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THE ROLE OF
CULTURE
AND
CULTURAL ATTRACTIVENESS
IN MERGERS AND ACQUISITIONS
MASTER THESIS
LUUK VAN DEN BOSCH - 10003084
JUNE 30, 2014
MSC BUSINESS STUDIES – LEADERSHIP & MANAGEMENT
UNIVERSITY OF AMSTERDAM
THESIS SUPERVISOR – KYRILL GOOSSEFF
ACKNOWLEDGEMENTS
First of all, I would like to thank my thesis supervisor Kyrill Goosseff. I would
like to thank you for your guidance and recommendations throughout the
process of writing my thesis. Without this help this thesis would not be the same
and I would not have been able to complete it successfully. I would also like to
thank all the interviewees who helped me by giving me their valuable time and
useful information and knowledge. The diversity of their answers and
backgrounds has helped me with both my thesis ad my personal ‘understanding’
of what mergers and acquisitions are and the consequences they can have for
organisational members. Last but not least I would like to thank my friends and
family for their support, guidance, and fruitful insights.
Luuk van den Bosch,
Amsterdam, June 2014.
Mergers and acquisitions (M&As) received a lot of research attention in the last two decades.
Their popularity has increased and they seem to be an important part of the modern business world. This can be seen by for example the magnitude of M&As, sometimes with values up to billions of dollars and hundreds of organisational members being involved, and the amount of M&As performed. In spite of their popularity, most of the M&As fail to achieve their objectives (50-83%). In research about M&As an agreement can be found about the different
motives for M&As and about threats and weaknesses for M&As. However, there also seems
to be ambiguity in M&A research, especially towards the role of organisational cultures in M&As. Another ambiguous concept is cultural attractiveness in M&As. It does not seem to be clear what role the perceptions of organisational members towards another organisational culture can play with regard to M&As. For that reason this study has a focus on the role of
organisational culture and the role of cultural attractiveness in M&As. Consequently, the
research question of ‘How is organisational culture in general and cultural
attractiveness in particular taken into account with regard to both the pre- and the post-mergers and acquisition phases?’ is been raised. Three concepts seem to be the most
important to answer this research question. These concepts are (1) the organisational culture, (2) the role of leadership, and (3) partner attractiveness.
In an attempt to gain more insight into these different concepts, data has been collected with the use of a qualitative research approach. This approach is chosen to be the best fit for this study, because culture and cultural aspects are known to be complicated and hard to objectify concepts. In response to the research questions, the findings indicate that organisational culture is a well-knownconcept that is taken into account in M&As. However, when culture is compared to strategy, the respondents indicate that strategy is always the most important. An M&A is performed because it promises certain strategic benefits and not because it promises cultural benefits (i.e. synergies on a cultural level). Respondents say they think it is hard to take both culture and cultural attractiveness into account before the M&A has started. They think cultural attractiveness occurs during or after an M&A, instead of before the M&A. Some of the respondents think the organisational culture can be changed and managed easily, which makes it of lesser significance to take into account in their due diligence. It seems like organisations marry before they even get to know each other. Some of the respondents say they ‘snog’ a little, but mostly they marry straight away. It might be important tot take culture into account in the pre-M&A phase.
1. INTRODUCTION... 01
2. LITERATURE REVIEW... 03
2.1. MERGERS AN ACQUISITIONS... 03 2.1.1. Mergers & acquisitions defined... 03
2.1.2. Motives for mergers & acquisitions... 04
2.1.3. Merger & acquisition failure... 07
2.1.4. Merger & acquisitions summarized... 10
2.2. (ORGANISATIONAL) CULTURE... 11
2.2.1. (Organisational) Culture defined... 11
2.2.2. Elements of organisational culture... 12
2.2.3. Organisational culture in more detail... 15
2.2.4. Organisational culture and M&As... 18
2.2.5. Organisational culture and M&A failure... 20
2.2.6. Organisational culture summarized... 23
2.3. LEADERSHIP... 24
2.3.1. Leadership defined... 24
2.3.2. Leadership and organisational culture... 25
2.3.3. Leadership and M&As... 26
2.3.4. Leadership summarized... 29
2.4. (ORGANISATIONAL) STRATEGY... 30
2.4.1. Organisational strategy defined... 30
2.4.2. Strategic environment and performance... 31
2.4.3. Strategy summarized... 32
2.5. PARTNER ATTRACTIVENESS... 33
2.5.1. Partner attractiveness as an M&A-phase... 33
2.5.2. Partner attractiveness summarized... 36
2.6. SUMMARY & CONCLUSION FROM LITERATURE REVIEW... 37 3. RESEARCH METHODS... 41
3.1. THEMES AND CONCEPTUAL MODEL... 41
3.2. RESEARCH APPROACH... 42
3.3. THE INTERVIEW PROCESS... 43
3.3.1. Purposeful Sampling... 43
3.3.2. Design of semi-structured interviews... 45
3.4. THE INTERVIEW PROCESS AND ANALYSIS... 47
4. RESULTS... 48
4.1. INDIVIDUAL CHARACTERISTICS AND GENERAL M&A REASONS... 48 4.2. ORGANISATIONAL CULTURE... 50 4.3. PARTNER ATTRACTIVENESS... 53
4.4. LEADERSHIP & CULTURE... 56
5. DISCUSSION AND CONCLUSION... 59
5.1. SUB QUESTION – OGRANISATIONAL CULTURE... 59
5.2. SUB QUESTION – CULTURAL ATTRACTIVENESS... 61
5.3. RESEARCH QUESTION... 62
5.4. LIMITATIONS... 64
APPENDIX 1: SEMI-STRUCTURED INTERVIEW QUESTIONS... 70 APPENDIX 2: SUMMARY OF INTERVIEW TRANSCRIPTS... 72 APPENDIX 3: QUOTATIONS PER TOPIC... 79
Herman Verburggen, who just retired as the dean of the Faculty of Economics and Business at the Vrije Unidersiteit Amsterdam, said: ‘A merger between the ‘University of Amsterdam (UvA)’ and the ‘Vrij Universiteit Amsterdam (VU)’ will go wrong because of the huge
cultural differences between the Universities. The UvA has always been slightly anarchistic and ‘cocky’, while the VU has always been more sound and humble. These differences will provide a collision.’ (Het Parool, 2014)
For months there have been rumours about a merger between the two universities. There are strategic benefits to carry on with the merger, because it can bring access to new resources and growth for both organisations. However, most of the mergers and acquisitions (henceforth called M&As) go wrong because organisations tend to forget the cultural aspects of ‘the other’ organisation and take their own cultures for granted. Although a lot of research has been done towards the role of culture on the outcomes of mergers and acquisitions, the results remain ambiguous. There are scholars who point out that cultural differences can make organisations stronger (Larsson & Risberg, 1998; Teerikangas &Very, 2006) and there are scholars who point out that cultural differences can be harmful for organisations and can make an M&A more difficult and complicated (Junni & Sarali, 2011; Risberg, 2011).
