qwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjkl

Mergers and Acquisitions: Effects on Employee Morale

10/2/2012

Gaurav Acharya

Content:

Abstract 3 Definition 4Introduction 5-6Literature review: 7- 13

a) The effects of merger and acquisition on employee engagementb) Prospective of merger and acquisition from employeec) Impact of merger and acquisition on employeed) Effect of mergers and acquisition on employeee) Human impact of mergerf) The impact of merger and acquisition on shareholder, employee and the

management g) The effects of an organizational merging on employeesh) The effects of merger and acquisitions on employee morali) Effects of low employee moralj) Ways to improve employee moral

Methodology 14Results 16-18Analysis 19-22Conclusion 23-24Bibliography 25

2

Abstract This paper examines the effect of corporate change mainly mergers and

acquisitions and effect of employee morale and productivity and their perception of job, measured as motivation and workplace retention of these employees. Specifically the effect of management has in open communication in an organization through times of corporate transformation on the employees. This investigation will be primarily through a review of existing literature relating to organizational conversion and its effect on internal stakeholders focusing on mergers and acquisition. Secondly empirical data gathered will consist of a sample survey of employees working in Ventura county and their perception on merger. The initial finding indicates a positive correlation.

3

Definition:

Mergers and acquisitions is an aspect of corporate strategy, corporate finance and

management dealing with buying, selling, dividing and combining of different companies

and similar entities that can help an enterprise grow rapidly in its sector or location.

An acquisition is the purchase of one business or company by another or other business

entity. Such purchase may be 100% or nearly 100% of a business. Acquisitions may be

divided into private and public acquisitions depending on the stock market and the

acquiring company.

There are many types of mergers and acquisitions like the US Legal highlights,

Dissolutions, Sale of majority of assets, mergers and consolidation, freeze out, Stock for

Assets, Stock for Stock, Tender offer, Triangular merger etc.

4

Introduction

In the world of business, mergers and acquisitions have become popular mainly

due to globalization, liberalization, technological developments and intensely competitive

business environment. During the recession of 2008 and 2009 there were many small

companies that merged with bigger giants. We mostly saw this in the financial sector as

many financial institution joined hands to restructure the business.

The joining of corporate entities has become a common occurrence in most large

scale business growth plans. It is important, presently to restructure and now it is one of

the best ways for growth and expansion. These mergers are generally anxious times for

employees in both management and the production sides. Change in corporate culture

can affect the performance of employees through the uncertainty in their position, lack of

allegiance to the new entity, new or additional criteria in their responsibility and

reclassification of their new job duties. One of the main reasons to merge is to acquire

market share.

In mergers and acquisitions there is a corporate strategy, finance and management

of dealing with buying, selling or collaboration of a company to create a new business.

One of the most difficult parts in merger and acquisition is to create a strategy in which

employees of both the companies can adapt. This is very difficult as there is a change in

the cultural organization.

One of the challenges that the companies face is keeping the employees who

survive the layoffs in the new company. The nature of layoffs and changing in attitude or

5

feeling towards the company from a prospect of an employee plays a vital role as to how

employees react.

This has a negative impact. According to Work Trends one of the data base that

is managed by Kenexa Research institute it stated that 13% of the United States

workforce were gone due to mergers and acquisitions and the highest impact was felt by

those who were India, as most of the jobs were outsourced.

6

Literature Review:

The effects of merger and acquisition on employee engagement

According to Jack W.Wiley “Close to 20% of workers in the banking and

financing industry were affected by mergers and acquisitions”. He further states that in

the past 10 years there was a higher level of mergers and acquisitions in the retail

industry. One of the questions that arise in his research was how does the experience of

being acquired by or merged with another company impact employee engagement and its

drivers? What I personally feel is that engagement generally shows a positive relation

between the team performance, customer satisfaction, customer loyalty, net income and

total shareholder return. However, in the case of employees it might be negative too.

They may not be able to adapt properly to other company’s culture. Imagine if we had to

sit in some other’s seat for one lecture. Can we perform better? I think we will not.

Although it is very hard for the employees to adapt the management thinks that the

increase in the level of employee engagement helps the corporation in increasing

effectiveness.

Prospective of mergers and acquisitions from employees

A research was conducted by the Kenexa Research institute which wanted to

know as to how the negative effects of M&A can be mitigated? The research in this field

was done by a database called the work trend and the employees were divided into two

segments. There was couple aof scenarios that was given to the employees. The

employees who were “employee centric” did better than the other group. The result

7

proved that it could be mitigated if the senior managers showed concern towards the

employees by communicating to them and informing them the steps that the company is

taking and also telling them as to how the employees are important to the organization.

