Effects of Merger on Employee Morale Essays

Effects of Merger on Employee Morale Essays Effects of Merger on Employee Morale Essay Effects of Merger on Employee Morale Essay 2000). MA’s have become a more integral part of business life. Frank (2002) acknowledges that the idea of a megadeal continues to haunt floors of the world’s largest companies. Therefore for companies involved in mergers or acquisitions, in an effort to prevent the hangovers that strike the majority of MA’s, management must manage their post-merger integration more consciously and professionally. The integration phase plays the most integral part in the success or failure of the merger (Bruner, 2005). One of the most important factors in how well two companies integrate depends greatly on how well the integration is managed (Meschi, 1997). Fisher (1994) asserted that the most success and best mergers were those where managers of both companies took the time to thoroughly understand what they were getting into. The leaders must be willing to create a new culture that makes use of the best parts from both partners. In order to convince all company members, it is essential to be honest with employees about all aspects of agreements and to take time to reassure valuable workers that their jobs are safe. HRM ?tr?tegie? History shows that only 30–40% of all mergers and acquisitions are successful, despite companies stating that their merger has been successful but have been unable to derive the kind of benefits that were expected, triggers the question what is stopping these companies from achieving complete success (Ajjarapu, 2004). Ajjarapu reported that one of the main reasons for failure of a merger or acquisition is based on human resources neglect. Companies which have failed to recognize the significance of human assets in their associations and their function in the success of integration have failed to come to success. Dixon and Nelson (2005) reported that HR professionals are not included as part of the MA team, which is typically comprised almost entirely of people from finance, IT and other disciplines seen as essential to making the deal work. Unsuccessful merger activity is fast becoming the norm and one of the main reasons behind this is the underestimating impact culture has on merger success. Cartwright and Cooper (2000) accepted that the premier functions of up to date human assets purposes are to be dynamically engaged in the association and perform as a enterprise colleague and advisor on business-related issues. Gaughan (2005) stated: Human resource departments in today’s organizations are practical and strategic. As such, they can add significant value for companies through development, managing personnel conflict, reinforcing the new HR system and corporate culture, and providing leadership and communication to reduce turnover. (p. 20) This is particularly critical in the locality of amalgamations and acquisitions. People issues have been the most sensitive but often ignored issues in a merger and acquisition (Giles, 2000). When a decision is taken to amalgamate or come by, a business analyzes the feasibility on the business, financial and legal fronts, but falls short to identify the significance adhered to the human assets of the associations involved. Organizations fail to realize that people have the capability to make or break the successful union of the two organizations involved. Ajjarapu (2004) reported that it is important for organizations on the verge of integration to analyze the feasibility of the integration of key players from the human resource side of the house. Research showed that only 35% of senior HR executives were involved in MA activities (Giles, 2000; Liberatore, 2000). Other research reported that 80% of combinations failed at the implementation stage as a result of the following factors; an inadequate road map, senior HR professionals brought in too little, too late; senior HR professionals lacking in business experience; an inadequate skills base overall; and ultimately, failed organizational change (Charman, 1999; Greengard, 1999). Anderson (1999) reported that it is imperative that human resource professionals are key in pre-merger discussions and the strategic planning phase of mergers and acquisitions early as to allow them access to the corporate cultures of the two organizations. Being engaged in the pre-merger stage permits HR to identify areas of divergence which could hinder the integration process. HR plays a vital role in addressing any communication issues, compensation policies, skill sets, and company goals that need to be