5 Why employees experiencing mergers and acquisitions think and act in terms of group dynamics of “us versus them”

Mergers and acquisitions can elicit a mentality among employees of “us versus them.” This is because the psychology sub-field of group processes and intergroup relations tells us that social situations which put people into groups elicit a sense of belonging and identity for people within one’s group but rivalry, hostility, or discrimination towards people outside the group or the outgroup (Tajfel & Turner, 1979; Turner, Hogg, Oakes, Reicher, & Wetherell, 1987). Employees could therefore respond to a merger or acquisition by seeing employees from the partner organization as “not one of us.” The field of group processes and intergroup relations is based on social identity theory (Tajfel & Turner, 1979) and self-categorisation theory (Turner et al., 1987). The merger and acquisition literature frequently applies these theories to examine how employees react, think, and behave (Amiot et al., 2007; Bartels et al., 2006; Boen, Vanbeselaere, Brebels, Huybens, & Millet, 2007; Edwards & Edwards, 2012; Fischer et al., 2007; Giessner & Mummendey, 2008; Giessner et al., 2006; Giessner, Ullrich, & van Dick, 2012; Gleibs, Mummendey, & Noack, 2008; Hogg & Terry, 2000; Jetten, Duck, et al., 2002; Panchal & Cartwright, 2001; Terry & Callan, 1998; Terry et al., 2001; Ullrich, Wieseke, & van Dick, 2005; van Dick et al., 2004; van Knippenberg et al., 2002; van Leeuwen, van Knippenberg, & Ellemers, 2003). This chapter discusses these theories and evidence about how employees react to mergers and acquisitions from the lens of ingroups versus outgroups. We will start by providing an introduction to social identity theory, then self-categorisation theory, followed by a review of the evidence about “us versus them” attitudes or behaviours after mergers or acquisitions. We will discuss literature showing the implications of employees’ perceptions of continuity in the identity of the organization after a merger or acquisition (e.g. Jetten, O’Brien, & Trindall, 2002; van Knippenberg et al., 2002), and evidence of the impact of status differences between organizations on negative consequences for employees (e.g. Terry et al., 2001) and organizations (e.g. Goddard & Palmer, 2010). We will also discuss the relevance of employees’ emotions for intergroup rivalry after mergers or acquisitions, drawing on literature showing the prevalence of threat or uncertainty and other emotions (Buono, Bowditch, & Lewis, 1985) and Rousseau, 1998).

Introduction to social identity theory

Social identity theory (Tajfel & Turner, 1979) and self-categorisation theory (Turner et al., 1987) are two “sister” theories in social psychology that have spanned a large amount of research and evidence from both basic and applied psychology, including organizational psychology. Social identity theory was inspired by Tajfel’s (1970) experiments into something called the “minimal group paradigm.” In these experiments, researchers show that simply putting people into a group influences their attitudes and behaviours towards people inside or outside the group. This is no matter how trivial (minimal) the reasons for the group’s existence, such as the tossing of a coin, and even if the people in the group are strangers to each other. In the real world, where social groups often have stronger bonds, groups have an even more powerful effect on their members. Social identity theory argues that belonging to a group makes people engage in a number of attitudes, behaviours, and tendencies. This includes favouring fellow members of one’s group (ingroup members) and discriminating against members outside one’s group (outgroup members). This means that when a merger or acquisition is underway, employees can think of themselves and their colleagues along the lines of “us” and “them.” For instance, they can categorise other employees, managers, policies, or activities in terms of whether they belong to the “ingroup” (the old organization) or the “outgroup” (the partner organization involved in the merger or acquisition). We suggest that ingroup bias in mergers and acquisitions could take various forms such as behavioural bias (e.g. allocating a bigger budget to the ingroup), attitudinal bias (e.g. stereotyping the ingroup as better skilled or more knowledgeable), collective self-esteem bias (e.g. valuing the ingroup more highly), and so on. Likewise, it is plausible that outgroup discrimination in mergers and acquisitions can take various forms such as behavioural discrimination (e.g. placing more outgroup employees in the list of people to be made redundant after a merger or acquisition), attitudinal discrimination (e.g. thinking of outgroup managers as less trustworthy or competent), collective self-esteem-based discrimination (e.g. viewing the outgroup as a lower status brand), and so on.

