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Raffertygarybookchapter 14thdecember2015
Raffertygarybookchapter 14thdecember2015
Alannah E. Rafferty
School of Management
University of NSW
a.rafferty@unsw.edu.au
School of Management
University of NSW
Authors’ Note: The preparation of this book chapter was supported by an Australian
Abstract
common themes and unique insights offered by these two bodies of work in relation to
outcomes may occur, at least in part, because researchers have tended to operate in fairly
strict discipline silos such that the strategy implementation and change management
literatures have developed independently and have only marginally informed one another. We
develop an integrated framework of the key processes driving M&A outcomes based on these
two bodies of work. We build an integrated model which identifies a number of feedback
perceptions of change management processes and practices, employee attitudes, and M&A
outcomes over time. Discussion focuses on the importance of exploring a number of issues
The value of worldwide merger and acquisition (M&A) investments totalled US$3.5
trillion during 2014, a 47% increase from 2013 (Toole, 2015). Research shows, however, that
many M&A investments destroy economic value (Haleblian, Devers, McNamara, Carpenter,
& Davison, 2009; King, Dalton, Daily, & Covin, 2004). Industry studies estimate that
between 70-90% of M&A’s fail to deliver the benefits that initially motivated the deal
(Christensen, Alton, Rising, & Waldeck, 2011). In addition, recent research reveals that only
nine per cent of business leaders think their merger or acquisition fully achieved its original
objectives (Hay Group, 2015). Academic evidence also shows that the change and disruption
associated with M&A restructuring often damages employee well-being and reduces
organizational capabilities as high performing individuals leave the company (Rafferty &
Restubog, 2010).
M&A outcomes because researchers do not currently have a good understanding of why
some mergers succeed while the vast majority fail. In their meta-analysis of M&A strategy
research, King et al. (2004) argued that “Empirical research has not consistently identified
suggesting the need for additional theory development.” Similarly, change management
scholars have reflected that while there has been a good deal of research on the human,
organizational, and cultural aspects of M&A over the last 30 years, “…there have only been
modest improvements in the M&A success rate” (Marks & Mirvis, 2011: 161).
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part, because researchers have tended to operate in fairly strict discipline silos (Larsson &
Finkelstein, 1999). For example, the strategy implementation and change management
literatures have developed independently and have only marginally informed one another
(Bauer & Matzler, 2014; Cartwright & Cooper, 2012). We argue that it is important to
consolidate knowledge from these two literatures so that we can delineate the common
themes and identify the unique insights offered by these two bodies of work. In particular, we
suggest that while the strategy implementation and organizational change literatures have
both contributed important insights regarding many aspects of M&As, the separation of these
phenomenon.
processes driving M&A outcomes. Our model identifies a number of previously unexplored
and change management literatures. First, integrating constructs from these two literatures
into a single theoretical model results in the identification of: 1) organizational-level change
management decisions that have previously not been explicitly considered and 2) previously
perceptions of change implementation) that we argue represent important factors that drive
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M&A success. Second, we build on initial theorizing in the strategy literature that has
in M&As (Larsson & Finkelstein, 1999). We expand on this initial thinking and propose that
ultimately influence employee change attitudes and in particular change readiness and
resistance to change, which in turn influence M&A outcomes. The inclusion of both positive
events (Oreg & Sverdlik, 2011; Piderit, 2000). Overall, our model proposes that employees’
change attitudes are critical psychological mediators of strategy implementation and change
Third, our theoretical model identifies the feedback effects between M&A outcomes,
over time. For example, managers may respond to poor employee outcomes – such as low
likely to result in more positive employee attitudes towards change (at time t + k) and,
ultimately, leads to improved employee attitudes and behaviors over time, which in turn is
likely to be associated with improved change implementation success. To date, most prior
empirical research on M&As has assumed that strategy implementation and change
management choices and perceptions remain fixed over the course of the post-acquisition
integration. However, large-scale integrations often span 2-3 years (and sometimes longer)
and recent research shows that implementation and change management decisions typically
adapt over time in response to outcome feedback (Atkinson & Gary, 2012, 2013, 2015; Gary,
2012). This is consistent with research that shows managerial implementation decisions
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initiatives (Gary, 2005, 2010) and with research documenting managers’ pervasive use of
decision rules and routines in making decisions over time (Gary, Kunc, Morecroft, &
Rockart, 2008; Gary & Wood, 2011). Understanding these feedback effects and complex
relationships over time will enable research to provide recommendations for improving
attitudes and reduced negative change attitudes, and ultimately, will enhance employee and
Conceptual Framework
Figure 1 displays the conceptual framework that is developed in this chapter. We first
examine strategy implementation research, which has highlighted three M&A integration
(Homburg & Bucerius, 2006), level of structural integration (Haspeslagh & Jemison, 1991;
Pablo, 1994), and top management team turnover (Cording, Christmann, & King, 2008; Zollo
management decisions that need to be made when implementing any large-scale change. For
example, senior managers need to determine the sequence or the order in which changes to
key organizational systems and processes is to occur and in what order aspects of the
more peripheral aspects of the organization to be modified early on in a change process (e.g.,
Amis, Slack, & Hinings, 2004; Klarner & Raisch, 2013; Liguori, 2012). In addition, senior
managers need to decide how much employee participation is possible or desirable based on
how quickly change is to be implemented. Senior managers also make high-level decisions
about how to communicate about change and how much information is to be provided to
employees.
