This section summarises the research findings. The findings are generated from the data collected in the interviews and the survey on the topic the effects of merger and acquisition on the organisational cultures of two merging companies. The data collected makes it possible to have different views on this topic, and the views are open to varying interpretation. The discussion looks into how participants feel about the management of culture change at the time of the merger. The discussion will also review culture change in the process of mergers and acquisitions and the employee’s perception about it. It will also develop a detailed discussion on the level of employee satisfaction with the work stations provided after the merger. This will reveal what impact mergers and acquisitions have on work stations and how employees feel about it. The discussion will also focus on change of work routines resulting from mergers and acquisitions and the level of satisfaction of the employees about it.
In short, the discussion will be based primarily on the research objectives including:
To study the effects of amalgamation of two different organisational cultures with particular regard to people’s motivation and performance.
To identify, how to manage cultural change in an organisation during merger.
To evaluate the role of effective leadership in the merger and acquisition process
Data from the research revealed that amalgamation of two different organisational cultures has direct impacts on people within the cultures. In the organisation context, it was revealed that employee’s performance is highly subjected to pressures resulting from the amalgamation of the two organisational cultures. 75% of the employees in the survey felt that their level of performance had gone down after the mergers because it presented significant challenges in the work environment including bureaucracies and poor communication among others. The in-depth interview with the ex-employees revealed the following as presented in the diagram below:
Poor Working conditions
Figure 3: Figure showing the reason for employee turnover after the merger (Data obtained from ex-employees)
Culture incompatibility was viewed as a major issue because of mergers and acquisitions. In this case, it was found out that, the two managers in-depth identified the incompatibility as resulting to the challenges in the performance of the organisation. In fact, the managers responded that growth of the organisation was an immense challenge because the employees did not welcome the cultural changes. Wasserstein (2001, pp. 6 – 18) argued that following mergers, the influence of one culture over the other leads to defragmentation of the weaker culture, which is incompatible with the new culture.
Bruner (2002, pp. 48 – 68) had earlier established a relation between mergers and acquisitions and poor performance attributed to the incompatibility of cultures. Brooks and Dawes (1999, pp. 194 – 206) noted in an earlier study that cultural incompatibility results from mergers and acquisitions causes’ poor performance. Poor performance is attributed to departure of key executives and conflicts in the organisation. Discussing culture within an organisation Schwert (2000, pp. 2599 – 2640) looked at it as having a critical role in the way employees react to mergers and acquisitions. ‘Culture clash’ is the term used by Schein (2001, pp. 102 – 109) to describe what happens after mergers and acquisitions. The clash affects both companies with the values, philosophies, styles, and missions of the organisations. Wasserstein (2001, pp. 6 – 18) noted that even in well organised mergers and acquisitions, mergers change the character, nature and orientation of the partners. Brooks and Dawes (1999, pp. 194 – 206) added that culture is usually the focus of attention during mergers and situations that lead to the clash of cultures are responsible for the failure of mergers. From the analysis of Penguin, people were decidedly positive about the company before the mergers. The employees asserted good things about the company and the environment in which they work in. However, after the merger, the story was different because the merger proved to have changed the perceptions of the employees negatively. The existing culture at Penguin became inappropriate, and led to a hindrance, which discouraged progress in the organisation.
Full Involvement in decision making (regular meetings)
Good working Conditions (leave, rest, comfort)
Adequate Compensation (adequate overtime pay)
Efficient communication (leadership dialogue with subordinates)
Effective Leadership (servant-leader type of leadership)
Before the merger
After The Merger
Involvement in decision making
Poor Working Conditions
Diagram 1: Diagrams showing the Web culture analysis of Penguin Company before and after the merger
Findings from ex -employees revealed that they had quit the organisation because of the challenges emanating from mergers and acquisitions. In the in-depth interviews the ex -employees asserted that they had left the organisation based on the fact mergers and acquisitions created fears among employees. Asked, why they left the company? the ex-employees cited fear of job loss. This was identified as the main reason, why uncertainty developed in them and they quit the organisation. They also cited that the realm of the unknown was a principal cause of turn over because they could not indulge or communicate well with the new team.
Also, the survey supported the above discussion and revealed that there was a fear of new leadership and new structures within the organisation.
As per the survey, the level of fear due to the merger focused majorly on the fear of unknown which was 60% and 25 % was due to the new leadership flag.
Figure 4: Pie chart showing the level of fear that the employees had because of the planned merger revealed through the survey.
