisfaction with the job, and wages. Additionally, if senior leadership were to work to halt these trending issues, one crucial way to do so would be to fix the working environment to make it more palatable for all. That kind of stability is often hard to come by, and if staff can witness its existence in the current organization, it is possible that their most important asset will stay for the long term. After analyzing the data of the employees of the business development organization, one of the most valuable pieces of data would be the age of the employees. Out of the 1,470 employees
contained in the organization, the predominant portion of the group is in Ages of Employees in the Organization
18-19 years old
20-29 years old
30-39 years old
40-49 years old
50-59 years old
60 years old
Merger Integration Report 6
the twilight of their career. As you can see, the largest part of the team is comprised of those staff members from 30-39 years old. By this age, staff will be aware of what they want out of a career. The younger the crowd, the more career opportunities that may flourish as a result as the younger crowd tends to be more proactive and not reactive towards developmental opportunities (Van Veldhoven & Dorenbosch, 2008). Next, the predominant educational
level of the staff involves nearly 90 percent
having some form of college or higher, with
approximately 66 percent having at minimum
their undergraduate degree completed. This
chart shows that the staff has the desire to
expand their knowledge. This could be
molded to even include organizational knowledge as well, with the help and encouragement of senior leadership. Are these employees being adequately trained and developed?
Leveraging training opportunities can greatly aid in building a better future for the organization. Just under
half of the employees have only been able to get two training opportunities, coming in at approximately 45 percent. This is inexplicable as the company had a young staff, driven to succeed and willing to learn. Education Level of Active Employees
Associate Degree
Undergraduate
Graduate
High School
Doctorate
Number of Training Opportuni-
ties in the Past Year Per Employee
0
1
2
3
4
5
6
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Merger Integration Report 7
The staff at the organization have
experienced a steady tenure with the
organization as most of the staff have been
with them from the start, or at least one other
organization outside of them, which is
something to be celebrated as it is by no means a common occurrence professionally.
The first glaring problem that can be witnessed by the data is that a significant percentage
of the staff, nearly 64 percent, have
recently received a promotion within
the past year. This is problematic
because it may brew dissension within
the ranks. A substantial percentage of
individuals have been with the
company and have not been considered for a promotion. Could it be complacency causing the lack of promotion? It is possible; however, it is arguably as likely if not more probable that the individuals were passed over because such a staggering selection of individuals was very recently promoted.
After combining the last pie chart with the pie chart showing the tenure of employees within the organization can help pinpoint the first reason for the high levels of attrition, lack of job growth opportunities. In addition to that, the other factors include things such as job satisfaction,
Merger Integration Report 8
wages, training opportunities and work-life balance. Nearly five percent of the staff has been overlooked for promotional opportunities for 10+ years now, with some being overlooked for 15 years. This would prohibit any growth for any employee. For anyone that is an already established employee, they are often overlooked for training opportunities as opposed to the brand-new team members.
To work on their retention
rates, the company working on the
acquisition should start by targeting
the dissatisfied employees to see
what is brewing the dissatisfaction
among staff. It may be the fact that
the lengthier the tenure, the less
likely it is to receive a promotion at status quo right now. This would be where it would be highly beneficial for the company to conduct an anonymous employee feedback survey with questions that are rated on a Likert-scale, with minimal open-ended questions intertwined. Dedicated communication should occur between management and the crowd that is dissatisfied should occur to ensure that employees are motivated enough to maintain production standards moving forward.
Based on the attrition
analysis data, the organization
should anticipate that the trend of
employees leaving will continue.
As you can see by the depiction of
Merger Integration Report 9
the work-life balance ratings from the employee attrition data, there are many staff members that indicated sub-par work life balance levels. Having poor-work life balance, coupled with poor job growth in an organization can dissuade a buyer from completing their purchase of the organization as it will show that whatever measure of stability that is currently there will not be there in the future.
Some actionable steps the company can focus on involve establishing open lines of
communication to start. This can be using an employee engagement survey but should be more
than that alone as well. Establishing a quality working environment is going to be key in
ensuring staff knows that they are appreciated and valued as a long-term member of the
organization. The next step to take is building said employee engagement survey from earlier.
