The Merger Emotions Syndrome

The merger syndrome is a phenomenon that illustrates employees’ reactions following the announcement of the M&A deal. Merger syndrome is a word often useful to how employees respond to a merger (MARKS and Mirvis 1992, P70) that reflects the humor of the workforce.

Merger syndrome is an ordinary response, and expected human reaction to a major corporate change. Most studies examining the human side of corporate mergers and acquisitions prove that disturbance and negative consequences are experienced by employees.

Employees of the acquired company are more affected by the big changes that trigger negative effects and consequences, it not surprising that organization members going through a merger or an acquisition are shaken and respond with shock and strong emotional reactions (Appelbaum et al ..2000b; Dickmann, 2000; Marks and Mirvis, 1986).

The literature describes a different spectrum of emotions in M&A, employees go through a variety of emotional phases.

The merger syndrome is characterized by a change of identity, higher centralization of decision making, less communication with the employee, high levels of stress, crisis management mode, a loss of identity, motivation and commitment, decreased productivity, feelings of insecurity and anxiety, mistrust. This especially occues if the individual is not able to view the upcoming changes as positive (Appelbaum et al, 200b; Bruckman and peters,1987;Dickmann,2000;Marks,1999;Marks and Mirvis,1986;schlieper-Damrich,2000).

These emotions bubbling over into family life can lead to frustration ,depression (Appelbaum et al ..2000b; Dickmann, 2000).

The consequences of this emotional turmoil are decreased motivation, lower job satisfaction and reduced commitment toward the company. Cooperation become difficult and good team work almost impossibleand The best elements began to defect to other recruiting organizations .

(Cartwright and Cooper,2000) Point out that With the acquisition by another company often a loss of idenity occurs because employee loses their work environment of rules, tasks and structures.

in the same way, (Appelbaumet al..)state that Employee’s identification with their company and their commitment are therefore likely to change after such a major intervention in organizational life (Appelbaumet al..)

This phenomenon of merger syndrome is most likely due to the fact that in the pre merger stage managers are expected to maintain silence on the upcoming decision, and therefore they are rather cautious not to reveal too much information prior to complete implementation (Marks, 1999).

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Managers tend to isolate themselves from employee in such situations because they do not know what to tell their staff or how to tell them (Gutknecht and keys ,1993;Marks,1999).and do not know how to handle employee’s emotions .for that reason, when managers correspond less with their employees during M&As ,though leads to doubts and mistrust.

We can sum up that during the merger syndrome, employee are preoccupied with the impact of the amalgamation on themselves and their work .they expressed their resistance to the like hood of change if this phenomenon is left unmanaged it may result a cultural clash inside the new firm.

The Merger-Emotions Syndrome:

Mergers and acquisitions can be fear-provoking for employees and generate anxiety and stress.

Hunsaker and Coombs (1988, 58) noticed particular expressed of emotional reactions experienced by employees during a merger or acquisition they have named this phenomenon the ‘merger emotions syndrome. ‘

The Merger Emotions Syndrome:

Hunsaker and Coombs (1988) have presented a nine-stage chronological model of employees’ emotional reactions in the course of a merger or acquisition, which illustrate the ‘merger syndrome’:

• Denial. At first employees react to the announced merger with denial an that nothing will happen or that it will not change their work environment.

• Fear. When the merger becomes a reality employees begin to fear the unknown and Workers become preoccupied with job loss which lead to a decline in productivity.

• Anger. Once employees feel that they have no control over the situation and that they cannot prevent Merger, they start to express anger towards those who are responsible.

• Sadness. Employees start to mourn the loss of corporate identity; they focus on the differences in the way the two companies operate and adopt a ‘we’ versus ‘them’ syndrome.

They may feel nostalgia about the good old days of loyalty they provided to the company with many years of quality service.

• Acceptance. After an adequate grief period has elapsed, employees begin to recognize that resisting the situation would be worthless, and they start to accept reality and become optimistic.

