Employee responses to acquisitions: evidence from Greek firms
| DOI | https://doi.org/10.1108/01425450810843311 |
| Pages | 104-120 |
| Published date | 04 January 2008 |
| Date | 04 January 2008 |
| Author | Irene Nikandrou,Nancy Papalexandris |
| Subject Matter | HR & organizational behaviour |
Employee responses to
acquisitions: evidence from
Greek firms
Irene Nikandrou and Nancy Papalexandris
Athens University of Economics and Business, Athens, Greece
Abstract
Purpose – The purpose of this paper is to examine the factors affecting the course of action that
employees in acquired firms choose to follow. Loyalty, compliance, voice and neglect (LCVN) are four
employee behaviors in acquired companies.
Design/methodology/approach – Two questionnaires were designed: one was administered to
employees of the acquired company and the other to a member of the post-acquisition managerial
team. One hundred and thirty-five administrative employees in 27 acquired companies in Greece
participated in the research.
Findings – The results of the study support that employees decide their course of action based on the
cost of their action, the effectiveness of the behaviour and the attractiveness of the company.
Research limitations/implications – This study concentrated at the individual level to examine
the factors affecting employee behaviours. Future research is needed to examine behavioural changes
over time and the factors that make employees move from one behavioural category to the other.
Practical implications – The findings in the paper have implications for organization members
facing the challenge of managing human issues in the sensitive phases of an acquisition. Evidence of
specific behavioural responses and the factors affecting them is presented.
Originality/value – The present study provides a model for understanding the complex and
multiple behavioral choices employees have after an acquisition.
Keywords Acquisitionsand mergers, Change management, Human resourcemanagement, Greece
Paper type Research paper
Acquisitions used to be thought of as cyclical phenomena which emerged and faded
according to the economic circumstances of the period. However, they have become
part of our lives. Since the 1990s, we have witnessed non-stop merger and acquisition
activity. Indeed, acquisitions have the unique potential to help firms grow more
quickly than through internal development. In today’s expansionist business cl imate
the acquisition route to growth is increasingly favored by corporate strategists.
Because of the increasing pressure to produce revenue and earnings and maintain
high growth rates, along with the international success of companies that have had a
merger or acquisition experience, a number of Greek companies decided to follow the
trend of their competitors and enter the M&A cycle. The first intense “wave” of M&As
in Greece took place in the period 1988-1999 and was, in fact, a systematic effort of
domestic companies to adapt more effectively to globalization conditions (Papadakis,
2002). The major factor that contributed to the increase of M&As in Greece was the
development of a Greek capital market, which allowed companies to invest great
amounts in domestic or international investments through mergers and acquisitions.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0142-5455.htm
ER
30,2
104
Received 16 October 2006
Revised 23 July 2007
Accepted 23 July 2007
Employee Relations
Vol. 30 No. 2, 2008
pp. 104-120
qEmerald Group Publishing Limited
0142-5455
DOI 10.1108/01425450810843311
At present, companies are looking for advice, best practices and general input based
on past experience as to what they can do best to generate, implement successful
M&As and enhance organisational effectiveness.
However, at the same time reality shows that many acquisitions (more than three
quarters of corporate combinations) fail to attain projected business results (Marks and
Mirvis, 1998). The compounding amount of studies indicating the financial failure of
mergers and acquisitions does not seem to affect the acquisition “madness”.
Poor and unclear business strategy, lack of due diligence, poorly managed integration,
unpredictable changes in the market, are some of the stated reasons for the failure of
acquisitions. However, the common denominator in the tactical implementation of such
strategic and financial plans is people. To overlook or underestimate this dimension is a
prescription for failed corporate expectation. Fortunately, an increasing number of both
academics and managers have come to recognize the importance and the costs associated
with the “forgotten” or “neglected” human factor.
Research in the behavioral stream has identified a wide range of potential responses
to the changes that an acquisition replies. The majority of studies mention the negative
effects of acquisitions on people, with only a few studies mentioning positive behaviors
(Dasborough et al., 2003; Marks and Mirvis, 2001). Moreover, in spite of the intense
research interest on the impact of M&As on human issues, most of the existing
research is based on the analysis of a single or a few cases studies.
Given that acquisitions may affect many work attitudes and behaviors of empl oyees
in the acquired firm, and in complex ways, we need to better understand the factors
affecting employee behaviors after an acquisition and their relative importance in
employee’s decisions on how to behave.
The present paper aims to fill this gap. Based on the loyalty, compliance, voice and
neglect model (LCVN; Bourantas and Nikandrou, 1998), the study examines the factors
affecting the course of action, employees in acquired firms choose to follow. The LCVN
model (see Figure 1) is based on the exit, voice, loyalty and neglect (EVLN) model,
which is a model examining employee reactions to dissatisfaction (Withey and Cooper,
1989).
All those who are involved with the investigation and design of an acquisition
should take into consideration the human capabilities of the company to be acquired.
Later on in the integration phase they should be able to understand human atti tudes
and behaviors to develop an effective approach and plan towards the human issues.
In the first part, the paper discusses the typology of employee behaviors in
acquisitions and develops the hypotheses to be tested. Next, the methodological
concerns of the study are examined. Then, the results are presented and the
implications for future research and practice are discussed.
Loyalty, compliance, voice and neglect (LCVN)
After an acquisition employees show a wide range of responses to the changes they
experience.
“Betrayal”, “grief”, “fight”, “anger”, “anxiety”, “stress” and “uncertainty” are some
of the most common words used in the literature to describe employee feelings after an
acquisition. Moreover, increasing negative employee behaviors, such as absenteeism,
unproductive work time, sabotage and increased error rates have been reported as a
common element in the failure of many acquisitions.
Employee
responses to
acquisitions
105
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