assessed (Deal Kennedy, 1999). Deal and Kennedy (2000) reported that it is imperative to involve HR to handle other issues such as addressing employee concerns, developing a detailed integration plan for merging the people of the two organizations, conduct talent audits, manage downsizing with care and most importantly motivate employees (Deal Kennedy, 2000). A study conducted by The Society for Human Resource Management revealed that more than two-thirds of the senior managers interviewed had been involved in three or more mergers, acquisitions or joint ventures within the past 5 years. Key results of the survey indicated that, while the experience level in corporate America is deep, the quality of such MA activities has gone missing. The findings included: [1. ] Only 43% of respondents reported success in achieving the expected pre-deal results. [2. ] Of the 82% of respondent companies that listed growth in market share as the most important expected result of the merger, only 49% reported achieving the goal. [3. ] Companies for whom the drivers were leadership in a consolidating industry and enhanced brand strength reported similarly disappointing results. 4. ] Respondents reported that the major obstacles to MA success were: [a. ] Inability to sustain financial performance (64%) [b. ] Loss of productivity (62%) [c. ] Incompatible cultures (56%) [d. ] Loss of key talent (53%) [e. ] Clash of management styles (53%) (p. 5) Dixon and Nelson (2005) asserted: These outcomes give a clear suggestion and supply a cornerstone for healing the MA persevering or at least begi nning the remedy with the right prescription. After all, three of the five obstacles listed above fall squarely within the human resource arena. p. 5) Most of these senior HR leaders were not included in the pre-deal planning activities by their own companies. With so much to offer and a general consensus of the positive correlation between HR involvement and the success of mergers and acquisition, the question remains as to why HR does not play an integral role in the MA proceedings (Dixon Nelson, 2005). ?te F?r ?tr?tegy Im?lement?ti?n Mergers and acquisitions represent change, and it is this change that generates different emotions among different employee groups. While employees from an acquiring company may feel excited about the new challenges that the integration brings to them, employees from an acquired company may have very different reactions, such as feeling anxious, uncertain, or even intimidated as they go through major changes (Machiraju, 2003). In the face of organizational changes from MA’s, employees tend to be worried with issues such as job security and their future careers with the organization (Daniel Metcalf, 2001). According to Wasserstein (2001) when uncertainty drags on without being addressed, or when employees do not have a good understanding about the change process or new work roles and standards, it impedes productivity and performance. The rumor mill begins and employee morale not only decreases, but many employees do not wait around: they jump ship and leave the company. For example, when Hewlett Packard (HP) broadcast its merger with Compaq, employees became concentrated on protecting their occupations rather than of assisting customers. Consequently, HP lost customers to other competitors (Nguyen Kleiner, 2003). Given that change is inevitable when two organizations are combined, communicating upfront about what will happen can help prepare employees for these changes. Each stage in a MA is a stressful time for both employees and managers, and each have to work together to avoid many of the disempowerment and mistrust that often comes with it. This is mostly because of today’s environment which seems to survive on rapid change and a great deal of uncertainty. It is very important for a company to maintain the trust of its employees when the change is taking place, this will ensure that as few employees as possible are â€Å"injured† and you retain much of the loyalty of the workers that remain (Brockner, Konovsky, Cooper-Schneider, Folger, Martin, Bies, 1994). When employees are treated well, they can survive any type of future crisis that an organization will go through. The surviving employees of the MA will work to build a better a better stronger company in the future. How management deals with these employees affects their morale and can either positively or negatively affect their productivity. MA’s are becoming a fact of life. They are something that will continue to happen unfortunately with no end in sight. As long as the economy continues to rise and fall, so to will the concept of merger, acquisitions, restructuring, streamlining and downsizing. References Abrahamson, E. (2004). Change without pain: How managers can overcome initiative overload, organizational chaos, and employee burnout. Boston: Harvard Business School Press. Ajjarapu, N. (2004). Mergers and acquisitions: Managing the HR issues. Anderson, J. E. (1999, August 9). Making operational sense of mergers and acquisitions. The Electricity Journal, 12(7), 49–59. Banal-Estanol, A. , Seldeslachts, J. (2004). Merger failures. Unpublished manuscript, University of Western Ontario (Canada) and Universitat Autonoma de Barcelona (Spain). 