• Relief. Employees begin to realize that the situation is not unfavorable as they predicted and feel more settled in the new organization and become more comfortable to interact with employees from the other company.

• Interest. As people become more secure in their new positions, they begin to look for the benefits of the new organization. They observe the situation as a challenge and seek to show their abilities and value in the organization.

• Liking. Employees observe new opportunities and begin to like their job.

• Enjoyment. Employees express commitment to the organization and feel more relaxed and secure.

“Resistance is a perfectly legitimate response of a worker”. Leigh (1988)

Emotional reactions of employees:

Resistance: the expected response to change

“People tend to resist change especially in the workplace .they may not understand what the changes entail,they may disagree with the reasons for making the changes,they may not appreciate the benefits,they may be afraid of losing something they value,they may be concerned that they won’t have the skills and ability to handle the changes….many people also tend to resist authority,for various reasons .resistance can do serious damage to morale ,dividing employees and causing frustration ,resnetment ,and distrust .”Anne bruce(2002).

Individuals differ generally in their openness and eagerness for change, some people thrive in the new environment while other are not, They prefer more stability and continuity.

Regardless of people’ mind-set towards change, people normally do find that change produces anxiety.

Employees involved in mergers are facing multitude of potential changes, these changes modify the person-environment relationship and cause several outcome that employees and managers must adapt.

There are a numerous reasons why the reactions from employees are often seen as negative when facing a merger or an acquisition.

The general reason behind the employee’s resistance is the insufficient information about the changes. The Employees expressed their feeling of fear and anxiety due to the uncertainties of change.

Kyle (1993) claim “that resistance is dependent upon two related factors ,the first one ,the degree of control an individual has over change and their ability to start, modify and stop the change, secondly ,the degree of impact of the change on individuals” .

The resistance is greater within the acquired organization since this often is the culture that has to throw away its traditions and routines.

The resistance can be expressed in two kinds of reactions:

In a Explicit way (disagreement,strike,)and Implicit way(loss of loyalty, lowering of morale ,absence, avoidance ,low tolerance)

Mergers and acquisitions are nerve-racking events for employees of the merging firms. “A merger or acquisition can sufficiently transform the structures, cultures, and employment prospects of one or both of the firms such that they cause organizational members to feel stressed, angry, disoriented, frustrated, confused, and even frightened” (Buono, & Nurick 1992: 19).

Schweiger, & Lee (1993) found in a study that employees in the acquired firm experience greater job insecurity than employees in the acquiring firm. Similarly, Lohrum (1997:a) states that the employees from the acquired firm often experience a higher uncertainty and resistance.

Lohrum (1997:a) claim that resistance exists among all employees and appear due to lack of control, anger or frustration when decisions are being made without their involvement.

Buono, & Bowditch (1989: 108) depicted resistance “As a result of the uncertainty, ambiguity, tension, and anxiety that organizational combinations can cause, they are frequently associated with decreased organizational satisfaction and commitment, increased turnover and absenteeism, power struggles among those managers who stay, and poorer job-related attitudes and performance for a significant proportion of the new firm’s work force”.

Larsson (1990) explains that the resistance to change can be seen in a collective aspect, as well as in an individual aspect, especially among the acquired employees. Cultural clashes are seen as a collective resistance and career uncertainties are connected to the individual resistance.

“Change itself is not the cause of resistance. Resistance is caused by how people perceive change”.

Managing Resistance to Change

“all change is a loss experience” (Levinson, 1976).

One of the most complex problems that face an organization today is resistance to change.

Conducting change through an organization is one of the most critical and challenging responsibilities.

Once the marriage is celebrated, issues come into sight especially the one concerning the employees who are experiencing the major change that the new entity is passing through.

The employee and staff are experiencing a new life style they are losing the old way of doing thing and have to adapt to a new system, new culture, and new managers.

The managers and leader of the company must be prepared to cope with employee feeling and behavior. Simply telling employees about the changes will never fully prepare them for the actual change.

Managers need to identify why people resist change and how to counter their resistance.

Bridges( 1991) and Levinson(1976) claim that Change is best handled when the parties involved know why the change is being implemented.