Following team conflicts, the employees felt that they could not continue to work in such poor-working environments. The ex-employees asserted that before the mergers, the environment within the company was welcoming, and they worked comfortable until the mergers were initiated. They also claimed that the situation was distressing, and it developed anxiety in the workplace. The ex-employees appreciated the fact that loss of effective and close team members who they had worked with for years contributed to their decision of turnover. They also agreed that the merger created a bad state of the work environment because the new team including supervisors forced their way into the organisation therefore, making it unbearable. Simpson (2000, pp. 3 – 8) was noted to support the same argument. His argument was that new teams being integrated in the workplace develops fears and tensions and the employees avoid taking risks or bring in new initiatives thus leads to poor performance. Song (2005, pp. 211 – 217) added that mergers develop the ‘us versus them’ thinking. In this case trust, for the new team is always minimal and there are poor corporations because of newly acquired behaviours. The negative attitude against the new contributes to the loss of cooperation among employees of both companies. Because of this, high rates of turnover are noticed in companies, which does not cease unless the situation is handled professionally. From a close perspective, the total number of employees working in the company from the time of merger was forty three (43) but by the time this survey was conducted the number of participants for survey present was twenty two ( 22) . This indicated that there was some level of resistance for mergers, and many of the respondents were unhappy with the state of the company at that time.
It was also evident from the data collected that the number of years, which the employees worked within the organisation, influenced the level of effect that mergers and acquisitions had on employees. The study was composed of four different categories including, below 2 years, 2-5 years, 5-10 years and above 10 years working in the company. The respondents from the four categories had different perceptions regarding mergers and acquisitions in the context of cultural change. The employees who had worked in the company for more than five years had a strong assertion that mergers and acquisitions were negative to a company. From the open ended questions integrated in the study, the reason for negating impacts of mergers and acquisitions was because of the attachment that these employees had with the company for those years. The employees were used to the culture of that organisation, which was distorted and reformed following mergers and acquisition. Getting used to the new culture was a difficult moment for the employees and thus negated consequences of mergers and acquisitions. This finding supported Stacey and Kenneth (2000, pp. 239 – 285) text who wrote that cultural change develops into “culture shock.” Culture shock was described as a situation in which an individual is not comfortable with the new cultures, and thus the environment is not sound for him or her to work.
Figure 5: Figure showing the influence of years in the organisation on employee’s probability of turn over
It was also revealed that communication was the most critical part of the organisational structure, which was affected most by the merger. In this case, 80% of the respondents in the survey agreed to the assertion that mergers are a barrier to effective communication within an organisation. The respondents felt that, before the merger, there was effective communication at Penguin and the managers normally communicated on the proceedings about the growth of the company. However, after the merger, communication became a tremendous challenge and 75 percent of the survey respondents asserted that they were not being informed about the growth of the company and personnel after the merger. Stahl and Mark (2005, pp. 23 – 37) were of the same view in their works arguing that mergers challenge communication between the companies. In the context of Penguin, It was also apparent that, after the merger the management ceased to call regular meetings, which were the case before the companies merged. The employees also noted that, before the merger, the company planned regular recreational activities, which engaged employee and the leaders. Such recreational activities were deemed as necessary because it improved the communications between employees, and the leaders and it was ideal for effective work relations in the organisation. However after the merger, such recreation activities were irregular and the management introduced a new program, which was quit tight. The employees were therefore, unsatisfied with the new programs and resented the merger.
Psychological impact was also identified as a major cause of turnover among employees at Penguin. Among the ex-employee respondents, it was clear that they quit the job because their psychological needs were not met. The ex-employees’ argued that they had a hard time dealing with the new management, and they feared losing recognition and appreciation. Sustaining themselves in such environments was psychological torture to the employees because they did not want to anticipate from the new leadership. Moreover, according to Cartwright and cooper (1993) in their article said that there is a psychological impact on the individuals when merger and acquisition happens as the change effects the mental health of the employees as they find the event itself intensely stressful even when there is a high degree of compatibility in their culture. Information from open ended questions for the managers revealed that mergers created unhappy employees. The managers argued in the in-depth interviews that mergers developed unhappiness in employees and thus spreads discontent among others. In this case, it is a psychological issue because the employees cannot concentrate in their jobs.
From the managers’ perspective, managing cultural change was identified as critical for the organisation during mergers and acquisitions. Adding to this finding, 60% of the respondents in the survey acknowledged that the major reason for the failure of the initial change process was poor management of cultural change. In this context, the views from the open ended questions adopted a strong argument that management of culture change is a useful approach in negotiating meaning out of the ambiguities, which come resulting from the change. In this context, the managers were of the view that management of “the human factor” is critical during mergers and acquisitions because it is critical to the success of an organisation. Stahl and Voigt (2004, pp. 210 – 216) supported this notion basing their argument on case studies from successful organisations. They asserted that culture plays a critical role in the success or failure of mergers. Conversely, they agreed to the fact that culture change is a negative attribute to employees’ performance because it tends to lower their motivation levels and thus lowers their productivity.
