JOURNAL OF ORGANIZATIONAL BEHAVIOR, VOL. 17, 429-430 (1996)

Comment Managers’ reactions to a corporate acquisition: Comment on Fried, Tiegs, Naughton and Ashforth

The study of mergers and acquisitions from a behavioural perspective is important, not only to ascertain whether the poor financial results that typically flow from them may be at least partly a consequence of (and thus potentially alleviated by, attention to) behavioural difficulties, but also because of the numbers of people involved in, and adversely affected by, the restructuring of contemporary economies. That is, there are strong humanistic as well as financial reasons for seeking to understand what happens when firms combine.

It has been estimated that in one decade one in four of the US workforce will have been involved in a merger (Fulmer, 1986). Not surprisingly, therefore, considerable interest has been shown in the merger process and its outcomes. Two recurring themes can be found in the literature. One theme looks at the process of mergers and acquisitions and highlights the tendency to focus on issues of strategic fit and the neglect of organizational fit (Jemison and Sitkin, 1986: Greenwood, Hinings and Brown, 1994). A second theme shows that mergers are associated with ‘a myriad of people-related problems especially for members of the acquired firm’ (Jemison and Sitkin, 1986: 147). These problems include high levels of stress, tension and anxiety, financial uncertainty, job dissatisfaction and diminished productivity, and higher employee turnover.

The paper by Fried, Tiegs, Naughton and Ashforth falls into the latter group of studies. Perhaps the defining interest of the paper is its attempt to spell out more clearly than is done elsewhere the causal logic that links merger and acquisition activity to particular behavioural outcomes. Thus, they elaborate how separately and in combination perceived unfairness of terminations and changes in job control (in particular a centralization of decision authority) produce in employees feelings of heightened helplessness, and perceptions of damaged career opportunities. Feelings of helplessness and perceived weaker career opportunities, in turn, ‘cause’ psychological withdrawal and a higher probability of the intention to leave. In short, the authors show why companies may suffer diminished commitment and may lose employees they would prefer to retain. In their discussion at the end of the paper the authors make useful suggestions as to how companies might go about reducing the risk.

Papers addressing important topics almost invariably leave the reader asking for further insights. In the case of Fried et af.’s paper the authors raise a number of interesting questions which they do not, or cannot, address in their paper. One such question is whether different categories of employees experience mergers differently and thus respond differently. Fried er ul. suggest that ‘middle managers’ (i.e. those without the golden parachutes available to top managers, and without the market prospects of those below them) are particularly affected adversely by mergers. Disappointingly, this theme is not worked out in the paper: no compara- tive material is provided across work categories. But the argument provided, that middle managers are a peculiarly vulnerable group, is compelling and should be pursued in further work.

CCC 0894-3796/96/050429-02 0 1996 by John Wiley & Sons, Ltd.

430 R. GREENWOOD

A second question is whether the chain of reasoning provided in the paper is generalizable to all mergers and acquisitions and all types of organizations. The authors are careful to point out that behavioural responses likely vary according to whether the merger is hostile or friendly, and whether the combining organizations are similar or different to one another. Fried et al.’s case is of a hostile takeover and it is implied that there were differences between the firms. In this respect, the authors appropriately delimit the potential applicability of their findings. The authors are less attentive, however, to whether different types of organizations experience different patterns of behaviours and different causal logics. Some research indicates that differences between organizations may be very significant (Greenwood, Hinings and Brown, 1994). Fried et al. refer to the organization studied as ‘a large Fortune 500 corporation in the service industry.’ Rather more details of the type of organization would have been helpful for cumulative theory building.

Buono and Bowditch (1989: 515) are pessimistic about the ability of firms to combine without experiencing behavioural problems: ‘it may very well be that regardless of how delicately and thoughtfully human resource issues are handled, some turmoil is inevitable.’ Given the enormous upheavals involved in mergers and acquisitions and the uncertainties and stresses that accom- pany them, Buono and his colleagues may well be correct in their assessment. However, on humanitarian grounds alone it is incumbent upon social scientists to better understand how such stresses can be managed more effectively, thus removing unnecessary turmoil. A better under- standing of how to manage mergers will come from closer attention by researchers to how different categories of employees are affected by merger activity, why they behave the way they do, and in which organizational settings particular findings apply. That is, a much greater specificity of the causal logic and its applicability to particular situations is required. Fried et af . have taken an important step in this regard and will, hopefully, influence others to seek greater specificity of understanding of how mergers affect employees.

References

Buono, A. F. and Bowditch J . L. (1989). The Human Side of Mergers and Acquisitions. Jossey-Bass,

Fulmer, R. (1986). ‘Meeting the merger integration challenge with management development,’ Journal of

Greenwood, R., Hinings C. R. and Brown J . (1994). ‘Merging professional service firms,’ Organization

Jemison, D. B. and Sitkin S. B. (1986). ‘Corporate acquisitions: A process perspective,’ Academy of

San Francisco.

Management Development, 5 , 4, 7-16.

Science, 5, 2, 239-257.

Management Review, 11, 145-163.

ROYSTON GREENWOOD

Faculty of Business, University of Alberta Edmonton, Alberta T6G 2R6

Canada