Thesis proposal
MSc Business Studies: International Management
THE IMPACT OF MANAGEMENT COMMUNICATION ON
EMPLOYEES TRUST TOWARDS MANAGMENT AND
ORGANIZATIONAL COMMITMENT IN
POST- ACQUISTION PROCESS
Sayed Asif Shah Gilani 10396470 Amsterdam Business School University of Amsterdam Supervisor: Suzana Rodrigues
Abstract ………..5
1 Introduction……….. ….6
2 Literature review ………8
2.1 Organizational commitment………8
2.2 Organizational commitment in merger and acquisition………...9
2.3 Trust towards management………...10
2.4 Trust towards Management during merger and acquisition………..11
2.5 Communication………...12
2.6 Management communication during merger and acquisition……...13
2.7 literature gap and research question………..14
3 Theoretical framework and Hypotheses development……….16
3.1 Organizational commitment and management communication……...16
3.2 Trust towards management and management communication…………..18
3.3 Management communication and organizational commitment: Mediating role of towards management………...19
4 Methodology ……….22
4.1 Research design and data collection………...22
4.2 Interview results……….25
4.3 Results and analysis of quantitative data………...28
4.3a Survey data analysis method………26
4.4 Measure and validation………...30
4.6 Common method bias ………..33
5 Analysis and results………34
5.1 Mean, Standard Deviation, Skewness and correlation………34
5.2 Analytical strategy and results………...37
5.2.1 Mediation tests……….37
6 Discussion and implications………...40
6.1 Management communication and organizational commitment………40
6.2 Management communication and trust towards management……...41
6.3 Management communication, trust towards management and And organizational commitment………...42
6.4 Managerial implications………..…...43
7 Limitation and Future research………..…..45
8 Conclusions………..………47
9 Acknowledgements………...48
Appendix A
1. Abstract
Despite growing interest on the issues of top management communication, trust towards
management and employees organizational commitment the interplay between all these three
variables is lacking. This study attempts to address this gap. The study was conducted to examine
the impact of management communication on trust towards management and organizational
commitment in post- acquisition process. It draws on survey data involving 149 employees of
both parent company (company HQ) and subsidiary (company X) who experienced the change
processes which included managers, co- workers, technician, analyst and engineers.
Regression analysis revealed that management communication in post- acquisition process is
significantly correlated with trust towards management and employees organizational
commitment. The relation between management communication and trust towards management
was the strongest, showing significant relation for trust towards management. While the
relationship between management communication and organizational commitment was relatively
weak. The results show that effective communication after post- acquisition process with new
subsidiary is related with trust towards management and employees organizational commitment
In particular, the study shows that trust towards management play a role of mediator between
management communication and employees organizational commitment. Similarly trust towards
management and organizational commitment does not just happen; they are forged and
implication, future research and conclusion are elaborated.
2. Introduction
In the current global economy, firms constantly need to think of (new) ways to do business in
order to stay competitive. Large multinationals are responsible for a big part of global economic
activity. These multinationals works together with local firms and often merge with or acquire
these local firms. They do this because they see great benefits like accessing new operational
excellence, a larger market share and a diversification of their product/service mix. However, by
merging with or acquiring other firms, a lot of interventions must be taken into account to let the
process be successful. As Disney and Pixar did a good job and seemed like a match made in
heaven. But dozens of examples of doomed mergers and acquisitions exist as well; a good one is
the merger of Daimler Benz with U.S auto maker Chrysler in 1998 for $ 37 billion. The logic
was to create a Trans – Atlantic car making powerhouse that would dominate the entire market
but there was a wide culture and communication gap between the two companies and German
culture became more dominate which lowered employees commitment and satisfaction level at
Chrysler dropped off the map. And in 2007 Daimler sold Chrysler to Cerberus capital
management.