Tajfel and Turner’s (1979) social identity theory argues that people often compare the ingroup and the outgroup, therefore a sense of competitiveness permeates relations between people in different groups. This suggests that employees can frequently compare what benefits or losses they have received from a merger or acquisition, and what benefits or losses employees in the partner organization have received. Social identity theory tells us that people want to feel that the ingroup is better than the outgroup, and they engage in behaviours or hold attitudes that create as much “distance” or “differentiation” as possible between the ingroup and outgroup. This means that employees could strive to accentuate the differences between them and employees in the partner organization, such as by engaging in resource allocation that puts their ingroup in a better position than the partner organization. This is plausible considering that experiments using something called the “minimal group paradigm” (Tajfel et al., 1971; Vaughan, Tajfel, & Williams, 1981) found that people have such a desire to make the ingroup better than the outgroup that their behaviour shows a preference for something called a “maximum difference” strategy over a “maximum outcome” strategy. For example, if employee A belongs to organization A (the ingroup), and A is asked to choose between (1) allocating a £1,500 marketing budget to organization A and a £1,000 marketing budget to organization B, or (2) allocating a £2,000 marketing budget to organization A and a £1,800 marketing budget to organization B, evidence from the experiments suggests that people tend to choose option 1 instead of option 2. In other words, people who are competing with an outgroup tend to use a maximum difference strategy instead of a maximum outcome strategy when allocating resources to themselves and the outgroup. As you can see, the difference in 1 is £500 whereas the difference in 2 is £200. The minimal group paradigm suggests that people prefer a bigger gap between the ingroup and outgroup over the alternative of getting more for the ingroup but achieving a smaller gap when comparing the ingroup and the outgroup.

Translating the experimental evidence about how people tend to think or behave when they are within a group suggests that employees could, after a merger or acquisition, perceive employees from a partner organization as “them,” hold prejudiced views against them, give them fewer resources or opportunities, and so on. These sorts of behaviours and attitudes are at odds with the purpose of most mergers or acquisitions (see Chapter 1), therefore organizations need to be aware about the psychology of intergroup rivalry. Although chief executives and other members of an organization’s senior management would like to think that the official strategy of the merger or acquisition governs the behaviour or attitudes of employees at ground level, the reality might be quite different. What is more, it is important to note that the “group” can be not just organization A versus B, but also managers versus non-managers, or human resources staff versus other employees. We believe that overcoming the powerful impact of group processes is an important step in helping mergers and acquisitions become successful.

Something that organizations undergoing a merger or acquisition can do is to understand why group differences are active, and help employees reconfigure their ideas about “us versus them” by emphasising the identity of the post-merger or post-acquisition organization as “all of us.” Additionally, another strategy is for organizations to help deactivate the relevance of group memberships within the organization by making each employee’s individuality more relevant and accentuated. Social identity theory (Tajfel & Turner, 1979) tells us that group memberships are not always relevant to how people think or behave in every social situation. People can fluctuate between thinking of themselves as individuals (e.g. I am extroverted, I am funny) and thinking of themselves as members of social groups (e.g. I am a Genex employee, I am an accountant). In order to develop interventions against intergroup rivalry after a merger or acquisition, organizations therefore need to understand self-categorisation theory – a theory that explains what social or psychological conditions make people mentally activate their group memberships.

Introduction to self-categorisation theory

Turner et al. (1987) expounded on social identity theory by developing self-categorisation theory, a perspective that explains how people cognitively navigate social situations and decide whether or not their group membership is relevant to the way that they will think about or behave towards other people. Self-categorisation theory argues that the psychological activation or deactivation of a group membership within someone’s mind depends on the literal social context, e.g. who else is in the room and whether their group membership is clear or ambiguous (see an illustrative example in Berry & Kamau, 2013). By psychological activation or deactivation, the theory means in the cognitive sense of someone’s thoughts, attention, and mental decision-making processes. Self-categorisation theory argues that whether group membership is relevant or irrelevant in a certain situation depends on the comparisons that someone makes with other people, e.g. “Bearing in mind what I know about what type of person is a prototypical member of my ingroup, and what type of person is a prototypical member of the outgroup, can I tell who in this room is an ingroup or outgroup member, and how similar or different am I from them?” Self-categorisation theory suggests that a person psychologically activates their group membership and thinks or behaves in ways that are governed by their group membership if there is a clear contrast between the ingroup and outgroup. This is called the meta-contrast principle. Self-categorisation theory defines the meta contrast principle as an algebraic equation with which you can metaphorically understand the cognitive processes at work. McGarty (1999) explains the algebraic equation thus:

