What follows are excerpts from a study by Ray Biegun, Connie Hackney, and Neal Massey done at George Mason University in 2000.  The full paper is available upon request.  Please include your reason for the request and indicate your willingness to share the outcomes of work you are doing.  Thank you.

Introduction

The objective of our study is to apply concepts from The Masters Program on Social and Organizational Learning (PSOL), to the lessons of organizations in today’s environment and provide insights that can help increase individual and organizational success. One of the most dominant trends in private sector organizations today is that of mergers and acquisitions.

The wave of corporate mergers and acquisitions that has swept the economy over the past ten years has been felt in almost every major business in the US. Changes in technological forces combined with increased domestic and global competition have created a drive toward consolidation and corporate partnerships. "Merger integration is without a doubt the ultimate change-management challenge" The Complete Guide to Mergers and Acquisitions Galpin and Herndon Jossey Bass, 2000. This practicum will focus on the human aspects of this vast phenomenon and illuminate the underlying principles and most effective practices for managing change in this environment.

The stakes are huge, for the corporations involved and their employees. Over 2.5 trillion dollars was spent in merger transactions in 1999 and the pace of merger and acquisition activity is expected to increase. Although this trend is well established, it also well known that approximately 70 per cent of mergers fail to achieve their anticipated financial value. The statistics that measure financial success seem to defy any argument to enter into a merger. In a 1995 Business Week survey it was reported that only seventeen per cent of the mergers to date created substantial returns based on total stock returns from three months before announcement to three years after announcement and relative to industry indexes. Even more astounding is that a total of fifty percent of all mergers had a negative financial impact on total stock returns. Thirty three per cent created only marginal returns. These statistics defy the logic of such a monumental trend.

Our original intent in the approach to this research was to focus on successful mergers.

In keeping with the appreciative approach of the PSOL Program and an interest in an objective qualitative methodology, we began to explore ways to measure the success of a merger or acquisition. This proved to be extremely difficult. In the absence of hard financial data on the mergers we investigated, we developed six general guidelines that we used to determine success. These were based on our reading and discussions with professionals working in this field. A certain amount of subjectivity is inherent in our assessment of success. In addition, there are a number of outside factors that can influence the assessment of success. These factors such as the price of a commodity or market forces are not necessarily the direct result of human behavior. In the energy industry, even natural events or weather factors can influence the success of a deal.

While the term merger is most often used to describe corporate alliances, the reality is that mergers of equals are quite rare and that the vast majority of the deals that are characterized that way are truly acquisitions. The term merger is used to soften the blow of defeat for the acquired company. In these cases, there can clearly be a winner and a loser. The acquiring company has almost absolute power over the acquired company to accomplish the financial goals reported as the reason for the deal. This win/lose scenario increases employee uncertainty among acquired employees to a much higher level than members of the acquiring company. The dynamics of behavior are different for these two groups. Our research was focused primarily on reportedly successful mergers. In a few cases we interviewed individuals in unsuccessful mergers. This provided a stark contrast and additional learning.

The pervasiveness of mergers and acquisitions in the U.S. is another factor contributing to the erosion of employee trust in the organization. Stories in the media abound describing the massive personal upheavel created in the process. A steady drumbeat of layoff numbers repeats almost daily in the news. We have heard stories of friends, neighbors or relatives that have suffered loss at the hands of a corporate restructuring or they have been involved themselves, perhaps more than once. Even in an era of low unemployment, corporations continue to churn employees through the process of change that increases uncertainty and personal turmoil for employees.

Massive corporate restructuring have changed the fundamental psychological contract between the employee and the company. This tacit agreement held that in return for hard work and sacrifice, the company would provide secure employment with an opportunity for advancement. Loyalty and dedication were valued. The personal sacrifice employees might make that compromised family or personal values were considered to be part of the contract. That contract is being rewritten with employees and companies increasingly looking out for themselves. This additional challenge for employees makes certainty in the workplace even more illusive. There is more responsibility on individuals to plan and develop their own career path. Companies are increasing the pressure on employees as they continually change and restructure with profits and stockholders holding higher ground than the employee in relative importance.

Much has been written on the topic of mergers and acquisitions. This research draws from sources that examine the human rather than financial factors. Initially the focus of the study was on the cultural aspects of merger integration. This proved to be a very broad topic that, while important, is not as specific to the personal dimensions of change. The importance of communication in the merger integration process was also considered. That topic is also very broad and the scope of the research was narrowed to a more manageable level.

Through the process of inquiry, several questions emerged from our discussions and literature review. How can individuals survive and even thrive in this fast moving and often brutal environment? What are the key strategies for facilitating success? What are the psychological forces that influence a person’s ability to succeed? Why are some individuals more successful navigating change than others? What can we learn about conditions that create or inhibit the management of change?

