4 What makes employees support or resist a merger or acquisition, and what makes them want to quit?

In Chapters 1 and 2 we explored different types of mergers and acquisitions, and their history as organizational events that have a reputation for cutting costs by making people redundant, closing sites, and making drastic changes to the people managing an organization. Chapter 2 also discussed how mergers and acquisitions have a reputation for failing for financial and economic reasons such as a national recession, a stock market crash, or changes in what is popular with consumers or investors. Although many mergers and acquisitions succeed, it is understandable that employees may be more aware of those that failed, such as through the news, personal experience, or anecdotal evidence from other people. This can explain why many employees have negative emotions and expectations about them (see Chapter 3). Although many mergers and acquisitions have positive outcomes, it is understandable that, as the review of the evidence in Chapter 3 showed, employees experience negative emotions such as feeling afraid, uncertain, betrayed, and distressed, and some react by withdrawing the amount of effort they put into the job or quitting. The negative emotions include feeling threatened, uncertain, and mistrustful, driven by fears about redundancies or drastic changes in their job role and working practices. This raises the question of what the consequences are for employees’ behaviour, as well as their support for or resistance against a merger or acquisition. This chapter fills the gap within the literature by providing a comprehensive, up-to-date review of the state of the evidence about how or when employees react to mergers or acquisitions by engaging in behaviours that support or resist an ongoing merger or acquisition. This chapter discusses evidence from the published literature about both positive and negative behavioural responses and attitudes that signify behavioural responses, such as intentions to quit among employees and managers, as well as the organizational or psychological factors that act as antecedents or correlates of the behavioural responses.

What makes employees support or resist a merger or acquisition?

One of the challenges that organizations may have when they are embarking on a merger or acquisition is persuading employees to support the idea. There are a number of published studies that collected data from employees or people involved with an organization that can tell us about what makes employees supportive or unsupportive of a merger or acquisition. The first implication of the evidence is that a leader’s style of leadership during a merger or acquisition matters in helping employees support it. Shearer et al. (2001) conducted an observational study and collected interview data from the management team of a newly merged organization within the chemical industry in the United States. The study found that Chief Executive Officers (CEOs) played a crucial role in cultivating supportive behaviours among employees. The factors that influenced the extent to which employees shared and embraced the CEO’s vision included: consistent organizational cultural values after the merger, structural changes, employment practices, and the CEO’s leadership style. Chapter 7 will discuss the importance of leaders further, helping you learn about the characteristics of a leadership style that sets out a vision that inspires employees to support that vision. A limitation of Shearer et al.’s study is that, in reality, a CEO might have very little influence over employees “below” the level of an executive board or senior management. Each of these leaders might have a different leadership style, and therefore research is needed to tell us the extent to which the average leadership style in the organization matters. A point related to leadership is that the trustworthiness of the people managing an organization matters, and it can be related to the extent to which employees are satisfied with their jobs or the organization they work for (Nikolaou et al., 2011). Nikandrou and Papalexandris (2007) conducted a cross-sectional study of 200 employees that went through mergers and acquisitions in Greece. The study found that employees were more likely to be supportive (e.g. loyal and compliant) when their level of satisfaction was high. The study also suggested that the extent to which employees perceive the people managing an organization as trustworthy helps in cultivating their support for the merger or acquisition. However, it is plausible that the statistical relationship between employees’ satisfaction and their supportiveness for a merger or acquisition depends on the type of satisfaction, and on factors that shape that satisfaction (e.g. job security, job role certainty). Additionally, job satisfaction after a merger or acquisition is not a static concept. It can change with time. Some studies suggest that employees’ satisfaction with their jobs consistently declines for a few years after a merger or acquisition has taken place (Amiot et al., 2006; Amiot et al., 2007; Guerrero, 2008; Peck et al., 2001), whereas some research suggests that job satisfaction slowly increases across about two years after (Gulliver et al., 2003). Employees’ support for a merger or acquisition might therefore rise or fall with time, depending on changes in their level of job satisfaction.

The second implication of the evidence is that the way that employees think of the two organizations involved as a good fit matters in cultivating employees’ support for a merger or acquisition. Gleibs, Täuber, Viki, and Giessner (2013) conducted a cross-sectional study from 316 students at higher education institutions that were merging in the Netherlands, as well as an experiment with 173 MBA students. The study found that the extent to which the people perceived the two organizations as a good fit was significantly related to their support for the merger. Gleibs et al. suggested that when people perceive two organizations as a good fit this increases their positive emotions about a merger, and that in turn increases their support for the merger. However, it is not clear from the evidence what factors influence employees’ perceptions of fit in different types of organizations and sectors (beyond higher education institutions and simulated organizations), therefore research is needed to examine how employees form stereotypes about the other organization involved in a merger or acquisition in a variety of real settings. It is also possible that negative emotions shape the way that employees show supportive behaviour towards a merger or acquisition. For example, Marmenout’s (2010) evidence based on an experiment involving 81 students in Switzerland suggests that the more uncertain people feel about a merger or acquisition, the less willing they are to collaborate about it. Chapter 5 will discuss the importance of group processes (of which group stereotyping is an example), and employees’ perceptions of “us versus them” in mergers and acquisitions. Evidence that some employees hold attitudes of “us versus them” when they are dealing with or thinking of employees from the partner organization involved in a merger or acquisition include Brown and Humphreys’ (2003) interviews with 75 employees in a merged organization in the UK. The study found that employees in each of the former organizations thought of the other employees as very different from themselves and relationships across the two sets of employees became competitive and discriminatory. The way that employees from the two partner organizations view each other could be influenced by group processes (see Chapter 5). Further empirical evidence should thus explore what variables shape employees’ perceptions of fit between organizations.

