Identifying employee resistance during the threat of a merger: an analysis of employee...

This study assessed potential resistance to a proposed merger by examining how individual perceptions of organizational success, job security, and communication related to organizational commitment in the context of a pre-merger situation. Literature is used to support the position that highly

committed individuals are more likely to support change (i.e., the possible merger), while individuals with lower commitment to the organization are more likely to resist the pending merger. The analyses indicated that perceptions of organizational success, job security, and communication were positively related to organizational commitment. The findings of this study have a number of implications, leading to three specific recommendations for managers involved in mergers. First, organizations involved in mergers should share related information with staff as early in the process as possible. Second, organizations should call on experienced staff to promote the merger among less experienced staff. Third, organizations should assess staff perceptions and attitudes related to the merger as early as possible in the process to avert potential problems and promote staff buy-in.

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The 1980's and 1990's have been characterized as an era of organizational restructuring (Allen, Freeman, Reizenstein, & Rentz, 1995). This organizational restructuring has been manifested in many forms. Mergers and acquisitions have become particularly prevalent forms of restructuring (McEntire & Bentley, 1996). In fact, over 11,000 mergers and acquisitions were consummated in the United States during 1998 alone, with an estimated value of approximately $1.3 trillion (Stanwick, 2000). Achieving economies of scale, growth, and diversification are common objectives of mergers and acquisitions (Buono, Bowditch, & Lewis, 1985). Obtaining a global presence is also acknowledged as a motive for mergers or acquisitions (Marks & Mirvis, 1992).

Despite the strategic appeal of mergers and acquisitions, research indicates that between 55% and 70% of mergers and acquisitions failed to meet the anticipated purpose (Carleton, 1997). In fact, it has been suggested that the tombstones in Wall Street Journal announcing mergers or acquisitions are apt premonitions of what is to come for the requisite firms (Swaim, 1985). For obvious reasons, such as the exorbitant costs associated with these merger transactions, there is considerable interest in understanding the reasons for this distressing success rate.

Researchers are becoming more interested in the human or cultural aspects of mergers and acquisitions since explanations from strategic, organizational, and financial perspectives are falling short in providing adequate explanations for merger or acquisition failures (Marks & Mirvis, 1992; Pablo, 1994). Existing research, limited as it might be, consistently indicates that mergers have a major impact on organizational members. For example, Isabella (1990) acknowledged that mergers are an example of organizational events that precipitated a multitude of individual and organizational changes. The organizational changes accompanying mergers and acquisitions often entail some type of organizational restructuring for at least one of the involved organizations. This is important since work role transitions and job changes have been recognized as frequent consequences of organizational restructuring (Allen et al., 1995). Furthermore, employee attitudes such as organizational commitment, job satisfaction, and intent ion to turnover are often affected by a restructuring (Allen et al., 1995).

The Importance of Employee Perceptions and Attitudes in a Pre-Merger Context

Considering the impact of a merger on an organization's employees is an important facet of the merger process (Marks & Mirvis, 1992). Marks and Mirvis (1992) also contend that the phase prior to the actual merger can be stressful for employees. Schweiger and DeNisi (1991) provide empirical evidence that mergers affect employee attitudes throughout the entire merger process. Their results indicated significant decreases in job satisfaction, organizational commitment, and perceptions about the organization's trustworthiness between the pre-announcement attitude levels and the attitude levels assessed approximately two weeks following the merger announcement or pre-merger phase. Further, Schweiger and DeNisi's (1991) results indicated significant increases in stress, perceived uncertainty, and employee absenteeism for the same time periods.

Additional evidence supporting the need for assessing employee attitudes in a pre-merger situation can be found in an early study by Shirley (1973) that examined physician and employee attitudes toward hospital mergers. Shirley (1973) observed that individuals demonstrating higher levels of job satisfaction prior to the merger tended to demonstrate higher levels of agreement with a merger. In addition to these findings, Shirley's study also emphasized that individuals' attitudes toward mergers, to an extent, were a function of the individuals' perceptions of how the merger would impact or benefit them personally. Futhermore, Armenakis and Bedeian (1999) argue that employee attitudes can also indicate or serve as "markers for tracking the likelihood of employees enacting behaviors necessary for achieving desired changes" (p. 304). Extending this logic to the current situation, it is likely that employees with more positive attitudes, such as organizational commitment, will tend to be more supportive of the pr oposed merger, while those with less positive attitudes will be more likely to resist the proposed merger.