You will seldom need to use the meta-contrast equation in practice, but what is important is to recognise the complexity of self-categorisation. What McGarty’s (1999) quote means is that in a given situation, people decide whether or not there is a division of “us versus them” (an entitative category) by considering whether the characteristics of the people around them show a clear division of “us versus them.” The equation suggests that people decide this by taking into consideration the numbers of people in the room or place, and the number of dimensions upon which they are judging people’s characteristics. Brown (2001) presents a textual version of the meta-contrast principle that simplifies the equation in a way that focuses on the difference between oneself and the most prototypical member of the ingroup, and the difference between the most prototypical member of an ingroup and the most prototypical member of an outgroup. Let us imagine a fictional employee, Jacob, who is an engineer. Jacob’s self-concept (his idea of himself) comprises of several group memberships that matter to him, as well several personal characteristics that define his sense of who he is. Figure 5.1, which follows, illustrates the group elements of Jacob’s self-concept within the areas shaded in black. The area shaded grey represents Jacob’s personal characteristics, such as being an introvert, enjoying solo fishing, being good at drawing, and so on.

We see from the figure that Jacob’s group memberships are shown in areas shaded black, and the more important a particular identity is to Jacob (and thus the more similar Jacob feels to the most prototypical member of that ingroup), the larger the area shaded black. For example, Jacob’s gender identity as a man is quite important to him, and therefore when he is in a room full of men and women, he will probably notice how similar he is to the other men in the room, how different he is from women, and he will thus feel a sense of belonging to men. Applying social identity theory and self-categorisation theory means that being a man will probably govern Jacob’s behaviour in the room. He might act in ways that he feels are typical of a man (e.g. being chivalrous towards women) or he might hold stereotypical views (e.g. thinking that men will want to talk about Premier League football and women will want to discuss cake baking or knitting). We also see that Jacob’s professional identity as an engineer is very important to him, and therefore he feels very similar to what he feels is a typical engineer. This means that, even in a room full of men and women, Jacob might focus on his identity as an engineer if he sees clear differences between people who are engineers and people who are not. For example, in a room full of 20 people there might be a group of ten people convened at the corner of the room who Jacob realises are all engineers, and therefore, what might matter to him is who is and is not an engineer – rather than who is and is not male. This means that, after a merger or acquisition, organization A versus B will be psychologically relevant to employees if the circumstances make it the most salient basis for categorising oneself and other people. The concept of “us versus them” after a merger or acquisition can also be based on other groupings, e.g. “IT staff versus other staff” and “managers versus non-managers,” and these can actually unite employees from across organizations A and B depending on the circumstances.

Self-categorisation theory argues that what is in a given person’s self-concept varies from person to person, and it depends on someone’s history and habits as well as who else is in a given situation. As you can see from the figure, Jacob has several group identities that are important to him and therefore, whenever he is in a social situation – even at work – he has the option of activating any one or none of these group identities. Let us recall the meta contrast ratio and understand what it means for Jacob. Brown (2000) simplified this ratio as comprising of two components. One component, the denominator, is the difference between the self (e.g. Jacob) and the most prototypical member of the ingroup (e.g. Bodega, the organization where Jacob works). The second component, the numerator, is the difference between the most prototypical member of the ingroup (e.g. an employee who best embodies a typical employee in Bodega) and the most prototypical member of the outgroup (e.g. an employee who best embodies a typical employee in the organization acquiring Bodega, Zunicon). If the numerator is greater than the denominator, which means that the intergroup differences between Bodega and Zunicon are greater than the intragroup differences within either, the meta contrast principle would predict that Jacob will activate his organizational identity as a Bodega employee. His attitudes or behaviours will exhibit ingroup bias favouring employees in Bodega, and he will engage in outgroup discrimination against employees in Zunicon, such as not including their ideas in projects or nominating them for redundancy. The greater the intragroup differences between Bodega and Zunicon, the bigger these problems. Put simply, mergers or acquisitions are most likely to evoke ingroup bias or outgroup discrimination when they involve two very different organizations and employees who view themselves as typical employees within the “old” organization.