M&As are an important aspect of the modern business world and organisations want to achieve a synergy: an outcome that equals 1 + 1 = 3. These synergies can be financial (cost reduction), but they can also be non-financial (knowledge sharing, access to new customers) (Bena & Ly, 2013; Homberg, Rost & Osterloh, 2009). Despite these objectives there is evidence from previous M&A studies that a lot of M&As fail to achieve their objectives and that they do not create a post-M&A synergy. There are different reasons for this negative figure, which will be reviewed in this study. An important determinant for the success of M&As might be the role of culture and cultural attractiveness throughout the entire M&A.
An M&A is known to ‘grow’ through different phases. It starts with the ‘pre-M&A phase’, followed by the ‘closing period’ and the ‘post-M&A phase’ (Rottig, 2013). This study adds a phase to the M&A process: the ‘partner attractiveness phase’, which is prior to the ‘pre-M&A phase’ and which assumes that two organisations have perceptions towards each other (Sarala, 2010). Perceptions about the other organisations’ culture or strategy influence the M&A process. Because (most) M&As occur for strategic reasons and because their strategies are likely to be ‘attractive’ to each other, this study will focus on cultural
attractiveness (Sarala, 2010) of the M&A partners towards each other. Strategy plays a less
significant role in this study. This study looks at if and why, after many studies about organisational cultures causing errors in M&As, organisational leaders still ignore the
(important) role of organisational culture in M&As and at the degree to which partner attractiveness is taken into account.
Research question
How is culture in general and cultural attractiveness in particular taken into account with regard to both the pre- and the post-mergers and acquisition phases, and with what effects?
In order to answer the research question the following sub questions rise:
1) What is organisational culture and what do organisational/strategic decision makers in the field mean by organisational culture?
2) What is (cultural) attractiveness in M&A processes and what do organisational/strategic decision makers mean by cultural attractiveness?
Once these questions are explored they lead to a further answering of the research question. This answer should provice rich and fruitful insight that can help organisations to gain more knowledge about the importance of culture with regard to the different phases of an M&A, which on turn might lead to more successful M&As.
Research goal
The purpose of this study is to find out if and why organisational decision makers ‘forget’ about cultural aspects in the pre- an post-M&A phase. This study tries to answer the question whether or not culture and cultural attractiveness are part of the entire M&A process, pre- and post. This is done by a qualitative research design, using semi-structured interviews focused on respondents’ experiences with M&As and especially on the role of culture and cultural attractiveness in M&As. Because M&As are such a big part of ‘the business’ these days, more insight in the effects of culture in the pre- and post-M&A phase might be beneficial for organisations’ strategy and leadership. Most scholars think culture has to be taken into account in the post-M&A phase, but little is known about culture in the pre-M&A phase and about cultural attractiveness throughout M&As.
The organisation of the thesis
After the introduction is given, the relevant literature will be presented. In this review all the relevant theories and topics will be discussed and defined, like for example M&A, (organisational) culture, (cultural) attractiveness and leadership. In chapter 3 both the research methodology and strategy will be discussed and explained. Chapter 4 discussed the main findings and analyses from the interviews and chapter 5 will give conclusions to these findings and will answer the research question(s).
The following literature review will address the relevant topics for this thesis: mergers and acquisitions in general, (organisational) culture, leadership, (organisational) strategy, and partner attractiveness. All chapters are written from an M&A-perspective and help identify the relevant factors for this study.
2.1 MERGERS & ACQUISITIONS
Mergers and acquisitions (M&As) received a lot of research attention in the last two decades (Appelbaum et al., 2007), with topics ranging from the increase of M&As to topics appointing the complexity of these M&As (Rottig, 2013; Lin, Peng, Yang & Sun, 2009). Although there is some agreement about the motives for M&As, the factors that might determine the success of M&As, and about some pitfalls with regard to M&As, there is still some ambiguity in M&A research, especially towards the role of culture within M&As and towards the role of partner attractiveness in M&As.
2.1.1 MERGERS & ACQUISITIONS DEFINED
The terms mergers and acquisitions are frequently used together, interchangeably. This might imply that they represent the same thing and have the same meaning, but this is not entirely true. Some scholars use a broad definition of M&As, in which M&As may be (trans)actions between organisations ranging from purchase and sales activities, alliances, management buy-in and buy-out activities, changes buy-in the legal forms of organisations, or jobuy-int ventures to the formation of organisations (Picot, 2002:15). Such a broad definition of M&As might however be insufficient and lead to confusion: a more narrow and specific definition is important for M&A research (Nakamura, 2005). For that reason a more specific definition of M&As is offered, in which a distinction is made between mergers and acquisitions.
A merger can be seen as the combination of two separate organisations into approximately equal partners (Johnson, Whittington & Scholes, 2011). In mergers there are two equal organisations and both organisations are the same in terms of size and power (Sarala, 2010);
In an acquisition one organisation with power takes over the control of another organisation. In other words, one organisation takes the control over another organisation inattentive of the sizes of the organisations (Sarala, 2010). This can be done on a friendly base or on a hostile base (Johnson et al., 2011).
Although mergers and acquisitions have a different meaning, in which the first implies an equal relationship and the latter implies some kind of power difference within the relation, in practice they are used interchangeably and they are mostly termed as mergers and acquisitions (M&As). This study also uses both terms in an interchangeable way. Taking the general approach of M&A corresponds with the final outcome, which has a focus on two or more organisations that combine their business efforts. In this thesis no attempt is being made to separate merger transactions from acquisition transactions: M&As will be treated as a transaction between two organisations in which there are a range of elements that determine the success of an M&A. Taking the general approach does not mean that the differences between mergers and acquisitions are forgotten; there are differences and similarities and they are acknowledged, but this study does not make a specific distinction between the two.
2.1.2 MOTIVES FOR MERGERS & ACQUISITIONS
In recent times M&As are one of the most important strategic tools in the industry (Cai & Savillar, 2012; Johnson et al., 2011). They are so important because the environments of today’s organisations keep changing. To keep up with these changes, M&As can be used to compete with others (Galpin & Herndon, 2000). Although there are high risks with regard to M&As, they are dominant in strategic choices of some organisations. According to Galpin and Herndon (2000), the main reasons for M&As are that organisations aim to create a more coherent customer base, new and better distribution channels, better access to global markets, and knowledge sharing (see table 1.1). In other words, M&As can be a strategic tool for organisations when they bring some kind of synergy with them.