Thus, the primary purpose of this article is to build on the work of Schweiger and DeNisi (1991), Shirley (1973), and others by extending research related to the impact of a merger event on employees. Specifically, this study examines how employee perceptions regarding the future success of the organization, perceptions of their job security, and perceptions about how well the organization has communicated merger plans with them relates to their commitment to the organization during the pre-merger phase or threat of a possible merger. The pre-merger phase, for the purpose of this study, will be characterized as the period of time subsequent to the announcement of a potential merger and the consummation of the actual partnership.

Organizational Commitment as Resistance in the Pre-merger Phase

It appears that organizational commitment would be of interest within the context of a merger since some researchers have found evidence of a relationship, albeit limited, between organizational commitment and organizational adaptability (Angle & Perry, 1981). As suggested by the Theory of Reasoned Action (TRA) (Fishbein & Ajzen, 1975), attitudes are also important determinants of individuals' intentions and their ultimate behavior. Thus, ascertaining levels of individual organizational commitment during the premerger phase may be predictive of their intentions, and ultimately their behaviors to support or resist the merger. Further, it has been suggested that organizational commitment will, presumably, be undermined by experiences that fail to meet employee expectations (Buchanan, 1974).

Potential Predictors of Organizational Commitment

Given the possibility that individuals who are more committed to an organization are more likely to support, rather than resist a proposed merger, identifying factors that affect levels of individual commitment can provide useful information regarding sources of employee resistance. In a comprehensive review of organizational commitment literature, Reichers (1985) portrayed research on antecedents of commitment as varied and unclear. However, in a study intended to identify the types of organizational experiences (antecedents) that engender organizational commitment, Buchanan (1974) found several work experiences that affected commitment. Of particular interest are Buchanan's findings that commitment was influenced by the nature and quality of work experience.

Perceptions of Organizational Success- Steers (1977) acknowledged concurrence among researchers (e.g., Angle & Perry, 1981) regarding the notion of exchange between the organization and the individual as an antecedent to organizational commitment. Steers poignantly acknowledged that individuals come to organizations with certain basic needs and expectations. Consequently, the level of organizational commitment varied depending on whether or not the organization fulfilled those needs and met those expectations. While not explicitly stated, it seems intuitive that a basic need and expectation of many employees, especially in a pre-merger situation, is that of organizational perpetuity. If the organization does not remain viable, it will be unable to meet the needs and expectations of the employees regardless of how diverse those needs and expectations might be. These needs, at the most basic level, certainly include continued operation of the organization and continued employment. It also seems intuitive that a proposed merger event might heighten individual's interest in the potential viability of the organization. No prior studies were identified that examined the relationship between perceived organizational success and organizational commitment during the threat of a possible merger. However, it seems instructive, for exploratory purposes, to anticipate that organizational commitment will be higher among employees who feel that the organization will continue being successful than for employees who do not feel that the organization will continue being successful. These individuals who are more committed are also more likely to support the possible merger since they do not perceive that the future of the organization is threatened or jeopardized by the merger.

Perceptions of Job Security-In a study on organizational restructuring, Allen et al. (1995) found, in addition to other things, that organizational commitment and satisfaction with job security were significantly lower following a restructuring. This suggests that the relationship between job security and organizational commitment might be intensified during times of major change, such as those associated with a merger or acquisition. It has been suggested that organizational commitment enhances security through providing stability and a sense of belonging (Mowday, Porter, & Steers, 1982). Indeed, potential job loss appears to be a common concern during organizational changes (Isabella, 1990; Marks & Mirvis, 1992). Thus, considering perceived job security seems germane to this pre-merger study. Consistent with this notion, it is anticipated that employees who feel that no staffing cuts are forthcoming (i.e., their jobs are secure) will exhibit higher organizational commitment than employees who feel that sta ffing cuts are forthcoming. Again, individuals who perceive that their jobs are secure are more likely to remain committed to the organization, willing to support, rather than resist a possible merger.