These success and failure stories show factors that affect the performance of a merger or an
acquisition. So, you might think that because already a lot of failures have been made, the chance
merger or acquisition are known. But why do mergers and acquisitions still fail? Probably
because managers and employees constantly face new situations, that call for different
interventions. So an important condition for a merger or acquisition to be successful is that
employees know how to handle in new and unfamiliar situations, without being resistant to
change. In the past a lot of research is already done on the financial and strategically parts of a
merger/acquisition, but human side still seems to be often mismanaged which result in negative
employee perceptions of the change processes and the outcomes. This negative outcome of employee’s attitudes toward change processes will often lead to an unsuccessful merger or acquisition. More research is needed in order to help the top management team of merger and
acquisition to implement changes that align the human strategy with the overall change in the
organizational strategy. Therefore our study on the human side will contribute to the existing
knowledge in a way that will help the management team to make a merger or an acquisition more
successful by realizing the strength that employees have over the outcomes of an organizational
change process. So it is really important to dealt with factors that are mostly to have a very
strong impact on the employees during and after organizational change, before it is too late. In
this study we will examine the impact of managerial communication on employee attitudes such
as, organizational commitment and trust. Because no specific studies look at the managerial
communication in post-acquisition process, and how they are related to employees attitudes. So
it would be really interesting to examine the managerial communication process during merger and acquisition and relate it with employees’ organizational commitment, and trust towards management.
2. Literature Review
2.1 Organizational Commitment
Organizational commitment is usually define as “the relative strength of an individual’s
identification with and their involvement in a particular organization” (Mowday , porter & steers,
1982). And can be identified into three components of commitment 1) a strong belief in and acceptance of organization’s goal and values 2) willingness to exert considerable effort on behalf of organization 3) a strong intend or a desire to remain employed by the organization (Mowday
et al; 1982). Hence organizational commitment is important factor and can be related with
individual’s beliefs, opinions and course of action. As describe by O’Reilly and Chatman (1986)
commitment is a psychological attachment with organization. Which tend an individual to internalize organization’s goal and involve himself in a discretionary behavior voluntarily. Organization needs employees who engage in some extra ordinary behavior, which is enhanced
by a very strong commitment. For every organization it is important to have committed
employees who believe in organizational goals and values during merger and acquisition, and
those employees are willing to put some considerable effort on behalf of organization.
Organizational commitment has important ramifications for both the individuals and as whole for
Organizational commitment is important during the change process because it balance the energy
employees divide between their personal and organizational goals. For merger and acquisition there is a need to modify employees’ behavior in order for the successful change to take place. So one can argue that only committed employees are likely to engage in behavior that is required
during organizational change process. Organizational commitment plays a vital and important
role in the success and failure of merger and acquisition. Evidence from various researches
suggests that organizational commitment decrease during transformational change process. There
are so many reasons for this and will be discuss next.
2.2 Organizational Commitment in Merger and Acquisition
Several studies have shown that organizational commitment is negatively associated with merger
and acquisition. Ashford, Lee and Bobko (1989) found empirically that changes in an
organization can increase perceived job insecurity which in turn decease employees
organizational commitment. Bouono (1985) in their study of merger of two banks show that the
experienced lack of proper communication between the two banks raised negative feeling among
employees towards the merger. These feeling in turn negatively affect employees’ organizational
commitment and their level of satisfaction. Another noticeable study conducted by Davy ,
Kinicki, Scheck and Kilroy (1988) found that there was a decrease in organizational commitment
level of employees after acquisition process because of the uncertainty surrounding a company’s
acquisition. The employees start feeling that they had no more control over the acquisition and
their job status. Davy et al (1989) argue that as employees commitment decreases, the intention
which can distract them from their current job. So it seems that there is a direct connection
between the change process and employees attitudes like organizational commitment, job
satisfaction and trust towards management. Another important employee related attitude that is
widely examined when talking about the change process is employee trust towards management
and will be discussing next.