As shown in table 1.1 Johnson et al. (2011:330) distinguish three broad types of motives for M&As and these are strategic, financial, and managerial in nature. Strategic motives for M&As aim, for example, at extending the reach of organisations in terms of geography, products, or markets. Also the capabilities of organisations might be enhanced with the use of M&As, because instead of doing their own research and development (R&D), organisations can for example merge with organisations that have a relevant and further improved R&D department. This motive for M&As might be related to the reason Galpin and Hendon’s (2000) point out which is that M&As happen to gain better access to global markets and to share knowledge with others. Financial motives for M&As concern the optimal use of the financial resources of organisations. Reasons for M&As can be that they bring, for example, financial and tax efficiencies. The managerial motivations for M&As can be triggered by for example the personal ambitions of managers (Johnson et al., 2011). Managers
might gain more power when they conduct an M&A, because their organisation grows and their organisation might exist of more employees and resources. This power translates to more
status, which managers might also seek and get with M&As. A link that’s easily made when
talking about manager’s power is that some scholars say M&As are triggered by CEO’ ego (Nasar, Masih & Badugu, 2012). They want to grow because they think this suits their ego.
These managerial motives have some correspondence with the motives Lin et al. (2009) found in their study. According to them, M&As may be implemented because of relational and behavioural reasons such as the wish to build networks, institutions or learning experiences. M&As do not occur in isolation: they occur within a social and organisational context and this context plays an important role with regard to the motives for M&As (see table 1.1). Haleblian, Devers, McNamara, Carpenter, and Davison (2009) identify four aspects and motives for M&As:
value creation: gaining more power in the market, being able to work more efficient and effective, enriching their resources and by being able to redefine their workforce;
managerial self-interest: specific managerial behavors like for example power-seeking and higher compensation- or bonus-power-seeking;
environmental factors: reducing concerns and uncertainties about the environment;
firm characteristics: the experience of organisations with M&As and the position and strategy of organisations,
According to Kode, Ford and Sutherland (2003) there are different reasons for conducting M&As: synergistic and non-synergistic. Non-synergistic M&A reasons can be seen as
“non-core diversification transactions” whilst synergistic combinations “are done for reasons such as eliminating competition, securing a supply or distribution line or preventing a competitor from acquiring the target” (Kode et al., 2003:2). Synergistic M&As are more strategic in
nature and aim for example on speed and cost considerations or on the sharing of knowledge and technologies with each other.
The efficiency theory (as cited in Risberg, 2011:9) claims there are three kinds of synergies in M&As: financial-, operational- and managerial synergies:
Financial synergies aim to lower the cost of capital. By for example increasing the size of an organisation, the organisation might be able to lower costs of resources (because of for example mass production);
Operational synergies want to combine different operations or to share knowledge with others with the reason to offer for example more unique products or services; it has a focus on combining different assets;
Managerial synergies can bring advantages on managerial-level, such as in reducing monitoring cost or other actions that might benefit employee performance.
The different motives for M&As can be, in short, strategic, financial, managerial, relational, and environmental in nature. These motives are summarized in table 1.1.
AUTHORS MOTIVES FOR M&AS
Galpin and Herndon (2000) Strategic: Create a more coherent customer base, new and better distribution channels, better access to global markets, and more sharing of knowledge with others
Johnson et al. (2011, p.330) Strategic: More resources and knowledge
Financial: optimal use of the financial resources of organisations
Managerial: personal ambition and power
Lin (et al., 2009) Relational: network expanding, learning experiences
Kode et al. (2003) Strategic: globalisation leading to scale requirements; speed, cost, and knowledge sharing-considerations.
Dichotomy: Make a distinction between synergistic and non-synergistic reasons for M&As.
Halebian et al. (2009) Strategic: gain more market power
Firm characteristics: prior M&A experience Managerial: power and compensation seeking
Environmental factors: regulations, resource dependence Efficiency theory
(as cited in Risberg, 2011)
Financial: financial synergies aimed at lowering the cost of capital
Strategic: operational synergies with a focus on the combination of assets
Managerial: reduced monitoring and training costs
Brouthers et al. (1998) Financial: economies of scale, risk spreading, respond to market failures
Managerial: Increase sales, managerial challenge and prestige
Strategic: Creation of barriers to entry, access to materials
Nasir, Masih & Badugu (2012) Managerial: CEO-ego Table 1.1: Literature review on reasons for M&A
2.1.3 MERGER & ACQUISITION FAILURE
So far the reasons for the carryout out M&As seem to be clear. It can bring advantages on multiple levels, such as the financial and/or the strategic level. It is important that these ‘theoretical’ advantages are achieved in practice. The achievement of M&A objectives might be easier said than done, because somewhere in between 50 and 83% of the M&As do not seem to achieve their objectives and fail to realize the benefits envisioned by their stakeholders (e.g. Moeller & Schlingemann, 2005; King, Dalton, Daily & Covin, 2004; Marks & Marvis, 2001). There are several reasons for this high percentage of failures and some of these reasons will be reviewed here.
It seems to be clear that culture can be an important factor with regard to the success of M&As. According to Rottig (2010) there are no clear findings about why so many leaders in organisations seem unable to unite and bundle two different organisations. According to Rottig (2013) there are different scholars who have outlined certain missing points with regard to the different research streams in the M&A literature. These cultural issues with regard to M&A failure will be explained in chapter 2.2.
Before going into further detail about (non-cultural) reasons for the failure of M&As, what does the failure of M&As mean? According to Bruner (2009) an M&A fails when one of the following outcomes come up:
Destruction of market value, resulting in for example a decrease of share values; Financial instability, in which at least one of the parties is destabilized because of the
Impaired strategic position, reflected by for example a loss of market share or the abandonment of R&D programs;
Organisational weakness, which might be a result of changes in the leadership-style or the loss of talented employees;
Damaged reputation, because some acquisitions might not happen on voluntary base (hostile take-overs) or because the names of organisations might change;
Violation of ethical norms and laws, in which norms like honesty, equity, or duty are violated.
These outcomes of M&As can be the result of a range of ‘mistakes’ that happen with regard to M&As. According to King et al. (2004), there are inconsistent findings about these M&A mistakes, which are due to different performance measures. Those differences can make it hard to compare the performances of M&As. Bower (2001, as cited in Cooper & Frinkelstein, 2012) claims that it is very hard to compare M&As because of the big differences between M&As; they are unique and hard to compare to each other.
According to Palmetier, Miao and Fang (2006) problems for M&As might arise from the customer base of the two organisations. There is a possibility that customers will leave an organisation after an M&A, because the differences between the acquirer and the acquired organisation and their products/services may confuse customers and they might get uncertain about the organisation, it’s employees and the products of the organsiation. The way customers view an organisation might depend on variables that are not under the control of the organisation(s) and, therefore, might be hard to grasp for organisations.
