Pros and Cons of Organisational Mergers

Abstract

The purpose of this paper was to take a look at a topic of our choosing and determine how it relates to a human resource management issue. The topic that was decided to be discussed was the pros and cons of organizational mergers. We also planned on looking at how organizational mergers affect both the success of the organization and the employees within the organizations involved. Lastly, we went on to look at whether this issue has an HR relationship or is it more of a management issue.

Overview

So for my topic project I came up with a proposal to investigate what the pros and cons are of organizational mergers. I also planned on looking at how organizational mergers affect both the success of the organization and the employees within the organization involved in the organizational merger. Therefore, we will start by creating an outline of what we will be looking for followed by the research needed to answer the questions asked by the outline. Once we have completed this we will look at a Q & A from a human resource professional’s point of view. Lastly, we will conclude by determining whether the pros of organizational mergers outweigh the cons of organizational mergers and if there is any kind of success that comes from organizational mergers for the organization and the employees.

Outline

Now to begin the following is the outline we will use to start our topic project.

1. WHAT ARE THE PROS AND CONS OF ORGANIZATION MERGERS (Moadhadi, 2015)?
   1. What are the pros of organizational mergers (Moadhadi, 2015)?
      1. The first pro of an organizational merger is a larger network of economies (Moadhadi, 2015).
      2. The second pro of an organizational merger is an increase in research and development (Moadhadi, 2015).
      3. The third pro of an organizational merger is all the other economies of scale (Moadhadi, 2015).
      4. The fourth pro of an organizational merger is that it allows for the avoidance of duplication (Moadhadi, 2015).
      5. The last pro of an organizational merger is that it helps with the regulation of monopoly for the industry (Moadhadi, 2015).
   2. What are the cons of organizational mergers (Moadhadi, 2015)?
      1. The first con of an organizational merger is that there can be higher prices (Moadhadi, 2015).
      2. The second con of an organizational merger is that consumers now have less choice (Moadhadi, 2015).
      3. The third con of an organizational merger is that there can be job losses (Moadhadi, 2015).
      4. The last con of an organizational merger is that the larger organization can suffer diseconomies of scale (Moadhadi, 2015).
2. WHAT ARE THE TWO TYPES OF MERGERS THAT ORGANIZATIONS CAN GO THROUGH (Moadhadi, 2015)?
   1. The first type of organizational merger is a horizontal merger (Moadhadi, 2015).
   2. The second type of organizational merger is a vertical merger (Moadhadi, 2015).
3. WHAT ARE THE EFFECTS OF MERGERS ON THE ORGANIZATIONS (Moadhadi, 2015)?
   1. A merger can cause employees to display a new attitude (Moadhadi, 2015).
   2. Mergers may cause employees to disapprove of the new regulations (Moadhadi, 2015).
   3. Mergers may cause concerns with whether the current benefits and compensations for each of the employees will stay the same (Moadhadi, 2015).
   4. There may be employee resistance to the new integrations (Moadhadi, 2015).
4. WHAT KIND OF RESISTANCE TO ORGANIZATIONAL MERGERS CAN EMPLOYEES HAVE (Moadhadi, 2015)?
   1. The first reaction is because they have a fear of control loss (Moadhadi, 2015).
   2. The second reaction is because there can be excess uncertainty (Moadhadi, 2015).
   3. The third reaction is because it may have been a surprise for them (Moadhadi, 2015).
   4. The fourth reaction is because the work environment is becoming different (Moadhadi, 2015).
   5. The fifth reaction is because there are changes in the way the work is completed (Moadhadi, 2015).
   6. The sixth reaction is because they may have competency concerns (Moadhadi, 2015).
   7. The seventh reaction is because there may be added responsibilities (Moadhadi, 2015).
   8. The eighth reaction is because the employee may have new risks on their company investments (Moadhadi, 2015).
   9. The ninth reaction is because the current work may be affect by unsettled matters prior to the merger (Moadhadi, 2015).
   10. The tenth reaction is because there may be a risk of the company downsizing due to economic losses (Moadhadi, 2015).

Research

Before we discuss what the pros and cons are of organizational merger we have to know what a merger is first. So what is a merger? A merger is a chosen fusion of two or more organizations with approximately equivalent stipulations into a single organization (Merger. 2015). Now that we know what a merger is so we can now begin to look at what are the pros and cons of organization mergers.

We can begin by looking at what the pros of organizational mergers. There are five major pros to an organizational merger. The first pro to an organizational merger is a larger network of economies (Pettinger, 2012). Basically, this means that by merging the new company now has a much broader network to cater to. The second pro to an organizational merger is there is an increase in research and development (Pettinger, 2012). This basically means that the new company is able to come up with better top of the line inventions or designs. The third pro to an organizational merger is all the other economies of scale (Pettinger, 2012). This is basically dependent on what type of merger has taken place. If it is a horizontal merger it will be much larger than if it was a vertical merger which will still expand, but it will be less than that of a horizontal merger. The fourth pro to an organizational merger is that tit allows for the avoidance of duplication (Pettinger, 2012). This basically means that the market is no longer over populated and that the market is now only influenced by one company instead of two. The last pro to an organizational merger is that it helps with the regulation of monopoly for the industry (Pettinger, 2012). This basically means that the government limits the new company’s pricing so that the consumers do not get hurt.