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These high-level change decisions were evident in a recent case study of a large-scale
M&A integration (Atkinson & Gary, 2015). In particular, these authors found that senior
management recognized partway through the integration that the intensity of change (i.e., the
amount of change in a given time period) had become overwhelming in some areas of the
the change needed to more directly consider how to coordinate the different change initiatives
so as to ensure that employees were able to manage with the intensity of change occurring in
that area of the organization. On a quarterly basis, senior managers utilized a portfolio view
of all major change activity across the organization to set priorities and assess the risks of the
total volume of change impacting different parts of the organization. If the volume of change
was considered too great for one or more parts of the organization, then manager adjusted the
schedules of change initiatives as needed to ensure that the changes were manageable.
implementation decisions that are made by senior management and/or other change agents,
which are apparent in the above case study example, research on this topic is relatively
uncommon (Ford & Greer, 2006). In this chapter, we argue that a company’s formal or
informal overarching change implementation plan will influence how and when change
occurs in that organization. In particular, the overarching change implementation plan will
provide a guide that allows an organization’s managers and other change agents to make the
day-to-day decisions about how to implement change. We suggest that this change
implementation plan will directly affect employees’ perceptions of the change’s content (i.e.,
the what of change) and process (i.e., how a change is implemented). In this chapter, we
discuss on one aspect of the change’s content, and in particular, the extent of change that
change management processes; the extent to which employees report that they have
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opportunities to participate in change and the quality of change information they report they
are provided.
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framework. The first five hypotheses detail a mix of established (i.e., Hypotheses 1a, 1b, 3b,
3c, 4a, 4b, 4c, 5b) and novel relationships (i.e., 2a, 2b, 3a, 5a). Our final three hypotheses
focus on testing novel hypotheses on the feedback effects that emerge in our model over time.
Below, we discuss each of the key elements in our conceptual model in some detail.
how different implementation decisions impact organisation performance (Gary, 2005, 2010).
Scholars have identified a number of critical implementation decisions that are made when
businesses seek to integrate the target and acquirer companies involved in a M&A. Three
integration decisions for which there is a strong theoretical basis in addition to empirical
support are: speed of integration (Homburg & Bucerius, 2006), level of structural integration
(Haspeslagh & Jemison, 1991; Pablo, 1994), and top management team turnover (Cording et
al., 2008).
The level of structural integration that is desired has been identified as an important
& Jemison, 1991; Pablo, 1994; Shrivastava, 1986; Yunker, 1983). This construct refers to the
extent to which the units/functions of the acquired and target businesses will be integrated
and harmonized. Management must make a decision about the desired degree of interaction
and coordination between the joining businesses, and then implement this decision in the
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post-acquisition integration through, for instance restructuring and altering material flows.
This may involve adapting the activities within the joining businesses to realize technical
coherence, and transforming systems of values, beliefs, and practices to create congruent
organizational frames of reference (Schweiger, Csiszar, & Napier, 1994). The desired level of
integration has implications for the extent of changes that will be required in the functional
organizations to facilitate their consolidation into a functioning whole. In order to realize any
of the potential synergy benefits that motivate M&A transactions – including expected cost
savings and revenue improvements from economies of scale and scope – some level of
integration is required (Datta, 1991; Hunt, 1990; Schwieger, Ivancevich, & Power, 1987).