The third implication of the evidence is that the relative size or status of an organization, compared to the partner with which it is merging or acquiring (or by which it is being acquired), matters in cultivating support for a merger or acquisition. Giessner, Viki, Otten, Terry, and Täuber (2006) conducted two experiments involving 148 students in Austria and 129 students in the United Kingdom. The study suggests that when people are in an organization that has a high status they are more supportive of a merger in which the lower status organization’s values, practices, and other norms are assimilated by the high-status organization. Status in the study by Giessner et al. (2006) was conceptualized in terms of the organization’s reputation and economic factors. The study suggests that when people are in the lower-status organization among two organizations involved in a merger or an acquisition, they are more supportive of process that involves integration, equality, and transformation rather than assimilation. Empson’s (2001) observational and interview-based study of 92 employees in UK organizations involved in mergers and acquisitions found that the employees feared being “contaminated” by the bad reputation of the partner organization, suggesting that employees who consider their organization to be of higher status want to assimilate rather than integrate with the lower-status organization because of reputational concerns.

The literature on the power relations between the groups after the merger or the acquisitions confirm this proposition. Specifically, employees who perceive the two partner organizations as dissimilar and are in the low-status (i.e. low dominance) organization appear to be less likely to identify with the new organization after a merger or acquisition (van Knippenberg, van Knippenberg, Monden, & de Lima, 2002). van Knippenberg et al.’s research involved 373 and 122 employees in two merged public organizations. Therefore, employees in high- or low-status organizations can hold prejudiced views about the partner organization in a merger or acquisition. Employees can construe a merger or acquisition as not being conducive to growth but a deterioration of image and professionalism, together with the addition of “low-calibre people” (McEntire & Bentley, 1996; Weber & Camerer, 2003), which can explain why employees fear being associated with a seemingly “downmarket” organization and why they might avoid being “contaminated” (Empson, 2001). Instead of cooperating, relations between the two sets of employees can become quite competitive and discriminatory (Brown & Humphreys, 2003). A limitation of the study by Giessner et al.’s (2006) is that an experiment involving students probably does not capture enough of the complex factors facing employees in real organizations, including the notion of status based on a reputation with customers, investors, or the stock market. It is thus important for evidence to tell us about the factors that are the best determinants of an organization’s status from the perspective of employees in real organizations. A point related to status is an organization’s size. Wicker and Kauma (1974) conducted a cross-sectional study in the United States that involved collecting data from 233 church members after two local religious institutions became integrated. The study found that members of the smaller-sized church were less supportive of the integration compared to the members of the larger church, which suggests that employees in the smaller organization are less likely to support a merger or acquisition. A limitation of this study is that members of an institution might not be psychologically comparable to employees of an institution because, for the latter, pay and job security are at stake. Therefore, more evidence is needed to clarify the impact of an organization’s size on employees in mergers or acquisitions.

Other studies support the idea that an organization’s status is important, including Terry and Callan’s (1998) cross-sectional study of 1,104 hospital employees in Australia whose hospitals were about to merge. Terry and Callan defined status by taking into account factors such as prestige and job opportunities. The study found that employees in the lower-status hospital showed stronger signs of favouring their own hospital, and the bias was related to the employees’ perceptions of the merger as a threatening event. Similarly, Amiot et al. (2007) found, in a cross-sectional study conducted three and 24 months after a merger, that employees in the low-status organization showed more signs of ingroup bias than employees in the high-status organization. A limitation of these studies is that they assume that there is consensus among employees about which of two organizations has higher status. Different employees might use different facts (or illusions) to define the status of their organization, e.g. the physical size, market share, financial productivity, length of time trading, popularity in a niche sense (e.g. winning industry awards), how ethical or green the organization is, and so on. Some employees might use one of these things to define status, whereas other employees will use a combination of two or more things to define status. It is also plausible that some employees define status in terms of the competence of the workforce in each organization, but perceptions of competence might be biased by group processes of “us versus them.” Weber and Camerer’s (2003) experimental study of students at two universities in the United States suggests that people blame the members of the merger or acquisition partner, and they blame difficulties on a lack of competence on the latter. Therefore, the relative status of two organizations can often be ambiguous and open to the subjective interpretations of employees which, in turn, can be shaped or made complex by a variety of group processes (see Chapter 5).

The fourth implication of the evidence is that getting employees directly involved with helping an organization transition into a merger or acquisition cultivates their support for it. Basinger and Peterson (2008) conducted interviews of 20 employees in a merged public sector organization within the United States. The study found that employees who were directly involved in the merger or transition process embraced the change and were accepting of the merger. The study found that employees who were not involved in the merger process felt that the change was unnecessary and they disagreed with it. A limitation of this study is that the data are few and qualitative, which means that it cannot tell us about the size or statistical significance of the differences between employees who are and are not involved with the transition process. A related point is that getting employees to trust and become committed to preserving the relationship between the two organizations cultivates their support for a merger or acquisition (Wittmann, Hunt, & Arnett, 2009). It is plausible that employees’ feelings of trust influence the way that they interact with and evaluate the relationship with the partner organization (Dirks & Ferrin, 2001). Wittmann et al.’s study involved 47 members of the Association of Strategic Alliance Professionals (ASAP) from several countries, but their views about what works in cultivating employees’ support should be corroborated by testing the views by collecting data from employees.

In summary, factors that shape employees’ support for a merger or acquisition are:

• A CEO with a visionary leadership style.
• Having trustworthy leaders in the organization.
• Having a good fit between two organizations.
• Being the higher status or bigger organization.
• Being directly involved in the transition process.
• Trusting the merger or acquisition process.