The research conducted by Work Trends stated that merger and acquisition has a

negative impact on every aspect of how an employee looks at the organization. The

employee feels insecure and thinks of leaving the job. This could be stopped if company

leaders shows its staff the upcoming vision of the company, giving timely information

about the merger’s plan of action and give them the assurance as to how bright the future

looks of the company this will result in higher motivation and in performing better in

future.

Impact of merger on employees

According to the research conducted by Wayne, being merged and acquired has

a pervasive and negative impact on all the aspects of the employees and how they view

the organization. It shows the feeling that an employee has over the company and its

feelings about the future. These motivate employees in leaving their jobs and going to

some other company.

An article that was written in business week stated that managers also have a

huge impact, as the managers who are coming from a merged company tends to be less

productive than the organization without any recent merger and acquisition activity.

Effect of Merger and Acquisitions on Employees

When two companies join hands it is very common to see as to how mergers

affect employees this is mainly due to uncertainly of work that generally covers the

employees at the lower and middle level of management. Questions like which

8

company’s policy to be followed and what are the new rules and policies? What should

we do, what are the new strategy and its reward? These kinds of questions create much

confusion and chaos. This also increases fear in the employees of losing jobs. They

cannot cope up with such kinds of changes. Feeling of anxiety can bring in absenteeism

or employees quitting their jobs. This kind of changes affects the productivity and output

level. Ineffective communication future strains the communication level between

employers and the employees. Relocating at different office makes employees feel that

they have been left out.

Human impact of merger

During the time of merging human resource is mainly held liable for the failure of

merger and acquisition (Mercer 1989); The process has a severe impact on employees

like the psychological effect in which the employees are not given enough support.

During mergers employees are not informed as to what is happening within the

organization; this mainly leads to lack of communication in the organization and

employees fear of losing jobs. Employees are also at the verge of leaving the company as

they do not know as to what will happen to them. Cultural clash also takes place between

the employees of both of the organization.

Employees have different sets of working styles and when they both are put

together to work the productivity of both the groups is low. Also, there not enough

direction given during the time of merger to the employees as managers are themselves

not very clear as to what to tell to the workers.

When there is merger and acquisition there are sets of two employees for one

particular project and that is mainly an operating cost for the company so right after

9

mergers there is a series of layoffs and downsizing. From the prospect of the company

there are many benefits, such as a boost in the morale of other employees.

Downsizing proves that the remaining employees of the company do take care

however; this is not true as many employees leave the company after the announcement

of merging is made. A U.S study found that almost 50% of the executives in acquired

companies leave within one year, 75% within three years and 58% of managers within

five years (Walsh 1988). This data of Walsh gives me an idea that change in

organizational culture may not tend to be fruitful to the upper class of management.

The impact of merger and acquisition on shareholder, employee and the management

According to the article that was written by McDuffie for the University of

Pennsylvania the impact of Mergers and Acquisitions on top level of management may

actually involve a “clash of the egos”. When the two companies merge there is a variation

in the company culture for the managers. Managers are told to use the strategies which

they are not familiar with which mainly leads to confusion. This would create loss in

production.

Shareholders are mainly of two types when the company mergers. One is the

shareholder of the acquiring firm the other is the shareholder of the target firm. The

shareholder of the acquiring firm is benefitted the most during the time of merger as the

acquiring company generally pays more dividends. The benefit enjoyed by the

shareholder is of the company is the same as the harm they are into.

The Effects of Merger and Acquisition on Employee Morale

Employee morale can be significant if it is not recognized as significantly in

business, and if it is not handled effectively. During the time of merger and acquisition

10

there are mainly two groups of employees that are involved. The employees who come

from a different organizational culture faces a new challenge about uncertainty of the

future is concerning them. They are also in the feeling as whose job will go. There are

many consequences that the employees feel first and foremost there is the stress. Change

is very difficult for the workers if they are not directly involved in decision making

position. Workers jobs are impacted from this as the level of efficiency tend to decrease.

They might be given a chance to improve however, if the worker is not able to cope with

the new stress he or she may be terminated.

During the time of merger and acquisition there is a lot of difficulty that an

employee goes through, the first and foremost is the stress. Stress can have a huge impact

and according to Linda Pophal communication is a must during the time of merger as it

informs the employee as to where they are at this time. The management can tell the

employees as to what to expect in coming days so that can and how the changes will

affect them.