The most fashionable solution to deal with resistance to change is to get people concerned to contribute in making change and encouraging them to think in diverse ways

In order to effectively carry out the change plan, it is extremely important for the organization’s management to recognize and handle resistance effectively.

Beckhard and Pritchard (1992) explain how the management of a changing process with regard to the implementation of changes is vital for achieving new goals and strategies.

The analyzing and planning of several areas is necessary to get the commitment to successfully perform an organizational change.

Larsson (1990) considers three areas of action to be able to reduce the collective and Individual resistance to change:

-Socialization is a mechanism that works for both improving the coordination of interaction and reducing collective employee resistance, this by enhancing the acculturation and creating common orientations.

-Mutual considerations reduce the eventual conflicts that may arise by focusing on commonalties with an interest in the acquired firm, maintaining the employees’ integrity. This will avoid the dominance of one side and facilitate the exploration of both firms’ competence.

-Human resource systems avoid individual resistance through job design, reward systems, personnel policies and career planning.

To facilitate the integration and uncertainties among employees, Levinson (1970) emphasizes that the acquiring firm should tell the truth about all eventual changes that will occur due to the M&A.

Further, Beckhard & Pritchard (1992) state that what is important is to manage resistance to change by changing negative energy into positive energy.

The introduction of a change program to employees could facilitate the integration process.

The program can help the employees to understand the need of the organization and how change affects the organization and the employees.

Pritchett (1994) suggests avoiding encountered resistance by providing employees with a clear direction, complete with short and long term goals.

The accomplishment of these goals helps employees to visualize that they are getting somewhere and will relieve them to get excited about the change.

During change it is essential to identify, as precisely as possible, what is ending and who is losing what (Bridges, 1991).

Employee reaction to change:

Mirvis, Cartwright and cooper (1996) discuss four stages that employee go through in connection with mergers and acquisition:

Stage 1: Disbelief and denial: typically, the individuals’ first reaction is extreme shock, which may result in denial from employee that the merger will take place despite circulating rumors. Even when the deal is concluded, individuals might still try to convince themselves that nothing will change.

Stage2:anger through rage and resentment: when the real situation become more clear after realizing that the change will take place, individuals’ feeling might be replaced by anger or resentment towards old management and new merger entity.

Stage 3: emotional bargaining: in this stage, uncertainty and fear increase about individual job future. Individuals become angry for not anticipating the event and feel nostalgic and resent commitment and loyalty invested in the past) which may lead to depression.

Stage 4: acceptance: lastly, the workforce become aware that the past is gone, and that they must admit the new situation. In this stage, the employee still feel letting down by the old organization and can no longer be satisfied with the new system.

Factors causing resistance to change :

According to maubin et al.(2001) managers need to identify resistance in it’s various forms and learn to identify the underlying reasons for resistance surrounding the change.

There are several factors causing resistance to change,and some of the most common reasons are stated below:

Fear of unknown:

mabin et al.(2001)explain that Such fear is due to uncertainty about the nature of change,feeling that one does not kown what is going on and what the futur holds

Bovey and hede(2001)claim that resistance is an expected part of a change process,since change involves a move from the known to the unknown .

Loss of control:

mabin et al.(2001)explain the loss of control as perceiving that the change is being done to the person ,resulting in concerns that the person have no influence on the events taking place.

moran and brightman(2001) clarifly that if change threatens a person’s sense of being in control ,it will be perceived as a threat to survival.

Loss of face:

mabin et al.(2001):Feeling of embarassment as a result of change and discerning it in such a way that the things that one has done in the past were wrong

Loss of competency:

Mabin et al.(2001)claim that people fear that the existing skills and competencies will no longer of any use after the change has occurred.

The possibility of losing their current jobs and the financial crisis that comes with that is of great concern.

Cartwright and cooper(1996) further state that M&A involve some employee turnover and competeny loss,partially due to the duplicity of staff members.the uncertainty of change will also encourage employees to seek employment elsewhere ,in order to regain the power of control,or because they doubt their ability to fit into the new organization.