On the other hand, employees can respond to a merger or acquisition by resisting it or engaging in a variety of actions or thoughts that demonstrate their resistance such as protesting or neglecting their duties (Nikandrou & Papalexandris, 2007), deliberately withholding valuable information and refusing collaboration with other employees (Empson, 2001), being reluctant to learn from other employees (Apfelthaler, Muller, & Rehder, 2002), behaving in a hostile way, or having cultural clashes or conflicts (Goddard & Palmer, 2010; Vaara, Sarala, Stahl, & Björkman, 2012). Conflict can arise about a wide range of issues such as the timing of the reorganization to the way that changes are communicated or implemented (Quah & Young, 2005). Employees’ resistance behaviours after a merger or acquisition, such as being reluctant to cooperate, can be harmful to the organization because knowledge transfer is an important way that integration can happen (Vaara et al., 2012). Table 4.1 summarises some of the evidence about resistant behaviours among employees and factors that contribute to them:

A limitation of some of these studies is that they do not necessarily tell us the extent to which employees who feel resistant towards a merger or acquisition express their resistance in behavioural terms and, if so, what the behaviours involve. There is a hint from the evidence that one type of resistance involves employees refusing to learn from other employees in the partner organization and refusing to give away information that the latter need (e.g. McEntire & Bentley, 1996; Apfelthaler et al., 2002). For example, Empson’s (2001) observational and interview-based study of 92 employees in UK organizations involved in mergers and acquisitions found that the employees dismissed the relevance of the knowledge of employees from the partner organization. Similarly, Chua and Goh’s (2009) observational and interview study of 28 employees within a research and development department of a merged organization in Singapore found that employees in the organization that was engaging in the acquisition were dismissive of the relevance of employees’ knowledge within the acquired organization. They made almost no attempt to study the latter’s knowledge base. A cross-sectional study of 123 employees in Finland found that mistrust, organizational politics, and conflicting views correlates negatively with knowledge transfer (Vaara et al., 2012). Resistance that takes the form of refusing to learn from employees in the partner organization could be symptomatic of the deliberate reduction by employees in their productivity, which is said to occur after mergers or acquisitions (Cording, Harrison, Hoskisson, & Jonsen, 2014; Chung, Du, & Choi, 2014), as well as the rise in conflict-related behaviour and an unwillingness to collaborate that is observed among some employees after mergers or acquisitions (Marmenout, 2010). Employees’ use of knowledge as a point of resistance is thus common after a merger or acquisition, and this is something that Chapter 8 will explore in further detail.

Another point of resistance could be in the sense of employees trying to keep the old organization’s culture and refusing to accept cultural changes after a merger or acquisition. Sarala’s (2010) study about employees who had experienced acquisitions found that the more employees engaged in cultural preservation (be they within the acquiring or the acquired organization), the more conflict there was after the acquisition. Cultural preservation could be symptomatic of a wider problem in which employees persist in maintaining their old organization’s values or identity. Ailon-Souday and Kunda’s (2003) study of a merger involving US and Israeli companies conducted interviews with employees who suggested that they were persistently trying to maintain a boundary that demarcated the two organizations and trying to assert their old organization’s authority. Those boundaries might have involved or been made worse by employees drawing on country-based categorisation. Tienari, Søderberg, Holgersson, and Vaara’s (2005) interviews of 40 employees in merged organizations from Denmark, Sweden, and Finland found that employees constructed ideas of “us” and “them” using national categories. Viewing two organizations as culturally dissimilar is something that employees can harness as a political tool with which to resist changes during a merger or acquisition, as Vaara’s (2000) semi-structured interviews with 200 employees in two financial companies from Finland and Sweden suggested. In Sarala’s study, conflict included employees experiencing or showing difficulties with cooperation, having differences in opinion, and feeling mistrust towards other employees. Future research should thus evaluate the relative importance of different types of psychological resistance in predicting, for example, grievances, conflict, or intentions to quit. Future research should also clarify whether organizations that engage in a high degree of consultation before a merger or acquisition have employees whose level of resistance after a merger or acquisition is high or low. Nonetheless, we can summarise the factors that contribute to employees’ resistance as follows:

• The two organizations are trying to integrate each other to a great extent.
• The two organizations have very different cultures or reputations.
• Employees are not kept well informed about the merger or acquisition.
• Not seeing learning between the two organizations as necessary.
• Being a manager.
• Not feeling a sense of belonging within the new organization.
• Holding persistent stereotypes about the two organizations.
• Feeling that a merger or acquisition will undermine an organization’s history.

Resistance and low support for a merger or acquisition could contribute to employees intending to leave an organization by going on the job market in the hope of getting employed elsewhere. The next section will discuss factors that contribute to employees’ intentions to quit after a merger or acquisition.