A number of typologies of the level of structural integration have been developed, all
of which distinguish between high and low degrees of integration (e.g., Haspeslagh &
Jemison, 1991; Hunt, 1990; Napier, 1989). A low level of structural integration maintains
each business separately with only modest interaction and coordination mechanisms
implemented after the acquisition. At the other end of the spectrum, a high level of structural
integration might involve absorbing the acquired business completely into the acquirer’s
existing organization structure and other control systems. In the integration phase, well-
established operational routines and processes are partially or completely changed and
harmonized throughout the new combined organization (Buono & Bowditch, 2003;
Haspeslagh & Jemison, 1991). This phase of a M&A has been identified as posing various
risks and has been associated with employee resistance and cultural conflict between the
acquirer and target businesses (Homburg & Bucerius, 2006; Larsson & Finkelstein, 1999).
resources are not feasible and the synergy benefits that motivated the transaction will not be
realized (Cording et al., 2008; Homburg & Bucerius, 2006; Karim, 2006; Pablo, 1994).
Speed of integration also has often been identified as an important decision in the
post-acquisition M&A process (e.g., Chatterjee, Lubatkin, Schweiger, & Weber, 1992;
Haspeslagh & Jemison, 1991). Speed of integration refers to the amount of time from when
the acquirer takes ownership of the target until the desired level of integration of systems,
structures, activities, and processes has been achieved. As an example, typical decisions after
an M&A relate to the speed at which differences between the two joining businesses
acquisitions, Inkpen, Sundaram, and Rockwood (2000) identified faster speed of integration
Homburg and Bucerius (2006) argued that a fast integration reduces the time during which
competitors may profit from an acquirer being distracted by integration issues and takes
advantage of the momentum in the early enthusiasm phase after the deal. They found that a
faster speed of integration is positively associated with M&A success (Homburg & Bucerius,
2006). The authors defined M&A success as the merging firms’ return on sales after the
large-scale change compared to the merging firms’ situation prior to the change. Other
scholars have argued that rapid integration improves acquisition performance by accelerating
value creation, exploitation of synergies, and returns on investment (Angwin, 2004; Larsson,
integration is appropriate under some conditions (e.g., Pablo, 1994; Shrivastava, 1986). For
example, Olie (1994) found, based on several case studies, that a slow integration process can
minimize conflicts between the merging partners. Ranft and Lord (2002), also adopted a case
study methodology, and reported that a slow integration can enhance trust building between
the merging firms’ employees. Haspeslagh and Jemison (1991) reported that the appropriate
speed of integration depends on the joint influence of the need for strategic interdependence
and the need for organizational autonomy of the involved firms. Homburg and Bucerius
(2006) reported that the relationship between speed of integration and M&A success is
moderated by internal and external relatedness. Specifically, in explaining M&A success they
found a negative interaction effect of external relatedness and speed of integration, and a
relatedness captures the similarity between the merging firms’ target markets and also market
positioning (i.e., the stance towards the external market). Internal relatedness includes
seems to have some similarities with the speed of integration - the pace of change. Amis et al.
(2004) suggest that a critical decision that occurs when an organization implements change is
how quickly changes are to be implemented in an organization. In the change literature, when
generally argued that such changes need to be implemented quickly so as to generate the
momentum required to overcome organizational inertia (Miller & Chen, 1994). However,
empirical results have not always supported this argument. In their 12-year study of 36
Canadian Olympic organizations, for example, Amis et al. reported that organizations that
12
successfully transformed themselves over that period did so with a slow change
implementation. The authors attributed this to the political sensitivity of the changes being
implemented, and the need to develop positive relationships among those affected by
changes.
Finally, the percentage of the top management team that is replaced after a M&A is
another important strategic decision in the post-acquisition M&A process (Walsh, 1988;
Walsh & Ellwood, 1991; Zollo & Singh, 2004). Some fraction of the top management team
of the target business can be either retained and motivated to cooperate, or replaced with top
managers from the acquiring business. According to proponents of the 'market for corporate
control' hypothesis, the better top management team of the acquirer should gain control of the
productive assets of the target business and then create value by displacing the less competent
team (Jensen & Ruback, 1983; Manne, 1965). However, research shows that replacing the
target's top management team results in reduced economic performance because it entails the
loss of human and social capital (Cannella & Hambrick, 1993; Krishnan, Miller, & Judge,
Zollo and Singh (2004) argued that replacing the target's top management team might
be connected with enhanced performance if the acquired business has low quality
team could outweigh the potential disruptions to routines and motivation within the target
business. In contrast, replacing a high quality management team in a high performing target
business is likely to be detrimental to the performance of the combined entity. Zollo and
Singh reported a negative interaction effect of top management replacement and resource
correlated with poorer performance when the resource quality of the acquired unit increases.