Need for security:

Mabin et al.(2001)state that employees worry about their potential role and position be after the change has taken place.

Appelbaumet al.(2000a) explain that people need to be treated with respect,to be identified with the new organization,to be accepte as members of the new team and to keep their status and prestige in the new organization.

Poor timing:

Mabin et al.(2001)state that the timing of the change might be poor,in the sense that people might feel surprised at a stage of changewhere employee feel already overworked.

Hoag,ritschard,and cooper(2002)further state that some people might wish to secure the present situation before embarking on any new changes activity.

Force of habit:

According to Mabin et al.(2001)employee might feel comfort in the existing routines and habits and not liking to change the actual ways of doing things. Appelbaum et al.(2000a)clarify that they may have had many successes with the existing company ,and now they have to accept different ways of doing things and most of the time without being consulted.

Marks(1997)continues by stating that employees will be exposed to multiple transitions.

Reengineering, downsizing, leadership changes, shifts in strategy and other transitions typically overlap one another. Cartwright and cooper (1996) further discuss that employee will be concerned with issues such as a potential relocation or change of workload.

Lack of support:

Mabin et al.(2001)state that the lack of important support from direct supervisors and the organization ,or not having the correct resources to implement the change. Leaders need to learn how to support rather than to control and provide employees with the tools needed in order to work together and perform the changes .

Nguyen and Kleimer (2003) claim that delays in communication can severely deteriorate the situation, and make employees feel apprehensive and even hostile toward the merger.

Lack of confidence:

Mabin et al.(2001) state that resistance might be a consequence of employees ‘lack of confidence that the change outcome can be better than the situation before .Moran and Brightman (2001) claim that in any change situation ,people may fear that the loss will be greater than the gain ,which can take away any positive outcome that the Change might yield.

Nguyen and Kleimer(2003) further argue that employee loyalty and perceptions of the organization’s trustworthiness decreases in connection with the organizational changes.

Marks(1997) claims that there is a natural tendency for people to exaggerate the differences as opposed to the similarities between the two companies.

People tend to ascribe the differences to competing values and philosophies, and view their own company as superior and the other as backward, bureaucratic .

Lingering resentment:

Bovey and Hede(2001)point out that individuals differ in their ability and willingness towards change based on how the they perceive it. Mabin et al.(2001)argue that some employees become angry due to a lack of respect for the people involved or over the way one been treated during past change efforts.

The lack of communication:

A Communication entails the use of verbal and nonverbal signs and symbols to create understanding (Vecchio and Appelbaum, 1995).

Acquisitions are synonymous with change, a destabilizing event affecting many people and often have a negative outcome on employee behavior resulting in absenteeism, low morale and job satisfaction.

The announcement of an M&A transaction generates uncertainty and ambiguity with frequent rumors that change the scene and a large proportion of merger failure is credited to employee problems.

The communication during M&A-transactions aims to decrease information deficits of employees, being informed should lower feelings of uncertainty of employees (Schweiger, & DeNisi 1991).

Through mergers and acquisitions, employees are seldom kept in distance from the M&A transaction.

Once a merger is announced ,the stress levels of employees begin to climb(schweiger and DeNisi,1991)and the lack of communication from top management lead to rumors and fake stories.

Feldman (1991:p. 146,) stress that ambiguity begins in an organization when there is “no clear interpretation of a phenomenon or set of events.” And the main cause of ambiguity in organization is the insufficient information while uncertainty is the result of lacking information about circumstances.

Once the information has not been transmitted to employee, they began to search for their own answers and this may show the way to rumors which can increase anxiety and result in a reduction in productivity and sabotage.

This can affect the working environment in the firms and the employees will likely experience ‘shock, disbelief and grief . . . followed by resentment, anger or depression’ (Sinetar1981).

Delays in communication can result in employees feeling apprehensive and even hostile toward the merger or acquisition, making any subsequent communication process strained and difficult (Kelly, 1989).