Why employees want to quit after a merger or acquisition

The topic of employees quitting (engaging in turnover) or intending to quit after a merger or acquisition is one which is popular within the published literature. The first implication is that employees are more likely to quit after a merger or acquisition if they feel psychologically disengaged and if they feel that the organization has broken a psychological contract with them (that is, the employees’ explicit or tacit expectations). Rafferty and Restubog’s (2010) longitudinal study of 155 employees in the Philippines found that the more employees felt psychologically disengaged the more they had the intention to quit, although the concept of “psychological engagement” might co-vary so closely with intentions to quit in a way that creates statistical multi-collinearity problems. Some factors make employees more likely to psychologically distance themselves or feel disengaged from an organization (Murray, Derrick, Leder, & Holmes, 2008; Murray, Holmes, & Collins, 2006). One of the things that might make employees feel psychologically disengaged from an organization is feeling the merger or acquisition has led to a breach in the promises that the organization made to the employee explicitly or tacitly. Evidence suggests that employees can view a merger or acquisition as a betrayal (Brown & Humphreys, 2003) and that the new organization has failed to fulfil its promises (Linde & Schalk, 2008), and this could make employees feel that they have to engage in compensatory actions to restore a sense of justice (Mahony & Klass, 2008; Darley & Pittman, 2003). The problem might be worse among organizations that do not deliver promises to employees. Cording et al.’s (2014) study of 129 employees that went through a merger or acquisition found that employee productivity was higher among organizations that had under-promised relative to those that over-promised. Organizations that had more consistency between their values and their practices were also more strongly associated with employee productivity. Employees sometimes react to broken promises by intending to quit the organization (Rafferty & Restubog, 2010). Bellou (2008) found, in a cross-sectional study in Greece, that the extent to which restaurant employees felt that their psychological contract had been breached after an acquisition had an impact on their intentions to move jobs as well as their civic virtue behaviour (e.g. doing favours or volunteering within the organization). It is plausible that employees’ expectations about the psychological contract in the future are also important. A change within the organization can make employees feel uncertain about its future actions and it can make employees fear that their job responsibilities or performance evaluations will change (Michela & Vena, 2012). A limitation with the study by Bellou (2008) is that the relevance of the psychological contract as a predictor of wanting to quit might depend on other factors, for example how dependent an employee is on the job. Some employees might have a high level of dependence on an organization and, for such employees, what might matter is not the psychological contract as a whole, but their level of certainty or uncertainty about job security after the merger or acquisition. Michela and Vena (2012) found that some employees are more psychologically dependent on an organization than others and that, for highly dependent employees, their level of uncertainty predicted their level of commitment to the organization. In short, we can conclude that employees who feel less psychologically engaged with an organization are more likely to want to quit after a merger or acquisition, and the reason why employees feel disengaged is believing that the organization has broken a psychological contract or feeling vulnerable or uncertain about one’s job security.

A second implication is that – on average – employees are more likely to want to quit if a merger or acquisition presents few or no career development opportunities. Chung et al. (2014) conducted a study of 174 employees in a merged organization in China and found that the more the organization provided employees with training opportunities and job security, the higher was task performance after the merger. Likewise, evidence from 200 employees in Greece suggests that training and development practices are positively associated with the effectiveness and performance of an organization, such as in terms of employee productivity, the quality of customer service and innovation (Nikandrou & Papalexandris, 2007). Mergers and acquisitions can create a lot of ambiguity and volatility about the scope of an employee’s work and his or her future within the organization (Marmenout, 2010). The purpose of a merger or acquisition is often unclear to employees (Eriksson & Sundgren, 2005), and there are questions about whether organizations give employees enough information about a prospective merger or acquisition (Rafferty & Restubog, 2010). Searle and Ball (2004) interviewed six employees who were going through an acquisition and the results suggest that employees felt uncertain, which made them vigilant about information they received about the acquisition, and they felt powerlessness, which made them engage in gossip about poor treatment by managers. Not having enough information can prompt employees to want to quit after the merger or acquisition is announced (Schweiger & Denisi, 1991), or even some years after (Hambrick & Cannella, 1993). This could be because employees have fears about the impact of a merger or acquisition on their careers and personal experiences at work, such as what their job entails, what promotional opportunities exist, how much freedom they have to make decisions within the job, and how much they can progress in their career. Employees can choose to look for other career options outside the merged organization because the merger or acquisition threatens their job role clarity, job autonomy, or status within the organization (Hambrick & Cannella, 1993; Lubatkin, Schweiger, & Weber, 1999; Krug & Nigh, 2001; Li, 2008). Fried et al.’s (1996) longitudinal study of 91 employees in an acquired Filipino company found that employees who do not feel that the merger or acquisition gives them career development opportunities are likely to withdraw from work and develop the intentions to quit the organization. However, there might be variation among employees in what they count as sufficient career development opportunities and the relevance of this variable could depend on what employees feel they were promised, or what they feel they can reasonably expect. One of the sources of information that employees use to gauge the career opportunities on offers appears to be the kind of language used by either of the organizations involved in the merger or acquisition. Piekkari et al. (2005) conducted unstructured interviews with eight employees in a financial organization that was formed after a merger between a Finnish and a Swedish organization. The study found that the kind of corporate language used by either of the merging organizations had implications for employees in terms of their career path and professional requirements. This created tension which seemed to have influenced some employees’ intentions to quit. A limitation of this study is the sample size, and ambiguity in whether the eight employees’ experiences were representative of the experiences of other employees.

A third implication is that employees are more likely to want to quit if they feel that the merger or acquisition deprives them of benefits that employees in the other organization have, and if they feel that there is unfairness between the two organizations in the way that job cuts or other negative things are distributed. Lee et al. (2013) conducted a cross-sectional survey of 271 employees in a merged organization in South Korea. They found that employees who felt more deprived than other employees had greater intentions to quit the organization. A limitation of this study is that the sources of deprivation can vary among employees and therefore there might not be a way of defining relative deprivation after a merger or acquisition in a way that is generalizable. For example, some employees might compare the parental leave allowance within the two organizations, whereas employees who are not intending to be parents might not feel deprived by the parental leave policy. Related to the idea of perceived deprivation is the idea that employees who perceive unfairness in the way that an organization is distributing punitive measures, such as job cuts, are more likely to want to quit. Fried et al. also found that the more employees felt that employee termination procedures were unfair, the more likely they were to psychologically withdraw from work, but clarity is needed about whether these results apply to organizations where redundancy procedures are governed by national laws.