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The pros of an organizational merger do so much for the new organization so what do the cons of an organizational merger limit the new organization too? There are four major cons of an organizational merger. The first con to an organizational merger is that there are higher prices (Pettinger, 2012). This basically means that now that there is only one choice in the market that they can make their prices less competitive which will make the new prices of the company become a little bit more expensive. The second con to an organizational merger is that consumers now have less choice (Pettinger, 2012). This is really straightforward in the sense that the consumer can no longer chose between the two rivaling companies now they can only chose the one company. The third con to an organizational merger is that there can be job losses (Pettinger, 2012). This is also straightforward in the sense that if the new company is considered as an aggressively merged take over than the employees may have to fear the loss of their jobs in under preforming departments. The last con to an organizational merger is that the larger organization can suffer diseconomies of scale (Pettinger, 2012). This basically means that with the merger that the new company may not be able to maintain control and with such problem may lose the ability to motivate their employees.

Now these are just a few of the pros and cons of organizational mergers. We will also look into two types of mergers that organizations can go through (Merger. 2015). Earlier I mentioned two types of mergers which we will now explain. The first type of mergers is an organization to organization merger known as a horizontal merger. The second type of mergers is an organization to supplier merger known as vertical merger (Merger. 2015).

Now the last things we will look into is how these types of organizational mergers affect the individuals that work within these organizations. With a merger of organizations the employees may begin to show some new attitudes (Kokemuller, 2015). Another issue that may occur is that the employees may not approve of the new regulations (Kokemuller, 2015). There may be concerns with whether the current benefits and compensations for each of the employees will stay the same (Kokemuller, 2015). Lastly, there may be resistance with the integrations of each of the organization’s employees. These are just a few issues that could arise within a newly merged organization (Kokemuller, 2015). With more research we can understand this so much better.

Now the last issue is slightly inevitable but there are ways to make the resistance to these changes a little bit more manageable (Bolognese, 2002). By keeping in mind these top ten reasons why the organization’s employees are resistant the organization can limit the amount and length of their employee’s resistance to the new merger (Kanter, 2012). The first reason an organization’s employees might be resistant to the merger is because they feel they have loss control (Kanter, 2012). The second reason an organization’s employees might be resistant to the merger is because there is a new excess uncertainty (Kanter, 2012). The third reason an organization’s employees might be resistant to the merger is because it may have been a surprise for them (Kanter, 2012). The fourth reason an organization’s employees might be resistant to the merger is because everything seems to becoming different (Kanter, 2012). The fifth reason an organization’s employees might be resistant to the merger is because the way things used to be done are gone (Kanter, 2012). The sixth reason an organization’s employees might be resistant to the merger is because they have concerns about their competence (Kanter, 2012). The seventh reason an organization’s employees might be resistant to the merger is because there may be more responsibilities (Kanter, 2012). The eighth reason an organization’s employees might be resistant to the merger is because it may affect their organizational investments (Kanter, 2012). The ninth reason an organization’s employees might be resistant to the merger is because not everything from before the merger was settle appropriately and may cause issue for everyday work (Kanter, 2012). The final reason an organization’s employees might be resistant to the merger is because the new organization might be downsizing due to a loss of funding instead of expanding (Kanter, 2012). With this in mind we can better understand how mergers impact the organization and their employees (Kanter, 2012). Now that we know what the pros and cons are of organizational mergers and how they can affect the newly established organization and their employees let us look at how a human recourse professional is made.

Interview of an HR Professional

The follow Q & A is of my interview with Judy Whimmer an HR professional of 15 years. With CSL Plasma

1) How did you meet the requirements for a human resource administrator’s status?

Answer: The function of a human resource administrator requires somebody that is able to relate with others on a private level and aids them in meeting their goals, while at the same time obeying the company’s guidelines (Whimmer, 2015). With that said, I believe that with my 15 years of skills I am more equipped to interact with both employees and consumers (Whimmer, 2015). Since my previous job allowed me to understand what the guidelines of a human resource administrator are (Whimmer, 2015). I now know that human resource administrators have to remain aware of these guidelines while operating (Whimmer, 2015).

2) What are your strong suits and weak points as a human resource professional?