Another reason for M&A failure might be that even if candidates within an M&A have some systematic procedures for sizing up a future partner, few of them follow these procedures during the M&A because they are under time pressures and have to deal with
internal policies and system. These policies and systems are immersed in the organisational
cultures, which can be incompatible. The next chapter will go into further detail about this (Marks & Mirvis, 1992). Also, after the M&A is finished, all employees have to deal with a lot of changes and adjustments. They might get, for example, a new manager, new peers, new ways of doing things, and new power bases. All these changes might cause problems or difficulties (Marks & Milvis, 1992). Fang, Frish and Schulzberg (2005) appoint three possible variables that might lead to M&A failure:
When there is a lack of trust between two M&A parties, they might be unable to work with each other.
When one or both parties underestimate the potential difficulties that might arise from an M&A, for example they might have underestimated the M&A process, which can lead to reluctance towards the M&A process because they get a lot of setbacks.
Thirdly it might be important for organisations to see what kind of history there might exist between the future M&A partners. When this history has some meaning, this can have negative consequences for the success of the M&A because changes of this success might be required.
Other variables that can be responsible for a negative outcome of M&As are for example when there is little flexibility among organisational members, when the organisational leaders have a bias in their strategy i.e. they only see the positive sides of the M&A, and when an M&A is conducted in ‘unsafe’ times (Burney, 2009). There are other variables that can have a negative influence on M&A performance, like for example time pressure (Sebenius, 1998), prior M&A experience (Sebenius, 1998), negotiation behaviours (Saaorin-Iborra, 2008), uncertainty under organisational members because change is required, and so forth. These variables are however beyond the scope of this study and will not be discussed further, because this study has a focus on organisational culture within M&As.
There is another reason why M&As can fail. This has to with the cultures of the two organisations. These cultures might be incompatible which results in a clash between the ‘two’ organisations. Many of the abovementioned variables that cause M&A failure are attributable to the organisational culture. Culture has its ‘roots’ in the entire organisation and has to be taken into account in M&As. The next chapter goes intro further detail about organisational culture.
2.1.4 M&A SUMMARIZED
In defining M&As, there is a differences between the term ‘merger’ and ‘acquisition’. Although this study does not make a clear distinction between them because the focus is on
transactions between two organisations, the research is aware of the differences between the
two. Overall, M&A motives can be summarized as a combination of strategic, financial, managerial, relational, and environmental reasons. All these different motives have different outcomes, depending on what synergies organisation might want to achieve. What ideal images organisational leader might have in mind when they begin an M&A, these images might not always turn out as ideal as they wanted. There are several reasons for M&A failure and one of them is a clash between organisational cultures. The next sub-chapter will define organisational culture and will go into further detail about some elements and characteristics of organisational culture(s).
‘Culture’ is a construct that originally comes from anthropology. Pettigrew (1979) is one of the first scholars who introduced the term culture within the context of an organisation: the organisational culture. According to Scheider, Erhart and Macey (2012) organisational culture has a relationship with elements of organisational performance like for example customer satisfaction, goal achievement, and top management reports. This chapter will give a definition of organisational culture, will appoint some elements of the concept, and it will show the relationship between organisational culture and M&As.
2.2.1 (ORGANISATIONAL) CULTURE DEFINED
Culture is omnipresent. Whether you look on global, national, or regional scale: culture is always there. Simmel (1921/1968, p. 11) was one of the first sociologists who wrote about culture. According to Simmel, people in an environment are influenced and sometimes threatened by the social structures of this environment. Simmel distinguishes two kinds of cultures: the objective culture and the individual culture.
The objective culture refers to all the things that are produced by people, for example science or music.
The individual culture consists of the capacity of individuals to produce, control, and absorb the elements of the objective culture.
In other words, the individual actors have the capacity to produce something, which might become ‘commonplace’ within a society or group of people and which becomes part of the objective culture. Culture can give people a way in which they can make sense of their environment. Culture can also be found within an organisation. According to Johnson et al. (2011:168) organisational culture can be seen as:
The taken-for-granted assumptions and behaviours that make sense to people
within the context of an organisation (Johnson et al., 2011:168).
Although this definition of culture might give some insight into what culture is, i.e. it has to do with people and the taken for granted assumptions, this definition is not sufficient because it is both too abstract and too simple. According to Schein (1992:3) an organisational culture can be seen as:
"A pattern of basic assumptions that a given group has invented, dicovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”.
In other words, an organisational culture is the result of a group within an organisation. It is very specific and group-bound. In the case of an M&A, two organisations become one. Those two organisations have at least some differences in their organisational cultures. They learned to cope with problems in a different way and they developed other assumptions that help them cope with internal integration. This has an impact on the M&A.
From the 1980s and on the topic of ‘organisational culture’ became more of interest with regard to research and managerial ‘guidelines’ (Chatman & Caldwell, 1991). It has been seen as an important variable for influencing employees’ commitment, satisfaction, productivity and longevity within the organization (Chatman & Caldwell, 1991). Employees seem to understand this culture, simply because they see it on an everyday base in words and behaviours and they have to adapt to it in order to ‘survive’. In that way it contributes to the way groups of people behave within an organisation and the way they respond to issues they face within an organisation. Culture influences the way in which people behave within an organisation and it therefore can have an important influence on the developments and changes of the strategy of organisations (Johnson et al., 2011:168). A more simple definition of organisational culture can be ‘the way we do things around here’ (Lundy and Cowling, 1996). The culture is ‘hidden’ in the typical characteristics of organisations and it has always roots in the past. Culture is divided into different elements like the basic values, the beliefs, the behaviours and the assumptions that are accepted as a part of the organisation (Martins & Terblanche, 2003). These cultural elements are central in the next part.
2.2.2 ELEMENTS OF ORGANISATIONAL CULTURE
According to Schein (1985) there are four aspects that are affected by the organisational culture (see figure 2.1). These aspects are influenced by an organsiational culture. The culture shapes them (Johnson et al., 2011, p.170):
values are the most easy to identify because they are often explicit, for example in the form of written ‘rules;
beliefs are more specific than values and are the way in which people think about issues the organisation faces. It is reflected in how people tell stories about their organisation and in organisational processes;
behaviors are the day-to-day ways in which an organisation operates, both in- and outsiders can see them;
taken-for-granted assumptions of an organisation are the most difficult to identify and explain. They can be seen as a set of assumptions within an organisation that are held in common and are taken for granted. They represent some kind of ‘cultural experience’ and in that way people and employees can make sense of the different circumstances they face: it gives common understanding to the people within an organisation.
