Organisational change and the psychological contract at a pharmaceutical company

Abstract

Orientation: Over a period of 6 years, a South African pharmaceutical company had been involved in several mergers and acquisitions. These changes had proved difficult for staff and staff attrition had risen.Research purpose: The objective of the study was to explore the perceptions of senior managers about the impact of change on the psychological contract. The sub-objectives were to determine what organisational factors contribute to changes in the psychological contract during periods of change, and the implications of the breach of the psychological contract for the company and its employees.Motivation for the study: As the company was set to embark on further mergers and acquisitions, the opinions of senior managers about how such changes should be addressed are important for the company.Research design, approach and method: A case study approach was used in this qualitative study. The population comprised 60 senior managers of whom 12 were purposefully selected for inclusion in the study. A semistructured interview schedule was used to capture the views of these managers and themes were extracted by means of content analysis.Main findings: Seven themes emerged which encapsulated the perceptions of senior managers about the impact of change on the psychological contract during periods of mergers and acquisitions – lack of communication, an absence of planning, lack of employee engagement, less than optimal human resources involvement, lack of preparation of the organisational culture and poor change management processes. These factors need to be addressed to strengthen the psychological contract of employees during periods of change.Practical/managerial implications: The study highlighted areas that leaders and managers of the company should consider when embarking on mergers and acquisitions if the psychological contract of employees is not to be negatively impacted.Contribution: While caution must be exercised in the generalisation of the findings, companies in the same industry or those in other industries could use the findings as points of departure for considering the elements that should be addressed in change initiatives.

The interplay of psychological contract breach, stress and job outcomes during organizational restructuring

“…Employees who accept the change also feel that their psychological contract has been replaced by a new one. Psychological contract breach can occur during periods of organizational change (Magano and Thomas, 2017). This study has reported that psychological contract breach is low in the case of the taken merger.…”

“…This study has reported that psychological contract breach is low in the case of the taken merger. Research has shown that lack of communication during mergers and acquisitions to be a major reason for the development of PCB (Magano and Thomas, 2017). Communication strategies need to be given importance to strengthen the psychological contract of employees during organizational change (Magano and Thomas, 2017).…”

“…Research has shown that lack of communication during mergers and acquisitions to be a major reason for the development of PCB (Magano and Thomas, 2017). Communication strategies need to be given importance to strengthen the psychological contract of employees during organizational change (Magano and Thomas, 2017). Informational justice can mitigate the adverse effect of breach on resistance to change, proving the importance of information during the anticipatory phase of change (Ruiter et al, 2016).…”

Employees versus implementing controlling to the business practice

“…On the one hand, they are afraid of excessive control as a result of the implementation of a new management tool, but on the other, they feel motivated to improve and increase their performance in a work environment where trust and respect prevail and commitment is rewarded with positive feedback from their direct supervisors. Thus, the success of implementation and management of changes depends mainly on the perception of the employees, while their reactions to changes differ due to personal experience, levels of motivation, socio-demographic characteristics, knowledge, values and behavioral models (Furxhi et al 2016;Magano & Thomas 2017). It is essential to perceive controlling not only in terms of its economic but also psychological aspects.…”

An Exploration of the Effects of Mergers and Acquisitions on the Psychological Contract of SME Senior Managers

“…Therefore, the global M&A market is referred to as the market for corporate control, which is the competition to ensure that whoever ultimately uses companies and their resources most successfully takes control of them (Jensen, 1996;Jensen & Ruback, 1983;Mueller-Stewens, 2016a). Business combinations, such as M&As, mean major and critical organisational changes for the organisations and employees concerned (Holland & Scullion, 2019;Joshi, Sanchez & Mudde, 2020;Magano & Thomas, 2017;Senior, Fearon, Mclaughlin & Manalsuren, 2017), especially those being acquired, due to the dominance and decision-making power of a larger company acquiring a smaller one. In people-driven professional services companies delivering knowledgeintensive services, including project management, planning and consulting, people are the most important factor in production, and executives have a unique role to play (Hitt, Bierman, Shimizu & Kochhar, 2001;Kaiser & Ringlstetter, 2011;Suseno & Pinnington, 2017).…”