Intervening in the Middle: Coping Strategies in Mergers and Acquisitions

Beginning of article

Most human resource (HR) researchers, and practitioners involved in the merger and acquisition (M/A) process readily agree that the personal, interpersonal, group, and intergroup dynamics that follow the combination of two firms are significant determinants of merger success or failure. As a growing body of research continues to document, such combinations typically have far reaching and often dysfunctional effects on those involved (see, Buono and Bowditch, 1989; Buono, et al, 1989; Jemison and Sitkin, 1986; Marks and Mirvis, 1986; Schweiger, et al; 1987; Schweiger and Walsh, 1990). A merger or acquisition can sufficiently transform the structures, cultures, and employment prospects of one or both of the firms such that they cause organizational members to feel stressed, angry, disoriented, frustrated, confused, and even frightened. For the individuals involved, these feelings can lead to a sense of loss, psychosomatic difficulties, and marital as well as personal discord. Yet, what is often overlooked is that M/As not only disrupt the lives of individuals but inevitably destabilize the organizations involved as well. Inter-firm consolidations often precipitate lowered employee commitment and productivity, increased dissatisfaction, high turnover, leadership and power struggles, and a general rise in dysfunctional behaviors such as sabotage.

This article develops an approach to assist middle-level managers, professionals, and technical-level employees to cope with such problems and difficulties. There are, of course, a variety of methods recommended to reduce much of the tension, strain, and discontent associated with the human side of inter-firm combinations. Such prescriptions, which are focused on the top management/organizational level, reflect a systems view of organization development (OD) in a transorganization development context (see Cummings, 1984), including such factors as (1) identification of relevant systems and appropriate representatives (e.g., internal stakeholder analysis, survey feedback, focus groups, active listening, and small group discussions); (2) convention of representatives and initiation of linkage processes (e.g., staged communication, realistic merger previews, transition teams, parallel organizational structures, intergroup mirroring and team building, question and answer sessions, and integration management workshops); and (3) organization of the system to regularize behaviors (e.g., team building, M/A-related workshops, counseling, strategic use of organizational symbols and rituals, management of retention and dismissal processes, joint evaluation, and integration review)(see Buono and Bowditch, 1989; Marks, 1988).

These efforts, however, assume that the key players at the top of the organizations involved have both a desire and a willingness to work toward a collaborative venture. Moreover, cases of successful mergers underscore that employee commitment to the combination must be earned rather than assumed, and that the stresses and strains inherent in the M/A process must be constructively confronted (see, Hirsch, 1988; Marks, 1988, 1990). Unfortunately, such attempts by upper level managers to ameliorate M/A-related pressures and tensions and to facilitate the post-combination integration of different work forces, cultures, and so forth remain the exception rather than the rule. This problem is especially the case with respect to middle-level managers who are literally squeezed between the demands of M/A-related decisions and strategies they do not either make or influence and the expectations, aspirations, and fears of increasingly independent subordinates (Kanter, 1986). Indeed, recent analyses suggest that these individuals are literally "under siege" today, as the 1980s merger wave has thinned their ranks and precipitated changes in their level of organizational commitment and their approach to managing in a period of rising competitive pressures (see Hirsch, 1987; Kanter and Mirvis, 1989; Schweiger and Walsh, 1990; Shleifer and Summers, 1988).

Many M/As grow out of what Zaleznik (1989) refers to as the "managerial mystique," a mind-set that values process, structure, formal roles, and indirect communication over people, ideas, and feelings. Two key elements in this view of management are control and professionalism (i.e., acting in a role). Since emotions such as the anxiety brought on by a merger or acquisition are considered outside the realm of professionalism, managers typically seek to eliminate or, at the very least, control the related pain. As part of this process, HR experts and change agents are usually brought in after the fact as a means of "control." In many instances, the parent company, seeking to avoid its own discomfort, may project its own uncertainty and anxiety onto the target company, creating a type of self-fulfilling prophecy. It then becomes the change? agent's role to quell this anxiety, which by this time is an extremely difficult, if not impressible, task. Indeed, the reality that there are far too few optimistic examples of companies that are dealing effectively with these changes and pressures readily raises concerns about the extent to which HR professionals have been able to influence such large-scale changes.

Human Resource Reactions in Two Acquisitions

These problems and concerns can be seen through a brief comparative analysis of two recent acquisitions: (1) a horizontal consolidation of two large computer firms and (2) a concentric diversification acquisition involving a supermarket chain and a regional conglomerate. Interventions with middle-level target company managers and technical professionals in these two combinations underscored (1) a lack of involvement, support, and direction from the acquiring organizations, (2) the frustrations and pressures associated with living through such change, and (3) the resultant problems and difficulties manifested at the organizational level.

A Horizontal Acquisition

During the late 1980s, one of the leading U.S. high technology companies undertook a horizontal acquisition of another large computer firm. From a strategic perspective, the acquisition was viewed quite positively by industry analysts. According to an industry publication: "It's a good fit for both companies. . . . |Target~ had good products, innovative technology . . . |Acquirer~ gained all that plus a significantly larger installed base. |Target~ got |Acquirer's~ reputation for support and service." The Acquirer's president even argued that the "|Target's~ potential is so exciting that we feel comfortable about diverging from our traditional approach to business development, which has not included major acquisitions."

Due to the horizontal nature of the acquisition, the underlying intent was to integrate the operations of the two firms. Support positions in finance and administration were to be consolidated, while the different engineering and product areas would be integrated "as appropriate." Throughout the process, early acquisition plans stressed that there would be "mutual respect and equitable treatment of employees" …