Perceptions of Communication- Practitioners, in related publications, are prescriptively advised that communicating with employees regarding merger plans is a key element of successful consolidation (Walker, 1998). Indeed, researchers concur that there is often a great deal of uncertainty in a merger situation and that this uncertainty can lead to undesirable outcomes including lower organizational commitment (Schweiger & DeNisi, 1991). The uncertainty often associated with a merger can be decreased through concurrent sharing of related information (Cartwright & Cooper, 1993; Marks & Mirvis, 1992; Schweiger & DeNisi, 1991). Effective communication can also enhance retention of organizational members (Sinetar, 1981). As a result, it is anticipated that employees who feel that the organization has shared information with them regarding a potential merger will exhibit higher organizational commitment than employees who feel that this information has not been shared with them. Individuals who perceive that the o rganization has been open with them are also more likely to trust the organization, further intensifying their commitment and willingness to support organizational changes such as a proposed merger.

Data Collection, Assessment, and Analysis

Change Targets: An Overview of Study Participants

The data for this study were obtained from a health care provider that was discussing a possible merger with another health care provider at the time the questionnaire was administered. The value of collecting data from a health care provider is bolstered by the fact that the health care industry, in particular, has experienced an onslaught of market-driven mergers (Stepanovich & Uhrig, 1999). In addition, the healthcare industry has ranked in the top 10 in the number of mergers since 1989 (Yafchak, 2000). Employees of the health care provider had been informed of the potential merger a few months prior to the study through formal announcements at company meetings, written company communication, and informal interaction with company management. In anticipation of a possible merger, the company had also transferred, via a management contract, several of the management functions to the other organization. A total of 169 employees worked for the organization at the time the data were collected.

Questionnaires were distributed to a total of 169 employees during regularly scheduled staff meetings. Participation in this study was voluntary and anonymous. A brief overview of the purpose and layout of the survey was provided. Candidate participants were assured of the anonymity of their responses and were informed that only summary information would be presented to the organization. The questionnaire was completed by 95 individuals, yielding a participation rate of 56%.

All job categories, including management staff, were included in the analysis. The majority of participants were female (94%) which was substantially similar to the overall gender mix for the organization. Demographic information on participants' age was obtained through assignment in one of four different age categories. The majority of participants (55%) were over 40 years old with 36% ranging between 30 and 39 years old and 9% under the age of 30. Thirty-four percent of the participants were African-American/Black, 63% were White and 1% was Asian. Since participation in the study was anonymous, an analysis of demographic differences between participants and non-participants was not possible.

Measurement of Organizational Commitment and Employee Perceptions

Organizational Commitment. The 15-item Organizational Commitment Questionnaire (OCQ) (Mowday, Steers, & Porter, 1979) measured organizational commitment, the variable in these analyses used as a proxy for employee support or resistance of the potential merger. Respondents rated their level of agreement with each item based on a seven-point Likert-type scale with options ranging from "strongly disagree" = (1) to "strongly agree" = (7). After negatively worded items were reverse scored, an average of the 15 items was obtained. Higher average scores were indicative of higher organizational commitment. A sample item from the OCQ is: "I am proud to tell others I am apart of this organization." In this administration, the OCQ yielded an alpha reliability of .89.

Perceived Organizational Success- Perceptions about future organizational success was measured by obtaining an average of scores on two related items. Individuals were asked to indicate their level of agreement with these statements according to a five-point Likert-type scale ranging from "strongly disagree" (1) to "strongly agree" = (5). Higher average scores reflected higher perceptions that the organization would succeed. One of the items, for example, stated, "[organization name] will continue to be a successful organization." The alpha reliability for this measure was .74.

Perceived Job Security- Job security was similarly measured via average scores on two statements designed to assess job security. These items were modeled after similar items in the Job Diagnostic Survey (Hackman & Oldham, 1975). Responses were arranged on a five-point Likert-type scale identical to the success measure described above. A sample item is: "My current job with [organization name] is secure." Alpha reliability observed for this measure was .86.

