The Impact of Mergers on Employees’ Behaviour: The case study of two consulting firms
An overview of the consultancy industry
Consultancy firms are perceived as medical practitioners, in that they diagnose organisational illness and prescribe appropriate remedies (Fincham and Clark, 2003). Consultancy firms, in various forms, have existed for as long as complex organisations.
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They are a unique part of the service sector, one in which emphasis is placed on personnel, rather than equipment and products. One of the main characteristics of the service of these firms is the orientation towards projects, due to the complexity and uniqueness of the work required (Kreitl and Oberndorfer, 2004). The work of consultants is mainly based on the influence and impact of the fashionable management knowledge and techniques (Fincham and Clark, 2003). With the recent increasing number of large multinational companies, greater commodification of intellectual capital and knowledge management has increasingly become a crucial function for many organisations (Donnelly, 2008). The rapid expansion in the number of consultancies and large multinational consultancy firms can be associated to the increasing needs of these large companies (Fincham and Clark, 2003). While the industry is composed of many thousands of firms, it is primarily the giant international firms, and the major strategy and systems firms, that have been the focus of commentaries and research (Fincham and Clark, 2003). The ideas and concepts they develop are sometimes adopted from external sources, and reflect famous acronyms such as BPR, TQM, and KM (Fincham and Clark, 2003). Consultancy firms bear a considerable part of the responsibility for disseminating management ideas internationally. They have spread to and penetrated different countries, often acquiring or merging with local consultancies; and they have spearheaded the transmission of global best practices and new organisational designs, channelling the competitive forces of the world economy (Fincham and Clark, 2003).
Consulting is a somewhat cyclical industry. After a decade of rapid growth and profits, the consulting business went the other way during 2001 to 2003. The stock market bust in 2000 and 2001, particularly in the technology and telecommunications sectors, caused this setback (Plunkett Research, 2011). Consultancy firms posted significant growth from 2005 through 2007. However, they faced many difficulties in 2008 and 2009 because of the global economic slowdown and shrinking corporate budgets. Corporations have been slashing spending, employment and capital investment in a desperate attempt to pay down debt while cutting costs (Plunkett Research, 2011). This has been particularly hard on some consulting sectors, since corporations and governmental agencies are prime clients for consultancies. In general, major consulting companies, including leading firms in management consulting and HR consulting, along with other advisories such as accounting firms, found themselves with substantial drops in business during 2009, in many cases 5% to 10% (Plunkett Research, 2011). Some companies cut their employee rosters and/or restrained hiring. However, as of late 2009 and early 2010, corporate profits in general had grown substantially, meaning that executives may be more willing to authorise new consulting projects as long as they see the potential for a good return on the cost. In 2010, the global consulting industry revenues is about USD345 billion, as compared to USD310 billion and USD330 billion in the year 2009 and 2008 respectively (Plunkett Research, 2011).
The consultancy industry in the United Kingdom
In the United Kingdom, the consultancy industry market had total revenue of ?13.1 billion in 2009 (Datamonitor, 2010). The industry is growing consistently from 2005 to 2008 but declined in 2009. The reason was because of the global economic downturn and companies across the globe cutting costs and spending to cope with difficult times.
(Source: Datamonitor, 2010)
The consultancy industry is divided into various segments and companies focuses on a particular segment or more depending on where their capabilities and expertise lies. According to Datamonitor (2010), the two largest segment of the consulting industry are information technology and operations management which makes up 26.8% and 23.3% respectively of the total market share.
The rivalry within the industry is moderate. Despite the presence of large organisations which increases rivalry, there are a number of smaller firms which specialises in certain segments, thus reducing the intensity of the overall market rivalry. The services provided by consulting firms are usually costly and requires a high level of specific knowledge or expertise. As consultants advise within a wide range of industries, there is a high degree of service differentiation within the market. Nevertheless, the economic slowdown has had a significant impact on the market, which lowers revenue and increases rivalry.
The larger organisations within the industry such as PriceWaterhouse Cooper and Deloitte, are worldwide firms with a strong brand reputation. It is important for customer retention within a highly competitive market. The time and experience needed in order to gain these reputations present significant barriers to entry for new entrants.
Many large organisations employ in house business analysts and marketing teams, which poses a strong substitute threat to consultancy firms. However, these organisations may find that these services are not required all the time and resources are wasted to maintain their own departments. Therefore, it would be sometimes cheaper to outsource these activities to consultancy firms.
Buyers of consultancy services vary from small to large companies. The service is relatively costly due to the high level of specialised knowledge required. Therefore, smaller companies are more likely to employ a business analyst internally. This combined with the service being largely dispensable to the buyer, increases buyer power. However, the consultancy services are very much differentiated and specialised, thus buyers have to choose the service which meets their needs most effectively. This on the other hand, reduces buyer power. When obtaining services from a consultancy firm, a company usually enters into a contract for the duration of the specific project or projects. Costs will not be incurred when switching projects but as many projects have a prolonged duration, it would make any switching of consultants expensive.
Major suppliers to consultancy firms are producers of computer hardware and software. Consultancy firms invest a huge sum of money in computers and their IT systems to make their processes more effective and less time consuming. The sophisticated IT systems are created and altered to suit the consultancy firms need. Such services usually involve binding companies with long term contracts together with frequent technical support and maintenance. Therefore, switching suppliers would require huge investments in time and costs. Switching will also require additional training and redesigning of the system. Overall, the supplier power within the consultancy industry is strong.
Company A is a United Kingdom (UK) corporate consultancy firm which provides mainstream and specialist company secretarial and accounting services to corporate and private individuals. Company A, a member of a multinational corporation, joined the group in 2008 to become the first office in the European region. In particular, Company A assists overseas investors in establishing and maintaining a presence in the UK. Company A also provide solutions to private clients in reducing administration burden so that they can spend more time to concentrate on other interests.
Company B is a consultancy firm providing professional advice to domestic and international clients. The services provided are accounting, international tax and corporate services. The company aims to provide customised solutions to individuals, businesses, companies, investors and trustees on an international basis (LinkIn, 2010). The company has 20 employees, consisting of qualified accountants, chartered tax advisors and experts in statutory compliance as well as corporate governance (LinkIn, 2010).
The merger between Company A and company B
In December 2010, Company A and Company B merged under Company AB to form an alliance of resources, capabilities and client database. Company AB continues to build its reputation and expanding through the European region through mergers and acquisitions of certain practices from major international accounting and professional firms. Previously, Company A acquired the secretarial business of a larger consulting firm in the UK. Both the companies provide somehow similar services but they have different target markets. Company A’s client are mostly large corporations meanwhile Company B’s clients are mostly privately owned businesses or smaller firms. Company A and Company B had a close relationship with each other, sharing capabilities to meet each other’s clients’ demands. In the current merger between Company A and Company B, certain issues which have to be carefully considered are change management and people management. There will be an integration of departments between Company A and Company B such as the Human Resource department and IT department. Therefore, the process of integration and change management has to be properly implemented to ensure a smooth transition takes place. There are a total of 23 employees and 5 partners after the merger.
Therefore, the research aims of the research are to present, compare, and discuss the results of employees’ interpretations of their experiences of the change in the merger of the two consulting firms.
2. LITERATURE REVIEW
Although often used synonymously, the terms merger and acquisition mean slightly different things. In the Oxford Dictionary of Business (2nd ed., 1996, cited in Frank, 2000) the term merger is defined as:
“A combination of two or more businesses on an equal footing that result in the creation of a new reporting entity formed from the combining businesses. The shareholders of the combining entities mutually share the risks and rewards of the new entity and no one party to the merger obtains control over the other.”