2.3 Trust towards Management
Mayer (1995) define trust as the willingness of a party to be vulnerable to the actions of another
party based on the expectation that the other will perform a particular action important to the
trustor (the party to be trusted), irrespective of the ability to monitor or control that other party. For any organization trust is consider to be “ the super glue “ that bonds people to the organization as well as to each other. The vulnerability factor in trust implies that there is
something important to be lost which convince the trustor to take a chance. Enough confidence
in target motives and future action is required so that the trustor is willing to trust the other party
(trustee) in a risky situation.
Fukuyama (1995) sees trust as the expectations of honest and collaborative behavior which is
based upon shared norms, values and attitudes. So if the employees and organization share
similar values with each other then it will have a positive impact on trust. When one member of
an organization see someone who acts in the best interest of the trustor and because of those
Dirks and Skarlicki (2004) explain in detail that risk and vulnerability affected by a follower’s perception of his or her management character in a hierarchical relationship. When a follower
believes their management has some level of integrity, fairness, competence and trustworthiness,
then they fell more comfortable and engaging in behaviors that lead them towards risk
2.4 Trust towards Management during Merger and Acquisition
After post-acquisition process employees often feel that something is lost, which can be their
freedom, autonomy or the everyday routine situation which they enjoy in old days. Most of their
coworker start looking to find another job and might decide to leave their organization. Trust is a
critical success factor during merger and acquisition process because the successful integration
process is only possible if organizational employees trust their organization management (Buono
& Bowditch, 1989) therefore the acquiring firm focus more on the trust factor after post-merger
integration process. Because if the level of trust is low among employees and organization the
success rate of change process is very low. Costigan & Berman, (1998) argue that a leader can
bring a successful change only when their working staffs who reflect organizational values and
aspirations trust them. As because of change process in organization distrust and tension are
created as indicated by Appelbaum (2000) that after post-merger integration stage, employees
face many adjustment problems such as fear of possible job loss, uncertainty about their new
employees evaluate which is based important to their organization based on the management’s behavior and simply modify their attitude accordingly.
A variable which affect organizational trust is the system trust, which is the relationship between
organizational employees and their top management (Luhmann, 1979). The role of top
management is very crucial for the success of the merger and acquisition (Beer & Nohria, 2000)
because the top management is responsible to implement changes and strategies based on their
objectives after post-acquisition process. Employees wait and see all the process and then decide
whether to trust top management or not (Costigan el al; 1998).
The above discussion about organizational commitment and trust towards management is
affected highly by organizational change process (M&A).
Another important factor which is directly related with organizational commitment and trust
towards management is managerial communication process during merger and acquisition, and
will be discuss next.
2.5 Communication
Communication is a common word use everywhere at home, office and in free time. According to Juholin (2006) the word “communicare” Latin word means to do together. That is a fair description for communication. Kitche and Daly (2002) claim that supportive communication is
the most important factor for the existence of organization because with the help of supportive
change occurs in organization most employees are cope with stress and insecurity which directly
influence their level of commitment and trust. One important factor that can help employees to
overcome stress and insecurity are managerial communication which are the explanation behind
the changes and implementation procedures during change process occurs when there is a lot of
uncertainty and need for information. When employees sense the communication of management
practices, the level of uncertainty and anxiety reduced and their negative reaction change into a
more positive reaction.
Through proper communication, manager can build mutual understanding, display of
consideration and a more concern, which could directly enhance employee trust and their
organizational commitment (Bass & Avolio, 1994). Thus providing clear communication and
explanation can enhance the fairness among employees which in turn positively affect employees’ commitment (Brockner & Wiesenfield, 1993)
2.6 Management Communication during Merger and Acquisition
Communication is the key tool within merger and acquisition process (Kanter, Stein & Jick,
1992). Communication with employees of the acquired firm has been related to the uncertainty
that employees experience after finalizing the deal communication by top management with the
acquired firm is directly related with uncertainty. Schweiger and DeNisi (1991) report that
management of acquiring firm. Perry (1986) found that employees feel satisfy when the acquiring company’s management were telling them as much as they could and that made their level of uncertainty to at least tolerable. Communication with employees minimizes acquired
employees native reactions. Honest and useful communication can affect the way employees
perceive the integrity of new top management (Schweiger & Walsh, 1990).