Another important factor that an employee faces is the fear of job loss. When

two companies come together they never have a similar culture in them which results in

cultural clash between the two parties. In this situation employees fear losing jobs and

this leads to a negative impact on the productivity or leads an employee to leave the job

and go work for some other company. In this particular phase it is very important for the

management team to provide opportunities to the employees and the management should

address the concerns that an employee has and try to create a new culture for both the

parties.

11

When employees are concerned with the job they are more competitive and this

also leads to cultural conflict. Although competition is good at the workplace however,

negative competition is not good as there might be violence at the work place. Employees

escalate conflict. In this time period, it is very important for the management team to alert

employees about negative competition and ensure that employees are given knowledge

about the consequences they might face.

Effects of Low employee morale

According to a survey that was done by Worldwork, it was found that during the

recession of 2008-2010 the level of employee engagement dropped 9 percent than the

previous year. A survey which was conducted showed that more than 40 percent of

employees felt that changes in pay and benefit over the past years had a negative impact.

An unhappy employee can cause trouble in the customer service industry; he or she might

be rude with them which would result in losing consumers. Low morale leads to turnover

in an economy. The cost of employees not showing to work and other factors are an

expensive factor to the company. This leads to decrease in the production of any kind of

goods and services and the company might go out of business. Going out of business

means employees again losing jobs and we would never want this to happen. Therefore,

to save a company from going out of business a manager should be more flexible with his

or her workers.

Ways to improve Employee Morale

When employees face low morale at work they are generally less productive

than they can be. In business employee’s morale plays an important role in production as

an energetic person is more productive than others. If there is a high morale in the

12

employees there is minimum wastages and maximum outcome. During M&A there is

low morale in the employees and this causes absenteeism in the employees which results

in low productivity. There are many ways to boost the morale of the employees like

improve the working conditions. Many employees are unhappy today mainly due to their

working environment that they have companies should give them facilities like work

from home or the company can also allow them to bring their kids to work with them

atleast once a month, this would help an employee feel that he or she is with her family

and this would help in higher production of work.

Breakdown in communication between manager and employees also affects the

morale of the employee. In today’s time many organization are transparent every person

in the business organization knows as to what is happening in their company this helps in

building a healthy relationship between the workers and this also helps in reducing the

communication gap. Mac Duffie on his research stated that to improve the moral of the

employees the companies should adapt to “employability” meaning that the companies

should provide trainings in numerous training that if the employee loses his job due to

downsizing or layoff he or she could get a new job.

Another way of improving employee morale is by rewarding the employees.

Rewarding not only means cash reward but an organization can implement numerous

plans like bring programs like employee of the month in which the winning employee has

a private parking space in the office this generally makes an employee proud of

themselves.

13

Methods

For the second part my research in mergers and acquisitions and its effect on employees

will consists of two parts. There will be a series of ten questions and those questions will

be divided into two parts.

The first half will have series of questions to the employees as to how their manager

treats them at work.

The second half will be on the employees as like how they are dealing with the problems?

How is the communication and how their work is all about.

14

Survey questions

1. My supervisor appreciates me.

2. My supervisor delivers on promises.

3. I trust my supervisor.

4. My supervisor shows too little interest in the feelings of subordinates

5. I have too much work to do it well.

6. Many of our rules and procedures make doing a good job difficult.

7. I have too much to do at work.

8. I sometimes feel my job is meaningless

9. I enjoy my coworkers

10. Communications are good within my work unit.

15

Results

This results that I have gathered are from the survey that I took from the employees who

were working in different areas in the field of business. These people to whom I handed

out the survey questions I met them at Bank of America in downtown Ventura. The

questions that I asked in the survey were fairly simple and it was easily understood by

many. There were ten questions asked and the score was ranging from 1 to 5 1 being the

lowest and 5 being the highest. From all the answers I could make out that many were

facing the circumstances at work. Couple of my questions focused on the treatment done

by the supervisors and then half of my questions were mainly work done by the

employees and their coworkers.

My first question was my supervisor appreciates me? Out of the total points I found the

mean to be 4.2 and the standard deviation to be 1.19.

The second question was my supervisor delivers on promises and out of the total the

mean was 3.9 and the standard deviation was 0.51.

The third question was I trust my supervisor and the mean was 3.8 and the standard

deviation was 0.83.