Mergers typically occur when companies join forces to create a new organisation which, because of complementary skills and expertise, will be a stronger and more competitive outfit (EGPL, 2011). Mergers have become a popular strategic option for firms that want to acquire new resources to meet the changing demands of the competitive landscape (Swaminathan et al., 2008; Cascio, 2010; Marks and Mirvis, 2001), which is recognised as a fast-track to organisational growth, increased profitability and greater market share (Lynch and Lind, 2002; Alexandridis et al., 2010; Schuler and Jackson, 2001). Although only few mergers actually add shareholder value for the organisations (Cascio, 2010; Marks and Mirvis, 2001), corporations have turned increasingly to mergers and acquisitions to fuel their future success (Lynch and Lind, 2002; Lind and Stevens, 2004). It has been suggested that mergers will also benefit the rival competitors or the non-merging firms (Clougherty and Duso, 2009). First, the more mergers reduce rivalry, thus the more pricing power for all firms and secondly, the more destructive the merger for insider firms, the more rival firms may actually gain (Clougherty and Duso, 2009). Therefore, it is inadvisable for managers to automatically assume that a competitor’s merger imperil rival firms (Clougherty and Duso, 2009).
Because the costs of failed mergers and acquisitions are so great, the challenge to make them more successful is vital. In the past decades, many researches have been done to identify the reasons for merger failures. The issues investigated are mostly on the strategic, financial, or operational side of mergers (Marmenout, 2010). Merger agreements are more likely to focus on the financial and planning systems at the corporate level. Though due diligence includes numerous financial elements and reports, the core of reasons for the success or failures of mergers are people and behavioural issues such as differences in cultures; several sets of policies, practices and procedures of the two organisations; restructuring of organisation chart; and loss of key personnel, all of which indicate the importance of the human factor (Cartwright and Cooper, 1993; Appelbaum et al., 2000; Schuler and Jackson, 2001; Weber, 1996). Yet, investigation of the human aspect issues and activities are least likely to be conducted during mergers (Horwitz et. al., 2002; Schuler and Jackson, 2001; Huang and Kleiner, 2004) but literature has suggested that this factor is one of the most significant in any merger environment (Craven, 2004; Cartwright and Cooper, 1993).
2.2 Types of mergers and personal management
There are many variables in merger and acquisition activities. The type of the merger could influence human resource practices (Napier, 1989; Pikula, 1999). The merger between Company A and Company B is identified by Napier (1989) as a collaborative merger. Collaborative mergers occur when two firms whose products or services are closely related or of the same type join to generate gains through a blending of operations, assets or cultures, or through an exchange of technology or other expertise (Napier, 1989). From an HR perspective, collaborative mergers are the most difficult mergers to be implemented, since the acquiring firm already has expertise in the business operations and will act to consolidate the two firms to avoid redundancy and become more cost-effective. Downsizing and voluntary layoffs usually recede, or immediately follow, the merger (Pikula 1999).
Meanwhile, Lynch and Lind (2002) have identified four basic types of acquisitions and have clearly pointed out that one type is not necessarily better than the other. This model was simply to provide managers with more clarity of an acquisition/merger, both during and after the merger process. Many mergers fail because managers pursue strategies that are inappropriate for their merging situation (Lind and Stevens, 2004; Marks and Mirvis, 2001; Schweiger and Weber, 1989).
The actions that Lynch and Lind (2002) recommend for each acquisition type overall points out that planning and management of the integration process is important which will determine the success or failure.
Almost all merger and acquisitions has to face issues like cost reduction (Marks and Mirvis, 2001), redundancies (Cascio, 2010), organisational structure, reporting processes and channels (Schweiger and Weber, 1989). Similarly, close attention needs to be paid to the integration departments such as finance, HR and IT; and to convergences and divergences between products sold and materials and services purchased.
All levels of management need to focus on such issues but senior executives’ primary focus must be on the total integration process. How they behave and what they say needs to send messages to both employees (Schweiger and Weber, 1989). Giving the wrong message will impact on the merger’s ultimate success. Kanter (2009) has also pointed out that successful mergers require integrating and motivating employees who will work quickly and smoothly, minimise disruptions, increase market share, innovate, and adapt to emergent trends.
Lynch and Lind (2002) conclude that all successful merger activity displays the same characteristics. It articulates and enacts a clear sense of purpose which is based on identifying the type of merger taking place. Each stage of the process aims to reduce uncertainty and confusion by being carried out quickly and effectively. Lynch and Lind’s (2002) analytical framework identifies useful first steps on the road to merger success.
2.3 Motives of mergers
According to Morden (1993), in a merger, the potential partners must feel that the union between them allows the constituents to:
Eliminate unnecessary competition and to harmonise operations; thereby cutting costs, focusing attention and energy, and combining to increase potential (Morden, 1993).
Join and harmonise competencies (Morden, 1993; Marks and Mirvis, 2001)
Achieve joint effect by combining resources and skills (Morden, 1993; Marks and Mirvis, 2001)
Offset weaknesses in each constituent’s structure and performance, and to augment strengths (Morden, 1993)
Increase enterprise scale and critical mass (Morden, 1993)
Morden (1993) also states that companies that seek to achieve a successful merger would require:
A clear logic to the merger, that is, one where the contribution of each participant is mutually compatible and adds value to the outcome (Marks and Mirvis, 2001; Schweiger and Weber, 1989)
Mutual willingness to make the merger succeed (Marks and Mirvis, 2001)
Compatible and flexible cultures (Schein, 2004; Kotter,2007; Cartwright and Cooper, 1993)
Mutually compatible organisation structures and styles of people management, both being flexible enough to cope successfully with the level of change involved in a merger (Marks and Mirvis, 2001)
Hopkins (1999, cited in Mellahi et al., 2005) classifies three distinct motives of mergers, which are strategic, economic and personal:
a) Strategic motives
Strategic motives aim to improve the overall strategic position of the firm. Knowing that acquisitions and mergers are essential to meeting their strategic objectives and in some cases necessary for their basic survival, firms take the opportunity to prepare to meet the organisational challenges in mergers (Marks and Mirvis, 2001). This includes the intention to create synergy and to strengthen market power (Hopkins, 1999, cited in Mellahi et al. 2005; Marks and Mirvis, 2001; Schweiger and Weber, 1989). Synergy is the potential ability of the firms to be more successful as a result of the merger. If synergy is achieved, the combined resources and values after the merger will be higher than the firms operating independently but in practice, it is much harder to achieve (Mellahi et al., 2005, Schweiger and Weber, 1989). A firm may also be motivated to merge in order to join and leverage its core competencies (Mellahi et al., 2005; Morden, 1993; Marks and Mirvis, 2001). Two firms with different competencies, when merged, could create a strong competitive force against other firms.
b) Economic motives
Firms may also merge to achieve economy of scale by joining productive forces and eliminating redundant resources after the merger (Mellahi et al., 2005). Firms can increase their market share through their client database and capitalising on the partner’s existing clients (Marks and Mirvis, 2001). Besides that, the combined firms can often reduce its fixed costs (Marks and Mirvis, 2001) by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins. Integration of departments may reduce the operating cost of the merging firms but this transformation effort requires proper leadership and management skills (Kotter, 1999, Saunders et al., 2009).
c) Personal motives
Some mergers are primarily motivated by the self interest of the top management team. This could be simply to satisfy their hubris and ego through ‘empire building’ (Marks and Mirvis, 2001), or for motives of self interest such as increasing their rewards package and job security (Mellahi et al., 2005; Berkovitch and Narayanan, 1993).