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directly influence the success of mergers and acquisitions: level of integration, speed of
integration, and top management team turnover. In this chapter, we expand current theorizing
to propose that the effects of these three decisions on M&A outcomes are mediated by
need to be adopted when implementing large-scale organizational changes. Ford and Greer
“sequences of individual and collective events, actions, and activities unfolding over time.”
Ultimately, these individual and collective activities are designed to ensure successful
change literature (Ford & Greer, 2006). In this chapter, we suggest that an overarching
change implementation plan enables managers and change agents to make the day-to-day
decisions about how to implement change. In particular, we focus on three decisions that are
part of the overarching change implementation plan: the sequence and order of changes, how
much to involve employees in the decision making process about changes, and how much to
broadly determines how a change will be managed and operationalized at the group level.
Although each group will develop a unique group-level implementation plan that suits their
particular circumstances and personnel (Whelan-Barry, Gordon, & Hinings, 2003), ultimately
adopted when implementing change. This includes the frequency and type of communication
strategies adopted and the amount of participation in change that is provided. These aspects
of the organization’s change implementation plan will ultimately also influence the extent to
which employees report that change represents a dramatic shift in the way things are done
implementation plan influences employees’ subjective perceptions about how changes are
are crucial to the success of organizational changes (Oreg, Vakola, & Armenakis, 2011). We
decisions on individuals’ perceptions of the content of change and on the process of change
they experience. The content of change refers to the “what” of change (Devos, Buelens, &
Bouckenooghe, 2007). That is, the content of change is concerned with what has been
modified in an organizational system (Devos et al., 2007), which in turn determines the likely
change as an individual’s subjective perception regarding the extent to which change has
working, values, structure, and strategy. Transformational change, by its very nature,
involves a dramatic shift in basic aspects of an organization and therefore has a considerable
impact on employees. In contrast, incremental change involves changes to less central aspects
employees’ work lives. While the content of change has been identified as a central
characteristic of organizational change, we were only able to identify one empirical study that
15
explicitly examined the influence of the content of change on M&A success (Bhatti, Gertz, &
Pederson, in press).
change (Self, Armenakis, & Schraeder, 2007). A number of empirical studies have explored
the influence of a range of individual change processes during M&As including the quality of
communication (Rafferty & Restubog, 2010; van Dick, Ullrich, & Tissington, 2006) and the
fairness of change processes (Schumacher, Schreurs, Van Emmerik, & De Witte, in press).
Other researchers have examined change process measures that incorporate multiple change
processes (Amiot, Terry, Jimmieson, & Callan, 2006). Recently, Waldman and Javidan
(2009) explored the theoretical role of leadership during M&As and identified two forms of
charismatic leadership – personalized and socialized – that they argue are associated with
different vision formation strategies, and ultimately with different integration strategies,
In summary, theory and research indicates that the content and process of change used
in M&As are likely to influence change implementation success. In this chapter, we focus on
one change content factor (the extent of to which change is experienced as transformational)
and two change processes (change communication and participation in change) that research
suggests will influence employees’ change attitudes, and ultimately, M&A outcomes.
Change Attitudes
change play in driving the success of organizational change efforts (DeCelles, Tesluk, &
Taxman, 2013; Rafferty, Jimmieson, & Armenakis, 2013). Indeed, Oreg et al. (2011: 462)
argued that a “main determinant of the extent to which any change can succeed is how
change recipients (italics in original) react.” While a wide array of reactions have been
studied when considering the impact of organizational change, we focus on two employee
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attitudes toward change; change readiness and resistance to change. Armenakis and his
and intentions regarding the extent to which changes are needed and the organization’s
capacity to successfully undertake those changes.” These authors suggested that readiness is
the cognitive precursor to the behaviors of either resistance to, or support for, a change
Resistance to change is one of the most studied change attitudes and has a long
history in the social sciences (Bouckenooghe, 2010). A number of authors have considered
resistance to change as a unidimensional construct (Bovey & Hede, 2001; Giangreco &
Peccei, 2005; Jansen, 2000; Peccei, Giangreco, & Sebastiano, 2011; Seo et al., 2012; Shapiro
& Kirkman, 1999; van Dijk & van Dick, 2009). In contrast, Piderit (2000) argued that
argued that resistance to change consists of a cognitive, affective, and intentional component.