The forth question was my supervisor shows too little interest in the feelings of

subordinates and the mean for this questions was 3 and the standard deviation was 1.04

The fifth question was I have too much work to do it well and the mean was 3.3 and

standard deviation was 0.85

16

The sixth question was Many of our rules and procedures make doing a good job difficult

and the mean on this question was 3 and the standard deviation was 1.04

The seventh question was I have too much work to do and the mean was 2.7 and the

standard deviation was 1.09.

Question number eight was I sometimes feel my job is meaningless and the mean was 2.5

and the standard deviation was 1.60.

The ninth question was I enjoy my coworkers and the mean was 3.8 and standard

deviation was 1.26.

The tenth question was communications are good within my work unit or department and

the mean for this question was 4.3 and the standard deviation was 0.85.

17

Analysis

Aftermath of mergers and acquisitions impact the employees or the workers the

most. It is a well known fact that whenever there is a merger or an acquisition, there are

certain uncertainties within the employee of job satisfaction as well as their job security.

The unit of observation in this study from the individual worker is limited but will

provide us with empirical evidence on the effects on the morale of the employees.

Over all survey result clearly shows the dissatisfaction of employees towards their

immediate supervisor/management. This is the main problem when mergers and

acquisitions happen within the company. Employees are very tied up with their daily

work and its process. In the course of time they build the bond with their coworkers and

their management. When the new management takes over there will be certainly some

changes weather it is new managers or work process within the course of time and

employees don’t want change. This is the problem that creates tension between employee

and management and will result in low morale of an employee which will result in

decline in motivation towards work and trust towards their immediate

manager/management.

When people were asked about the work, I got the mixed feedback. Some said

work load went high where as some was saying that it remained same. But no one said

that the work load went low which isn’t surprising to me and there is a saying there is no

such things like free bread. In of the survey question it clearly showed the employee

thinking of their work load in the new management which is average to above average.

18

One of the survey questions was if the job people were doing was worth doing or not.

Surprisingly the outcome of the survey was disaster. 95% of the people were very

dissatisfied with the job that they were doing. When I asked them if it was the trend

before the merger some were hesitant to answer and those who came forward said that

this happened due to the change in the management.

When asked about the co-workers got the result what I was expecting. Most of

them were above average which means they were happy because they were bonded,

helped and supported each other at the transition period of the merger. Nobody is happy

with the management and their rules and the procedures which makes job difficult but at

least people are being supported and being helped by their subordinates.

During mergers and acquisitions it is important for managers and HR

professionals to be alert to signs of negative competition and to ensure that employees are

being kept informed about impacts on their jobs and their futures with the company.

While some competition is good, competition is not good when it creates tension and

negative conflict in the organization.

When asked about their supervisor if they show interest in the feelings of

subordinates most of them agreed to the statement. During the merger and acquisition

process, managers need to allow employees to express concerns about their future.

Managers and supervisors should be able to listen to current employees and address their

concerns. It is also important for organizations and their supervisors to recognize

opportunities for employees to get to know each other, to openly address concerns, and to

19

work together toward the creation of a new culture that will merge the best of both

worlds.

It must be noted that there is a remarkable difference between acquisitions and the

unification of two companies can play out very differently in different scenarios. The

employees of large company deal with such problem better than their corresponding

person, working in relatively smaller companies. That’s is why most employees agreed to

the statement that sometimes they feel that their job is meaningless

Communication is a key to success in every business. No matter how or when the

merger happens, communication within the organization must happen. After taking the

survey everyone has the mixed feeling about the communication within their work place.

Mergers and acquisitions offer different challenges and one of the challenges is keeping

those employees and notifies those employees their values and what they can bring as

valued employees to the new company. This can be done through proper communication

from upper level management. There is need for developing and executing effective

employee communications, particularly conveying the employees that how the transition

will impact organizational members. Communication between two merger companies as

well as all the employees should be clear, open to questions any time anywhere.

Mergers and accusations impacts more when there is a cultural shock if

companies involved are from two or more different countries.

Although mergers and acquisitions will lead to the company having better access to

capital for expansion of operations, it must be emphasized that the fates of employees lie

in the hand of the employers. There is a great need that the mergers and acquisition be

20

undertaken with due consideration of how best to manage and reduce loss of

employment.

There are indeed many factors that lead an employee of an organization to be

dissatisfied. There is a saying that the day when you don’t feel like working in the

company any more you should leave the company and look for some other job. Literature

review clearly supports my statement in this topic the first and foremost of my discussion

is the effect of mergers and acquisition on employee engagement. From the research that

was conducted by Jack W. Wiley it showed that organization culture plays an important

role in a person. It is indeed very difficult for a person to work in a totally new work

environment; a person’s performance will decrease.