Perceived Communication Regarding the Merger- Perceptions regarding whether or not information about the merger had been communicated was assessed via two related questionnaire items. Individuals were asked to indicate their level of agreement with these statements according to a five-point Likert-type scale ranging from "strongly disagree" (1) to "strongly agree" = (5). Higher average scores reflected higher perceptions that the organization had shared information with them regarding the potential merger. One of the items, for example, stated, "Information regarding the plans between [organization names] have been shared with me." Alpha reliability for this measure was .74.

Demographics- Several studies have found a significant positive relationship between tenure and organizational commitment (Angle & Perry, 1981; Buchanan, 1974; Leong, Furnham, & Cooper, 1996; Mowday et al., 1982). Tangential to this, Allen et al. (1995) suggested that organizational commitment of those employees who have experienced prior reorganizations would not be as affected. Therefore, job tenure was incorporated as a control variable in this study. Organizational tenure was measured according to self-report information provided in the demographic section of the survey. Individuals were asked to indicate how long they had worked for this organization on a Single-item by placing a check mark in the appropriate box. Selections were categorized from (a) less than one year, (b) from one to two years, (c) from two to five years, and (d) over five years. Buchanan (1974) suggested that organizational attitudes among employees reach a mature stage of non-growth by the fifth year of employment. As a result, year s of experience was capped at "over 5" for the purpose of this study.

Analysis Procedure

Relationships between tenure, employee perceptions, and organizational commitment were determined by entering the variables into a hierarchical regression model. Employee perceptions and tenure were treated as independent variables. Organizational commitment was treated as the dependent variable. This approach was utilized to determine if employee perceptions were predictive of individuals' organizational commitment.

Findings

The primary objective of this research was to expand prior research on the human implications of a merger by attempting to identify predictors of employee resistance to a merger. Specifically, this was accomplished by examining the extent to which employee perceptions of future success of the organization, job security, and communication about the merger related to their organizational commitment in a pre-merger context. It was argued that individual levels of organizational commitment were indicative of potential support or resistance by employees. While studies have acknowledged the impact of a merger on employees (Cartwright & Cooper 1993; Marks & Mirvis, 1992), few have examined the factors that may impinge on organizational commitment in a pre-merger context (e.g., Schweiger & DeNisi, 1991). Identifying predictors of commitment is important since individuals who are more committed to the organization may be more supportive, or less resistant, to a possible merger than individuals with lower levels of com mitment.

As anticipated, perceptions about an organization's continued success had a positive relationship with organizational commitment. In fact, perceived success had a stronger positive relationship with organizational commitment than any other variables analyzed. Thus, it does appear that perceptions about the organization's continued success are important when considering organizational commitment in a pre-merger situation. It is also likely that these individuals will be less resistant to the merger given their commitment to the organization and their perceptions that the organization will continue to be successful. These findings not only contribute to research regarding organizational commitment in a merger situation, but also provide interesting insight into research related to general antecedents of organizational commitment.

Since perceived organizational success and job security were significantly correlated (r=.33, p<.001), it was not surprising that job security was also significantly related to organizational commitment. While these findings are instructive, future studies could enhance these findings by examining how these variables interact to explain variation in organizational commitment. These findings might also suggest that perceived success is a more comprehensive umbrella encompassing other, more specific, antecedents of organizational commitment.

Individual perceptions about whether or not the organization communicated with them about the possible merger were also predictive of organizational commitment. As anticipated, individuals who perceived that the organization had communicated with them had comparatively higher levels of organizational commitment than those who did not perceive that the organization had communicated with them regarding the merger. These results contribute to the growing body of literature reinforcing the positive value of communicating with employees in the midst of organizational change initiatives.

Consistent with other research, (e.g., Angle & Perry, 1981; Buchanan, 1974), the results of this study identified a significant positive relationship between tenure and organizational commitment. This could, indeed, indicate that individuals who have been with the organization for longer periods of time have gained confidence in the organization and its ability to persevere in the midst of organizational changes. Thus, their commitment to the organization in the midst of this particular change is comparatively higher than their peers with less organizational tenure. Given this higher level of commitment, these individuals are more likely to support, or less likely to resist the pending merger than those individuals with less tenure and lower commitment to the organization.