Having understood the theories that explain how people think and behave when group membership is potentially relevant, let us now examine evidence of “us versus them” attitudes or behaviours among employees who have undergone a merger or acquisition.

Evidence of “us versus them” attitudes or behaviours in merged or acquired organizations

Social identity theory and self-categorisation theory have been used to study employees undergoing mergers and acquisitions (Amiot et al., 2007; Bartels et al., 2006; Boen et al., 2007; Edwards & Edwards, 2012; Fischer et al., 2007; Giessner & Mummendey, 2008; Giessner et al., 2006; Giessner et al., 2012; Gleibs et al., 2008; Hogg & Terry, 2000; Jetten, Duck, et al., 2002; Panchal & Cartwright, 2001; Terry & Callan, 1998; Terry et al., 2001; Ullrich et al., 2005; van Dick et al., 2004; van Knippenberg et al., 2002; van Leeuwen et al., 2003). These theories are commonly called group processes and intergroup relations theories, and they are influential within many psychological studies about mergers and acquisitions. They are useful theories when researchers examine how organizational identity, self-categorisation, ingroup bias, outgroup discrimination, and other group processes govern employees’ attitudes and behaviours towards other employees after a merger or acquisition. This chapter will not review the application of social identity theory and self-categorisation theory within studies about mergers or acquisitions because reviews exist in previous literature (e.g. Giessner, 2011). What this chapter will do is help you understand some key conclusions from the literature that can help organizations prevent “us versus them” attitudes or behaviours among employees.

Lesson 1 – Beware of the psychological power of the “old” organization after a merger or acquisition

Employees can hold on to their feelings of affiliation with the pre-merged or pre-acquired organization because the salience of the “old” organization might remain powerful, especially if the old logo, team, clients, and physical location are unchanged. Studies have found that the extent to which employees feel they belong to the new organization after a merger or acquisition is often lower than their feelings of belonging towards the old organization (Boen et al., 2007; van Knippenberg et al., 2002; van Leeuwen et al., 2003; van Dick et al., 2004; Gleibs et al., 2008; Giessner, Ullrich, & van Dick, 2012). The problem can be compounded by a lack of rebranding or integration of the two organizations. In a replication of the minimal group paradigm, van Leeuwen et al. (2003) found that the more a new group was perceived as a continuation of the old group, the more people displayed ingroup bias. In a study of employees’ perceptions of a merged organization in banking, Gaertner, Dovidio, and Bachman (1996) suggests that the more the employees perceived the two organizations as one group, the lower their levels of intergroup anxiety were, whereas the more they perceived the organizations as two separate groups, the higher their level of intergroup bias. Therefore, it is important to understand the power of the old organization, and the relevance of employees’ emotions (e.g. feeling threatened or fearful) as cognitions that fuel attitudes or behaviours of “us versus them” in mergers and acquisitions.

Lesson 2 – Rebrand and integrate the two organizations after a merger or acquisition

Evidence shows that there are psychological and organizational benefits of embracing the new organization after a merger or acquisition. If employees develop a strong organizational identity relating to the new organization after the merger or acquisition, research shows that this is conducive to successful integration outcomes (Gleibs, Noack, & Mummendey, 2010). Evidence shows that when employees believe they share a common future in the new organization it increases their level of commitment and engagement, which leads to better workplace cooperation (Kramer, 1991; Tyler, 1999), organizational citizenship behaviour (Dutton, Dukerich, & Harquail, 1994), support for the organization (Mael & Ashforth, 1995), and lower staff turnover (Mael & Ashforth, 1995; Tyler, 1999). It also improves perceptions of fairness and smooth adjustment (Amiot et al., 2007), commitment, job satisfaction, and wellbeing (Terry et al., 2001).