A fourth implication is that the more employees feel a sense of identification (belonging or loyalty) with the organization after it has embarked on a merger or acquisition the less likely they are to want to quit. Feelings of belonging can play an important role in helping employees cope with a merger or acquisition, perhaps because it tallies with seeking support from other employees. Terry, Callan, and Sartori’s (1996) cross-sectional study of 662 employees in a merged airline in Australia found that social support was among the strategies that the employees used to cope. Makri and Hantzi (2012) conducted a cross-sectional survey of 140 employees in Greece and found that the more strongly employees felt they identify with the organization after a merger or acquisition, the less likely they were to intend to quit. A study by van Dick et al. (2004) in Germany also found similar results. The importance of identity is something that studies in other areas of the field have found. Lipponen, Olkkonen, and Moilanen’s (2004) cross-sectional study of 189 employees in Finland found that developing a psychological bond or identity with the new organization (after a merger or acquisition) has a positive impact on the extent to which employees behave in a way that benefits the organization, even if it is beyond their job role. Similarly, other evidence from 459 employees in a merged organization in Germany suggests that identification is positively related with the rate at which employees engage in organizational citizenship behaviours as evidence (van Dick et al., 2004). Another study by Smith, da Cunha, Giangreco, Vasilaki, and Carugat (2013) interviewed employees in a merged organization (comprising of organizations from Finland and Sweden). The study found that some employees did not develop a sense of shared fate and similarity with the employees of the merging organization. The study suggested that the more the employees from the two sets of organizations interacted, the more they found reasons to view each other as different. Employees can perceive such differentiation by persistently challenging the partner organization’s work procedures and decisions (Colman & Lunnan, 2011), being dismissive of them, and imposing their own solutions (Chua & Goh, 2009; McEntire & Bentley, 1996). A limitation of these studies is that they do not tell us about what causes employees to develop a sense of identification with an organization after a merger or acquisition, and whether some causes are more important than others. A sense of belonging with an organization might be less likely among employees who feel uncertain about what is going to happen to their jobs or job roles after the merger or acquisition, and therefore uncertainty might make employees want to quit. Marmenout (2010) conducted an experiment among 81 students in Switzerland using hypothetical situations and the results showed that the more the perceived uncertainty about the situation, the greater are the intentions to leave and the lower the willingness to collaborate. A limitation of this study is the fact that the experiment was scenario-based and it did not involve employees, therefore, additional evidence is needed to clarify the correlation between uncertainty and quitting intentions after a merger or acquisition.

In summary, factors that increase employees’ intentions to quit an organization after a merger or acquisition include:

• Feeling psychologically disengaged.
• Perceiving a breach in their psychological contract.
• Feeling dependent on the organization, yet uncertain about job security.
• Few or no opportunities to develop their careers.
• Unfairness in what employees in the two organizations have.
• Unfairness in job cuts or redundancies.
• Low feelings of belonging to the organization.

This raises questions about what makes employees want to switch jobs more generally (in any organization), and what this can tell us about why mergers or acquisitions inspire employees to want to quit. A meta-analysis of 316 studies about employee voluntary turnover by Rubenstein, Eberly, Lee, and Mitchell (2017) found that the antecedents of employee turnover include an employees’ personality, aspects of the job, whether an employee has traditional attitudes about work (e.g. believing that workers should remain in the same organization for as long as possible), the external job market, context, and having an attitude of withdrawing from the organization. In terms of personality characteristics that predict turnover, Rubenstein et al.’s meta-analysis found that employees who have an external locus of control (e.g. blaming experiences on other people) and who are more externally motivated are more likely to quit an organization. That is compared to those with an internal locus of control (e.g. blaming themselves for experiences) who, when they experience work-related stress, try to overcome the obstacles and stay in the organization. In terms of context, Rubenstein et al. found that factors that were important in contributing to employees’ decisions to quit an organization were: a negative working climate, stressful experiences within the organization, and poor support from the organization. These superseded positive aspects such as the reputation benefits that employees can get from working in a prestigious organization.

Rubenstein et al.’s (2017) meta-analysis also found that other strong predictors of employee turnover were job satisfaction and commitment to the organization. Feeling committed to an organization is one of the best predictors of voluntary employee turnover, and such commitment can be shaped by a variety of factors. Porter, Steers, Mowday, and Boulian (1974) suggest that organizational commitment is related to how strongly employees identify with the organization, how much they believe in and accept goals and values, and how willing they are to expend effort in remaining within the organization. Evidence suggests that employees can fail to develop a sense of “we” within an organization after a merger or acquisition (van Knippenberg et al., 2002). One leading perspective about what constitutes commitment is Meyer and Allen’s (1991) model, which postulates that there are three components of organizational commitment: affective, continuance, and normative commitment, rooted in the multidimensional. Affective commitment is an employee’s emotional attachment to, sense of belonging with, and involvement in the organization. Continuance commitment is based on the costs that an employee thinks are associated with leaving an organization, and normative commitment is about feeling obligated to remain in the organization. Meyer & Allen’s model suggests affective commitment correlates positively with normative commitment, but negatively with continuance commitment. This means that the more employees feel emotionally connected to an organization, the more they also tend to feel obliged or bound to stay within the organization. The sense of fear and uncertainty about the merger or the acquisition leads to decreases in organizational commitment (Schweiger & Denisi, 1991) and Koch and Steers (1976) suggest that organizational commitment is a bigger predictor of quitting intentions than job satisfaction (Steers, 1975). Employees who are not committed to the organization are likely to underperform, quit the job, not show up, be late at work, or experience stress and work-family conflicts (Steers, 1977; Mathieu & Zajac, 1990; Meyer, Stanley, Herscovitch, & Topolnytsky, 2002; Cohen & Freund, 2005). Conversely, evidence suggests that the more employees have affective commitment towards the organization, the more they engage in voluntary behaviours such as organizational citizenship and behaviours that help an organization but are not part of their job role (Williams & Anderson, 1991). As well as feelings of commitment being an important predictor of employees’ intentions to quit, job satisfaction was found by meta-analysis to be an important predictor of employee turnover (Boswell, Boudreau, & Tichy, 2005; Judge, 1993). Literature about mergers and acquisitions supports the idea that job satisfaction is related to not just quitting intentions but also counterproductive behaviours (Tett & Meyer, 1993).