As noted earlier, data on several demographic variables were collected. While the findings discussed to this point are insightful, it seemed appropriate to determine if the demographic variables revealed any significant differences in organizational commitment levels amongst participants. Significant differences, if identified, could provide additional information regarding potential sources of resistance to the proposed merger. This examination was accomplished through analyzing differences in average organizational commitment among the different levels of each demographic variable utilizing single-factor analysis of variance (ANOVA). The demographic variables considered for this analysis included job title (four levels), employment status (three levels), gender (two levels), age (four categorical levels) and race (five categories). The only significant differences noted were within the job title variable. An evaluation of the mean organizational commitment levels for each of the four job title categories r evealed that mean organizational commitment was significantly higher for the management/supervisor group than that of the unlicensed clinician group (mean difference = -1.22) and licensed clinician group (mean difference = -1.37). It is interesting that no other significant differences in mean organizational commitment were noted within any of the other demographic variables.

Management Implications and Strategies

The findings of this study have a number of important implications for managers or organizational leaders who may be involved in a merger or acquisition. These implications, when considered in the context of findings from other merger studies, lead to a number of recommendations or strategies for managers and leaders involved in a merger. These strategies may reduce employee resistance to mergers and, more importantly, the deleterious impact of these events on the staff of the effected organizations. The following list of implications and strategies, while far from exhaustive, reflects some of the most salient considerations supported by the findings of this study and other related literature.

Sharing Information Regarding the Merger- The importance, especially the positive effects, of communication on employees and their related attitudes have been well documented (e.g., Gopinath & Becker, 2000). Schweiger and DeNisi (1991) found that sharing information with employees early in the merger process through the form of realistic merger previews tended to stabilize levels of job satisfaction and uncertainty experienced by employees. The findings of the current study indicate that positive perceptions of communication regarding the merger are related to higher levels of organizational commitment. Thus, it appears that sharing information with employees about a pending merger can have a number of potential benefits for an organization. Specifically, sharing information with employees may increase their commitment to the organization and, as a result, reduce their resistance to the merger. This assertion is bolstered by Shirley's (1973) argument that individuals who are more satisfied with their jobs ma y be more willing to support a merger. Similarly, sharing information with employees in an effort to increase their knowledge about a merger may also reduce employee cynicism. Reichers, Wanous, & Austin (1997) found that cynicism related to organizational change was more common with hourly employees than managers, concluding that management is often more knowledgeable about the nature and rationale for impending changes. Cynicism, in turn, has been linked to lower levels of job satisfaction (Reichers et al., 1997) and commitment (Reichers et al., 1997; Wanous, Reichers, & Austin, 2000). While communicating with employees regarding anticipated changes related to mergers or acquisitions is particularly important (Buono et al., 1985), it should be acknowledged that the Security and Exchange Commission restricts the type of information that companies can disseminate regarding pending mergers (Buono & Bowditch, 1990).

Call on Experienced Staff to Promote the Merger- Findings of this study indicated that individuals with over five years of experience had higher levels of organizational commitment than individuals with less than five years of experience. Thus, organizations in the midst of a merger could possibly enhance the efficacy of the transition by calling on individuals with more job tenure to serve as change champions, promoting the merger transition amongst those with comparatively less job tenure. One effective way this could be achieved is through the creation of work teams or work groups, charged with specific responsibilities throughout the merger process. High tenured individuals could serve as facilitators for teams comprised of individuals with lower levels of tenure. Support for this approach can be found in Marks and Mirvis (1992) who suggest that creating teams and encouraging optimism in these teams about the future of the organization may address some of the challenges associated with mergers.

Consider Employee Perceptions/Attitudes as Early as Possible- The findings of this study suggest that employees who perceive that their jobs are secure, that the organizational will remain viable, and that the organization has communicated with them will be more committed to the organization in the midst of a merger. As a result, leaders or managers should undertake initiatives to assess employee perceptions and attitudes as early in the merger process as possible. As previously discussed, Marks and Mirvis (1992) noted that the pre-merger phase could be stressful for employees. This observation, coupled with Schweiger and DeNisi's (1991) findings that job satisfaction and commitment dropped following the announcement of a merger reinforce the value of considering employee attitudes and perceptions even prior to the consummation of the transaction. Knowledge of employee perceptions could guide leaders and managers in developing a merger plan that incorporates the concerns of staff in an effort to build suppor t for the merger. Additionally, information about employee perceptions could reveal staff misperceptions or incorrect information resulting from the grapevine or speculation, thus permitting leaders and managers to provide correct information as early as possible.