2.4 Employees’ experience in mergers
One of the first considerations of employees in a merger situation is how will it impact them personally as a merger is a beginning of a period of uncertainty and unpredictability (Shirley, 1973; Schweiger and Weber, 1989). There will be many feelings and experiences encountered among the employees throughout the organisation because of the differences in expectations, questions and reservations. It is also sometimes usual for management to use mergers as an opportunity to reduce employee, thus making job security a major concern for them (Schweiger and Weber, 1989; Bryson, 2003). Therefore, employees are often filled many fears about the impacts that they will face following a merger, most particularly losing a job. Other fears or uncertainties include changes in salary and benefits; changes in the job responsibility; changes in performance evaluation systems; relocations; changes in career paths; changes in bosses and co-workers; changes in organisational power, status and prestige; changes in corporate culture and loss of identity with the organisation (Ivancevich et al., 1987; Huang and Kleiner, 2004). A high level of uncertainty or fear could result in higher absentees, stress, low job satisfaction, a negative behaviour, resistance to change, lower productivity, and lower commitment to the organisation (Schweiger and Weber, 1989; Nikandrou et al., 2000; Papadakis, 2005; Cartwright and Cooper, 1993). In the above context, M&A literature identifies maintaining the stability of the workforce throughout a merger as a key priority. The literature reveals that the same merger rumours, facts, and activities would be perceived as a threat by one person and an opportunity by another. As work is an essential part of most people’s lives and helps them accomplish the things that they value, mergers are powerful events that have the potential to change these relationships. However, not all mergers threaten the outcomes and values that the work provides. The fears could be offset by several hopes, which include advancement opportunities, meeting new people and forming new working relationships, learning new skills, and setting new goals, as well as creating an organisation that is better than the two originally separate organisations (Marks and Mirvis, 1992). Though these might enhance value achievement, until the initial shock is over and the dust begins to settle, seeing personal benefits from mergers is difficult (Ivancevich et al., 1987). Since the perceived events and consequences were deemed to be an important part of employees’ lives (Marks, 2006), in the absence of actual information concerning the merger, an individual’s appraisal will be determined primarily by his/her speculations about events that might occur and rumours associated with them. In this context, frequent and honest communication to employees has a stabilising effect and helps to reduce the level of uncertainty and fear (Schweiger and DeNisi, 1991; Marks and Mirvis, 1997; Cascio, 2010; Kotter, 1997). Furthermore, a number of programmes, such as stress management training, career counselling, merger sensitisation workshops, small group meetings helps to facilitate the coping process (Eisenbergeret al., 1990; Elliot and Maples, 1991). Re-training programmes help employees develop new job skills, and training in conflict resolution and team building help employees deal with new work situations (Schweiger and Weber, 1989; Yeung et al., 1991; Covin et al., 1996; Pollitt, 2004; Kusstatscher, 2006).
2.5 Merger Process and Change Management
A merger involving two companies combining resources, competencies and values, and organisational restructuring and integration of departments are often required. When performing a literature review on change models, it was discovered that much time and energy has been dedicated to bring about a better understanding of change as it relates to organisations. Each strategy has advantages and disadvantages for all parties involved. The primary starting point is to recognise the need for change in an organisation. A thorough review of each strategy is essential when determining there are any commonalities with each of the change models and whether these strategies will aid or hinder the success of the organisational change.
An awareness of the need for change is the beginning of the whole change process (Armstrong, 2006). A complete assessment of the current situation is necessary to begin the process of merger in an organisation. Unfortunately, this kind of assessment might sometimes take longer than expected. Various studies have been done to identify strategies concerning the very nature of change and how it relates to organisations. While change can be risky and is time-consuming, careful preparation can enhance the process (Coulson-Thomas, 2008). Managers tackle the situation of how most people do not enjoy change, but somehow, because change must happen, individuals will adjust over time with the right people in management (Evans and Ward, 2004, cited in Banks, 2010).
An aspect within change models are the individuals involved in working together to implement change. Ulrich and Brockbank (2005) provide some insights to this pointing out how high-performing HR professionals make change happen successfully and thoroughly with their most critical contribution to make sure the change happens quickly. There are various reasons their involvement is crucial to the success of any type of change, including mergers. Individuals’ familiarity with the organisation’s culture and employees becomes a great asset to the individuals responsible for organising changes though it is up to the organisation themselves to decide upon how much they need to be involved.
Kanter (1992) relates how organisations have to be able to adapt to change or face the possibility of losing out to competition. Kanter (1992) also explains how some top management attempt to force change by just changing polices without warning and expecting their middle management to take charge and make the change work. These experiences reflect how strategic-planning models are only a piece of the change process, which usually results in some sort of modifications to work with an individual organisation.
Schein (2004) uses the term “culture” and shows how it is extremely important to investigate and study the culture of an organisation in order to work with them in a more organised manner. Knowing the culture of the organisation is the responsibility of the leaders in order to determine how to lead or else the “culture will lead them” making any change model more difficult to implement (Schein, 2004).
2.6 Communicating the merger
Communication, often agreed by many people, is a key to good management and effective people management. It is also vital when an organisation goes through a transformational change, often involving all parts of the organisation to take part in the change. Kotter (2007) points out that transformational change is impossible without the help of hundreds or thousands of people, often to the point of making short-term sacrifices (Cascio, 2010). Without effective communication the hearts and minds of the troops are never captured. Kotter (2007) also states that gaining understanding and support is tough when downsizing is a part of the vision and for this reason, successful visions usually include new growth possibilities and the commitment to treat fairly anyone who is laid off. Smith (2006) and Cascio (2010) adds on that such communication must be accurate, honest, delivered at the right time and in formats appropriate to the audience. Enduring change cannot simply be forced. For a change to be successful employees must be involved and engaged with the change process and to have a real sense of involvement in shaping the process and direction of change (Smith, 2006; Kotter, 2007). Leaders, by demonstrating to employees that a genuine process of listening and two-way interaction exists, can build organisational cultures of trust which support efforts to achieve change (Smith, 2006; Kanter, 2009; Saunders et al., 2009). A culture of organisational trust and honesty is a significant contributor to the start of an environment, where employees are willing to accept the change message communicated, think constructively about change, and generally working towards the vision and moving their organisations forward (Smith, 2006). Smith (2006), lists down four rules that should be followed in order to achieve effective communication in times of organisational change:
Recognise that organisations vary
Individuals and groups at different levels and in different segments of an organisation are likely to react to change in a variety of ways.
Messages that are appropriate to the intended audience must be delivered effectively to the right people and/or groups at the right time (Cascio, 2010; Duck, 1993).
It is vitally important to make communication with employees during periods of change a genuinely two-way process (Cascio, 2010; Saunders et al., 2009).
A variety of communication methods and consultation processes should be used (Cascio, 2010).
Communicate the reasons for change.
Employees should be told clearly why and how things are changing, the intended outcomes of the changes and what the impact of the changes may be on individuals and on groups (Cascio, 2010; Saunders et al., 2009).
Explanation of the changes should be made in plain words, avoiding jargon and “buzz phrases” (Cascio, 2010).
Demonstrate commitment to genuine and open communication at all levels of management and involve all managers in the process of communicating about change.
It is important for employees to hear about change from both senior managers and from their line managers (Schweiger and DeNisi, 1991).
Clear communication from the top is critical in expressing and reinforcing organisational commitment to make changes
Communication from line managers and team leaders working at a grass-roots operational level is also important.
However, Lengel and Daft (1988) state that different communication methods can lead to different effectiveness according to situations. He further commented that effective communication is a matching process; the richness of the medium should be selected to fit the nature of the message. Therefore, is important that the management selects the appropriate method of communication because choosing the wrong method could cause a backfire. A proper communication can help in managing employee’s expectations (Davy et al., 1988). Unfortunately, unofficial and informal communication system such as rumours often becomes the first source during a merger (Davy et al., 1988). The lack of information, which increases uncertainty, could possibly result in wrong perceptions by the employees.