Rubenstein et al.’s (2017) meta-analysis is important in providing an overview of the psychology of employees’ voluntary turnover, but it raises the question of whether mergers or acquisitions inspire more employees to want to quit, and whether this is because they make employees more pessimistic than they usually would be. The announcement of a merger or acquisition can cause an abrupt shift in how employees view their work and the organization (Schweiger & Denisi, 1991). Many employees feel uncertainty and cynicism (see Chapter 3) about a merger or acquisition, and we suggest that this can make employees more pessimistic about whether stressors within the organization will change. Evidence shows that employees tend to have low levels of job satisfaction after a merger or acquisition, and this persists months into the integration stage (Schweiger & Denisi, 1991), and even two (Amiot et al., 2007) or three years (Guerrero, 2008) after the implementation of merger- or acquisition-related changes. This could be because a merger or acquisition creates a real or perceived climate that prompts employees to go back on the job market. Negative expectations about mergers or acquisitions as prone to failure (see Chapter 2) could make employees less likely to view their jobs in positive terms and more likely to focus on signs that negative changes are going to happen such as job cuts or relocation. For example, employees can develop the idea that a merger or acquisition will result in being asked to relocate to another region inside or outside the country based on knowledge about relocations in other cases of mergers or acquisitions. Relocation can be quite common, with a case study by Stovel and Savage (2006) in the United Kingdom showing that there was an increase in the number of employees who were geographically transferred at time points that coincided with a merger or acquisition. Stovel & Savage examined historical records about the bank Lloyds, its mergers or acquisitions, and the work histories of 2,500 employees. During a merger or acquisition, employees might also be more likely to experience unfamiliar stressors (e.g. redundancy consultations, a new management team), and this could increase their stress levels, making their overall attitudes about the working environment more unpleasant and their expectations of positive prospects more pessimistic. Research should clarify why withdrawal behaviour and turnover intentions are common behavioural coping devices that employees use after mergers or acquisitions (Fried et al., 1996). A meta-analysis replicating that done by Rubenstein et al. (2017) can tell us more about why mergers or acquisitions inspire so many employees to quit an organization. Such research should clarify the impact of different types of mergers or acquisitions (see Chapter 1) and employees’ personal expectations about whether mergers or acquisitions are likely to succeed or fail.

Organizations suffer when employees leave because the costs include the recruitment, selection, and training of replacement employees (Allen, Bryant, & Vardaman, 2010). Whereas some authors suggest that voluntary staff turnover has positive consequences such as “value creation” within the new organization (Papadakis, 2005), other evidence points to negative consequences. Cording and colleagues (2008) found that employee turnover had a negative effect on the financial performance of an organization after an acquisition. Organizations also suffer when employees leave because this means that they have lost the abilities, expertise, and experience of people whose tacit knowledge about the organization cannot be easily replaced, and the losses in social capital or reputation could lead to low morale among the remaining employees (Dess & Shaw, 2001; McElroy, Morrow, & Rude, 2001; Felps et al., 2009). As well as employees’ quitting intentions being notable as a frequent topic within the merger and acquisition literature, managers’ intentions to quit are also frequently researched. The risk of departures by top management employees is said to be even higher than that of other employees (Hambrick & Cannella, 1993). The next section will discuss factors that contribute to managers’ intentions to quit after a merger or acquisition, and other types of behavioural responses among managers.

What makes managers want to quit and what are other common behaviours?

Voluntary turnover is a common escape route for not just many employees after a merger or acquisition, but also for many managers (Walsh & Kosnik, 1993). In a study examining the rate of quitting by managers within top management teams by Hambrick & Cannella, 1993), the results showed that 67% of the executives within the acquired organization quit within four years. Another study by Walsh (1988) found an average management turnover rate of 59% across five years in various types of mergers or acquisitions. Walsh found that market extension acquisitions have the highest turnover rates; a market acquisition involves organizations in similar industries but selling in different geographic markets (Walsh, 1988). In such acquisitions, the rate of quitting by top management is 37% in year one and rises up to 64% in year five (Walsh, 1988). The first implication from the evidence is therefore that some managers quit, and that the rate of quitting rises over five years. However, it is important for further evidence to clarify whether the rates of management turnover over five years are equivalent or higher than they would be without the merger or acquisition.

