Determinants of human resource responses in the context of mergers - an exploration into executive responses

Abstract

Mergers and acquisitions have become the principal tools for corporate restructuring. There has been a sharp increase in both the number and size of the mergers and acquisitions in the 90s. An extensive review of literature indicates that merger and acquisition related studies are dominated by strategic, financial and operational concerns. Organisational and human issues that influence the through merger and post merger processes have received less than adequate attention. In the Indian context, most of the research is confined to either the study of merger as an outcome of economic reforms or is seen through the financial, strategic or industrial organisation perspectives The review of studies points towards the need to examine the modalities of human resource responses and also to identify the determinants of human resource response modalities in the merger context. This study, therefore, makes an attempt to identify the detenninants of human resource responses to mergers. The dependent variable, human resources responses, as a construct, on the basis of previous research, has been operationalised in terms of: merger induced stress; uncertainty as a response to merger; interorganizational degree of distrust between merging organizations; job satisfaction variations in the merged entity; commitment to the merged reality; interorganisational attitudinal orientation in the merger process and cooperative orientation among the merging constituencies: Existing literature on the subject of the study, has indicated that the following factors are likely determinants (the independent variables) of human resource responses : cultural differences between the merging entities; tolerance for multiculturalism of the associating organizations; extent of integration between the organizations; changes in the HR systems in the merged reality; acquiring - acquired relationship dynamics; degree of strategic relatedness of the merging organizations and degree of human resources management interventions in the merged entity operationalised as intervention strategies, which seek to manage differences in culture, systems and service conditions in the context of the merger. The main research objective of this study, therefore, is to identify the determinants of human responses in the merger context and to examine the effect of the determinants on human resource responses. Based on the main research objective, specific hypotheses were developed to examine the relationship for each dependent variable. Measures were developed for each variable, pre-tested and checked for validity and reliability using item-index correlation analysis, Cronbach Alpha and Split Half Reliability. A multimethod approach to data collection was adopted. Respondents for the study were drawn from fim~sth at have undergone merger1 acquisition during the period 1989-2000. Exploratory interviews with key informants in order to get a perspective on the merger process; a questionnaire survey of executives who were part of the firm at the time of merger - either actively involved in or a participant observer or affected by the mergerlacquisition process; an intensive case study of an organisation involved in merger in order to enhance the interpretation of the prvcess and dynamics of human resource responses in the merger process were the methods employed to generate data towards the purposes of the study. Regression analysis indicate that of the seven independent variables, the changes in the human resource systems in the merged reality and the degree of human resources management process interventions in the merged entity have a significant effect on human resource responses in mergers. Case data also supports the regression results. The insights which emerge from the study have implications for the world of practice and the world of scholarship. From a practitioner point of view, the research brings out the importance of functional and human resource management process interventions in the context of merger. A fruitful line of research as a sequel to this study would be to examine the relationship between planned pre merger human resource functional and process interventions and the sustainability of merger outcomes.