It was also found out from the managers that the most appropriate ways of managing cultural change is through relating everything including plans and policies to employees and considering their perceptions. Employee awareness and understanding is critical in managing cultural change, and for an organisation to succeed, it has to raise their awareness about the entire process. Vansina (2001, pp. 61 – 69) noted that, in mergers situation, creation of awareness includes helping them understand the reason behind the change. On the same note, the managers noted that it is critical to encourage employees during the entire process because they give up extremely quickly and normally react negatively to the change. Bijilsma-Frankema (2002, pp. 192 – 207) noted in their text that it is indispensable to ensure that the employees realize the relevance of improving their skills, knowledge and abilities to fit in the new work environments. The idea is to create a positive atmosphere where employees can work comfortably and change is effected.
Vassilis (2007, pp. 43 – 50) also added that creating a positive atmosphere in the workplace is ideal because it develops job satisfaction in employees in times of mergers. Management of change was also established by the managers as demanding that the company retains performers and key employees in the organisation. Retrenching employees has negative consequences to the organisation because it draws the routine practice back and discourages new initiatives. Wasserstein (2001, pp. 6 – 18) noted that the best thing is to develop retention programs, which are a necessity in the merging process. Cultural management was also noted as requiring the enhancement of quality of decision making. Managers at Penguin observed that incorporating employee is essential for decisions to be effected in an organisation in an effort to reach the goals of the company. Failure to manage culture was identified as the main cause of why the merger failed. It was observed by the managers that poor management was to blame for the barriers in the merging process and the reduced motivation among the employees.
The role of effective leadership in the merger and acquisition process was considered critical in management of change in the process of mergers and acquisitions. Leadership was found to be a critical aspect in the process of mergers and acquisitions by 70% of the respondents in the survey, acknowledged working at Penguin as stressful because of poor leadership that was initiated after the merger. 60% of the respondents in the survey asserted that they were never involved in the companies’ operations, and the superiors did not pass the subordinates’ grievances message to the management correctly.
Figure 6: Figure showing the level of agreement to the assertion that poor leadership at Penguin after the merger caused high rates of turnover
Because of the poor governance issues, employees were suppressed, and they did not have a voice. This was challenging to the employees because they could not enjoy any improvements to the working conditions. Such circumstances were also noted by the ex-employees who felt that it was one of the main reasons for their quitting. Vivian and Barton (2000, pp. 767 – 791) looked into the issue in their text and observed that leadership not only plays a role in ensuring mergers and acquisitions, but they also have a greater role of ensuring that employees are comfortable with the new cultures. 45% of the respondents in the survey supported the notion that, before the mergers, the leadership used to support them when they came up with ideas. However, the mergers distorted the entire management and the employees asserted that the new management did not appreciate them. Therefore, the employees were demoralized, and they felt unappreciated, which resulted to poor performance.
Leadership was also found to be critical by Boyatzis (2006, pp. 607 – 623) who asserted that tension resulting from mergers and acquisitions can only be restored by the leadership of the respective organisations. Leaders serve the role of aligning cultures between the two merging companies. Bijilsma-Frankema (2002, pp. 192 – 207) gave the example of two merging organisations with leaders coming from the same background, and sharing similar style. They asserted that these leaders may collide over approaches to decision making, which is negative to the organisation and its development process. According to Cianni (2002), she proposed that the role of a leader during the merger and acquisition process is to engage, inform and motivate people of the organisation. As per Gill (2006, pg-316), he referred to Jeffrey Schmidt(2002) criteria’s to be an effective leader in merger and acquisition stating that the merged company should have a new vision, communicating it in an encouraging way, setting up unambiguous corporate values, examine and responding towards the attitudes and feelings of employees, team building and communication. Building trust towards the organisation is the most difficult and fundamental part.
Mergers and acquisitions were found to start a dilemma within the organisation. The respondents asserted that, after the merger, they felt that they were unaware of how they are expected to behave and carry out their responsibility. The employees argued in the open ended questions that mergers and acquisitions result to confusion in the organisation, and they bring about role conflict. In this case, the employees are in a dilemma of the authority to adhere to, and instructions to hinder to. Appalbaum (2004, pp. 649 – 662) was of the same view in his works looking at mergers as having negative consequences on the communication within the organisation. They asserted that mergers and acquisitions diversify the communication process especially when there is no clear stipulation of authority. The employees also argued that after the mergers, they were uncomfortable with the work environment because of the newly introduced technologies. In the case of Penguin, the employees were used to the IT technology, but the merger introduced new technologies, which demanded that the employees undergo training to be able to use the technologies. Therefore, the mergers were viewed by the employees as resulting to hefty challenges in the working place. As a result of the takeover, re-skilling was mandatory at Penguin and the employees were not happy about it. In fact, the ex-employees argued that they were heavily burdened by the work and training, which was a reason for their turnover.