Adopting this approach, Oreg (2006: 74) defined resistance to change as “a tridimensional
(negative) attitude towards change, which includes affective, behavioral, and cognitive
components.”
Hypotheses Development
In this section we develop and build the arguments for the causal pathways
hypothesized in our conceptual model. For completeness, we include hypotheses for both
We suggest that the strategy implementation decisions made in a M&A will have a
direct relationship with M&A outcomes. In particular, theory suggests that decisions about
the extent to which the units/functions of the acquired business will be integrated into the
acquirer’s existing business structure are motivated by greater cost and revenue synergies
(Pablo, 1994). There is also empirical evidence that shows an increased level of integration is
17
directly positively associated with post-acquisition financial performance (Bauer & Matzler,
Hypothesis 1a: Increasing level of integration will be positively associated with M&A
Speed of the integration refers to the amount of time from when the acquirer takes
ownership of the target until the desired level of integration has been achieved (Cording et
al., 2008). In the strategy field, research indicates that rapid integration can result in faster
realization of synergies and also less time for competitors to poach customers while the
organization is distracted by the integration (Homburg & Bucerius, 2006). Therefore, speed
Hypothesis 1b: Faster speed of integration will be positively associated with M&A
Implementation
While we could not locate any prior research examining the effects of strategy
change attitudes. Larsson and Finkelstein (1999) hypothesized, but did not find support for, a
negative relationship between degree of integration and employee resistance. They reasoned
that a higher degree of integration would increase uncertainty and stress among employees,
and would therefore increase employee resistance. One possible reason why Larsson and
Finkelstein did not find support for this hypothesis is because they omitted a mediating
employees’ experiencing a larger magnitude of change and therefore high job-level impacts
Several studies also have proposed, but not tested, that the speed of integration
influences M&A financial performance through employee change attitudes. For example,
Olie (1994) proposed that a slow integration minimizes conflicts between the merging
partners. Ranft and Lord (2002) proposed that a slow integration can enhance trust building
between the merging firms’ employees. Similarly, Bragado (1992) argued that a slow
integration process may be superior to a fast approach to provide a period for employees of
suggested that a faster speed of integration can reduce uncertainty for employees and help to
capitalize on the early enthusiasm and momentum after the deal (Bauer & Matzler, 2014).
However, a faster speed of integration may also reduce the time available to “sell” the change
associated with negative perceptions of change processes and positively associated with the
Hypothesis 2b: Faster speed of integration will be negatively associated with quality
Implementation
determine the type of change procedures and processes that are used by work groups when
implementing change. As such, three decisions that are part of the overarching change
implementation plan – the sequence and order of changes, how much to involve employees in
the decision making process about changes, and how much to communicate with employees
about changes – will cascade down the organization and influence employees’ perceptions as
argue that the overarching change implementation plan will influence employees’ perceptions
regarding the way in which change is implemented in terms of the quality of change
communication provided, and the extent to which employees are provided with opportunities
to participate in change.
positively associated with employees’ perceptions about the extent to which change is
experienced as transformational.
Hypothesis 3b: The amount of information about changes shared with employees will
communication.
decision making will be positively associated with employees’ perceptions about the
extent of participation.
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Research suggests that the change processes adopted when implementing change are
associated with employees’ responses to change (Amiot et al., 2006; Rafferty & Restubog,
2010; Schumacher et al., in press; van Dick et al., 2006). Rafferty and Restubog studied a
merger in the Philippines and focused on the smaller, lower-status merger partner. These
perceptions regarding the quality of change information provided and attendance of formal
voluntary employee turnover. Results indicated that the influence of change process (the
Amiot et al. (2006) examined a merger of two airlines, collecting data three months
and then two years after the merger had been completed. These authors identified employees’
participation in the merger process, perceived effectiveness of senior leadership during the
merger, and perceived clarity of communication about the merger as important change
process factors, which were treated as indicators of a latent measure of change process.
Results indicated that this change process factor was positively associated with self-efficacy
and negatively associated with employee stress at Time 1. In summary, based on prior
change.
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change.