Although it is important to have a good common understanding and perception within an organisation, or a strong organisational culture, there are some cases in which it can be ‘dangerous’. For example when change is needed or when organisations merge and have to adapt to other organisational cultures. An example of a situation in which change is needed is during M&As. M&As require flexibility and change, which might be difficult when organisations have very ‘strong’ developed values, beliefs, behaviors, and assumptions.
A more recent perspective on values and beliefs shows a different view on their meaning and definition. According to Eccles and Wigfield (2002) values can be seen as the basis for human’s behavior and motivation. They are very abstract and dynamic concepts that give humans a grasp on what they desire or what they seek to achieve. A value is something that a person ‘aspires’ or that has some kind of meaning to that person. Because people may have different values with even different definitions or meanings of that value, the concept of value can be very abstract and complicated. Whilst Schein (1985) sees values as the easiest to identify within an organisational culture, Eccles and Wigfield (2002) see values as very abstract and hard-to-identify variables within a culture and organisation. They also have a different view on what is meant with the concept ‘beliefs’. Beliefs are, according to Eccles and Wigfield (2002), some kind of judgements or statements people have about themselves and about their environment, usually grounded from generalizations; some things are good, some things are bad. These beliefs can influence the way in which people think and behave within a society or an organisation. If an employee believes that working hard and being open minded towards other employees is good practice, this employee might engage in behaviors that support these beliefs. Schein has a different view on beliefs and sees it as, for example,
the way in which people talk to each other. Overall it seems like the concepts and definitions of Schein (1985) are more practical, whilst the concepts of Eccles and Wigfield (2002) are more theoretical.
An organisational culture influences and consists of different elements that are all interwoven. The values and beliefs of employees influence the way in which work is done within an organisation. These values and beliefs form the behaviors within organisations and all these three elements contribute to form a ‘paradigm’, which can be seen as the taken for granted assumptions within the day-to-day life of an organisation. For an illustration of this theory see figure 2.2.1.
Figure 2.2.1: Elements of Organisational Culture (Schein, 1985) Organisational Culture Values Beliefs Behaviour Taken for granted assumptions
2.2.3 ORGANISATIONAL CULTURE IN MORE DETAIL
Culture can be of significant value for organisations. According to Johnson et al. (2011:174) the ‘taken for granted’-nature of organisational cultures has several implications for organisations. When organisations have a certain culture, this gives employees guidance in the way things get done in organisations. Like for example what kind of language is accepted, what kind of clothes should be worn, whether or not employees talk about personal things or not. Such cultural elements might reduce the need for constant supervision, because all employees take the way in which the organisation operates as taken for granted. This ‘benefit’ of culture can sometimes be a disadvantage, because organisations with a certain culture might be less able to adapt to change. It is hard to manage culture, because it is so difficult to
grasp culture as it is formed by the assumptions and beliefs of organisational members.
Because it is very difficult for organisations to 'observe', control or identify its own cultures it can be very complicated to manage or even change it (Johnson et al., 2011:175).
According to Cameron and Quinn (2010), organisations often fail to change their organisational culture, while in current times organisations might need to change in order to compete with other organisations. Organisations often fail with regard to changes in their strategy or management system and these failures might be explained by the neglect of the cultural aspects of the organisation (Cameron and Quinn, 2010). In other words: a certain organisational culture can be important for both the performance and the long-term strategy of organisations. Organisations need to have a ‘strong’ culture in order to survive.
The question arises about what a strong culture is. Culture is a construct that is hard to measure, which can make is difficult to explain what a ‘strong’ or ‘good’ culture is. According to Posner, Kouzes, and Schmidt (1985) a strong organisational culture can be seen as an organisational 'environment' in which employees have more shared values, which might lead to a shared feeling of commitment, self-confidence, and ethical behavior. The more organisational members share their values, the stronger an organistional culture is, so say Posern, Kouzes and Schmidt (1985)
According to Schneider, Erhart, and Macey (2012) there is a relation between a strong organisational culture and organisational performance. They say that an organisational culture makes it easier for employees to work together. Because a culture is hard to measure and to grasp, changing an organisational culture can be very hard. When change is required within an organisation, as is the case within an M&A, a change in the culture of the organisation might also be required and such a change can be difficult because of the ‘taken for granted’ nature of cultures.
Despite the fact that culture might be hard to grasp, capture, and manage, there are tools to analyze the culture of organisations. One of these tools is the ‘cultural web’ that shows the symbolic, physical and behavioral manifestations of a specific culture that works through the taking-for-granted assumptions of an organisation. A cultural web consists of different elements like the routines, symbols, rituals, power systems, organisational structures, stories, and control systems. All these elements contribute to form a ‘paradigm’, which is the core of an organisational culture and which can be seen as the taken-for-granted assumptions. The assumptions and the ‘collective experiences, can be found within this paradigm (Johnson et al., 2011:176).
It might be necessary to highlight that there is a difference between organisational and national cultures; they are separate concepts. Both these types of culture have their own implications, attitudinal and behavioral assumptions and processes (Stahl & Voigt, 2008). When two organisational cultures ought to become one (as is the case within an M&A), than all the different elements of the organisational cultures might be divergent towards each other (see figure 1.3). Organisational cultures might have a higher negative impact than national cultures with regard to M&As (Stahl & Voigt, 2008). This relationship has something to do with the cultural fit.
There are big differences between the cultures of organisations: it is hard, if not impossible, to find two organisations with the same culture. This has important implications for the cultural fit, because it is assumed that the greater the cultural fit, i.e. the more two organisations are the same, the greater the M&A success (see figure 1.3). The more the cultures of two organisations fit and are similar, the easier the post-acquisition integration will be and the more successful an M&A will be (Bauer & Matzler, 2014). This similarity has something to do with the way in which cultures can complement each other. It is not just being similar, it is the degree to which two organisational cultures have the ability to complement each other; whether or not they are ‘balanced’ (Bauer & Matzler, 2104). Figure 2.2.2 show the cultural fit model. The values, beliefs, behaviors, and assumptions all derive from on an organisational culture. These four elements can differ between organisations in M&As.
This cultural fit model has some overlap with the ‘cultural distance hypothesis’ from Hofstede (1980). According to this hypothesis there are certain costs, difficulties, and risks that are associated with cultural contacts and that increase when there are more differences between two organisations. However, although some theories and assumptions about culture and M&As might seem plausible, the results remain ambiguous. In other words, there is no clear answer towards the question whether cultural differences or similarities are good or bad for organisations in M&As. Some studies see a positive effect in cultural differences in M&As, while others see negative effects with regard to culture and M&As. Although most scholars would incline a negative relation between cultural differences in M&As, there is no clear understanding when they matter, under what conditions they matter, and how they might matter (Stahl & Voigt, 2008). According to Stahl and Voigt (2008) it depends on the degree to which organisations are related (relatedness) and what specific dimensions are separating the cultural differences.