A related implication is evidence that the greater the number of managers who quit an organization during or after a merger or acquisition, the more negative the outcomes are for the merged or acquired/acquiring organization. Ellis, Reus, and Lamont (2009) conducted a longitudinal survey of 62 employees in the United States, and the study suggested that retaining managers significantly predicted the amount of value that was created during and after a merger or acquisition. Another study by Kiessling et al. (2012) collected cross-sectional data from 92 employees in managerial positions, and the study suggests that retaining managers is positively correlated with the performance of an organization after a merger or acquisition. Similarly, 29 case studies about mergers and acquisitions by Butler, Perryman, and Ranft (2012) found that the more senior managers quit within an acquired organization, the worse is the organization’s performance after the acquisition. The problem with these studies, however, is that they do not compare the impact of managers quitting alongside the impact of non-managers quitting. It could therefore be that any kind of staff turnover is negatively correlated with good outcomes after a merger or acquisition and, therefore, that retaining managers is no more important than retaining other types of staff. The impact of managers quitting might also be neutral in some cases, with a meta-analysis by Butler et al. (2012) finding that there is a negative or neutral relationship between management turnover rates and financial performance measures such as return on equity or assets.

The second implication is that cultural differences between organizations, and removing managerial autonomy, can contribute to managers quitting during or after a merger or acquisition (Lubatkin et al., 1999). Lubatkin et al. conducted a longitudinal study of 69 CEOs and 36 senior vice presidents of companies that went through mergers or acquisitions in the United States. The study found that cultural differences significantly predicted the likelihood of these senior managers quitting the organization within the first year, and having their autonomy removed predicted their likelihood of quitting within four years. A related piece of evidence is that by Krug and Nigh (2001), who conducted a cross-sectional study of 284 executives in the United States, representing 142 merger or acquisition cases. The study found that some of the key reasons why executives quit were: a lack of leadership or direction, dishonesty, low morale, and loss in job status. The study also suggested that the executives were more likely to quit if they felt alienated from the top management team over time. A limitation with these studies is that they tacitly assume that managers or executives are unique, psychologically, when in fact the factors that make them quit (e.g. feeling alienated, reduced job autonomy, cultural differences, or low morale) are the same factors that could make non-managers quit.

A third implication is that some managers psychologically withdraw from work after a merger or acquisition, and their behaviour is governed by the emotions that they have. A cross-sectional study of two mergers in India suggests that the emotions that managers have about a merger or acquisition shape the way that they behave (Bhal et al., 2009). For example, some studies suggest that managers tend to withdraw psychologically from work and remain largely passive after a merger or acquisition (Choi, Holmberg, Löwstedt, & Brommels, 2011). Choi et al.’s study of 22 employees suggest that there is the perception of managers as people who prefer to “wait out the storm” after an initial enthusiasm for the change. A limitation with these studies is that adequate comparisons of managers and non-managers are necessary to show how they differ from other employees in the emotions that they experience, and in the type or extent of their psychological withdrawal. For example, job satisfaction is an important antecedent of the decision by senior managers to stay in the organization after a merger or acquisition (Krug & Nigh, 2001), as well as an antecedent of supportive, compliant behaviour or resistive behaviour (Nikandrou & Papalexandris, 2007), but these findings echo those of studies about employees who are not managers.

Among those managers who do not quit after a merger or acquisition, the evidence suggests that managers vary in their approaches to managing. In the previous section we saw evidence that leadership during a merger or acquisition matters in inspiring and instilling trust among employees, but do leaders play an important role in protecting employees from harm during a merger or acquisition? The fourth implication within the current section concerns evidence that protective managers are beneficial to employees. Case studies of two acquisitions by a company in Norway by Colman and Lunnan (2011) suggested that in the acquisition that resulted in successful integration, the managers behaved protectively towards employees, shielding them from harm during the acquisition. The study found that in the other company where the acquisition led to less successful integration, managers behaved confrontationally in the process of shielding their employees from harm, and the employees in that company were unhappy about the merger, with the study suggesting that there was noise and conflict about it. A limitation of generalising this study is that in some mergers or acquisitions, managers might not have much power or say over the future of the employees that they manage, therefore they may not have the opportunity to behave protectively. It also raises the question of whether what matters is not so much how protective managers are, but rather conditions that allow any positive attitudes, policies, or practices about managing employees. It is also important to recognise the isolation that managers can feel because of practices such as the use of confidentiality agreements within mergers or acquisitions agreements. Harwood and Ashleigh (2005) interviewed 33 managers in a merging healthcare organization and found that the use of confidentiality agreements led to feelings of inclusion, membership, belonging, responsibility, and exclusivity on one hand, but feelings of being isolated on the other hand. This can also create a boundary dividing managers and non-managers.

A fifth implication of the evidence is that managers who behave in a way that prioritises their own personal interests, and managers who fail to intervene effectively when intervention is required, can hinder the success of a merger or acquisition (Meyer, 2006). Meyer conducted interviews of 49 employees in Norway and found that if managers behave egocentrically, this can hinder the success of a merger or acquisition, and the study suggested that such egocentricity is a bigger problem than resistance against a merger or acquisition from employees. This study was limited because it involved qualitative data that cannot tell us about the statistical effect size or significance of the impact of managers’ self-interested behaviour on the outcomes of a merger or acquisition. The problem of some managers construing mergers or acquisitions from an egocentric point of view is one which has been noted in other research. Vaara, Junni, Sarala, Ehrnrooth, and Koveshniko (2014) conducted a cross-sectional study from 92 managers involved in mergers and acquisitions in Finland. The study suggested that managers tend to take credit for successes and failures, which might fuel the illusion that needs, wants, and priorities during mergers and acquisitions revolve around managers. Managers might have developed this idea from the fact that many organizations do blame or credit them for negative and positive outcomes (respectively). The idea that managers behave egocentrically during or after a merger or acquisition is not a firm fact. Other research suggests that managers try to behave equitably in allocating resources after a merger or acquisition. For instance, a case study involving two European logistics companies that were merging involved interviews of managers at three time points, and the study found that the managers’ concerns about equality shaped their decisions about how to allocate resources (Monin et al., 2013). A related point of evidence is that suggesting that managers try to create homogeneity (similarity) across the two partner organizations involved in a merger or acquisition. Langley et al. (2012) interviewed 18 and 21 employees in two merged organizations, and found that employees felt under pressure from managers to have a sense of sameness. Golden-Biddle et al.’s study also suggested that employees react to managers’ efforts to create homogenous identity across the two organizations by trying to differentiate themselves within the new entity. On the other hand, other evidence suggests that managers (as well as other employees) constantly negotiate around organizational boundaries when it comes to deciding how to implement best practice, transfer information, and assess performance (Drori et al., 2013). Drori et al.’s study was comprised of interviews of 41 employees in a merged organization in the United States and found that the boundary negotiations involved managers or employees expressing acceptance or rejection of various practices, beliefs, and values. Therefore, whereas some managers do behave egocentrically after a merger or acquisition, other managers might not; whereas some managers try to achieve equality and homogeneity across the two organizations, others omit or include organizational boundaries in different circumstances.