2.7 Organisational culture in a merger situation
Mergers and acquisitions, as agreed by many authors, are becoming popular as companies look to achieve growth and dominance in the market (Weber et al., 1996; Lodorfos and Boateng, 2006; Badrtalei and Bates, 2007). Culture represents an important element of mergers process and its full impact is seen during a merger when two divergent cultures are forced to become one (Lodorfos and Boateng, 2006). Combining different types of cultures, as mostly happens in mergers, is likely to have important consequences for organizational outcomes. One of the reasons that cause mergers between organisations to fail is incompatible culture. Cartwright and Cooper (1993) suggested that mergers are generally driven by financial and strategic considerations, but many organisation alliances fail because the cultures of the partners are incompatible. As a result, instead of achieving synergy, it could lead to poor morale, resistance (Saunders et al., 2009), poor work quality and declining financial performance (Cartwright and Cooper, 1993). Weber (1996, cited in Lordofos and Boateng, 2006) added by suggesting that the magnitude of cultural differences can effectively impede a successful integration during mergers and acquisitions, resulting in poor overall performance. Although cultural compatibility or fit alone is no guarantee to merger and acquisitions’ success it creates tensions and affects financial and managerial performance (Jamison and Sitkin, 1986; cited in Lordofos and Boateng, 2006). Moreover, managers prefer culture similarities rather than differences because shared experience and culture form a basis of trust (Lodorfos and Boateng, 2006). According to Cartwright and Cooper (1993) culture is a fundamental part of an organisation and that culture is to an organisation what personality is to an individual. Cultural similarity therefore serves as a force that brings members of the merging organisations together creating a sense of cohesion and consequently achieving synergy (Lordofos and Boateng, 2006).
Organisational culture concerns symbols, values, ideologies, and assumptions which operate, often in an unconscious way, to guide and fashion individual and business behaviour (Cartwright and Cooper, 1993). It is agreed that culture is the ingredient which binds individuals and creates organisational cohesiveness (Cartwright and Cooper, 1993). This is why behaviours which are driven by culture are difficult to change. Mergers between two organisations will normally encounter this issue and it is crucial that managers have the necessary knowledge and tools to manage this issue (Saunders et al., 2009).
2.8 Research Questions
The initial review of the literature provides various scopes in the process of a merger between two firms and how it affects employee behaviour. Based on the review, the research questions drawn out are:
What is the level of satisfaction of employees with the information received
What are the consequences of communication before and after the merger
What are the expectations of employees following and after the merger
To what extent uncertainties affect the employees’ performance and behaviour
How was the experience of employees following the merger
What is the level of satisfaction of employees involved in the merger management and those who are not involved
To what extent does culture have impact on the collaborative merger
What were the consequences of the merger towards employees’ behaviour
3.1 Research Philosophy
This research focuses on the employees’ behaviour before and after the merger of two companies. Basically, this research focuses on the feelings, attitudes and perspectives of the employees who have gone through the whole merging process. The two main research paradigms, which guides how research should be conducted based on people’s philosophy and assumptions about the world and the nature of knowledge (Hussey and Hussey, 1997: Collins and Hussey, 2009), are the positivist and interpretative approach.
The ontological assumption of the positivist is that reality is objective and singular and external to the researcher (Hussey and Hussey, 1997). Positivists believe that reality is independent from them and is not affected by the act of investigating it (Collins and Hussey, 2009). They also believe that only phenomena which are observable and measurable can be validly regarded as knowledge (Hussey and Hussey, 1997). They seek facts or causes of social phenomena with little regards to the subjective state of the individual (Hussey and Hussey, 1997). Therefore, they apply logical reasoning so that precision, objectivity and rigour underpin their approach, rather than subjectivity and intuitive interpretation (Collins and Hussey, 2009). They seek facts or causes of social phenomena with little regards to the subjective state of the individual (Hussey and Hussey, 1997).
On the other hand, the interpretative approach criticises the positivist approach which ignores the subjective dimensions of human action, that is internal logic and interpretative processes by which action is created (Gill and Johnson, 2010). The aim of this approach is to understand how people make sense of their worlds, with human action being conceived as purposive and meaningful rather than externally determined by social structures, innate drives, the environment or economic stimuli and so on (Gill and Johnson, 2010). Interpretivists attempt to minimise the distance between the researcher and what’s being researched because to them, reality is highly subjective and shaped by participants’ perceptions (Hussey and Hussey, 1997: Collins and Hussey, 2009). Therefore, the act of investigating has an effect on the reality (Collins and Hussey, 2009). Whereas positivists focuses on measuring phenomena, interpretivists focuses on exploring the complexity of social phenomena with a view to gaining interpretive understanding (Collins and Hussey, 2009).
The positivists approach is not suitable for this research as human behaviour is highly subjective and is not measurable. As this research focuses on human feelings, attitudes and perspectives, the interpretative approach is taken to this study because it emphasises on the people rather than objects or data (Saunders et al., 2009). This approach is chosen because it involves understanding the situation, gathering views and developing recommendations through induction of data. As agreed by many authors, the interpretative approach is highly appropriate in the case of business and management research, such as organisational behaviour (Saunders et al., 2009; Hussey and Hussey, 1997: Collins and Hussey, 2009; Hair et al., 2007).
3.2 Research Approach
The research approach, which relates to the nature of relationship between theory and research can be performed using the deductive or inductive approach. The deductive approach can be referred to as moving from the general to the particular, where a conceptual and theoretical structure is developed, then tested by empirical observation (Collins and Hussey, 2009). On the other hand, the inductive approach is the opposite approach, where theory is developed from the observation of empirical reality (Collins and Hussey, 2009; Gill and Johnson, 2010).
As this research will be based on the principle of developing a conclusion after the data have been collected, the inductive approach has been used. The research conducted on the employees would be to interviewing them and gathering data about how they feel before and after the merger of two companies. The purpose is to understand the nature of the process and making sense of it by analysing those data (Saunders et al., 2009). As noted by Saunders et al. (2009), there are three reasons for taking on an inductive approach to conduct a research. First, it enables to make a more informed decision about the research design. Secondly, it helps to think about those research strategies and choices that will work to find what is more appropriate. Finally, inductive approach enables to adopt research design to cater for constraints like limited access to data or lack of prior knowledge of the subject. However, an inductive approach to conduct the research can result in no useful data patters and theory that will emerge.
3.3 Research Strategy
The case study approach is used to gain a better understanding about the merger process happening and how it affects employee behaviour. In this research, the reactions and responses of participants are described and compared in order to draw conclusions. As pointed out by Morris and Wood (1991; cited in Saunders et al., 2009), this strategy will be useful if a rich and understanding of the research is wished to be gained. Rather than following a fixed research design to examine a limited number of variables, this strategy involves an in-depth examination of a single event (Gill and Johnson, 2010). This strategy is also used because the boundaries between the event being studied and the context within are not clearly evident (Yin, 2003; cited in Saunders et al., 2009).
3.4 Data collection method
The data collection method used is semi-structured interviews. This method is appropriate because the aim of this method is to develop an understanding of the participants’ situation (Collins and Hussey, 2009). It is also suggested by Easterby-Smith et al.(1991) states that the most fundamental of qualitative methods is that of in-depth interviewing.
The interview is conducted involving all employees throughout the organisation who could reasonably be expected to have been affected by the merger. As the research’s theme is on employee behaviour, the questions asked during the interview will be similar to all employees. Additional interview questions may be required to explore the research questions and objectives given the nature of responsibility of the two groups of people, those who are involved in managing the merger and those who are not involved (Saunders et al., 2009). Further questions are also asked to encourage respondents to elaborate on their responses.
All the conversations are recorded with their consent so that the notes during interview process will be enhanced by transcripts. These notes include the key themes that will be built up for the interview questions. The interview questions are designed to attempt to answer all issues raise in the research objectives and research questions therefore there will be various types of questions. The same set of interview questions is used on all participants but further questions, which have not been prepared beforehand, is probed to explore answers in more depth. The interviews are performed in the same manner, including the pose of the questions and the location of the interview. According to Easterby-Smith et al.(1991), respondents may be reluctant to be truthful about the issue because of the sensitivity of the subject. Therefore, a one-to-one interview in a closed room is conducted to eliminate this potential variable. It is also possible that events which have taken place prior to the interview may affect the interviewee’s responses (Hussey and Hussey, 1997). Therefore, to avoid or minimise this issue, interviewees are put at ease before the interview by engaging in small talks for a few minutes.