This can include both open and closed ended questions in order to determine any trends from
staff; however, during this week, it should also be deemed employee appreciation week where
staff are celebrated for the good work that they have done in the organization. Finally, the third
actionable step is creating Key Performance Indicators (KPI's) to set standards for everyone in
the organization. These KPI's will be used as a benchmark to assign raises at the end of the fiscal
year for the organization. Depending on how the organization does at the end of the fiscal year is
how the raises will be calculated.
One thing that management can do to prevent employees from leaving the organization is
to increase the pay scale. There may be unnecessary discontent due to employees having to work
lengthy hours just to be able to provide for their families. Especially with the employees that
have been there substantially longer than others, increase that pay scale. It is not going to ruin
the budget if managed appropriately. To do this, the organization can create a career
development ladder program. This can ensure that employees are where they can do their best
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Merger Integration Report 10
work, and open up the door for opportunities for others to step into where they want to be.
Additionally, creating a sense of transparency and working on establishing a professional
environment where people feel empowered to speak up and speak out to coach each other when
needed, not to challenge others and brew anger, but to spur continuous learning opportunities
within the company.
When an organization can be a part of such a comprehensive tool like the NAICS Code system, it can help to identify competitors in the same industry. This will be highly beneficial in establishing a contingency plan for an organization planning to be acquired by another company. However, due to market instability and economic downturn, it is a good idea to establish a contingency plan in the event the company that was originally interested still backs out of the proposal.
Alternative Buyer Research Report
Current Market
Merck & Co. Inc. has their foothold in many different industries such as vaccines, biologic therapies, animal health, but the most notable aspect is their spot in the pharmaceutical industry. The company was established in 1891, and though their history is arguably tainted due to its Vioxx-related lawsuits that had the company paying out $4.85 billion dollars to settle the claims made citing increased disposition to heart attacks and strokes in patients taking it for a year and a half or more (Krauskopf, 2007), has rebounded quite admirably to become the pharmaceutical giant it is today. Research and development is of utmost importance to the company. Merck & Co. Inc. has even compiled a staple of most doctors’ bookshelves, The Merck Manual, which is composed of a massive listing of human ailments and their treatments. Even in the 1960s, Merck
Merger Integration Report 11
was commonly churning out more substantial medications than any of its rivals in the industry, setting the standard for the pharmaceutical industry, and often resulting in their staff being pried away due to the prestige of the company (Hawthorne, 2004).
Merck & Co. Inc. boasts an impressive portfolio of pharmaceutical products for both animals and humans, and arguably the most groundbreaking medication of which being Keytruda. Keytruda is one of the oncology pharmaceuticals that Merck has produced that has earned them noteworthy responses, even from the Johns Hopkins Kimmel Cancer Center researchers at the 2015 American Society of Clinical Oncology annual meeting, where value is always the biggest focus. Merck understands the importance of having options for treating cancer, and they do not shy away from researching to ensure that patients have appropriate value in their treatments, as studies show that it is one of the most effective pharmaceuticals, posing minimal risk to its patients (Raedler, 2015).
Merck’s other products include products such as Januvia (for type 2 diabetes), Zetia (for high cholesterol), Remicade (for rheumatoid arthritis, Crohn’s disease, ankylosing spondylitis, and plaque psoriasis), Gardasil (human papilloma virus vaccine), and Ivermectin (an anti-
parasitic medication that has been used to treat river blindness and in some cases, though no recorded proof of efficacy, has been used in the treatment of COVID-19 (Popp, et al, 2021)). As you can see, Merck has their presence in a wide array of ailments for their patients. This coincides with the strategy of Merck to improve the health and wellness of both humans and animals by expanding the access to medications and vaccines, providing value for their external stakeholders in times when they need it the most. Merck sports a positive Compound Annual Growth Rate (CAGR) coming in at 14.9%. CAGR details the mean annual growth rate over a period of time longer than a year and is one of
Merger Integration Report 12
the most commonly used ways to determine the Return on Investment (ROI) (Wayman, 2023). A
rate of 14.9% shows long-term sustainability. Additionally, market share is a substantial consideration as well. Market share signifies the percentage of sales in a market that a company’s business makes up. This helps to determine if the ROI is worthwhile, as well. Market share is commonly viewed as one of the biggest indicators of profitability, and Merck is certainly no slouch, coming in at 13.39%.