When organizational transitions are not well managed, the lack of top-down communication starts the rumor employees are left feeling anxious, threatened, and preoccupied with their own safety, their incomes, and their careers. Distrust is inevitable and becomes widespread.

The employees have a need of knowing what the new structure of the firm will look like and get answers to their uncertainties as early as possible to prevent frustration and anxiety.

Bastien (1987) established that during periods with communication shortage the individual’s uncertainty peaked among the workforce. He further found that the members of the new organization changed their attitudes during those periods; their motivation decreased, and they expressed an increased intention to resign from the organization.

Another common issue in M&A process is the accessibility to information, at the stage of a merger assessment the management team hardly has all details in place that employee’s request.

“Since the actual details of the merger or acquisition have to be worked out over a period of several months or even years after the combination, management rarely has accurate answers to employee questions” (Buono, & Bowditch 1989: 16).

Buono, & Bowditch (1989) recommend that the top management of a merged firm should communicate as soon as possible with employees. “Accurate and honest responses to questions about these issues provide organizational members with a realistic assessment of what the merger or acquisition will mean for them personally and for the new organization” (Buono, & Bowditch 1989: 204).

Buono, & Bowditch (1989) indicate that “Ambiguity in organizations is generally conceptualized in terms of the adequacy of information available to organizational members” (Buono, & Bowditch 1989: 102).

“The employees have to be informed frequently. Even if there is not anything to know, they have to be informed that nothing new has happened.” (Stoppel, 2006)

Finally, The Management ought to share as much information as it can with employees before, during, and after the acquisition. Communication with employees can do more than just providing information

It can help to diminish and drive out the speculative rumors which cause negative emotions and behavior.

The importance of communication:

Mergers and acquisition are an important part of the management setting and Communication plays a crucial role in the success of M&A and is a decisive tool to use in order to change attitudes and behavior.

Being truthful, open and forthright in this communication process is particularly important (Daniel, 1999; DeVoge and Spreier, 1999; DeVoge and Shiraki, 2000).

Trzicky (2000: 55) point out that communication is the most important measure to reduce uncertainty and hostility of employees in mergers and acquisitions.

Similarly, Schweiger and DeNisi (1991) established that communication is the only way to reduce anxiety among employees, and that the communication should start as early as possible in the process.

In the field of research, they come across that employees who receive more communication at the stage of M&A, they demonstrated more positive behaviors and selected positive coping strategies after M&A-transactions.

Salecker, & Müller-Stewens (1991) and Ivancevich, Schweiger, & Power (1987b) state that one of the effects of communication in the acquisition process is the avoidance of negative reactions of employees which can limit the dysfunctional outcomes of M&A-transactions.

Ford and Ford (1995) relate the success of a change in an organization to the way that managers have handled the communication. Consistency in communication when the organization is going through changes will reduce the employees’ resistance.

The management team should use communication efficiently so that rumors do not become the main source of information .

as Ashkenas ,de monaco,and francis(1998)recommend:”communicate,communicate,and then communicate some more….keeping the communication process going -an making it reach broadly and deeply throughout the organization-requires more than just sharing information bulletins”

However, true communication is complex to realize since the communication process faces numerous obstacles.

All forms of communication do not have the same effect. Communication and information flow can take a variety of forms: memos, e-mail, magazines,newsletters, videos, internet and face-to-face contact.

In order to manage an opposition, a communication plan should be done in order to pass down information to all levels in the organization; further to have a feedback system that investigates employee attitudes is important.

The integration process should be planned as thoroughly as possible to make sure that the questions from employees can be answered. During a merger or acquisition, employees will have an incredible longing for more information. Uncertainty will darken the workplace, and employee questions will seem never ending.

The employees have a need of knowing what the new structure of the firm will look like and get answers to their uncertainties as early as possible to prevent frustration and anxiety. To put together a transition team with the job to communicate to the organization, treat people fairly and with respect, the communication must be visible to the employees and clarify the employees’ role in the firm and communicate the message clearly to the employees (Daniel & Metcalf,2001).