For the purpose of this research, the sampling method used is purposive sampling. The reason is because I believe that not all the employees in the organisation have been working in the organisation long enough to experience the change happening. Some of them may have just joined the company recently and does not have information which I will need to meet my objectives. As the case study research strategy is adopted, the purposive sampling is more suitable to collect information-rich data (Saunders et al., 2009). The total number of employees in the company is 23, excluding partners, and 15 employees have been selected to participate in the interview. The conditions and reasoning of participants selection are as follows:
The participant is not a decision maker of the merger
Having a role in decision making might cause biasness in responses
The participant has worked in the company at least 3 months before the merger
To ensure that the participant has experienced the before and after event and provide comparative data
The participant is not intending to leave the organisation (i.e Interns and part time workers which contracts will expiring contracts)
Intention of leaving the company might affect the validity of data
The following interview questions are formed based on the research objectives:
How did you get to know about the merger decision
To what extent do you feel that this decision was made taking into consideration the needs and interests of the staff
How did you feel about the way the decision was communicated
How did you react to the decision made
What were your expectations from this merger
What do you think will change or be different
To what extent will that affect you
What was your experience following the merger
To what extent did the merger affect the way you work previously
To what extent do you think the merger has affected the organisation’s culture
Overall, to what extent did the merger help you, others and the organisation
3.5 Data Analysis
At the first stage of analysis, the recorded interviews sessions are converted into transcripts for analysis. The data from the interview transcripts are then analysed using the process of open coding, which identifies, analyses and categorises raw data. This process makes data more easily recognisable and less complicated to manage (Hussey and Hussey, 1997). Short or amended phrases in the codes are used to maintain participants’ confidentiality. These codes, which were primarily based on participant’s own language, are then consolidates, classified into different elements and grouping them into categories.. Using the constant comparative method, we repeatedly compared data overtime and across participants to discern the major concepts of interest. The frequency of the codes is reported in the findings to determine whether an action or event normally happens or whether it is a rare occurrence (Hussey and Hussey, 1997).
In the second stage of our analysis, the categories identified are then connected together on a more conceptual level using axial coding process (Hussey and Hussey, 1997). This process involves a relatively straightforward task of examining the relationships among the categories that could be linked into a set of more simplified dimensions.
3.6 Data Quality Issues
The lack of standardisation in semi-structured interviews may lead to concerns about the reliability of the data collected (Saunders et al., 2009). Therefore, the following preparation is made:
Level of knowledge – prior to the interview, an initial literature review is performed to gain a good understanding on merger processes. Further research on the merging companies is also performed to understand the nature of the business.
Level of information supplied to the interviewee – A general briefing on the themes and topics is given to the interviewees before the interview is conducted.
Appropriateness of location –To ensure that the interviewees feel conformable and to avoid the interview from being disturbed, the interviews are conducted in a separate room away from the other employees. Choosing a separate room also ensurse that outside noise will not reduce the quality of audio-recording of the interview.
Appropriateness of researcher’s appearance – As appearance has an adverse effect on the researcher’s credibility in the view of interviewees, a similar style of dressing is adopted during every interviews.
Nature of opening comments to be made when the interview commences – To obtain confidence and reduce anxiety, the objectives of the interview is explained at the beginning of every session. Consent is obtained before recording the interviews and anonymity is maintained to increase the level of confidence and trustworthiness.
Approach to questioning – To reduce the scope of biasness during the interview and increase the reliability of the information being obtained, open ended question is used followed by the use of appropriately worded probing questions, which will help to explore the topic in more detail.
Nature and impact of the interviewer’s behaviour during the course of the interview – A neutral approach is adopted to reduce the scope of biasness.
Demonstration of attentive listening – Proper listening skills and full concentration is given during the course of interviews.
Scope to test understanding – Summarising explanations provided by the interviewees is done to ensure correct interpretation.
Approach to recording data – The interviews are audio-recorded after consent is obtained. At any point of time, the interviewees can request for the recording to be stopped. They have the right not to answer any questions if they wish to.
When conducting the research, ethical issues will be faced throughout the many phases of the research process. For the purpose of this research, the London Metropolitan University Code of Good Research Practice will be complied. Besides that, further ethical practices will be considered based on the process of this research.
This research will be conducted with the highest standards of integrity. Honesty will be ensured in respect of the actions in the research, including experimental design, generating and analysing data, applying for funding, publishing results, and acknowledging the direct and indirect contribution of colleagues, collaborators and others. Plagiarism, deception or the fabrication or falsification of results will not be conducted throughout the process. Any real or potential conflict of interest identified before, during and after the research will be declared immediately.
Openness will be practiced when discussing the work with other colleagues or the public and relevant data and materials will be made available to other researchers, upon request, provided that it is consistent with any ethics approvals and consents. Participants of the research will be briefed about the research, its purpose and application before the start of their involvement.
Consent from participants will be obtained before the start of every interview. Participation will be obtained voluntarily and coercion will not be used to force participants into taking part. This is to ensure a faithful participation which will ensure the quality of the data collected. The participants have the right to withdraw from the research at any point of time without penalty and without their being obliged to give any reason. They have the right to not answer any interview questions without further probing. The rights of the participants will also be communicated to them before the interview. As this research requires the interview sessions to be recorded, the participants will be well informed and permission will be obtained before the start of every recording. At any point of time when the participant wish to discuss sensitive or confidential matters, they can pause the recordings and resume it anytime later as they want.
Throughout the research project, the identity and data from the participants will be kept anonymous and confidential at all times. The interviews will be conducted in a private room, away from other participants or any other personnel to maintain the participants’ privacy and confidentiality.
The risks to participants and researchers involved in the research (e.g. physical and mental discomfort or danger, impact on the individual) will be assessed to ensure that it is minimal or none. The interview questions will also be assessed to ensure that it will not raise any sensitive issues which will harm the participant or other participants in any way. The participants will also be treated with dignity throughout the research and will not be embarrassed or ridiculed in any way.
3.8 Degree of access
This research has been supported by one of the Partners of Company A. Access to interviewing employees has been granted and necessary information will be provided unless deemed private and confidential.
Before the merger, the relationship between Company A and Company B has been referred to as being “sub-contractors”. As both the companies have different capabilities and provide different services, they referred clients to each other depending on their capabilities and available resources. For example, Company B provides accounting services, which is not one of the services provided by Company B. Thus, when their clients request for an accounting service from Company A, they will then refer it to Company B and the fees will be shared between the two companies. According to the participants, this relationship has been going on for more than a year before the merger. It has brought benefits to both the firms and relationships were built along the way.
Company A’s staff were mostly from a bigger organisation previously, they joined Company A after the company acquired one of the service arms from a bigger organisation. Therefore, Company A did not only bring over the employees, but also the culture and working habits from the previous organisation. The culture of Company A is different from Company B. As they come from a bigger organisation, they tend to be more systematic and organised in their operations and daily work. Corporate policies, procedures and guidelines become a fundamental part of their culture. The employees prefer to work in a more controlled environment as they had before. Company A’s clients are mostly larger organisations brought over from the acquired service arm, thus, the services provided to them are more complex and requires more expertise. The turnover time for each service tends to be higher due to the complexity of the work. Their clients do not expect fast results or delivery. The working hours of the employees are consistent, which seldom requires them to work overtime.
On the other hand, Company B was built up on its own. The culture of the employees is different from Company A’s. They do not have as many policies and guidelines as Company A. However, not having a well structured set of policies and procedures do not lead to an unsystematic organisation. The employees of Company B were given more liberty to work independently and self-organising their work. Meanwhile, the clients of Company B are different from Company A in terms of size and volume. Company B’s clients are mostly smaller companies or businesses from the local market. The client database is described as “small but high in volume”. The services required are not as complex as Company A’s clients, thus the turnover time for each service is faster. Therefore, the clients expect quicker results and delivery time from Company B. The working hours of the employees in Company B is higher as compared to Company A. Working overtime seems to be very common amongst the employees. However, this does not seem to cause lower motivation or morale among the employees. Working overtime is part of their culture.