5. Berenson, M. L. , Levine, D. M. , Krehbiel, T. C. (2006). Basic business statistics: Concepts and applications (10th ed. ). Chicago: Prentice Hall. Bohl, D. (1989). The effects of mergers and acquisitions. New York: American Management Association. Brooks, I. Dawes, J. (1999). Merger as a trigger for cultural change in the retail financial services sector. The Services Industries Journal, 19(1), 194–206. Bruner, R. (2005). Deals from hell: MA lessons that rise above the ashes. Hoboken, NJ: John Wiley. Borland, J. (2002). Despite breakup, ATT continues to reshape telecom landscape. Cartwright, S. , Cooper, C. L. (1994). T he human effects of mergers and acquisitions. In C. L. Cooper D. M. Rousseau (Eds. ), Trends in organizational behavior (pp. 47–62). New York: Wiley. Cartwright, S. , Cooper, C. L. (1996). Handbook of coping: Theory, research and applications. New York: John Wiley. Cartwright, S. , Cooper, C. L. (2000). HR know-how in mergers and acquisitions. London: Institute of Personnel and Development. Charman, A. (1999). Global mergers and acquisitions: The human resource challenge. Alexandria, VA: Society for Human Resource Management, Institute for International Human Resources International Focus. Daniel, T. A. , Metcalf, G. S. (2001). The management of people in mergers and acquisitions. Bridgeport, CT: Quorum/Greenwood. Deal, T. , Kennedy, A. (1999). The new corporate cultures: Revitalizing the workplace after downsizing, mergers and reengineering. Cambridge, MA: Perseus Publishing. Deal, T. , Kennedy, A. (2000). Corporate culture: The rights and rituals of corporate life. Cambridge, MA: Perseus Publishing. Dixon, I. , Nelson, N. (2005). SHRM case study: Culture management and merger acquisitions. Dooney, J. (2005). Communicating HR’s business impact. The morale and satisfaction of midlevel administrators: Differentiating the constructs and their impact on intent to leave. Feldman, M. L. , Spratt, M. F. (1999). Five frogs on a log: A CEO’s field guide to accelerating the transition in mergers, acquisitions, and gut-wrenching change. New York: HarperCollins. Fisher, A. B. (1994). How to make a merger work. Fortune, 129(2), 66. Frank, R. (2002, June 25). Where have the masters of the big mergers gone? The Wall Street Journal, p. C1. Gaughan, P. (2005). Mergers: What can go wrong and how to prevent it. Hoboken, NJ: John Wiley. Habeck, M. M. , Kroger, F. , Tram, M. R. (2000). After the merger. London: Prentice Hall. Haspeslagh, P. C. , Jemison, D. B. (1991). Managing acquisitions: Creating value through corporate renewal. New York: Free Press. Huselid, M. (1995). The impact of human resource management practices on turnover, productivity and corporate financial performance. Academy of Management Journal, 38(3), 635–672. Jansen, S. A. (2001). Mergers and acquisitions (4th ed. ). Wiesbaden, England: Gabler. King, D. (2004). Meta-analyses of post-acquisition performance: Indications of unidentified moderators. Strategic Management Journal, 25(2), 187–200. Leedy, P. D. , Ormrod, J. E. (2005). Practical research: Planning and design (8th ed. ). Upper Saddle River, NJ: Prentice Hall. Luecke, R. (2003). Managing change and transition. Boston: Harvard Business School. Machiraju, H. (2003). Mergers, acquisitions and takeovers. New Delhi, India: New Age International. Rend cultural management. Human Relations, 50(2), 211–228. Munck, B. (2001). Changing a culture of face time. Boston: Harvard Business School Publishing. Nguyen, H. , Kleiner, B. H. (2003). The effective management of mergers. Leadership and Organization Development Journal, 24(8), 447–454. Picot, G. (2002). Handbook of international mergers and acquisitions: Preparation, implementation and integration. Houndmills, England: Palgrave/Macmillan. Reed, S. , Lajoux, A. (1998). The art of MA: A merger acquisition buyout guide. New York: McGraw Hill. Wasserstein, B. (2001). Big deal: Mergers and acquisitions in the digital age. New York: Warner Business Books.