Applying theories about social identity and self-categorisation suggests that mergers and acquisitions should ideally result in the formation of a new organization with a new name, and with physical and psychological integration of employees as a way of minimising ingroup bias associated with the old organizations. Without that, self-categorisation processes can encourage employees to defend perceived threats to their old organizational identity and stereotype or allocate unfavourable traits to the outgroup as a way of defending their old organizational identity (Deaux & Emswiller, 1974; Hewstone & Jaspars, 1982; Deschamps & Clemence, 1987). However, while rebranding and physical/psychological integration is feasible in some types of mergers, it is less likely to be possible in cases of mergers or acquisitions where the two organizations retain their former branding and physical/staffing infrastructure. Creating a unified organizational identity can also be made difficult by real or perceived differences in the status or power of the two organizations involved in a merger or acquisition.

Lesson 3 – Beware of the impact of status differences between the two organizations

Mergers and acquisitions are very rarely of equals, and therefore the process of forming a new organizational identity is often made difficult by the difference in status between the two organizations (Amiot et al., 2007; Boen et al., 2007; Ellemers et al., 1992). For example, even in a merger that is supposedly of equals, one organization might have a higher financial status or a better reputation than the other, a more recognisable brand or a bigger share of the consumer market. One organization might also have to compromise by moving its staff to the other’s locations. Organizations going through an acquisition are also often subsumed by the identity of the organization taking them over. Therefore, status can determine how much employees identify with the new organization blending the two (van Knippenberg et al., 2002). Employees from the high-status organization (e.g. the acquirer, or – in a merger – the more profitable or well-known of the two organizations) might view themselves as the dominant of the two organizations. This could give them the advantage of being in a position of assimilating the lower-status organization and dominating the new organization’s brand, operations, location, and so on. Being in the dominant organization might make employees from the high-status organization more willing to embrace a merger or acquisition. Research suggests that employees from the low-status organization tend to perceive the merger or acquisition as unfair (Amiot et al., 2007). They can feel attached to their old organizational identity and uncertain about embracing a new one. Evidence shows that status differentials in mergers or acquisitions correlate with ingroup bias, affective responses, and perceptions of stability and threat (Terry & Callan, 1998). Employees from low-status groups often hold onto reasons why they differ from other groups by choosing “status irrelevant” dimensions of comparison (Terry & Callan, 1998). For example, employees in a small web company about to be acquired by a technological giant can think of themselves as doing well in being innovative, small, and friendly.

In research aimed at examining the ingroup bias in response to an anticipated merger between two hospitals, Terry and Callan (1998) found that the low-status employees rated themselves more positively on status-irrelevant dimensions than the high-status group rated them, and moreover, that the low-status group derogated the high-status group on the status-irrelevant dimensions. Also, employees of the low-status group rated the high-status group on the status-irrelevant dimensions more negatively than the high-status group rated themselves. In this study, the authors operationalised status dimensions in terms of high prestige, challenging job opportunities, and high variety in patient care, while the status-irrelevant dimensions, in terms of inter alia, good relations between staff, good communication by management, and relaxed work environment. The low-status group thus viewed the other group as having superior competence level, and the ingroup as higher on scales that defined interpersonal relations. Similar findings were also obtained by Terry et al. (2001) in the case of a newly merged airline company, where the low-status employees viewed their merger partner higher in technical expertise and professional attitudes, and described their ingroup as higher on communication skills, hard work, and administrative efficiency.