Interviews were conducted on the employees of both organisations. Their responses are then consolidated and analysed. Figure 1 shows the data structure of our findings. It depicts the four main dimensions that emerged from our analyses (right side of the figure), as well as their constituent categories, which emerged from the formation of codes or responses from interview participants. We then discuss the emergent dimensions and their categories individually, while acknowledging their interactivity.
Table 1 provides representative supporting data (in the form of quotes from participants) for each category identified. The frequency of the data represents the number of participants quoting the same or similar phrases. Some quotes are repeated by the participants during the interview session. Therefore, the repeated quotes are deemed to be void and the frequency will be counted as one.
Table 1: Representative Supporting Data for Each Category
Representative supporting data
a. Communication method“It was something which was talked about rather than coming straight from management. I knew it from talking to various people at both sides of the organisation.”
“The management mentioned that it could be happening.”
“ I was told quite earlier by the partner before a lot of the other staff did because we had to plan for a lot of stuff to do with the merger.”
“The partner sent out an email.”
“One of the partners announced it at the Christmas party.”7
b. Reactions to method of communication
“I was comfortable with the way the decision was communicated to me / I thought it was fine.”
“I was quite happy about the way it was communicated.”
“It was very effective.”
“No comment. It was pretty clear.”
“Maybe formal announcement could’ve been made sooner but I think the partners had a lot to decide before they formally announce it.”
“I think it could’ve been done better because there was a lot of uncertainty and confusion on what’s going on.”10
c. Perceived management consideration on employee welfare
“I think the needs and interest of the staff were fully taken into consideration / I think they do care about the staff / I had an impression that it was not something taken lightly.”
“I don’t know / I’m not sure to what extent.”
“I don’t think it would’ve take much part in the consideration.”10
d. Expected outcome of merger
“Growth in the business or within the organisation / Expand the company or have a bigger client base.”
“It will open up more opportunities for exposure to different types of work.”
“We will work closely together towards one objective / Better integration of the two companies / The two companies to work alongside each other, try to work comfortably and compromise in the way we work to going forward.”
“Hopefully we’ll have referrals for each other which will help with the company’s profit / We’ll get support from other offices in Asia.”
“I could progress in the department / the experience I get from this merger.”
“I don’t know.”10
e. Expected changes arising from merger
“Putting a process or system in place that will make things work more effectively / There will be more procedures, rules and guidelines.”
“It’s going to be a more corporate (formal) atmosphere.”
“It makes things a lot easier right now that we’re working together / We’ll be dealing more closely with our colleagues.”
“Because the clients are different, so the expectations are different and our staffs have to adapt to the different clients / Managing client expectations.”
“We’ll have larger client base and the work will be more complicated.”
“I don’t think a lot will change / Only time can tell.”5
f. Employees attitudes
“New systems that we’re going to deal with. We’re getting more organised / Formalities are being introduced.”
“In my day to day work, nothing much has changed.”
“There was more interaction between the two sides. We are learning from each other in ways of doing things / Everybody working closer together.”
“Everything was a bit hectic / People had more work overnight / The volume of work has increased.”
“Even though we’ve worked alongside each other for a long time, it’s quite different to the working environment before / There’s two very different ways working with one and the other.”
“We now have client who have come across from Company B, which is more in volume, less technical and more process driven / Our client portfolio is now diversified.”
“I was quite heavily involved with the merger. I find it very useful because we can view the changes more objectively / I’ve got more opportunities / I can now concentrate on something rather than doing lots of everything.”
“There is an excitement there / I feel that certainly the operational side of the merger was handled pretty well.”
“It would have been easier if handovers were done properly.”
g. Personal changes experienced after merger
“I get involved in more strategic issues. It makes me feel much more part of being the increased firm / It has put more responsibility on my door. I do more strategic work / More organised and creating systems for work.”
“My workload has increased / I have a bigger team and I’ll have more people to manage / Everything has to be done quicker / We are basically running the clients separately.”
“I am now beginning to get involved with working with Company B / I’m learning how to do things for the clients the way Company B did.”
“I am now being trained by the company / I’m learning new stuff / I am doing something different now. It’s something I have to teach myself.”
“I don’t think there are changes / In my role, everything’s the same.”3
h. Cultural difference experienced
“We have been working together for quite some time / I think everybody knew each other already for a couple of years before the merger took place / It’s not like a completely different company coming in.”
“I haven’t experienced this yet / At the moment, I think it’s still the same / People still wear two different hats.”
“The staffs are willing to accommodate each other / We all seem a lot closer now / People are trying to build relationships and interact with each other more.”
“The working hours have changed in both the firms / Teams that have taken on Company B’s work are now moving slightly faster but it’s not how it’s used to be”
“There are differences in the structure and system of the two companies / We have to take into account their working practices / The biggest challenge is the difference between the way both companies work”
“Clients need to be trained to be more structured and organised / There was a different expectation regarding urgency because of the difference between the clients of both companies. We have to retrain the clients expectations”
“Company B has to adopt a new system / We are now more concerned with the systems and processes.5
i. Perceived benefits from the merger
“We have more access to each other’s resources / We can now provide more services / Having two different companies allows us to target two different demographics”
“It has opened up more opportunities for me to learn new things / The possibilities and potential of what could happen are very big and very positive”
“I think it’s beneficial because we’re part of an increased firm / It’s going to certainly help with our revenue targets and we’ve got a whole new client base / The firm’s presence in London has become stronger / The company will be growing really fast and I think there will be more investment in the company.”
“Some are getting new exposure, which wouldn’t had been if the two companies stayed separated / There were various projects that the organisation’s working on and we’re barging out on a lot of different things / It gives us more exposure to the more high level work which help us gain more work related experience”
“The new systems will be helpful to us because we’ll have a set of steps that once we start working on something”
“I’ve been a lot more stress because I’ve got more work to do”
“I don’t know. Just got to wait and see”6
Effects of Communication
a. Communication method
In attempt to evaluate employees’ behaviour at the initial stage of the merger, we first attempt to find out what method was used to communicate the merger to the employees. Our findings revealed that the participants knew about the merger through various forms of communication. Many of them had received information through “talking with other people” which suggests that there was a high reliance on rumours for information flow. Other forms of communication also took place as some participants received the information through “talking to partners”, “announcement during a Christmas party” and emails. The initial form of how most the participants receive the information was very informal way but subsequently, a more formal method was used to communicate the merger to the employees, i.e. announcements made and emails from partners were sent out. As both the company’s had not merged during that time, the management of both companies had used different methods to communicate the merger to the employees. Company A had one to one meetings with the employees while Company B used emails as a form of communication.
b. Reactions to method of communication
The majority of participants had showed a positive or neutral reaction to the method of communication. They were expecting the merger to happen from the rumours and talks of it before that. To a certain extent, the participants were confident that the merger will take place in the future. They weren’t “surprised” or reacted much to the news mainly because most of them already knew about it before it was announced. One participant also mentioned that it was a “relief” when the announcement was made. In general, all the participants did not show any signs of negative reaction or feelings towards the communication method. However, there were suggestions that the timing of the announcement could be made earlier or more information could be given about the merger. This suggests that the period between the talks of the merger and the official announcement made would have been a long time.
c. Perceived management consideration on employee welfare
This category is analysed to understand to what extent the participants felt that consideration was given towards staffs’ welfare when making the merger decision. Our findings show that the majority of the participants felt that there was consideration given towards staff welfare when the decision was made. It suggests that the participants were satisfied with the merger as their importance of their position and presence was well taken care of. It is possible that through the information received, they are aware that their jobs are still secured after the merger as one participant responded “This merger doesn’t involve restructuring or retrenchment”. Though the operational and management side has changed, everything else is the same.” Some participants responses such as “I don’t know to what extent” and “I don’t think it would be part of the consideration” suggests that the communication method used was not effective enough to capture employees’ confidence. It also suggests that information flow about the merger was not made aware to every single employee or some parts of the organisation.