Answer: As I deal with an employee’s dilemmas I have a tendency to get overly involved in their problems (Whimmer, 2015). Yet, I believe that this aspect has allowed me to understand their dilemmas better (Whimmer, 2015). After understanding their problems I am able to suggest to them possible solutions while remaining within the company’s limits (Whimmer, 2015). I have come to understand that experiences like this have helped shaped my attitude towards problems that my staff has had in the past and has allowed me to help them while remaining loyal to this company (Whimmer, 2015).

3) According to you, what are the qualities that a human resource administrator must have?

Answer: I feel that an administrator has to have understanding, instinct, adaptability, elasticity, concentration, and above all an employee needs to be in touch with what has to be done on a daily bases (Whimmer, 2015).

4) Why did you choose a human resource career?

Answer: It was because I enjoyed being involved when new employees are hired (Whimmer, 2015). The reason I enjoy this because human resource administrator are able to help recognize the right people and how they will fit in the company (Whimmer, 2015). It was as a recruitment officer that I found that I enjoyed the human resources field and adopted a human resource profession (Whimmer, 2015).

5) What are the major roles and responsibilities of a human resource administrator?

Answer: The role of a human resource administrator is to care for the strategic and functional responsibilities of all of the human resource disciplines they work with (Whimmer, 2015).

6) What are the responsibilities of a human resource administrator?

Answer: The responsibilities of a human resource administrator can include, but are not limited to staffing, education, structural progress, interaction, operation progress and administration, income and benefits, crew development, developing staff relationships, forming directions, motivational trainings, evolving company rules and processes, and handling health care programs for employees (Whimmer, 2015).

7) Why did you decide to get into HR after you graduated?

Answer: I was looking for a job when I got my first opportunity as a human resource administrator (Whimmer, 2015). I picked it up and gradually realized that I had a liking for it (Whimmer, 2015). I improved my skills by remaining up to date on any new advances in the field (Whimmer, 2015). I also went and acquired a professional degree in the human resource field. It was one of the best choices in my life (Whimmer, 2015).

Conclusion

So now we have looked at an outline of what we will be researching, we have conducted our research, and we have even chatted with a real life HR professional we will now take the time to determine whether the pros of organizational mergers outweigh the cons of organizational mergers and if there is any kind of success that comes from organizational mergers for the organization and the employees. To begin the amount of pros to an organizational merger are much more significant than the amount of cons an organization merger has. I also feel that what an organization gains from a merger is much more rational than what may potentially occur to both the consumers and the employees. I also feel that the pros to an organizational merger are better than the minimal issues that may come from the cons of an organizational merger. Now with this said we also have to look at if there is any kind of success that comes from organizational mergers for the organization and the employees. To answer this it solely depends on a few things. The first thing is to determine what kind of merger we have on our hands. For example if the merger is horizontal than the success of the merger is dependent on whether the merger takes well by the employees and the consumers. So let us say we have two hospitals that merger this is a great example of a horizontal merger and can have some major recourse in the sense that the doctors may now fear the loss of their jobs and may even resent the new changes or even management and their decision to merger in the first place. We will now look at the other side. For example if the merger is vertical than the success of the merger is dependent on whether the merger takes well by the consumers. So let us say we have a retailer and a third party soda vendor that decide to merger. The retailer now has to make sure that the inventory of their newly merger supplier takes well versus that of the sodas of other non-merged vendors. With all of this said the success of a merger is really dependent on a handful of situations and if they are not the right situations than the successfulness of an organizational merger tanks rapidly. Therefore, I have to conclude that the pros of organizational mergers do outweigh the cons of organizational mergers and the any kind of success that comes from organizational mergers for the organization and the employees is dependent on situational factors and depend on how well the merger is taken by all the parties involved. I also feel that the effects of organizational merger can be controlled by HR Professionals such as the one we interviewed.

References

Bolognese, A. (2002). Employee Resistance to Organizational Change. Retrieved May 26, 2015, from http://www.newfoundations.com/OrgTheory/Bolognese721.html

Kanter, R. (2012, September 25). Ten Reasons People Resist Change. Retrieved May 26, 2015, from https://hbr.org/2012/09/ten-reasons-people-resist-chang.html

Kokemuller, N. (2015). Post-Merger HR and Cultural Issues. Retrieved May 26, 2015, from http://smallbusiness.chron.com/postmerger-hr-cultural-issues-14400.html

Merger. (2015). Retrieved May 26, 2015, from http://www.businessdictionary.com/definition/merger.html

Moadhadi, S. (2015). Merger Proposal. Retrieved June 6, 2015, from https://api.turnitin.com/dv?o=545723293&u=1007168898&s=3&student_user=1&lang=en_us&session-id=e954f4cc236d3d4b1434f6533eb8d641

Pettinger, T. (2012, February 22). Pros and Cons of Mergers. Retrieved May 26, 2015, from http://www.economicshelp.org/blog/5009/economics/pros-and-cons-of-mergers/

Whimmer, J. (2015, June 5). Human Resource Professional Analysis [E-mail interview].