It seems like organisations consider culture as a small part of M&As. The strategic benefits and synergies seem to be more important (Weber & Camerer, 2003). However, the opposite might be true: an organisational culture has very important implications for the way in which the things in organisations get done (Sarala, 2010; Schneider, Erhart & Macey,
Degree to which the cultures are similar
Figure 2.2.2: Cultural fit model
Organisational Culture Values Beliefs Behaviour Taken for granted assumptions Organisational Culture Values Beliefs Behaviou r Taken for granted assumptions
2013). It is important that the employees within an organisation look at the same direction and have the same priorities, understandings, and so forth. According to Weber and Camerer (2003) there are no studies conducted on the causal effects of cultural conflict within M&A. According to them the most evidence for a successful M&A is the degree to which organisations make similar products: previous studies look at similarities or differences that are related to culture, but that don’t explicitly address culture. This might have some overlap with partner attractiveness (Sarala, 2010), which will be pointed out later on.
In short, an organisational culture is an important aspect of an organisation. Many definitions of organisational culture exist, some more accurate than others. The definition in this study is deriver from Schein (1992:3) and sees the organisational culture as a pattern of a given group. This pattern is ‘evolved’ by the group trying to “cope with its problems of
external adaptation and internal integration and that have worked well enough to be considered valid, and therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”. The culture forms the values and behaviors of organisational members. Because of the culture an organisation has the ability to adapt to the environment. An M&A might be more successful when there are little cultural differences between two (future) partners, but there is no clear consensus about this (Stahl & Voigt, 2008). Whether or not cultural similarities are an important determinant for M&A success or not, it seems like organisational culture is always an important factor that has to be taken into account in M&As.
2.2.4 ORGANISATIONAL CULTURE AND M&AS
Although some scholars have argued that M&As can result in poor performance (Marks & Marvin, 2001; Hunt, 1990; Johnson et al., 2011, Teerikangas & Very, 2006), there are no clear findings about the role of culture with regard to both the domestic and international success of M&As. According to Weber (1996), the cultural differences between organisations can be very harmful for the success of M&As. On the other hand, it has been said that cultural differences create value for organisations and serve as an improvement with regard to M&As (Larsson & Risberg, 1998). According to Teerikangas and Very (2006), an important reason for the inconsistent findings might be that culture within M&As has a multilevel character, formed by different variables such as organisational, functional or professional cultures. In other words, culture consists of different layers and levels, which are interrelated and connected in a dynamic way. For that reason it is very important that within M&A research, the concepts like culture and strategy are very well defined and explained.
M&As are, despite their high failure rate, popular in the business field: M&As promise strategic benefits, such as knowledge sharing or reduced costs, between two organisations. The costly high failure rate of M&As might be mostly due to the cultural aspects that might be forgotten or undervalued within M&As. There are no clear findings about why so many leaders in M&As seem unable to unite and bundle two different organisations: it seems like they ‘forget’ about culture, because they are ‘blinded’ by strategic benefits. According to Rottig (2013) there are different scholars who have outlined certain missing points with regard to the different research streams in the M&A literature. There is a lack of a comprehensive and encompassing conceptual model that provides a complete image of the post-acquisition integration processes within M&As. According to Rottig (2013) such a model is needed because it can help leader integrate two different organisations.
According to Rottig (2013) there are three phases and approaches to M&As. First there is the ‘pre-M&A period’, which can also be seen as the contingency perspective. There are some factors that might determine the success or failure of an M&A, which is mostly investigated by using a ‘cultural fit’ model (Rottig, Reus & Tarba, 2013). The third phase is the ‘Post M&A-period’, also seen as the process perspective. This perspective is concerned with integration issues after an M&A. There is an important difference between the pre-M&A and the post-M&A period. The first tries to identify the differences and similarities between two organisations, whereas the latter tries to ‘blend’ two organisations and tries to make them compatible after an M&A. The two perspectives influence the second phase of an M&A, which is the ‘closing period’ (Rottig et al, 2013). According to Rottig et al. (2013) it is important to combine both perspectives (i.e. the contingency perspective and the process perspective) to create a better understanding of the phases of M&As. The different phases of M&As are illustrated in figure 2.2.3. The difference between them is, in short, whether or not organisations take into account the (cultural) differences and similarities before the M&A,
after the M&A, or whether they do both. This study asks the question whether or not culture
is taken into account in both the pre-M&A phase and the post-M&A phase.
According to Rottig et al. (2013) it is important to combine both a contingency and a process perspective, because this might reduce the negative effects of M&As. In other words, it is important to deal with cultural issues from day one, instead of waiting with the cultural issues until the post-M&A period. This might increase the opportunities for a more successful M&A (KPMG, 1999). There is a need for a conceptual model of M&As that is clearer and more logical (Rottig et al., 2013).
Figure 2.2.3: Three Phases of M&As according to Rottig et al. (2013)
2.2.5 ORGANISATIONAL CULTURE AND M&A FAILURE
It seems to be clear that culture is an important factor with regard to the success of M&As. According to Rottig (2010) there are no clear findings about why so many leaders in organisations seem unable to unite and bundle two different organisations. Within M&As it is important that there is some kind of fit between the two (former) organisational cultures. According to Rottig (2013) there are different scholars who have outlined certain missing points with regard to the different research streams in the M&A literature.
The most common problems that arise with regard to M&A failure have something to do with the integration between the acquiring and the acquired organisation (for an overview see table 2.2). For example, the changes that arise in the functional activities and the differences in structures between organisations can cause problems. Also, differences between the cultures between the acquired and the acquiring firm can cause problems. The integration after the acquisition, also termed post-acquisition integration, between the two firms can play an important role with regard to the success of an M&A (Sarala, 2010).
According to Rottig (2013), post-acquisition integration is a key performance determinant of the success of M&As. When organisations do not focus on cultural issues with regard to this integration, the chances of success strongly decreases (Rottig, 2013). The
pre-M&A Period
Contingency Perspective
''emphasizes pre-M&A conditions which determine the success or
failure of the M&A''.
Closing Period
Lack of Research
''If organizations are able to influence the perceptions about pre-M&A cultural contingencies oduring the
closing and post-M&A phases of these transactions, then pre-M&A organizational and national cultural differences may not be detrimental to,
and perhaps even be beneficial for, M&A performance if managed
effectively.''
post-M&A Period
Process Perspective
''From a process perspective, not pre- M&A cultural fit but the extent to which dissimilar cultures are made compatible after an M&A constitutes
the main determinant of M&A performance''
cultural differences or similarities between organisations might be the number one predictor of the success of M&As (Rottig, 2013). It is not just about differences: it is especially about the degree to which culture are compitable. Two ‘different’ cultures can have the ability to complement each other. In other words: differences can be positive. It is important that cultures are compatible.