Mergers also have a negative impact on all aspects of the employees and how they

view their organization. From the literature review I found that when two corporations

join hands it is very difficult for the employees to work as there is a new set of

organizational culture that they face. Employee tend to have different sorts of feelings

and numerous types of questions arises in their mind. From the study we can also see the

cultural clashes that take place within the organizations. Sometime communication is not

clear in the organization which makes an employee leave the job.

21

22

ConclusionToday mergers and acquisitions have become a part of industrial life. Over the last

decades around 10-15% of workers working in U.S have been impacted through this. The

workers value at beginning does not decline till the time there are no layoffs involved.

Mergers provide an opportunity to change. They can be used to create a stranger and

more resilient company. The study and researches has shown that human aspect of

mergers and acquisitions should be given equal importance like companies give financial

or other concerns.

A strategy for dealing with the culture of a corporation and human resource is very

important to the success of mergers and acquisitions, however, some issues are hardly

considered until some serious difficulties or problems arises.

Human resources of the company must stress on honesty, clarity and a feeling of

involvement by employees. Carefully designed integrations programs needs to deal with

communication, transitions, management, organizational structure and staffing process

and there should be development of common policies and practices. Senior leaders of the

companies should give its employees a confidence that there is future for them inside the

company this way the confidence level of the workers get high and the efficiency

increases. The decline in confidence can offset the employee-centric managers.

From all the survey that was being taken what I found out was that employee morale is

very important. All of my questions to find the hypothesis like the mean and the standard

deviation. One of the most important and common factor that I found was if the

supervisors are not good; meaning they do not appreciate an employee or do not

communicate with them and due to this morale of the employees go down.

23

Imagine yourself being in that situation what if your supervisor does not trust you? You

being the employee of that institution will never be motivated to work for him. Your

efficiency will decrease and eventually due to this factor either you will quit the job

yourself or you will be fired.

During mergers and acquisitions an employee feels that he or she has to much work to be

done which sometimes is true as during downsizing many layoffs takes place and work

will be divided in very few hands. In this time period insecurity of job within the

employees takes place. Employees are stressed out and to relief the stress they might start

consuming excessive alcohol or other harmful substances which are injurious to health.

In today’s economy all companies emphasize that their employees are their valuable

asset. The companies should always back up with material once they make these kinds of

statements. Companies to show gratitude towards their employees should provide them

with some training that if by any chance an employee looses their job they should have

some kind of training with them that helps them in finding better job.

For an employee to be motivated to work one of the important factors that the supervisor

should keep in mind is communication. Communication plays an important part in the

performance of an employee. Imagine that in the production line supervisor does not

communicate well with his or her team the product produced may not be adequate. To

have a healthy working environment a good and enjoyable workplace is very important.

24

Bibliography

Richards, L. (N/A). The effects of merger and acquisition on employee morale. Retrieved from http://smallbusiness.chron.com/effects-merger-acquisition-employee-morale-3196.html

McClure, B. (n.d.). Mergers and acquisitions: Introduction. Retrieved from http://www.investopedia.com/university/mergers

Robert. The high cost of low morale. Business management journal. Retrieved from http://www.roberts.edu/Academics/AcademicDividions/BusinessManagement/msl/Community/Journal/TheHighCostofLowMorale.html

Mergers and Acquisitions and impact on employees. (n.d.). Retrieved from Business Salary: http://business.salary.com/how-mergers-and-acquisitions-impact-employees

Impact of mergers on employees working conditions. (n.d.). Retrieved from Slide share: http://www.slideshare.net/mf23/impact-of-ma-on-employees-working-conditions

How do mergers and acquisitions affect employees? (n.d.). Retrieved from www.buzzale.com: http://www.buzzle.com/articles/how-do-mergers-and-acquisitions-affect-employees.html

The effect of mergers and acquisitions on employee. (n.d.). Retrieved from Kenexa research: http://www.kenexa.com/getattachment/309e96a3-261e-4a1lf-9254-6c6a359bf041/the-effect-of-mergers-and-acquisitions-on-employe.aspx

Employee morale. (n.d.). Retrieved from knowledge: http://knowledge.wharton.upenn.edu/article.cfm?articlid=1136

People management. (n.d.). Retrieved from irc.queensu.ca: http://irc.queensu.ca/gallery/1/cis-people-management.pdf

business mergers and employees. (n.d.). Retrieved from americas job exchange: http://www.americasjobexchange.com/employer/employer-articles/business-mergers-and-employees-articles62

25

26