d. Expected outcome of merger
After the merger was announced to the employees on both companies, a phase that followed was the expectations arising from the merger. The most common responses given by almost every participant was that the company will grow and there will be more opportunities for exposure. Some of the expectations were for the “client base to increase”, “capabilities to provide more services”, “both companies learn from each other”, “exposure to different types of work”, and “gaining more experience”. These positive expectations suggest that the employees look forward to the merger to go through and somehow satisfied and motivated. Although a few participants did not have expectations, they were not dissatisfied with the merger which was going to take place.
e. Expected changes arising from merger
The next category of expectations is the changes that would arise from this merger, more specifically, changes that are perceived to have an affect the employees personally. As expectations were high on the growth of the two companies merging together, one of the major changes that is expected is corporate policies to be put in place. “Systems”, “procedures”, “rules” and “guidelines” are some of the more specific terms given by the participants. Though they had expected these changes, they perceived these changes as a good thing and beneficial to them. Some had also expected the workflow would be easier after implementing those. These responses suggest that the employees are looking forward to tighter monitoring and operational controls which would be an advantage rather than causing disruption. Other expectations arose are employees “working more closely together”, “support from overseas offices” and personal “progression”, which suggests that the participants are motivated to build relationships and support each other.
Employees actual experience
f. Experience of merger taking place
When the participants were asked about their experience after the merger, there were mixed responses from them. Our findings showed that the merger had not affected every part of the organisation. Some participants had responded “In my day to day work, nothing much has changed”, which suggests that the role of the merger did not have a significant impact on them. Meanwhile, there were new systems or corporate policies incorporated in the merged organisation. Some participants felt that the employees are working closer together which suggests that relationships are being built within the new organisation but they also felt that the way the two companies worked were different from each other. The employees are going through a transition stage and they are adapting themselves to the different ways of both companies. However, there were slight signs of resistance shown by some participants but at the same time, they were “hopeful” that it wouldn’t be long term. The drive from other positive changes seems to overcome their resistance. Therefore, it can be assumed that the slight resistance did not have an impact on their behaviour. Some of the participants have also felt that the workload has increased but there were no signs of participants suggesting that workload has decreased elsewhere. Further research revealed that the reason is because after the two companies merged, a new department was formed to provide additional services to clients. The formation of a new department has been viewed as an opportunity to “learn something new”. It wasn’t only the new department, other participants who had their workload increased has also perceived it as an opportunity rather than the opposite. Therefore, we can assume that the increase in workload might not cause resistance if the employees perceived it as an opportunity. During the merger, some employees were involved in integration process of the two companies. A team was created by the management to review and research on issues such as structure, strategy, systems, communications, etc, all related to the process of unification of both the companies into one organisation. Our observation showed that the participants who were involved in this process were more motivated, positive and enthusiastic in their response about their experience.
g. Personal changes experienced after merger
When participants were asked to describe the changes which have affected them after the merger, many responded that they had a “bigger workload” or “more responsibilities”. However, this change did not affect all the participants because in some departments, it hasn’t affected them much. Our observations suggest that the increase of workload did not have a negative impact on the participants. On the contrary, the participants reacted either positively or neutral to it with further comments such as, “I think it’s a good thing” and “I’m learning new stuff”. The reason is because the organisation has exposed them to different types of work which in view was new experience to the employees. The overall impact on the participants was somehow positive.
h. Cultural difference experienced
The cultural difference in both Company A and Company B did not affect everyone in the organisation. We had mixed responses from the participants when the culture issue was raised. Though many agreed that they have experienced a few or at least one difference, some were not aware of the differences. Based on the participants’ comments, it is suggested that the reason was because the cultural integration process has already started before the merger as the employees have been “working closely together for a long time”. Another reason for this could be because the integration did not or has not happened in certain departments. Participants who have experienced the cultural difference are those who have moved locations, taking over portfolios from the other company and working in a new department. Some of the changes that they faced were difference in client expectations, turnaround time and corporate policies. There were no signs from the participants which indicate that the cultural differences were incompatible. They were reacting positively to these differences as some further stated that they are “learning from each other” and “bringing out the best of both sides”.
Level of Satisfaction
i. Perceived benefits from the merger
Another category which has emerged from our research is the participants’ perceived benefits or disadvantage of the merger. Most responses from the participants on this subject were positives benefits. There were no comments or signs indicating that they perceive the merger to bring disadvantages to the organisation. The merger has overall helped the organisation and the employees of the organisation. The participants agreed that the organisation has achieved growth and had increased capabilities to provide more service to their clients. They also commented that the merger has increased the organisations revenue and their client’s database had become larger, capturing more market share. In terms of the employees, some participants responded that the merger had helped them gain more experience, exposing them to different things and higher level of work. The merger, which prompted new systems and procedures, had also helped the organisation in terms of making the workflow smoother. Overall, our observation suggests that the participants responded positively to the outcome of the merger. However, the increase in workload has also caused more stress to the employees.
The main objective of the research is to present, compare, and discuss the results of employees’ interpretations of their experiences of the change in the merger of the two consulting firms. Our case study has identified four main dimensions which will be discussed and analyse how they have impacted the employees’ behaviour and reactions.
5.1 Communication effect
Perhaps the earliest stage of a merger which would impact the employees is when it is first communicated to them. The communication program provided information about the new company, its goals, management style and expected organisational changes. Communication methods and information flow can take a variety of forms. It has been suggested by Lengel and Daft (1988) that different forms of communication have different impact on the recipients. Our findings indicate that the communication method used in the merger of Company A and Company B was in various forms, such as face to face meetings, emails, announcements and rumours. If Lengel and Daft’s (1988) theory was consistent with our findings, we would expect different reactions from the participants. However in contrary, the reactions of the participants to these forms of communication were almost similar. The majority of the participants reacted well to the various methods used to communicate the merger decision. There were no strong objections or dissent towards the methods used although they came across different forms of communication. Positive reactions to the communication methods could also engender higher perception of control, commitment, job satisfaction and motivation. Therefore, our findings contradicted to the theory suggested by Lengel and Daft (1988).
Davy et al. (1988) argues that informal methods of communication can lead to lack of information and as a result, increases ambiguity among the employees. In our findings, there were various forms of communication taking place in Company A and Company B, both formal and informal. The formal methods include emails and formal announcements while informal methods include rumours, face to face meetings and talking to partners. However, the informal method of communication, i.e. rumours and talking to partners, took place earlier before formal methods were used. A considerable amount of employees first knew about the merger through talking to other employees but our findings show that the level of ambiguity was very minimal. When probed further, the participants did not show signs of uncertainty or fear even before they were told formally because they were aware of it at a very early stage, months before the merger was formally announced. Furthermore, the perceptions of the employees on this decision were mostly positive and they agreed that their welfare in the company is taken into consideration before the management made the decision. In this respect, the effect of formality of communication appears to be different from the literature.
We could speculate that making awareness to the employees at the very early stage, when the merger first came into consideration, allows employees to digest the information and be prepared for it. Our findings suggest that the rationale behind the employees’ positive reactions to the decision might be due to the long period of awareness before it took place. Thus, an obvious question for future research on mergers is whether employees’ reaction is associated with time factor (from the moment awareness was created to the actual merger). Our data could not directly support this statement but our observations about the time factor lead us to suggest the following proposition:
Proposition 1: Employees’ reactions to merger are more likely to be positive if awareness is created at an earlier stage, as the initial shock takes time to settle down.
