Employee Sensemaking in Mergers: How Deal Characteristics Shape Employee Attitudes

Abstract

This experimental study examines how employees make sense of a merger announcement and investigates the relationship between deal characteristics (culture clash potential, degree of integration, position in deal structure) and employee attitudes. A sensemaking mechanism is proposed and tested on graduate students subjected to merger scenarios. As employees make sense of the merger, higher perceived uncertainty is associated with greater dysfunctional outcomes. Although perceived uncertainty mediates the effect of perceived cultural similarity on employee attitudes, this is not so for perceived power. An employee's position in the deal structure strongly influences perceived power, but unexpectedly, higher perceived power does not reduce uncertainty. Still, greater perceived power is directly associated with lower intention to leave and greater satisfaction. Although the degree of integration did not affect any of the outcome variables directly, complex interaction effects were found. Complementary qualitative data analysis sheds light on how employees make sense of the deal.

Group processes, intergroup relations and human resource practices in mergers and acquisitions post-combination: A critical review and research agenda for the future

“…Higher pre-merger organizational partner status usually stems from comparison dimensions before merger begins such as market share, organizational size, or reputation (Marmenout, 2010) and most likely defines the character of the merger post-integration. As such, higher pre-merger organizational status employees are anticipated to have a more favorable (or positive) organizational identity post-merger due to increased sense of continuity from the pre-to the postmerger entity, as they are more likely to feel that their pre-merger group is powerfully represented in the newly merged organization (Hornsey and Hogg, 2002).…”

The Insider Perspective: Three Emic Studies About Sensemaking and Organizational Change Over Time

“…Three studies used a mixed method approach as they included both quantitative and qualitative data analysis. These three papers included work by Bartunek Rousseau, Rudolph and DePalma (2006) who used regression analysis to investigate the relationship between change recipients' participation in change implementation and their assessments of the change impacts, Marmenout (2010) who employed structural equation modeling to examine the impact of merger deal characteristics on employee attitudes towards change, and Gioia and Thomas (1996) who undertook a 2-phase (one qualitative, one quantitative) study to investigate top management team sensemaking in higher education institutions. Only one study (Chaudhry, Coyle-Shapiro, & Wayne, 2011) employed an exclusively quantitative approach.…”

“…-which necessitates looking at a process over time (Weick et al, 2005). The remaining four quantitative (n=1) and mixed methods (n=3) studies employed variance based approaches (Bartunek et al, 2006;Chaudhry et al, 2011;Marmenout, 2010) or a combination of variance and process based approaches (Gioia & Thomas, 1996) to study organizational change. Gioia and Thomas's (1996) mixed method study involved two studies.…”

“…This is likely related to the fact that most studies employed multiple techniques for data collection. One study (Marmenout, 2010), utilized a sample of students. Although the extant research varies with respect to sample homogeneity, studies often focus exclusively on the sensemaking of managers (i.e.…”

“…38% Balogun, 2003Balogun, , 2006Balogun & Johnson, 2003Bean & Hamilton, 2006;Brown & Humphreys, 2003;Balogun et al, 2015;Gioia et al, 1994;Gioia & Thomas, 1996;Heracleous & Barrett, 2001;Hernes et al, 2015;Landau & Drori, 2008;Lockett et al, 2014;Kezar, 2013;Stensaker et al, 2008;Stensaker & Falkenberg, 2007;Van der heijden et al, 2012;Weber & Manning, 2001  Different people interviewed each time 1 2% Landau & Drori, 2008  Unclear if different or same people 6 13% Heracleous & Barrett, 2001;Lockett et al, 2014;Kezar, 2013;Stensaker et al, 2008;Stensaker & Falkenberg, 2007 Balogun, 2003Balogun, , 2006Balogun et al, 2015;Balogun & Johnson, 2003Bean & Hamilton, 2006;Brown, & Humphreys, 2003;Gioia & Thomas, 1996;Gioia et al, 1994;Hernes et al, 2015;Weber & Manning, 2001 *n=47 because this table includes only the 47 out of the 50 empirical papers reviewed that were process oriented. Bartunek et al (2006), Chaudhry et al (2011) and Marmenout (2010) are not included ...…”