In an experimental study Weber and Camerer (2003) showed that differences in the cultures of organisations can lead to decreased post-M&A performance. According to them this decreased performance is mostly due to failures in coordination. When two organisational cultures collide, it might be hard to give directions towards the desired goals of the organisation because the employees are busy with protecting ‘their’ cultural values. The probability of a cultural clash and coordination failures is underrated, which might explain why the failure rate of M&As is so high (Weber & Camerer, 2003). According to them it is possible that, when there is a lack of coordination and cultural ‘glue’ in M&As, the two former organisations form groups and create a ‘us’ versus ‘them’ feeling
According to King et al. (2004), who conducted a meta-analysis on the performance of M&As, there are four variables that are (the most) important with regard to the success of M&As. These variables are:
whether the acquisition was by a conglomerate firm, i.e. the degree to which the products or services of organisations are similar;
the degree of relatedness between the acquiring and the acquired firm, the method of payment, and prior M&A experience of the acquiring firm;
the method of payment;
prior M&A experience of the acquiring firm.
All these variables were considered to determine the success of M&As. However, King et al. (2014) concluded their research noting that those four variables did not determine M&A success alone: it is important to integrate non-financial variables into M&A research. These non-financial or cultural variables are important and influence M&A success.
Stahl and Mendenhall (2005) concur that non-financial variables can have a significant influence on the performance of organisations after an M&A. Nonfinancial variables can be for example the amount of communication between the organisations, the role of leader
by both firms, the cultural dynamics between organisations, and the social climate of both organisations.
In short, non-financial or cultural variables can be an important factor for the success of M&As. Such variables have an influence on the employees of organisations. However, it seems that managers forget about these non-financial variables (Sarala, 2010). This is important for explaining the high failure rate of M&As. Culture can be of significant
importance for M&A success (Sarala, 2010; Teerikangas & Very, 2006) and this might not be
taken into account sufficiently. Besides that, it seems like most scholars focus on culture in the post-M&A phase. It might be important to expand this view by taking culture into account in the pre-M&A phase as well.
In table 2.2 an overview is given with different scholars approaching the culture and M&A relationship as described before. These scholars all think that culture is important for the success of M&As and that culture has to be taken into account. However, they all focus on culture in the post-M&A period. It might be explanatory to look at organisational culture
throughout the entire M&A process, including both the pre- and post-M&A phase. This is the
central focus of this study: culture throughout the entire M&A process. Chapter 2.5 will go into further details about this.
AUTHORS CULTURE & M&A
Sarala (2010) For an M&A to be successful it is important to have a focus on the role of culture within the post-M&A integration process
Rottig (2013) For an M&A to be successful it is important to have a focus on the role of culture within the post-M&A integration process
Degree to which the organisations have (cultural) differences and similarities
King (et al., 2004) 5 variables important for M&A success:
- Whether the M&A is done by a conglomerate firm
- Relatedness of the organisations
- Method of payment
- Prior M&A experience
Stahl & Mendenhall (2005) Non-financial variables important, like for example:
- The role of leader figures
- Amount of communication between employees
- Social climate of both organisations
- Integration approach Table 2.2: M&A success
2.2.6 ORGANISATIONAL CULTURE SUMMARIZED
A lot of research has been done towards the concept of ‘organisational culture’. When the concept is defined the most important aspects seem to be that there is a certain group, which has to cope with certain problems or developments, and that shares their values and assumptions. An organisational culture can help organisational members: it gives a ‘common ground’ because the members learn to perceive, think, and feel in a way that suits the organisational culture and organisation. According to Schein (1985) an organisational culture
influences the values, behaviors, beliefs and assumptions of organisational members. The
behaviors are, for example, expressions of culture. On the other hand, these values, behaviors, beliefs and assumptions also form a culture. There is an interaction between the two. Because culture is an ambiguous and vague concept, it can be hard for organisational leaders to get a grip on culture. It can be hard to change or manage culture and this has important implications for M&As because in M&As two cultures have to become one and some (cultural) adjustments might be necessary.
The organisational culture is thus also an important factor that has to be taken into account in M&As. For some reason it seems like organisational leaders forget about culture in M&A, which can lead to a failure of the M&A. It has been shown that non-financial variables are important for M&A success, but still the M&A failure rate is between 50 and 83%. The questions arises whether or not organisational leaders are ‘blinded’ by strategic and financial benefits and underestimate the ‘power’ of organisational culture.
Now that organisational culture is defined and explained, it might be important to go into further detail about an important implementer and creator of the organisational culture: an organisational leader. The concept ‘leadership’ is an omnipresent subject in the modern business field on which has been conducted a lot of research. Leadership is known to be of significant importance for organisational performance (Kreitner & Cassidy, 2012). Not only has the importance of leadership been indicated, also there has evolved a focus on the more moral aspects of leadership and the importance of ‘charisma’ and ‘ethics’ in leadership. According to the ‘new leadership’-style, it is important that leaders have a vision and that they inspire loyalty and create emotional attachment of their employees (Bryman, 1992, as cited in Den Hartog & Koopman, 2001). Leadership can best contribute to the overall effectiveness of organisations and the actors within these organisations if the focus of leaders is not only on the business, but also on the human actors within this business (Godwyn & Gittell, 2012). Although organisational leaders can have a lot of responsibilities like for example creating organisational strategies, PR, or managing the different departments of their organsiation, this study has a focus on the relation between leadership and organisational culture.
2.3.1 LEADERSHIP DEFINED
Leadership can be seen as the competence of a person to motivate others to precede self-interest in the self-interest of a collective entity and vision of that entity (House & Shamir, 1993). Usually a distinction is made between a transactional and a transformational leadership style. Burns (1978, as cited in Nijstad, 2009) is one of the first scholars who acknowledges the necessity of good leadership in organisations. The distinction between transactional and transformational leadership can be seen in terms of what leaders and their followers offer one another. Transactional leaders have a focus on the exchange of resources that usually are centered on contingent rewards: employees are rewarded for the goals they obtain. When compared to transformational leadership, the transactional approach has a more short-term focus (Burns 1978, as cited in Judge & Piccolo, 2004). Transformational leaders try to offer their followers a purpose in their work. They focus on the intrinsic motivation of employees and have a long-term focus. A transformational leader tries to inspire and enthuse employees and explains the motives of certain actions to employees. In that way, transformational leadership is more transparent (Burns 1978, as cited in Judge & Piccolo, 2004). When a transformational leader decides to conduct an M&A, he or she will most likely explain his/her decision about this M&A towards the employees. Transformational leaders have the ability to change and manage cultures when they get support for their subordinates.