While a good deal of research has addressed the relationship between the process of
change and employee change attitudes, we were only able to identify one empirical study that
linked the content of change with change attitudes in the context of a M&A. In particular,
Bhatti et al. (in press) conducted a study with Danish local government municipalities, some
of whom were forced to merge. These authors examined an objective measure of the extent of
change occurring as a result of a merger by calculating the relative size of the original
municipality in the newly merged municipality. Bhatti et al. reported that mergers had more
experienced a greater degree of change took 1.4 more days absence than did other employees.
We propose that:
employee job attitudes and behaviours. Herscovitch and Meyer (2002), for example, found
strong positive relationships between affective and normative commitment to change and
employees’ behavioural support for change. Similarly, Shin, Taylor, and Seo (2012) reported
that employees’ normative and affective commitment to change were positively related to
behavioural and creative support for change and these attitudes were negatively related to
turnover. Furthermore, additional research indicates that employee attitudes and behaviors
22
(Kehoe & Wright, 2013). Research also shows employee attitudes, including job satisfaction
and commitment to the organization, are positively associated with a range of organizational
performance outcomes (Allen & Meyer, 1996; Judge, Thorensen, Bono, & Patton, 2001).
Overall, we suggest that when employees report high change readiness and low resistance to
change that this will translate into positive M&A outcomes as reflected in positive employee
job attitudes and behaviors, enhanced organizational performance, and post M&A financial
Hypothesis 5a: Higher change readiness will be positively associated with post-
Hypothesis 5b: Higher resistance to change will be negatively associated with post-
Finally, we argue that employee change attitudes will mediate the relationships
proposed that:
Hypothesis 6a: Change readiness will mediate the relationships between employee
financial outcomes.
Hypothesis 6b: Resistance to change will mediate the relationships between employee
organizational outcomes.
Feedback Effects
The next three hypotheses focus on the feedback effects between M&A outcomes,
We use the term “feedback effects” to refer to the effects of time-lagged values of what are
constructs over time, where outcome feedback influences subsequent cognitive and affective
responses involved in decision-making (Brehmer & Dörner, 1993; Gary, Pillinger, & Wood,
2012). For example, as an M&A integration progresses, M&A outcomes – at any time t
management decisions at time t + k. Over time, changes in these decisions also influence
employee attitudes, which then influence posterior M&A outcomes. Our hypotheses about
the feedback effects involved in M&A integration, stem directly from our interview and in-
depth case-study research over the last two years (Atkinson & Gary, 2013, 2015; Gary, 2012;
Gary & Rafferty, 2014) and from our survey research (Rafferty et al., 2013; Rafferty &
Restubog, 2010). Our data indicates that managers closely monitor the M&A outcomes
continuously throughout the integration project, and adjust the implementation strategy and
change management content and processes based on whether the M&A outcomes are judged
A specific feedback effect that emerged from interviews we conducted as part of our
recent research is that poor M&A outcomes at time t, such as financial performance delivered
through change initiatives that are below targets, lead managers to increase the level of
integration and accelerate the speed of the integration at time t+k (Atkinson & Gary, 2012,
2013, 2015; Gary, 2012). Increasing the level of integration is an attempt to extract more
financial synergy, and accelerating the speed of the integration is an effort to deliver the
changes that are in progress faster. However, these decisions may negatively impact
employee change attitudes over time, with follow-on negative effects for posterior M&A
outcomes.
24
financial performance).
Hypothesis 7b: M&A Outcomes below target levels(t) will be associated with
Another specific feedback relationship that emerged from our interview data is that
poor employee attitudes at time t, such as low change readiness and high resistance to change
compared with target values, also influence managers to modify change processes by
employee attitudes about change and M&A employee and organizational outcomes.
However, it is important to recognize that there is a nontrivial trade-off here for managers to
with increased costs such as bringing in change management consultants to help mentor team
leaders and the opportunity cost of time spent communicating versus other activities.
Hypothesis 7c: Employee attitudes below target levels(t) will be associated with
A final feedback relationship that emerged from our interviews is that poor employee
outcomes at time t, such as high employee turnover and low change-related citizenship
behaviours compared with target values, over time also negatively influence other
25
employees’ attitudes and subsequent behaviours about the change process at time t + k. These
feedbacks can create a vicious spiral where poor employee outcomes drive declining
process.
downward spiral.