The new control system at penguin was observed by the respondents as ineffective and not fit for organisational growth. The respondents looked at it from the communication point of view arguing that the system was inefficient and a significant factor, which contributed to the poor working condition at the workplace. The new system was identified by the managers as complicating the situation and creating the over-your-shoulder effect. This is identified in numerous literatures as the anxiety experience. Employees wonder about the effect the merger particularly after it is completed. The employees noted that they were concerned with their position in the organisation, the new management and job statuses. As stated from leading scholars, mergers and acquisitions take place mainly to increase the efficiency of the organisation (Cartwright 2005, pp. 116 – 132). However, as per the Bakker and Helmink (2000, pp. 53 – 58) in their article stated that efficiency doctrine was found to be negative when they did an analysis on all the mergers that occurred between 1988 and 2001.
The employees were particularly angry about job entry times, breaks and exit times, which were noted to have changed after the mergers. The employees complained that the new management was strict and overloaded them. It was also observed that the new management decreased the resting hours, which was handled negatively by the employees. The employees felt that the introduction of the new management introduced new policies and structures, which they were not comfortable with. Generally, the employees were against the new management after the merger.
The research also found out that mergers created a cultural isolation effect. This means that the mergers isolate some of the cultures in the organisation because of the superiority of the others. The managers asserted that there was observable isolation in the way employees participated in the change. This is supported by the earlier works of Avery, Judith, and Scott (1998, pp. 24 – 43) who argued that the cultural ways and assumptions, which result from a merger varies much. They also noted that even in cases where a high degree of alignment between cultures exists;
there is a likelihood that tensions prevail during the time of mergers. As a result, the tension created a culture of isolation, which works negatively to one organisation and the way employee handle the process.
Managers also noted that mergers develop some uncomfortable patterns in the organisation. From a general perspective, the managers asserted that according to their experience there was a negative reaction from the employees concerning the merger. The managers noted that employees did not support the idea, and this was not fit for necessitating production in the organisation. A similar case was noted in earlier works by Appalbaum (2004, pp. 649 – 662) who noted that mergers set new goals for the organisation that might not be achievable within the specified time. The scholars looked into the corporate world and asserted that a widespread assumption was that many of the mergers are failures and the pin down managers to rethink of other strategies to salvage the situation. Such uncomfortable situations result to turn over of employees and leads to stagnation in the organisations’ operations.
From the managers’ perspective, they agreed that mergers activated the resentment of employees against any form of change. The employees were perceived by managers as resisting any change after the merger in the organisation. The managers noted that there was a build up of resistance to organisational change initiatives sometime after the merger. A discussion from the open ended questions revealed that mergers had negative consequences on the employees and thus, they tended to view any change as destructive. The managers noted that even with positive changes introduced to provide for the welfare of the employees, the employees did not take time to consider it. They resented any change and were totally against any new initiatives. The managers noted that this showed the employees’ dissatisfaction with change in the organisation and this was a problem noted to have emanated from the merger. Earlier text by Andrade, Mark, and Stafford (2001, pp. 103 – 120) had a similar line of argument. These scholars conducted surveys in two major companies, and they developed comparisons. In this context, the employees had different perspectives about change because one was unitary while the other had merged with another company. In the real sense, it was clear that changes resulting from the mergers are unwelcome on the side of employees but accepted by the management who have different motives to increase profits.
A resentment of mergers was also evident from the performing employee’s in the organisation. The employees at Penguin asserted that after the mergers changes led to a loss on their side, they noted that leave pay out, bonuses and medical-aid allowances were reduced after the merger. The merger introduced new policies, which adjusted the allowances and the employees were not happy about it. Therefore, there were enormous problems in the operational issues leading to a loss of motivation among employees. The ex-employees also agreed to this fact and quoted it as a major contributor of their turnover. Basing on the same perspective, Wasserstein (2001, pp. 6 – 18) had earlier noted that mergers come in to create new policies. On the same context, mergers are initiated because companies want to cut down costs and increase profits. Therefore, all efforts by the merged companies target a reduction of costs and thus they turn to reducing allowances. On the side of employees, this is negative and thus, the organisation suffers unmotivated employees, which leads to low productivity.
merger at Penguin was a failure for both companies. It is viewed from the discussion that the approach adopted for the merger was ineffective because it did not consider change in organisational cultural. From the employees’ perspective, it was better to work for the company before the merger than after because circumstances had changed, which were discouraging in the sense of developing an appropriate environment for work.
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