We know from the field of group processes and social cognition that, within a prototypically homogenous and cohesive group, group members seek to differentiate themselves from the outgroup and increase similarities within the ingroup (Fiske & Taylor, 1991; Hamilton & Sherman, 1996; Hamilton, Sherman, & Lickel, 1998; Sherman, Hamilton, & Lewis, 1999; Hogg & Terry, 2000). Employees in a lower-status organization can tend to view the differences between the two organizations as more pronounced than employees from the more dominant organization (van Knippenberg et al., 2002). Making group processes even more difficult is the fact that employees can influence each other and views among ingroup members can converge (Keltner & Haidt, 1999; McHugo, Lanzetta, Sullivan, Masters, & Englis, 1985; van der Schalk et al., 2011). That process can amplify beliefs among employees that there are substantial differences between the two organizations involved in the merger or acquisition, and employees from both sides can end up sharing the same belief about which organization is of higher status than the other. Empirical evidence shows that groups tend to recognize their respective status (Blake & Mouton, 1985; Buono et al., 1985; Schweiger, Ivancevich, & Power, 1987; Terry & Callan, 1998; Terry et al., 2001), cognitively legitimise (Halsall, 2008; Roundy, 2010; Vaara, Tienari, & Laurila, 2006; Vaara & Tienari, 2011; Zhu & McKenna, 2012) and dominant groups perpetuate a reality that confirms their sense of being higher in the hierarchy (Deschamps & Clémence, 1987; Pettigrew, 1979). Several empirical studies also suggest that employees from both the low- and high-status organizations can hold similar views about the status each group holds in the post-merger or post-acquisition organization (Bastien, 1987; Blake & Mouton, 1985; Buono et al., 1985; Gaertner et al., 1996). As social dominance theory proposes (Sidanius & Pratto, 1999), groups can create a mythical reality that enhances or attenuates hierarchical differences between them and other groups (Pratto, Sidanius, Stallworth, & Malle, 1994).

Evidence (e.g. Terry et al., 2001; Amiot et al., 2007) shows that status differentials can arise even in mergers “of equals.” This may be because status can be defined in different ways. Haunschild, Davis-Blake, and Fichman (1994) and Terry and Callan (1998) defined status in terms of technical skills, while in a laboratory experiment, Boen et al. (2007) manipulated the status by informing participants about their pre-merger performance. Other studies define status in terms of dominance akin to power (van Knippenberg et al., 2002). In their empirical study of one merger of two local government organizations and one merger of two secondary education institutions, van Knippenberg et al. (2002) operationalised status in terms of prestige, and questionnaire items referred to the level of influence in the merger process by the merger partners. Status can also be defined in terms of the resources held by each organization, because these can shape hierarchy within the new organization (Clegg, 1989; Vaara et al., 2005). Resources can be tangible, such as money, property and staff, or intangible, such as what is known as social capital or cultural capital (Bourdieu, 1984, 1986, 1989).

Lesson 4 – Being in the lower-status organizations can reduce job satisfaction and esteem

We discussed the concept of status earlier and concluded that status differences can antagonise intergroup relations (Bastien, 1987; Vaara et al., 2003). Status is relevant not just because of group processes and their related concepts, such as organizational identity, but also because status differences are an important antecedent to job satisfaction (Terry et al., 2001; Amiot et al., 2007; Makri & Hantzi, 2012). Employees of low-status organizations tend to feel less satisfied with their jobs than employees from high-status organizations. Status is also relevant to how satisfied employees are with a merger or acquisition. Covin et al. (1996) devised items to measure satisfaction such as “The atmosphere at the organization is becoming similar to ‘the good old days,’ ” or “All things considered, the merger should not have taken place” (Buono, Bowditch, & Lewis, 1988). Evidence shows that employees with the acquiring organization display higher levels of satisfaction than the employees of the acquired organization (Terry et al., 2001).

Belonging to the lower-status organization after a merger or acquisition can also reduce employees’ sense of esteem at work. People want to be associated with groups that have a positive identity (Tajfel & Turner, 1979) or what is sometimes called a sense of “positive distinctiveness” (Abrams & Hogg, 1988). This means that people want to be associated with groups that are popular or doing well because this adds value to their sense of self, contributing to what is known as “collective self-esteem” (Luhtanen & Crocker, 1992). A loss of group status can reduce collective self-esteem (Lupina-Wegener et al., 2011; Piekkari et al., 2005; Vaara, 2000). When people are trying hard to maintain group boundaries, this can make them behave competitively or uncooperatively, which can jeopardize the success of a merger or acquisition (Empson, 2001).

