Managing Merger Stress
Business college research garners national attention
By Paula Short
In today’s global economy, mergers and acquisitions are common as organizations seek to improve efficiencies, extend market share or access new products or technology. But many mergers and acquisitions fail entirely or don’t live up to expectations.
Dr. Theresa Floyd, a UM assistant professor in the College of Business, looked at employee responses as an indicator of underperformance post-merger. She and her fellow researchers focused on employee reactions to mergers and acquisitions to understand how the response influences the likely success of the post-merger organization.
Why are mergers so hard on employees? Floyd says the biggest stress comes from uncertainty.
“Employees don’t know whether they will keep their jobs, whether their job duties will be affected or whether their status in the organization will be affected,” she says. “The uncertainty is what creates the stress, because when you know what you’re facing, you can react and plan, but when you’re uncertain, you’re in a holding pattern.”
Her team studied an organizational merger between two large American consumer products companies, how they communicated with employees throughout the process and how employees’ merger reactions impacted their attachment to the company over the subsequent year.
The research revealed the impact of employees’ organizational identification and organizational attachment on the success of a merger. Organizational identification relates to how employees define themselves in regards to belonging to the organization. Organizational attachment relates to their psychological and behavioral involvement in the organization.
Floyd says the key to addressing employee uncertainty is frequent, effective communication.
“The worst thing a company can do is to fail to communicate,” says Floyd, who works in UM’s Department of Management and Marketing. “It seems like a no-brainer that you have to keep your employees in the loop to alleviate their uncertainty, but a number of factors can lead to poor communication.
“Maybe some information cannot be shared due to confidentiality issues during the deal-making process,” she says. “Maybe high-level leaders have communicated to their teams, but the communication is not trickling down effectively. Or maybe mid-level managers are feeling just as uncertain as their employees, so they are holing up in their offices instead of being available and communicative.”
The second-worst thing is to communicate ineffectively, Floyd’s team discovered during their study. The top-level management team thought they had communicated the benefits of the merger very well, but they didn’t realize that they hadn’t addressed many employee concerns.
Rather than focusing on organizationwide communications such as mass emails, videos or meetings, the research showed companies should provide personalized, frequent interactions with employees that provide the reassurance and certainty they seek in terms of both their feelings about the merger and their role in the new organization.
Floyd and her peer authors also recommend that post-merger activities should include individualized sessions for employees to resolve their own personal concerns.
After Floyd and her team completed the study, the shareholders and the board of a company they studied decided to let the CEO go, which led to an exodus of most of the top management team.
“I think this illustrates that communication is key and that effective communicators are able to put themselves into other peoples’ shoes,” she says. “Like I said, the top management team thought they had communicated very well, but employees and other stakeholders — including shareholders and the board — were not satisfied.”
With the volume of global mergers and acquisitions in the trillions annually, and competition intensifying each year, Floyd’s research is timely and vital for organizations looking to ensure they can retain a highly skilled workforce and create a fully integrated, successful organization post-merger. It also dovetails nicely with her overall UM research interests, which involve how psychological processes operate within social networks in business and environmental governance contexts, as well as social influence and the effects of organizational identification and attachment.
Originally published in the Journal of Applied Psychology, Floyd’s merger research publication was nominated for the Best Paper Award at the 2018 Academy of Management annual meeting.
In addition, a popular website that offers science-based information to help companies and individuals succeed recently featured Floyd’s research, and her team offered helpful insights on how organizations can anticipate and address the anxiety employees often experience post-merger.
Thrive Global, owned by the Huffington Post Media Group, published the article “Coping With Employees’ Post-Merger Uncertainty” to provide direction for businesses on how to best help employees navigate workplace transition following a merger. According to the website, a part of Thrive Global’s mission is to help companies and individuals mitigate burnout and enhance well-being with science-based information.
“It’s very fulfilling to write an academic paper that has been embraced outside of academia — in the real world of business,” Floyd says. “I’m glad our work offered some practical advice to managers and leaders that can help them communicate more effectively with their employees through times of stressful change.” •