From the review of the literature a common element that seemed to be central to the success of mergers from a cultural or communications perspective is how merging organizations handle employee certainty and uncertainty during the process of change and integration. In this context, the research could more clearly address the questions listed above. As our research continued, individual and organizational patterns of behavior emerged. The patterns evolved into themes as we looked deeper into the literature and interview results. The themes centered around issues relating to employee certainty and uncertainty and included: questions of "what about me?" by employees, involvement in the merger process, feelings of grieving and loss and the influence of leadership.

The behavioral patterns and themes drew us closer to an awareness of the relationship between the Gestalt model of organizational consulting and employees’ attempts to deal effectively with change. The cycle of experience, a central concept in the Gestalt approach has strong parallels to the experience of the employees described in our interviews. It is also relevant to the question of what psychological factors influence individual responses to change. We learned through the interview process that employees at different levels of the organization find out about the merger at different times and work through the change from varied starting points. We will explore the implications of these differences in the context of organizational change.

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In many ways the limited access we had to companies is similar to the limited access we have to our clients we are paid to help. We take a qualitative approach and hope that our experience, intuition, and knowledge take us to well grounded conclusions.

It is essential for organizations to understand, acknowledge and prepare people for the losses they will encounter as part of the merger, as early in the process as possible. Losses extend beyond salary and benefits. They include loss of position and responsibility, loss of connection with their team, loss of control, loss of identity, loss of confidence, and loss of certainty. Grieving is an essential healing process that everyone must go through in order to let go of their losses and move on.

More successful outcomes were reported when organizations actively took care of their employees' "me" issues. It is important to be aware that what is real for an employee may not seem real to the manager. To ignore that employee's reality is to ignore the employee. During trying times people need to be nurtured in different ways.

It is the responsibility of leaders to create some certainty for employees by actively engaging them in the merger, shifting their focus to the "here and now" and creating stability and certainty. Formalized involvement, such as integration teams or cross-organizational committees ultimately involve informal involvement through dialogue and relationship-building, providing certainty about the other organization.

Companies that have well thought out communication plans and infrastructures and implement them early in the merger process are more successful in reducing employee uncertainty and maintaining productivity. The strategy of conducting "business as usual" is non responsive and an inadequate approach to building momentum toward the goals of the merger. Swift and effective rumor management helps maintain trust. It also lets employees know that management is listening to the concerns and language of the employees.

In times of uncertainty and change in the merger and acquisition process, employees look intently at the leaders of the organizations for understanding, support and certainty. They notice every action and scrutinize each move carefully. Leaders are at their most visible point immediately following and throughout the integration stage of the merger process. Employees are at their most dependent and vulnerable point prior to integration of the merging companies.

An important beginning to establishing trust and understanding of the future is the establishment of a vision for the newly merged company. All members of the senior management team must support the vision if it is to be credible.

Visibility of the key leaders in the new organization further builds trust and solidifies employee buy-in to their future in the organization.

Creating an understanding of the individual differences in awareness and what is figural for different individuals is paramount for leadership. Development of collective meaning and common figure or vision is core to organizational effectiveness within the Gestalt Cycle of Experience model, and is critical to the success of the merger. Each person in the organization experiences the merger in his/her own way. For optimal merger achievements, employees must complete their own individual Cycles of Experience.

Leaders must be aware of the merger process and where employees are in relation to it at all times, recognizing that the greatest mobilization of energy occurs when there is group figure. It is the leaders' responsibility to look beyond employee resistance to identify unconscious forces inhibiting change.

The main research question of how companies handle certainty and uncertainty during merger integration brought out many interesting insights and varied company practices. The literature review and interview process allowed the researchers to see many perspectives on the subject. Ranging from the intensely personal to the purely academic, these perspectives blended into a meaningful view of the world of corporate mergers and acquisitions.

Another perspective came from one of the researchers who happened to be going through a hostile takeover that played out at the time the practicum was being conducted. This provided another inside view of the subject. This particular merger took place in a consolidating and deregulating industry where mergers were becoming the norm. As in banking, there is a trend toward bigger and fewer companies dominating the industry. The rationale that bigger is better and that survival of the fittest is the name of the game seems to drive irrational behavior. Given the very low success rates of the mergers that have taken place to date, what are the real drivers of this corporate "group think"? If the result of increased shareholder is not being accomplished, why does the trend continue?

This same researcher wonders about the extent to which a few very powerful individuals who are orchestrating massive change for personal gain drive the result. Is this simply one facet of the western notion of corporate conquest, win/lose competition and the evolution of economic forces? To what extent is this trend driven by the male ego? These questions of how individual agendas can create huge waves of change for others could be interesting questions for further research. It might also be interesting to see how mergers led by females are handled differently. Also, what are the differences in merger implementation when the leaders have a personal vision or transformation that includes a more social construction view of the purpose of the merger?

Another dimension of the merger process is the dismantling of corporate cultures. As mergers occur there are fewer organizations with a clear identity. What are the implications of this for the individual? Employees of large organizations are by implication encouraged to have less loyalty to their company and to maintain a purely selfish motive in their professional environment. This is not a new concept but the trend in mergers and acquisitions has reinforced this idea to where there may be broader implications for the individual and our national culture.