Many studies have examine that providing clear communication and information after
post-acquisition process enhances the perceived procedural justice which in turn effect employees
commitment and trust (Brockner & Wiesenfield, 1993). Research suggest that the
communication variable is the most essential factor during merger and acquisition and play a
vital role in the success and failure of merger and acquisition of two culturally different
organizations ( Appelbaum, Gandell, Jobin, Yortis & Proper, 2000). For management,
communication plays a big role to boost up employees moral and to keep up their commitment
and trust level high.
2.7 Literature gap and Research Question
Most of the research trying to understand the human side of merger and acquisition process and
examine the factors such as communication during merger and acquisition (Melanie, 2012),
cultural similarity of the two organizations, autonomy removal (Webar, 1996) and sources of
stress (Cooper & Cartwlight, 1993). The interest of some studies is to measure organizational
However, no specific studies look at the communication level after post-acquisition process and how it is related with employees’ attitudes. But some studies have investigated the relationship between communication flow between employees and management and their impact on employees’ commitment and trust level and their intention to leave in an environment that is rather stable and the organization is not implementing any major changes (Rachid, Tipu & Ryan,
2011). To understand the post-acquisition events and how it affects employees’ attitudes, it is
important to look at the level of communication that top management share with the acquiring
organization after post acquisition process. A lot of research has been done on the culture issues
during merger and acquisition process and many argue that cultural misfit is the main reason
behind unsuccessful post-acquisition process. But there are some other factors that can also play
an important role in the success and failure of post-acquisition process. To address the gaps
above, the current study aim to provide an in depth understanding of the direct and indirect
relationship among communication, trust and commitment after post-acquisition process. This
study takes a different approach by attempting to reveal the impact of managerial communication on employee’s work related employee attitudes in an unstable situation when organization pass through a major change in the form of merger and acquisition. We will check that up to what
extend managerial communication affect employees work attitudes like organizational
commitment and trust towards management. Taken as a whole, the research question in this
paper is the following:
What is the main impact of management communication on employees’ attitudes such as organizational commitment and trust towards management after post-acquisition process?
3. Theoretical framework and Hypothesis development
The primary hypotheses to be tested in this study are as follows:
3.1 Organizational Commitment and Management Communication
Fewer studies have examined the relationship between employee’s organizational commitment
and managerial communication. However, there is a limited body of research which pointed out
the relationship between management communication with employees and their effects on
employee organizational commitment. In his study Guzley (1992) found that employees’
perceptions of management communication were positively correlated with the employees’
organizational commitment. Varon (1996) also found a positive relationship between
communication and employees and their effects on their organizational commitment.
Management communication is considered as a key element of organizational strategy for the
purpose to promote employees involvement which will instill the sense of organizational
commitment. Van den Hoff and de Ridder (2004) also found that communication climate can
influence the knowledge sharing during stable environment. Constructive communication
climate positively influence the knowledge donating, knowledge gathering and effect employees
commitment positively. Van Vuuren (2007) examined the impact of management
communication satisfaction on employees’ commitment towards organization. All these studies
related to commitment and communication is conducted in a stable environment.
Buono and Bowditch (1989) in their studies suggest that effective communication on the long
term basis within merger and acquisition process may significantly bolster employee’s
confidence and commitment to the new consolidation. McEntire and Bentley (1996) added that
communication during merger and acquisition process can play a central role in the acculturation
process. Davy (1988) conducted a study measuring the effects of management communication
during merger and acquisition process. Davy examines the effect on employees’ attitudes,
intention to leave and job satisfaction and job performance. The employees found the
communication between employees and top management correlated positively towards
perception of personal control, organizational commitment and job satisfaction. So from the
above discussion one could argue that the higher the communication between top management
and acquired employees, the more committed employees of acquired organization towards
organization. The following hypothesis is proposed.
HYPOTHESIS 1: Communication between employees (acquired) and top management is
3.2 Trust towards Management and Management Communication
A very little attention has been given to the role of management communication and employees
involvement in the development of trust towards management after post-acquisition process.