Financial Situation and Recent Developments
Even with all its controversy surrounding the Vioxx lawsuits, Merck experienced third-
quarter revenues that surpassed expectations, mainly due to the sales of Keytruda, Gardasil and the Covid medication, Lagevrio. In a time in which the public expected assistance in the form of
a cure for Covid, Lagevrio was able to exceed expectations, causing Merck’s revenue to hit approximately $60 billion dollars for the year, and $15.96 billion for the quarter, surpassing estimates by nearly $1 billion dollars (Erman, 2023). The aforementioned items should more than prove that the organization is fiscally sound enough to endure this transaction.
Buyer Rationale
Additionally, with the massive presence that Merck & Co. Inc. has in the pharmaceutical industry, it can help expand R&D opportunities in the newly formed organization. R&D opportunities seem to be finely engrained in the foundation of Merck, and being acquired by this powerhouse would be of great success for the organization.
Top Competitors
The top three organizations that share the same NAICS code are Merck & Co Inc, Eli Lilly and Company, and Bristol-Meyers Squibb Company. To start with, Merck & Co Inc is a well-renowned pharmaceutical company that has a rich history that dates back over 130 years,
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same as the other competitors like Eli Lilly and Company and Bristol-Myers Squibb Company. Merck commonly holds a spot on the Fortune 500 listing which details the biggest companies in the United States based on revenue. Merck is commonly noted as one of the "Most Admired Companies" per Fortune magazine, a title they held for six years, from 1987 to 1993. More so than that, one of the most groundbreaking aspects that shows that the company is ready for such an acquisition is the distinction of being the only pharmaceutical company to be dubbed as one of Fortune's "100 Best Companies to Work For" every year since the inception of the list (Hawthorne, 2004). This distinction shows that Merck holds a stable culture that would help aid in the transition. Merck has been a crucial figure in the pharmaceutical industry for a long time, and with this kind of stability it will be around for even longer.
The other two powerhouses, Eli Lilly and Company and Bristol-Myers Squibb Company are no slouches, as both boast impressive resumes. Eli Lilly has been around nearly 150 years at the forefront of the pharmaceutical industry. Engrained in its foundation was the need to establish quality medications without hindrance from others. Eli Lilly and Company commonly held scenario planning to ensure projects would remain resilient for the duration of their life cycle. This scenario planning was to ensure that the company was making the best decisions to ensure a sustainable future (Henderson, 2007). Research & Development (R&D) is engrained in the foundation of the company since its inception. Finally, Bristol-Myers Squibb Company has nearly as lengthy a tenure as Eli Lilly and Company. Bristol-Myers has been around for nearly 140 years. Similar to Merck, is a regular part of the Fortune 500. It is when we start examining Bristol-Myers that we start establishing criteria for the ideal company to be acquired by. In 2002, the company had a monopoly on a cancer treatment, dubbed Taxol and was brought to court, where the company decided to settle
Merger Integration Report 14
instead of going through the case. Additionally, there are several other notable run ins with lawmakers that Bristol-Myers had been subjected to, stemming from things like accounting discrepancies that caused a $2.5 billion overstatement in sales over a three-year period. This overstatement had wholesalers with a $2 billion excess inventory (Parboteeah & Cullen, 2018). This somewhat routine occurrence of being subjected to lawsuits, regardless of reason, is a primary reason that detracts from how attractive it would be for our company to be absorbed by Bristol-Myers, mismatched core values.