5.2 Expectations built
The expectations of the employees appear in Table 1 (d) and (e). Because expectations affect behaviour, the management have to manage employees’ perception, which builds their expectations (Davy et al., 1988). Generally, the employees have positive expectations towards the merger. Organisational growth and exposure were the most common responses from the participants. The expectations associated with the merger are vague and based on rumours. Without knowing the actual situation of what was going to happen in the future, their expectations are built on their perception. The behaviour of the employees could also be affected by their expectations. For example, if they have negative expectations on the merger, it is most likely that they will exhibit non productive behaviour, lose motivation or even start to look for a new job (Davy et al., 1988). Our finding results on employees’ reactions discussed previously shows that the majority of the participants showed a positive reaction to the merger decision. As suggested by Lengel and Daft’s (1988), with a rich form of information, the information will be better communicated to the employees and as stated by Davy et al., (1988) accurate knowledge will help employees fill their gaps in their perceptions and shape a better expectation. As there were various methods used to communicate to the employees about the merger, it is most likely that the management has provided the employees with ample information on the merger situation. Subsequently, with the information provided the employees of the organisation built their expectations. Our findings show that most of the participants have experienced what they first expected. As the organisation is going to merge, the participants expected changes such as growth, new systems and people working closely together. Later, when we gather data on their experience, most of them experienced things which they first expected. This demonstrates the accuracy of their expectations and that most of the initial expectations were experienced after that. Thus, our findings agree with the literature and we can propose that:
Proposition 2: Accurate and rich information helps the employees with better perception. For that reason accurate expectations can be built.
5.3 Employees actual experience
Findings of the actual experience faced by the employees following the merger revealed that not all the employees felt that the merger has affected them. In the current situation, the merged organisation still operates in different floors on the same building. A few employees were transferred but the rest remained on their floors. The transfers were made as part of the integrating process between a few departments but not everyone move geographically. Some of the participants have also mentioned that they are “still doing the same thing”. As the merger is still at its beginning stage, it could be the reason why changes have not been experienced yet but some employees.
On the other hand, our observations also indicate that other employees had a good experience of the merger. Although change can sometimes be negative, it was the opposite for the employees in this case. The employees felt that the change has helped them in certain ways such as personal growth and experience. The employees have also felt that relationships were closer and they can “learn from each other”. Considering the cultural differences between the two organisations, we expected some form of culture clash but there were no signs of resistance from the employees. This event contradicts to the literature which suggests that cultural difference very likely leads to negative experience (Cartwright and Cooper, 1993). However, our findings have also indicated that relationships could have been built before the merger because the two companies were having business relationships previously. Our data was not sufficient to signify to what extent did the previous relationship contributed in reducing cultural clash but we can propose that:
Proposition 3: Relationships built before mergers, which promotes familiarity between employees, can help reduce the level of cultural clash when the merger takes place.
Besides that, our findings also indicate that there was an increased workload throughout the merged organisation. The cause of the workload increase is due to a new department formed, which purpose was to provide clients with additional services. The increase in workload has resulted in various experience felt by the employees. Some responded well to it because it is perceived to offer them new exposure and personal growth but some responded negatively as it creates stress. Nevertheless, the employees perceived it to be a short term situation. As new systems and procedures are created and implemented continuously, it is expected that these systems will help improve the efficiency of their departments, thus indirectly reducing the workload. The employees hope that things will get back on its balance after both the companies are fully integrated.
Based on our observation, we noted that there is distinct behaviour between two groups of participants, those who are involved in the merger integration process and those who are not involved. We observed that the attitudes and responses from the first group tend to be more positive and motivated. This observation could further support our suggestion in Proposition 2.
Overall, the employees’ experiences were positive. Although there were signs of resistance, it has been offset by several other positive changes in the new organisation. Our findings agree to Marks and Mirvis (1992) argument that fears could be offset by several hopes, which include advancement opportunities, meeting new people and forming new working relationships, learning new skills, and setting new goals, as well as creating an organisation that is better than the two originally separate organisations.
5.4 Level of Satisfaction
Our findings on the level of satisfaction which arise from the merger are considerably high. The merger between Company A and Company B are perceived to have brought benefits to the employees and the organisation itself. Feelings on job security and future growth have been very positive as the merger has benefited the employees in their work experience and job exposure. There were no signs which suggest that employees will leave their jobs or signs of uncertainty and ambiguity. Revenue and market share of the organisation has also increased after the merger, which gives the employees a better sense of job security and their future growth in the organisation. The implementation of new systems and procedures is accepted by the employees and is perceived to have helped them in making the workflow smoother. All these positive events lead us to come to a conclusion that the employees are satisfied and pleased in their current position. It could also be very well related to the positive reactions and perceptions by the employees before the merger took place. Future expectations from the employees are still high but the management has to continue the communication program to keep the employees perception high (Davy et al., 1988 and Kotter, 2007). It is important prepare employees to become hopeful about the future situations, preparing them to perceive new situations as a challenge in which they can prove their abilities and worth to their organisation, and helping them to discover new opportunities that they had not envisioned before. Based on our findings and observations, we can propose that
Proposition 4: The employees’ level of satisfaction correlated significantly with their perception at the beginning of the merger.
Although it has been suggested by Napier (1989) that from an HR perspective, collaborative mergers are the most difficult mergers to be implemented, the merger of Company A and Company B has been managed very well. Our case study contributes to the important dimensions of the employee behaviour aspects in a merger event. As there could be different ways and practices to manage mergers, it is evident that employees are concerned with the possible changes and the way the management handles it. The reason is because these changes will not only affect their job routines but also the relationships between the staffs. Therefore, mergers do create uncertainties and fears. It is vital that perceptions of the employees are managed at an early stage to avoid fears and uncertainties arising. Negative feelings could lead to outcomes such as low performance, resistance, resignations and other negative reactions. Our findings implied the importance of communication as a medium to shape perception. Communication should be an on-going process to provide employees with accurate information about the merger. A discontinued communication program could lead to insufficient information, thus reducing the perceptions of the employees and causing them to build negative expectations. Our findings also implied that positive expectations lead to a higher level of job satisfaction. It is important that the management obtain information about the employees’ expectations before mergers and after mergers. In turn, management can use this knowledge to create a communication program and develop specific interventions aimed to reduce stress and uncertainties
The developing interest in the role of organisational culture has become increasingly popular. Cultural integration is a long term process and may continue for years depending on the speed of which integration is affected. It is important that cultural issues are continuously managed and closely monitored throughout the integration process. Sophisticated measures may be necessary to avoid costly indicators of failures such as high staff turnover, merger stress, and high absentees’ levels etc. which in turn could affect the profits of the organisation (Cartwright and Cooper, 1993). Overall, it is imperative management have to be aware of the entire process, including the desired outcomes, and should possess skills and experience to handle sensitively and effectively the people aspects of mergers.
7. LIMITATIONS AND DIRECTIONS FOR FUTURE STUDIES
This research has some limitations. It was confined to investigating employees’ interpretations of their experiences of people aspects in two consulting firms. The sample size is not sufficient to give a true representation of the consulting industry. It is suggested that future research could expand the samples of the number of organisations to enhance the representation in the industry. As this study is based on qualitative methods, it would also seem important to extend the merger literature beyond the descriptive to the quantitative. Furthermore, this study was conducted as a preliminary investigation to identify specific research areas to be investigated using interviews and analysis of archival material. Therefore there is a need to compare the findings of this study with data from other sources. However, without any large scale quantitative studies to draw upon, it is impossible to compare and assess the degree and extent of the issues.
Besides that, our research has been directed only towards the identification of employee experiences in a collaborative merger. There are several possible areas where this study could be expanded. One possible area for investigation is the influence of the type of the merger on the extent to which people management practices of the integrated organisation following the merger. Thus, detailed investigations could be conducted on each of the people management aspects to compare how they have been handled in the different types of mergers.
There is a need for an ongoing analysis of employee perceptions towards human resource management practices relating to mergers, such as performance evaluation, career development, salary and other benefits before, during and after the first few years following the merger. However, our research was only limited to the impact of the merger on the first few following months.