2.3.2 LEADERSHIP AND ORGANISATIONAL CULTURE
A big part of the organisational culture can be connected to the leader of the organisation. According to Schneider, Erhart and Macy (2013) the leader of an organisation is the source and founder of the assumptions and values that are present within an organisation’s culture. There has been done a lot of leader-culture oriented research, which came to several conclusions with regard to the relationship between the culture of an organisation and the leader of an organisation. For example, Ogbonna and Harris (2000) conclude that the impact of leadership on the performance of an organisation is mediated by the culture of an organisation, i.e. organisational culture can have an influence on the relationship between the leader of an organisation and the performance of an organisational. According to Hennesey (1998) the leadership style within an organisation can create an environment that is more or less likely to cope with organisational change, and Brooks (1996) concludes his research appointing that a leader can use his or her knowledge of the organisational culture to affect changes in their organisation. Also, an organisational culture can have an impact on the emergence of different leadership styles (Pillai & Meindl, 1998), i.e. the culture of an organisation influences the leader of an organisation. It is important for a leader to have a clear vision, an image that portrays an ideal future for an organisation, of how he or she sees an organisational culture (Awamleh &Gardner, 1999:347). Leaders have to communicate their vision towards their followers in order to realize the vision.
According to Schein (2010) there are two mechanisms by which leaders can influence their subordinates with regard to the organisational culture; primary and secondary embedding mechanisms. These (cultural) embedding mechanism can have an impact on the culture within an organisation. They can be useful for the organisation because it can help employees cope with their work environment, they give employees guidance with regard to which work related behaviors and values are most successful within their organisation (Schein, 2010):
Primary embedding mechanisms: what leaders can do to articulate their values. For example the way of recruitment and selection, the allocation of rewards and promotions, and the way in which leader react to critical incidents and organisational crises.
Secondary embedding mechanisms: what leaders can do to reinforce their values. For example the way they design and structure the organisation, rituals of the organisation, or for example stories about important events or important people.
According to Schein (2010) an organisational culture is created and evolved by the leaders of organisations. The organisational culture and the leaders of an organisation can be seen as the ‘intangible capital’ of an organisation. The culture can be seen as the result of the prevailing leadership style. It is not just the policy that gives leaders their cultural influence; it is also their exemplary behavior. Leaders have the ability to create valuable networks within their organisation and they can create an ‘esprit de corps’; a certain group morale. The attitudes and behaviors of leaders are continuously observed and taken as an example. The type of leaders within an organisation can be a decisive factor with regard to the way in which an organisation is managed. According to Harrison (1972) four types of organisational cultures can be distinguished, each with different leadership styles:
power culture, in which there is one clear leader. A certain culture can be mostly found within family businesses. Behaviors like loyalty and obedience are valued; role culture, in which there is a high degree of bureaucracy, a clear job separation,
and a lot of rules, procedures and systems that guide the behaviors of employees; task culture, in which employees are more likely to have a voice. The central focus
within a task culture is achieving the goals. A leader can be seen as a coach that helps achieving these goals;
person culture that has a focus on the personal development of employees. Employees have their own interests and are able to develop themselves and leader guide them with this process.
2.3.3 LEADERSHIP AND M&AS
According to Sitkin and Pablo (2005) the role of leadership in M&As has been neglected for a long time. For that reason they applied an already existing model of leadership towards an M&A environment. This model (Sitkin, Lind & Long, 2001) distinguishes six dimensions of effective leadership, all with their own advantages and disadvantages:
a personal leadership style raises loyalty. A leader with a personal style explains who (s)he is, what his of her values are and how he or she likes the work to be done;
relational leadership style creates space for trust and justice and has a focus on connecting employees with each other;
contextual leadership helps to build fellowship and communication and it has a strong focus on effectiveness;
inspirational leadership has a focus on the inspirations of employees, it tries to enhance the self-esteem of employees and it gives employees a feeling of enthusiasm and confidence.
a supportive leader has as focus on intrinsic motivation and tries to make employees aware of the organisation’s performance. A supportive leader makes sure that employees have the knowledge, skills, and abilities to cope with organisational challenges.
stewardship has a focus on employees’ own responsibility and it tries to make employees feel like their work is their own responsibility .
These dimensions of leadership (personal, relational, contextual, inspirational, supportive, and stewardship) can be applied within an ‘M&A environment’ (Sitkin & Pablo, 2005). All these dimensions have a different focus on how to manage employees during M&As. A personal leadership style, in which subordinates know who their leader is and what values (s)he adheres, can be very effective because the leader can become an anchor. When subordinates are insecure about their role in the organisation, a shared personal leader might become an important symbol for them and they might feel more secure (Sitkin & Pablo, 2005).
A relational leadership style might be important within M&As, because it can coach employees towards creating new social connections by focusing on culture and a common language (Ashkenas & Francis, 2000). M&As are complex and for that reason a contextual leader might help to function as the ‘architect’ of both the structure and the culture of the (new) organisation. An inspirational leadership style also has benefits for M&As. When leaders can motivate their employees to enhance ‘higher’ goals and can create a feeling that these higher goals are achievable for the organisation, the organisation might actually be able to achieve these goals. Another benefit of inspirational leadership can be that employees might become enthusiastic and confident about the M&A. A supportive leader can be efficient during an M&A because it ensures that employees are aware of how the M&A process is developing and a supportive leader makes sure his or her employees have the abilities to make the M&A as successful as possible. The last dimension, stewardship, can be useful because it creates a shared set of (new) organisational values and history (Sitkin & Pablo, 2005).
Next to different leadership styles, leaders have certain roles to fulfill, especially during M&As. According to Gadiesh, Buckanan, Daniell, and Ormistion (2002) leaders play five essential roles in every M&A: visionary, cheerleader, closer, captain, and crusador:
Visionary, leaders have to be clear about why the M&A is performed. They have to communicate the strategic vision and and the expectation;
Cheerleader, leaders have to enthuse the organisation(s) and have to confront the organisation with their fears and uncertainties;
Closer, leaders have to ‘close the deal’;
Captain, leaders have to be on top of the changes by managing the integration of
both organisations;
Crusader, this is seen as the most challenging role because leaders have to crusade for the new organisation.
A leader can play a significant role during an M&A, and it can mark the degree to which employees are having positive attitudes towards the M&A and are willing to cooperate. According to Perrin (2003) a leader is one of the most important drivers for employee engagement. Especially when an organisation changes, with periods of disruptions and uncertainty, a leader is an important coach and pillar of guidance for employees. The way leaders behave during an M&A has a significant impact on the way employees behave. When employees have positive perceptions of their leader during an M&A, they might be more willing to cooperate with the M&A and to embrace the changes that come with it.