Management communication can be defined as the degree of clarity and completeness in the
information/message sent by management to employees (smidts et al., 2001). Management
communication and employee trust are helpful in the coordination of employee efforts and in
steering employees to attain organizational goals and objectives.
Some studies suggest that trust towards management play a mediating role in the relationship
between communication and other organizational variables. According to (Schweiger & Walsh,
1990) communication with employees is an important tool to minimize acquired employees
negative reaction towards the change process. Frequent communication does not mean to share
every little detail of the process but it means that top management communicate its concern
about employees related issues that affects the way they perceive managements’ benevolence
and competence, which in turn affect its perceived trustworthiness. Therefore affective
communication is an essential tool to develop trust towards management and organization (de
Ridder, 2006). The investigation of Massy and Kyriazis (2007) shows that management
communication quality instead of frequency had significant effect on the trust level. Kottila and
Ronni (2008) also found that the quality of information share is more important for employees
Irena, Nancy and Dimitris (2000) found that it is not enough to communicate any information
regarding the acquisition or only the more positive side, or to spread some false information in
order to minimize temporarily, the stress, anxiety and some other negative reactions. This kind of
information will lead to dysfunctional outcomes like job turnover, uncertainty and lower the trust
level towards management. Thus communication between employees of the acquired firm and
management of acquiring firm must be honest and directed towards issues that are of particular
concern for employees and organization. Honest and useful management communication always
affects the way employees perceive the integrity of their new management. Integrity based trust
play an important role in the success of merger and acquisition process, as it is a major predictor
of trust during the communication process with top management. On the basis of above
discussion following hypothesis are proposed.
Hypothesis 2: Communication between employees (acquired) and top management is positively
associated with employees’ trust towards management after post-acquisition process.
3.3 Trust towards management as a mediator of the relationship between management communication and employees organizational commitment.
Communication plays an important role in building trust in management as according to
provide them with information and adequate explanation for their decisions and is open to employees’ reaction, such as employees’ criticism. When employees are well informed about organizational changes, future planes and achievement are more likely to develop a higher level
of cognitive – based trust towards management (Elsbach & Elofson, 2000). The higher level of
cognitive based trust can have a positive impact on employees’ faith in the ability of top
management.
As Mowday (1979) defined organizational commitment as the relative strength of an individual’s
identification with and involvement in a particular organization. Research indicates that
committed employees to their organization are less likely to quit their organization (Bishop,
2000). To increase the level of organizational commitment among employees after
post-acquisition process top management communication can play a vital role to provide employees
with a clear sense of direction and also encourage them to exert effort towards achieving
organizational goals. A clear communication between management and employee of acquired
firm can create a strong desire to maintain membership in the new organization. Furthermore
employees after merger and acquisition are more likely to accept organizational goals and values
if they value their positive association with new organization and providing employees with
information about their future plans. Managerial communication can increase the value of
employees associated with their organization (Simidts, 2001).
As management communication after merger and acquisition creates an atmosphere of openness
organizational actions the more they likely to trust that top management is discharging its
obligations in good faith. Thus, the following hypothesis is proposed:
Hypothesis 3: Trust towards management mediates the positive relationship between top
management communication and organizational commitment after post-acquisition process.
Figure .1 comprises all hypotheses and provides a conceptual model of management
communication and their effect on trust towards management and organizational commitment.
Figure 1. Conceptual model Trust towards Management Management communication Organizational commitment
4. Methodology
4.1 Research Design and Data Collection
This study focus on managerial communication with employees of acquired subsidiary after
merger and acquisition process. The main focus of this research is to examine the impact of top
management communication with employees of acquired subsidiary and how it is related with
trust towards management and employees organizational commitment. For this purpose a cross
sectional study is used which allows examining employees attitudes after merger and acquisition
process. To perform the research study, we have selected a sample of two companies engaging
in merger and acquisition process. Both interview and survey data have been taken from those
employees who experience the change process. For confidential reasons the name of both parent
(company HQ) and subsidiary (company X) is kept anonymous. The study was conducted in
company HQ (Headquarter) and company X (subsidiary) because of two major reasons: first to
find out the relationship between various variables and their impact on employees attitudes and
The in-depth interviews follow up by actual survey are used as main procedure to gather data.