While these mismatched core values can potentially subject the new organization to a negative image in the public eye, this is not the primary reason to deter us from Bristol-Myers. The primary criteria of which would be the internal work environment, which based on research, Merck is clearly the leader in stability. This item is the most important because in such a volatile
time, it is important to have the tools to account for the absorption of another company to address
any hesitancy by employees. The next factor in consideration should be the type of markets that the company has a presence in. Does the company that will be buying us out have a reach in new markets? Will it help the company grow even more? Finally, the third most important criterion is the possibility of being subjected to bad public image. Which, being subjected to bad public image during such a volatile period can be problematic and spell doom for a company
undergoing such a massive transition.
Quantitative data aspects are not heavily considered as opposed to qualitative data. Items
that arguably could have or should have been under consideration include, the number of staff members, total sales revenue or even items like click-rate for company website. While all three of these bits of quantitative data could be beneficial, it is not the best tool in determining a fit for the organization to be bought out by.
Merger Integration Report 15
Company Information
Company Name
Strategic Vision
Primary product(s) or
service(s)
Overall
market share
Compound
annual growth
rate (CAGR)
Merck & Co. Inc.
Use innovation as the biggest driver of value
for internal and external stakeholders.
NuvaRing, Implanon, Januvia, Ketruda, Propecia, Fosamax
13.39%
14.9%
Eli Lilly and Company
Increase medication access for the world, while improving health care for people with limited resources and strengthening communities in an effort to address social
issues.
Cialis, Humalog, Cymbalta, Emgality, Humulin, Trulicity
7.97%
9.9%
Bristol-Myers Squibb Company
To be the top biopharma company in
the world that reshapes
patients’ lives through science.
Eliquis, Sotyktu, Opdivo, Nulojix, Yervoy
9.20%
20.9%
Acquisition Road Map
Since becoming part of the strategic planning team, determining what would make a proper transition has been of paramount focus. The first step was establishing a guiding coalition
as a way to have a controlling entity oversee the process of the acquisition, should be of
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Merger Integration Report 16
paramount importance. The next point of concern was to examine the causes of why staff members could be inclined to leaving the organization and how to thwart the trends.
This road map would best be served in sixteen to eighteen months, as it is crucial that this
transition goes off seamlessly, while maintaining steady progress. It is important that we reach out to Merck to review this proposal within the three months. After reaching out to Merck to evaluate the interest, the strategic planning team should come equipped with appropriate quantitative and qualitative data that can supply enough information to entice Merck. This phase
should last approximately five months.
After supplying the pertinent information to Merck to make an educated decision comes the negotiation stage. Merck should be afforded ample time to gather an appropriate assessment of our organization, which may present some variation on timeframe depending on the speed that
Merck can draw their conclusions, but ideal estimate would be approximately four to six months.
After these preparatory stages are complete, now involves the legalities of the transaction.
Each entity’s legal teams will create the appropriate documents and aspects of the transaction, which should not go any longer than three or four months. Simultaneously, during the latter stages of this timeframe, the acquiring organization should also objectively evaluate their financial status, which should not exceed the legal stage timeframe, at most should take a few weeks to complete. By conforming to this proposed timeframe, a pristine transaction will occur of the two businesses. Below will indicate the proposed road map, depicted as a Gantt chart.
Merger Integration Report 17
Exit Strategy Recommendations and Plan
Above and beyond utilizing visual evidence and persuasiveness to illustrate the need for change, it is important to set deadlines for specific tasks to be completed by. Furthermore, one additional question that the sense of urgency must make it the benefits of these changes, not only
to the guiding coalition members but to all staff, readily transparent. Inherently, staff will want to know, “What’s in it for me” – and that is not an unreasonable expectation. The coalition of similar-minded individuals working cohesively will help facilitate the implementation of the change initiatives. Additionally, the cohesiveness of the guiding coalition can help garner employee buy-in to the initiatives, putting them on the same page to achieve the organizational objectives.