In summary, the evidence from this section suggests that, during mergers or acquisitions:

• Some managers quit.
• Quitting by managers is associated with negative organizational outcomes.
• Some managers behave protectively, shielding their employees from harm.
• Some managers behave confrontationally while trying to protect employees.
• Some managers behave egocentrically, taking credit for successes or failures.
• Some managers fail to intervene when their intervention is needed.
• Managers’ emotions shape the way that they behave.

Therefore, many managers quit after a merger or acquisition, and this has negative consequences for organizations – but this is a similar effect that non-managerial voluntary staff turnover has on consequences for organizations. In that sense, managers are not unique or special employees, but the breadth of literature about the impact of their quitting on how mergers or acquisitions fare could be because managers (as a sample) receive more interest from researchers than non-managers. However, there are ways in which managers have a unique position within an organization that makes their reaction to a merger or acquisition different from that of a non-manager. That includes being in a position to protect his or her employees from harm during the organizational changes and to intervene. Managers can also have the unique privilege of being able to behave egocentrically (e.g. taking credit for their team’s successes). Managers can also be more vulnerable than non-managers in that more senior managers might blame them for their team’s failures, and they therefore might feel more vulnerable to negative consequences after a merger or acquisition. These are possibilities that future research should investigate.

Conclusions

This chapter has discussed evidence about how employees respond to mergers or acquisitions, behaviourally speaking. This chapter started by examining what makes employees supportive or resistant towards a merger or acquisition. The first implication of the evidence was that a leader’s style of leadership during a merger or acquisition matters in helping employees support it. The second implication of the evidence was that the way that employees think of the two organizations involved as a good fit matters in cultivating employees’ support for a merger or acquisition. The third implication of the evidence was that the relative size or status of an organization, compared to the partner with which it is merging or acquiring (or by which it is being acquired), matters in cultivating support for a merger or acquisition. The fourth implication of the evidence was that getting employees directly involved with helping an organization transition into a merger or acquisition cultivates their support for it. Instead of supporting a merger or acquisition, employees can respond by resisting the change by engaging in a variety of actions that demonstrate their resistance. The evidence shows that employees are most likely to engage in resistance behaviour when: the two organizations are trying to integrate each other to a great extent; when the two organizations have very different cultures or reputations; when the employees are not kept well informed about the merger or acquisition; when employees do not see learning between the two organizations as necessary; if they are a manager; if they do not feel a sense of belonging within the new organization; if they hold persistent stereotypes about the two organizations; and if they feel that the merger or acquisition will undermine the organization’s history.

This chapter then examined evidence about why employees want to quit after a merger or acquisition. The first implication is that employees are more likely to quit after a merger or acquisition if they feel psychologically disengaged and if they feel that the organization has broken a psychological contract with them. A second implication is that – on average – employees are more likely to want to quit if a merger or acquisition presents few or no career development opportunities. A third implication is that employees are more likely to want to quit if they feel that the merger or acquisition deprives them of benefits that employees in the other organization have, and if they feel that there is unfairness between the two organizations in the way that job cuts or other negative things are distributed. A fourth implication is that the more employees feel a sense of identification (belonging or loyalty) with the organization after it has embarked on a merger or acquisition, the less likely they are to want to quit. Other predictors of employee turnover are job satisfaction, commitment to the organization, an employees’ personality, aspects of the job, whether an employee has traditional attitudes about work (e.g. believing that workers should remain in the same organization for as long as possible), the external job market, context, and having an attitude of withdrawing from the organization. This chapter then examined the evidence about what makes managers want to quit, because a notable proportion of managers do quit after a merger or acquisition and evidence shows that the rate of quitting rises over five years. One implication is that the greater the number of managers who quit an organization during or after a merger or acquisition, the more negative the outcomes are for the merged or acquired/acquiring organization, but this can be true about non-managerial turnover. The second implication is that cultural differences between organizations, and removing managerial autonomy, can contribute to managers quitting during or after a merger or acquisition. A third implication is that some managers psychologically withdraw from work after a merger or acquisition, and their behaviour is governed by the emotions that they have. The fourth implication is evidence that protective managers are beneficial to employees. A fifth implication of the evidence is that managers who behave in a way that prioritises their own personal interests, and managers who fail to intervene effectively when intervention is required, can hinder the success of a merger or acquisition.

Mergers and acquisitions thus lead to employees and managers behaving supportively in some cases, but most of the evidence points towards quitting, quitting intentions and resistance behaviours as more common outcomes. Resistance behaviours are often inspired by attitudes among employees of “us versus them,” which Chapter 5 will discuss.