Lesson 5 – Emotions fuel intergroup rivalry between the two organizations

In the previous chapter we discussed how employees display feelings of anger, anxiety, confusion, insecurity, shock, resentment, and resistance. It is plausible that some of these emotions arise from the anticipation of intergroup rivalry, and that emotions fuel a sense of “us versus them.” For example, employees feel that a merger or acquisition threatens their previous organizational identity (Terry et al., 2001; Haunschild et al., 1994; Rousseau, 1998). Group processes can also encourage feelings of mistrust and uncertainty about the intentions of the outgroup, strengthening the psychological boundaries between the two groups and the old organizational identity (Hogg & Terry, 2000), explaining why research observes anxiety, trauma (Scwheiger et al., 1987), threat, and uncertainty (Haunschild et al., 1994; Terry et al., 2001) among employees after mergers and acquisitions. Also, status differences between the organizations involved in a merger or acquisition can make employees feel pessimistic. An experiment by Fischer et al. (2007) found that an organization’s status predicted employees’ satisfaction with a merger, and that employees in the low-status organization were more pessimistic in believing that the merger was not beneficial in the long term.

We believe that group processes exacerbate employees’ emotions about mergers or acquisitions, and that emotions fuel group processes evoking intergroup rivalry. Evidence shows that employees can feel betrayed, deceived, or exploited by either the acquiring organization (Brown & Humphreys, 2003) or their own organization (Searle & Ball, 2004). Employees often also feel that HR policies are applied inconsistently (Teram, 2010), and that mergers or acquisitions are seen by employees as threatening events. Feelings of threat are often connected with group identity and the self-esteem that people derive from their group membership (Amiot et al., 2007; Colman & Lunnan, 2011), as well as the sense of structure, meaning, and security that membership to a group provides (Spicer, 2011) and the potential loss of material or symbolic resources held by the group (Smith et al., 2013). Threat in mergers and acquisitions literature has also been framed in terms of existential risks posed on the groups involved (van Vuuren et al., 2010; Clark et al., 2010; Lupina-Wegener et al., 2011), and in terms of the need to compete for resources and power (Smith et al., 2013).

Employees feel threatened by fears that the central, distinctive, and enduring aspects of their organization are going to disintegrate (Jacobs et al., 2013), and that embedded ways of thinking, values, and beliefs central to their old organization are in jeopardy from a merger or acquisition (Spicer, 2011; Colman & Lunnan, 2011). If an outgroup organization has very different values or beliefs, this can make employees feel threatened. Dissimilar outgroups challenge the validity of on an ingroup’s values and the threats that this poses to the self-esteem of ingroup members can make them behave defensively and reject or ridicule the outgroup (Greenberg et al., 1990; Greenberg, Solomon, & Pyszczynski, 1997; Solomon, Greenberg, & Pyszczynski, 1991). They can also perceive interactions with the outgroup as a sign of submission and a threat to their old group identity (Smith et al., 2013). Threat is linked with the urge to eliminate the source of threat through fight, flight, or freeze responses (Blanchard et al., 2001), therefore, consultants and researchers working with employees experiencing a merger or acquisition really need to understand the far-reaching consequences of threat as a form of affect. We recommend assessing the extent to which employees perceive a merger or acquisition as a threat using available scales (e.g. Zhou et al., 2008). Other emotions can make employees feel even more threatened. For instance, ambiguity about the impact of the merger or acquisition on their career progression, rewards, and job security can make them interpret information about the merger or acquisition in threatening terms (Goddard & Palmer, 2010; Lupina-Wegener, 2013; Burlew et al., 1994; Clark et al., 2010; Kovoor-Misra & Smith, 2008).

