The effect of leadership style on talent retention during Merger and Acquisition integration: evidence from China

Abstract

Leadership and talent retention are critical HR-related components in post-merger and acquisition (M&A) integration, but the extent to which these factors interact with each other and eventually contribute to the success of post-M&A integration is under-explored. The present study investigates the effect of leadership styles on talent retention strategies and on the effectiveness of post-M&A integration in a Chinese context. Based on in-depth examination of an M&A case study, we propose that an authoritative, coaching, task-focused, and relationship-focused approach has a positive influence on talent retention and effective post-M&A integration in a Chinese context. As far as talent retention strategies are concerned, authoritative leaders use communication, whereas leaders adopting a coaching style use an incentive structure to positively influence talent retention. Furthermore, task-focused leaders use position and performance in order to identify and retain talented employees. By contrast, relationship-focused leaders emphasize the guanxi network, communication, and an incentive structure in their strategies of talent retention.

The impact of leadership on organizational ambidexterity and employee psychological safety in the global acquisitions of emerging market multinationals

“…In fact successful integration of mergers hinges on a competent leaderships style that facilitate expectations, cultural adjustment, talent retention and employees' psychological safety during M&As integration stage (Kavanagh & Ashkanash, 2006;Nemanich & Vera, 2009;Waldman & Javidan, 2009;Zhang et al, 2015;Rao-Nicholson et al, 2016). The leadership style alternatively referred to as charismatic (Conger & Kanungo, 1998;Waldman & Yammarino, 1999), transformational (Bass, 1985;Pawar & Eastman, 1997;Judge & Piccolo, 2004;Nemanich & Keller, 2007;Vasilaki, 2011a), visionary (Sashkin, 1988) or inspirational, will be examined along with the transactional and laissez faire ones for their impact on EMM cross-border acquisitions; for simplicity, we will refer to the main style under study as 'charismatic'.…”

“…In their meta-analysis review of research conducted over 25 years, Gang Wang et al (2011) found that charismatic leadership has higher impact on contextual performance than it has on task performance. Leadership style has been noted to play an important role in the retention of talent and improving post M&As integration in the context of China (e.g., Zhang et al, 2015). Thus, the adoption of a charismatic leadership style during an acquisition's post-integration stage can potentially reduce target company employee turnover rates.…”

CULTURAL DUE DILIGENCE IN M&A. IMPORTANCE OF SOFT RISKS FACTORS

“…One of the enduring paradoxes in M&A activity has been the propensity of corporations and executives to engage in M&As despite consistent evidence that post-merger performance of acquiring firms is disappointing [Zhang et al, 2014]. A possible explanation to this paradox is that existing knowledge on M&As provides a limited and insufficient understanding of different parts of this important phenomenon, although the high emphasis on surveys clearly indicates a preference in gaining more pragmatic knowledge of strategic alliance activity by studying firms in realistic as opposed to simulated contexts [for a review, see Gomes, Barnes & Mahmood, 2016].…”

The moderating role of transformational leadership on HR practices in M&A integration

“…It is suggested that in order to maintain positive employee behavior in the new organization, human resource management practices must be implemented (Bartels et al 2006;De Wever et al 2005;Maguire and Phillips 2008). Prior research indicated that leadership style has a signific a nt effect on talent retention during post-M&A integration (Zhang et al 2015). Therefore, it is also important to consider the role that leaders play in moderating the impact of these HR practices.…”

“…In general, the impact of M&A on individuals and groups may differ widely between various human resource management practices (Budhwar, Varma, Katou, and Narayan, 2009;Sarala, Junni, Cooper, and Tarba, 2014;Weber and Tarba, 2010), and can be influenced by nationa l cultural distance and corporate culture differences (Weber, Tarba, and Reichel, 2009;, strategic agility (Junni, Sarala, Tarba, and Weber, 2015), knowledge sharing during postmerger integration (Aklamanu, Degbey, and Tarba, 2015), and talent retention (Stokes, Liu, Smith, Leidner, Moore, and Rowland, 2015;Zhang, Ahammad, Tarba, Cooper, Glaister, and Wang, 2015).…”