Academic journal article International Journal of Management

Impact of Employee Merger Satisfaction on Organizational Commitment and Turnover Intentions: A Study of a Canadian Financial Institution

Academic journal article International Journal of Management

Impact of Employee Merger Satisfaction on Organizational Commitment and Turnover Intentions: A Study of a Canadian Financial Institution

Article excerpt

This study was conducted to examine the impact employee post-merger satisfaction has on employee organizational commitment and turnover intentions. Employees of a Canadian Financial Institution (N=70) completed surveys approximately seven months after a merger between two comparably sized banks. Partial Least Squares (PLS) approach to structural equation modeling (SEM) provided evidence for the relationship between satisfaction with a merger and the affective and normative components of organizational commitment. Support was also found for the hypotheses that proposed that affective and normative commitments are negatively correlated with turnover intentions. We discuss the implications for theory and practice in organizational change.

Introduction

Organizational change, such as merger and acquisition (M&A) activity, continue to occur at a high rate in organizations (Armenakis & Harris, 2009; Herold & Fedor, 2008). However, in organizational change literatures, M &A failures range from a pessimistic 80% to a more optimistic, but still disappointing, 50% (Cartwright, Tytherleigh, & Robertson, 2007; Marks, 2006). There is undoubtedly a range of contributing explanations of these high M&As failure rates, however, recently there has been growing acceptance among management researchers that the neglect and mismanagement of the human aspects during and following the actual merger or acquisition are significant determinants of merger success or failure (Seo, Taylor, Hill, Zhang, Tesluk, & Lorinkova, 2012; Shin, Taylor, & Seo, in press; van Knippenberg, Martin & Tyler, 2006).

Consequently, M&As have come to be associated with outcomes such as lower morale and job dissatisfaction, acts of sabotage, increased labor turnover and absenteeism rates rather than increased profitability (Armstrong-Stassen, Cameron, Mantler, & Horsburgh, 2001; Cartwright et al., 2007). There is a general consensus that such change activities results in reduced organizational commitment (for an overview see Datta, Guthrie, Basuil & Pandey, 2010). Therefore, lowered commitment of employees after periods of mergers and change is identified as one of the reasons as to why the intended long-term effects of organizational change does not succeed (Cascio & Wynn, 2004; van Dierendonck & Jacobs, 2012).

All of these factors may negatively impact the competitiveness of the new organization. At a time when organizations rely on the commitment of their employees to make the merger work (van Dierendonck & Jacobs, 2012), employee problems will not only block the creation of synergy but also directly cause the failures of M&As (Cho, 2002).

Our study makes three important contributions to the organizational change literature. First, we investigate employees' perception of post-merger satisfaction and their psychological experiences (i.e., organizational commitment and turnover intentions). Few researchers have investigated such employee or individual level constructs. We are also particularly focusing on the Canadian context. Subsequently results in a dearth of knowledge on the context of Canadian mergers and acquisitions.

Second, recent researchers have discussed the theoretical importance of the change context (e.g., Herold, Fedor, & Caldwell, 2007; Holt, Armenakis, Feild, & Harris, 2007). However, empirical attention has predominantly focused on change processes. The lack of interest in the role of the change context is surprising because the identification of contextual factors that influence employees' responses to large-scale changes signifies an important opportunity to more effectively manage change (Rafferty & Restubog, 2010). We address this gap in research by examining a malleable variable; merger satisfaction (i.e., employees' perceptions of their acceptance and satisfaction with merger) and how these reactions will shape subsequent attitudes.

Finally, our proposed model also seeks to understand the mediating mechanisms that might underlie the relationship between merger satisfaction and turnover intention; we predict that organizational commitment would act as a mediator. …

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