As well as threat, group processes can explain other common emotions in mergers or acquisitions. For instance, uncertainty and anxiety (see Chapter 3) are common. This could be because employees feel unsure about their future in the new organization (Searle & Ball, 2004) and its rewarding prospects, because people joining a new group are more likely to develop a sense of belonging if the group is rewarding (Kamau, 2013). It can also be because mergers or acquisitions force changes in what an organization stands for, as well as its culture, meaning that even those factors that are not necessarily related to social identity, self-categorisation, or other group processes can be interpreted from the lens of group processes. The introduction of strict new working arrangements or standards (Kavanagh & Ashkanasy, 2006) can make employees feel overwhelmed by new targets and expectations (Drori et al., 2013), and create a sense of cultural anxiety about what their organization stands for, making employees wonder, “What are the organization’s values or norms now, and where do I fit in?” Styhre et al. (2006) wrote about cultural anxiety in mergers and acquisitions as an effective response to changes within the organizational reality. Styhre et al. studied the emotional experience of employees in two merger cases (Astra with Zeneca, and Ford with Volvo) and found differences among the cultures of the different organizations. They found that employees became anxious as a result of the culture clash because previously familiar and established procedures, practices, or norms were now potentially contentious. Employees were also made anxious by differences in management, mistrust, inequality among employees, a short-term financial focus by the organization, and a clash of individualist versus collectivist cultural values. The literature also suggests that some employees fear “cultural contamination” of their organization’s public image. Employees in high-status organizations can fear being associated with a “downmarket” organization or having their public image “contaminated” by a less savvy or trendy organization that will hurt their reputation (Junni, 2011; Mirc, 2012). Therefore, emotions such as anxiety about a merger or acquisition can be understood from a group processes perspective.

By considering the role of emotions within an organization’s understanding of “us versus them” attitudes or behaviours, you will be bridging two very different fields of psychology – but this is necessary within applied areas of the subject, such as in helping employees and organizations who have experienced a merger or acquisition. Just as meta-approach is encouraged more generally within the field (Grant & Pollock, 2011), we call for this kind of “meta-approach” to understanding the cognitive processes that underpin employees’ perceptions about their new and old organization. In other words, although self-categorisation theory and social identity theory do not explicitly discuss the role of emotions, it is important to acknowledge the importance of fear, shock, anger, and other types of affect as cognitions that can fuel the fire of “us versus them.” Although several attempts have been made to bridge different theoretical frameworks, these have focused on bridging the psychological and non-psychological literature and on specific outcomes, such as employee health and wellbeing (e.g. van Oudenhoven & de Boer, 1995; Citera & Stuhlmacher, 2001), and how employees interpret power differentials (Haunschild et al., 1994; Terry & Callan, 1998; Boen et al., 2007; van Knippenberg et al., 2002).

We therefore urge researchers examining intergroup rivalry after mergers and acquisitions to include measurements of employees’ emotions. For instance, it is plausible that employees experience fear that their previous organizational identity will be undermined by the merger or acquisition, so they fail to engage in self-categorisations of “we” (in the superordinate sense of embracing both organizations) and zoom instead to the previous organizational identity in their search for positive distinctiveness, which they connect with their self-efficacy, self-worth, and self-consistency (Millwar & Kyriakidou, 2004; Ashforth & Mael, 1989). Emotions can thus fuel employees’ self-categorisations of themselves and others after a merger or acquisition in terms of “us versus them.”

Conclusions

This chapter helped you explore theories about group processes and intergroup relations – social identity theory and self-categorisation theory. These theories helped you discover why employees can react to mergers and acquisitions from the lens of “us versus them” or “ingroups versus outgroups.” In this chapter, we explored key concepts within these theories, such as the meta-contrast principle and its implications for how people evaluate the relevance of their group membership in different social situations. We then gave you an overview of the evidence about “us versus them” attitudes or behaviours after mergers or acquisitions, such as the power of the old organization, especially when employees feel that there is continuity in the identity of the organization after a merger or acquisition. We then discussed evidence of the impact of status differences on employees after mergers or acquisitions, and the relevance of employees’ emotions as cognitions that fuel a sense of intergroup rivalry. We also discussed the impact of group processes on emotions, such as threat and employees’ pessimism about a merger or acquisition. By understanding the importance of group processes and intergroup relations in the attitudes and behaviours of employees, you can help organizations (and employees) take preventative steps. Effectively rebranding and integrating two organizations after a merger or acquisition is important not just because it reduces the chances of intergroup rivalry within the new organization, but also because it improves employees’ commitment and satisfaction. This leads us to explore some of the ways that cultural differences between organizations can have an impact on the way that employees interact in Chapter 6.