Ascertaining employee perceptions and attitudes could be accomplished in a variety of ways using rather simplistic methods. For example, an employee hotline could be established to allow employee to call a central number to voice any concerns or questions. The organization could then respond by distributing correspondence to staff addressing the specific concerns (when appropriate) or any trends that were identified. Surveys or questionnaires could also be distributed to staff to assess their attitudes and perceptions. These surveys/questionnaires could be comprised of a combination of existing quantitative measures and open-ended questions to allow staff to specifically describe their concerns or questions. This information, again, could be incorporated into the transition plans to promote buy-in and reduce staff resistance. Responses on initial surveys could also be used as a benchmark for future administrations of the survey to determine if organizational efforts to address staff concerns were effective. Given the level of uncertainty that exists during a merger, it would be advisable to assure that employee perceptions or attitudes were assessed in an explicitly anonymous manner.

Study Limitations

The small sample size could arguably be considered a weakness of this study. Indeed, the small sample size limited the use of more robust statistical procedures such as structural equations modeling (SEM) that may have provided more insight regarding the relationships between the variables of interest here. It is important to note, however, that field studies often include small samples. Cartwright and Cooper's (1989) study on success in joint ventures between information technology firms included a sample size of 68 participants, representing a 41 percent response rate.

Since data for this study were collected from a single organization, generalizing these findings beyond the context of this study should be made with caution. While most research on mergers makes the tacit assumption that all mergers are alike, it should be acknowledged that mergers could differ significantly depending on a multitude of factors. In fact, contrary to the norm in research related to mergers, Alexander, Halpern, and Lee (1996) did not adopt the theory that all mergers are alike, positing that the environmental circumstances or context of the merger could impact operational changes.

A final limitation worth noting is the use of self-report data. Researchers utilizing exclusively self-report data commonly acknowledge possible concerns with observed covariance in the study variables being attributed to common method variance (e.g., Parsons, Liden, O'Connor, & Nagao, 1991). Consequently, the results of this study may have been influenced by the use of a common method to collect the data. Future studies could be improved by collecting data from multiple sources.

Conclusion

By definition, individuals who are more committed to an organization are apt to be more supportive of the organization (Meyer, Paunonen, Gellatly, Goffin, & Jackson, 1989) and the initiatives undertaken by the organization. Consequently, highly committed individuals may be less likely to resist planned changes, such as a possible merger. As the analysis in this study revealed, individuals perceiving that the organization will remain successful, perceiving that their jobs are secure, and perceiving that the organization has communicated with them tend to be more committed to the organization. Organizations planning a merger or acquisition may improve individuals' commitment to the organization and illicit their support of a possible merger by focussing efforts on enhancing their perceptions related to the organization's success, their job security, and efforts to communicate with staff regarding the merger (Schweiger & DeNisi, 1991). Before an organization can embark on efforts to influence employee perceptio ns, it must assess employee perceptions and attitudes. Once identified, employee perceptions and concerns can be addressed in a variety of ways. Consistent with other research, the findings of this study suggest sharing of information regarding the merger with employees as soon in the process as possible. Additionally, employee perceptions may be influenced by calling upon experienced employees to serve as champions of change, promoting the merger plans with those who have comparatively lower levels of tenure.

Received on July 2, 2001. Final version was accepted on October, 19, 2001.

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The author would like to gratefully acknowledge comments from Dr. Sharon L. Oswald and Dr. Michael Kincaid on earlier versions of this manuscript Comments from anonymous reviewers are also gratefully acknowledged.

Mike Schraeder has been a graduate research assistant for the Thomas Walter Center for Technology Management at Auburn University since August 2000. His research interests include employee attitudes in the midst of strategic and technological changes. He recently completed his PhD. in management at Auburn University. In addition to the PhD., Mike has a Bachelor of Arts in Education (1989) from the University of Wyoming, an MBA from Auburn University-Montgomery (1994) and a Masters of Science degree in human resource management from Auburn University (2000).