Discussion
literature and the change management literature. We have argued that some of the equivocal
empirical results reported from both the strategy and change literatures in relation to M&As
are likely due to the omission of important variables from research models. In particular, we
decisions, change management decisions, and employee outcomes and M&A financial
decisions as an important driver of M&A outcomes. To date, very little, if any, work in the
decisions that occur as a firm seeks to implement any large-scale change. We identified the
sequence in which changes to key organizational systems and processes are to be made, how
made.
26
we know very little about how senior leaders engage in this process. There are also a number
implementation plan look like, 2) what measures (e.g., interviews, surveys, archival
implementation plan, and 3) which of these potential measures (or which combination of
measures) provides the highest quality data? A number of logical measures that can be
aspects of the planning process used when considering change implementation. Questions
archival records, such as transcripts of meeting notes or reports, which can inform us as to the
change implementation plans adopted. We suggest using a variety of measures of the change
implementation plan is most likely to provide a rich picture of change implementation plans
One relationship that we did not hypothesize in the research model in the chapter
concerns the link between strategy implementation decisions and the organization’s overall
change implementation plan. This relationship has not been discussed in an academic setting
but this relationship is likely to exist. For example, the desired level of employee
participation may be contingent on the speed of integration (or pace of change). Overall, we
suggest that the relationship between strategic implementation decisions and the change
27
implementation plan is likely to be a very important relationship that has not yet been
also noted some potential overlapping constructs. In particular, it is interesting to note that the
which appears to overlap with the pace of change construct that is discussed in the
organizational change literature. The speed of integration refers to the amount of time from
when an acquirer takes ownership of the target until the desired level of integration of
systems, structures, activities, and processes has been achieved. The pace of change construct
organization (Amis et al., 2004). The mixed findings relating to the impact of speed of
integration on M&A success mirrors the mixed findings related to the importance of the pace
of change construct in the change field. Both the strategy and change literatures would be
enhanced if researchers explicitly consider whether the “speed of integration” and the “pace
The research model that is proposed in this chapter is a process model that outlines
how strategy implementation decisions and change management decisions are translated into
employee and organizational-level outcomes. However, it is likely that a range of factors will
moderate the relationships outlined in our model, including the role of employees’ subjective
perceptions of their change history in an organization and management style similarity across
merging organizations. There may also be other potential moderators but we will only discuss
In the organizational change literature, empirical research reveals that the internal
has explored the moderating role of change history. Devos et al. (2007) reported that trust in
executive management and history of change interacted such that in the condition of low trust
and a poor change history, low openness to change was reported. We argue that employees’
perceptions of their change history will influence the strength of relationships between
they have a poor change history in an organization will have negative expectations about their
likelihood of carrying out tasks successfully during an organizational change (Devos et al.,
2007), and are likely to be highly cynical about change (Reichers, Wanous, & Austin, 1997;
Wanous, Reichers, & Austin, 2000). As such, we expect that employees who perceive they
have a poor change management history in an organization will respond more negatively to
strategy implementation decisions and also will respond less positively to positive change
management decisions.
Empirical research also shows that the management style similarity of two merging
organizations influences change attitudes. Larsson and Finkelstein (1999) hypothesized and
found support for a negative relationship between management style similarity and employee
resistance. Management style similarity was defined as the degree to which managers in
Finkelstein argued that when management styles are similar across merging organizations,
the level of cooperation is enhanced, perceptions about the degree of change taking place
may be cushioned, and therefore the extent of employee resistance to an acquisition may be
attenuated. Homburg and Bucerius (2006) also examined the influence of management style
similarity, arguing that this was one component of organizational culture, and found that the
relationship between speed of integration and M&A success was moderated by management
style similarity. Specifically, in explaining M&A success they found a positive interaction
29
effect of management style similarity and speed of integration on M&A success. Similar to
Bragado (1992), we argue that the appropriate speed of integration is likely to depend on the
fit of the two merging organizations, especially on their cultural fit. Therefore, we would
expect that greater management style similarity enables faster speed of integration without
Conclusion
In this chapter, we have argued that it is time to adopt a broader perspective on M&As
by acknowledging that multiple literatures have addressed this topic. We argue there is a need
to start integrating these literatures and to build more theoretically rich models that better
explain M&A success. As a first step, we have sought to integrate the strategy
implementation literature and the change management literatures. By doing so, we have
identified a number of novel hypotheses and also have emphasized the importance of
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