The guiding coalition must actively engage the staff members, while ensuring top-notch communication during this process. The guiding coalition members must be able to support the changes that are being made, and these leaders must show support for these changes. By supporting the organizational objectives, these high-quality leaders can help facilitate the changes. Omar Mattson, John Martensson and Elaine Hartwick have a vast array of experience
Merger Integration Report 18
that members of their teams can absorb. They will be tasked with several items that are part of the acquisition roadmap. These tasks include things such as the evaluation if issues driving staff out of the organization, outreaching of Merck to review the proposal to purchase the company, supplying Merck with the company data to make a well-informed decision, but one of the most important aspects that is not necessarily blatantly included on the roadmap is creating a shared vision, which is a proactive way of ensuring that the staff of the organization stays working towards the same comprehensive goals instead of working against each other. The guiding coalition must have a cross-functional repertoire of experience because the impact will reach everyone in the organization. The timeline will last approximately 18 months, mainly to keep things moving during the transition. The vision statement must exemplify in a concise, refined way of what the company’s long-term aspirations are. Establishing such a concise, well-rounded strategy will show how well the company fits with the one doing the purchase, in this case Merck. Once such a statement is created, it is important to be continually adjusting based on the foundational knowledge and resources within your organization. For the life sciences organization about to be
bought out by a larger corporation, a strategic vision centered on expanding accessibility and affordability should be of highest importance going forward. For an organization centered so much around research and development, there should be a way the production of the medicine to align with these values to expand the access to these medications for all.
To enlist a group of employees that support the common vision, it is important to utilize the guiding coalition. The guiding coalition must show support and enthusiasm for the change, to build a culture centered around teamwork. In addition, ensuring that the coalition has open lines of communication to address the questions and concerns of frontline staff members. By
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Merger Integration Report 19
doing so, the organization can mitigate one of the biggest barriers to change, hesitancy for staff to accept the proposed changes. Communicating these proposed changes and the standards via a town-hall meeting where the guiding coalition can answer questions as staff members have them,
instead of speculation running rampant, especially negative speculation, at that.
To track the progress of these changes, it is important to set Key Performance Indicators (KPI’s) such as operational performance, and financial results. These can be tracked on a quarterly basis to ensure that as a company, we are moving in a positive direction. This can be coupled with periodic employee surveys to assess the impact that the transition will have on our employees. Whenever we have short-term wins, such as meeting certain KPI’s set for the organization, these would be communicated through various channels, but to ensure regular communication, the most common of which will be e-mails. Other methods would be things like
team meetings or informal conversations with staff. The underlying item to communicate is that change should be embraced, as it is not as scary as it sounds.
When the transaction has finalized and the two companies have become one, the main item of concern will be, do the goals and aspirations of both organizations align to make a good fit for future prospects? These goals should be formalized with aspirations for the future and how they will build towards a better future. The newly formed company will fit in remarkably with the oncology market segment. With the research and development capabilities that both companies hold it is quite possible that the company will find its niche in a hurry. There may be a bout of volatility, at least initially, but it is important to stay the course and with the guiding coalition at the helm of the transition, it should rebound in a hurry.
Merger Integration Report 20
References
Farris, K. B., Demb, A., Janke, K. K., Kelley, K., & Scott, S. A. (2009). Assessment to transform competency-based curricula.
American journal of pharmaceutical education
,
73
(8).
Merger Integration Report 21
Hawthorne, F. (2004). The Merck druggernaut: The inside story of a pharmaceutical giant. John Wiley & Sons.
Henderson, R. M. (2007). Eli Lilly’s Project Resilience: Anticipating the future of the pharmaceutical industry.
Hofstede, G. (2011). Dimensionalizing cultures: The Hofstede model in context.
Online readings
in psychology and culture
,
2
(1), 8.
Kotter, J. P., & Schlesinger, L. A. (2008). Choosing strategies for change
. Harvard Business Review. https://hbr.org/2008/07/choosing-strategies-for-change Murphy, J. B. (1998). Introducing the North American industry classification system. Monthly Lab. Rev., 121, 43.
Parboteeah, K. P., & Cullen, J. B. (2018).
Business ethics
. Routledge.
Rollag, K., Parise, S., & Cross, R. (2005). Getting new hires up to speed quickly. MIT Sloan Management Review.
Van Veldhoven, M., & Dorenbosch, L. (2008). Age, proactivity and career development.
Career development international
,
13
(2), 112-131.
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