The primary used of such method is to collect accurate and less biased data (Sekaran 2003;
Cresswell, 1998). The sample for this study was drawn from a multinational mining company X
(subsidiary) and parent company HQ. Company HQ was initially established to focus mainly on
mining business and now it is the world largest iron and pellets producer. At the initial stage of
data collection procedure an in-depth interview were conducted. Firstly, the designed flexible
interview questions which related to three main issues: management communication, trust
towards management and organizational commitment. Secondly, a purposive sampling technique
was used to identify five experience employees, three from parent company HQ and two from
company X (subsidiary), who experience the change process and have sufficient knowledge
related with our research issue. Finally the result of interview was used as a guideline to develop
survey questionnaires.
In next stage questionnaires data were collected from current employees of company X
(subsidiary) and company HQ who experienced the acquisition event. To make sure respondent
employees can understand the questions correctly and to predict the validity and reliability of
constructs, two measurement methods were employed. One respondent understanding the
questionnaire was designed in two languages: English and Portuguese. Respondent of survey
questionnaire can choose the language by their preferences. On the other hand, a pretest is
conducted to validate the questionnaire. A four stage approach suggested by Churchill (1979)
was used. After analyzing the pretest result, I made some adjustment and removed irrelevant
questions. Overall the survey resulted 173 responses. I discarded 24 because of the systematic
individual samples from employees working at various subsidiaries of company X and parent
company HQ who experience the change process. Table 1. Embraces the descriptive statistics for
the sample.
Table 1.1 respondents’ profile
Job title sample numbers(N =149) Percentage Director 2 1.34% Manager 40 26.84% coordinator 13 8.74% Geologist 24 16.12% Engineer 28 18.79% Analysis 23 15.43% Technician 19 12.75% 4.2 Interview Results
The interviews were recorded, transcribed, organized and group into meaningful categories. The
information collected from these interviews were categorized and constantly compared with
obtained results in proper context. The design questions for interview were related to discuss
three issues: management communication, trust towards management and employees
organizational commitment after post- acquisition process. These three patterns are illustrated in
Table 1A , which includes illustrative quotation and extracts from the respondents on the issues
related with management communication and their impact on employees trust level and
commitment after post-merger acquisition process.
Table 1A Examples of interview extracts
Management communication Anxiety/Stress(deficient
communication and integration between managers and employees)
Trust towards Management Uncertainty (lack of
predictability and the
company inability to transfer information)
Organizational Commitment Unfairness ( Treated with respect; consider promotion and status fair)
Supporting interview quotations Supporting interview quotation Supporting interview quotation
People are generally resistant to change. You know better that employees are happy in environment to which they are familiar and don’t like changes drastically ….. Another point I think is communication. I mean within company X we weren’t always the best at it, but quite often you had have an idea of what is going on in different parts of the world projects…… if employees are up to date about company’s different project and what’s going on they feel as part of team.(company Analyst)
Its true that company HQ have subsidiaries all over the world….. updates and information from everywhere but timing of sharing that information is very slow with other subsidiaries. That is bad , people stay working for the company because of their pension plan or because of the support that the company provides, not because that they are really enjoying their job or they really feel motivated and like to accept new
challenges.(company HQ middle manager)
That’s something that’s going to take time again to build all these
relationships. I think that really helps to make you feel more comfortable and to make you feel like you fit in more when you get more comfortable with people, and you know with whom to interact and from whom to get specific information. But we are still in a position where we don’t know who should we call or from whom should we get…. It will take time to build trust towards this new company.(company X middle manager)
I was working with company X and I was familiar with my old
organization and management but after this take over I don’t know what will happen to my future …. Yes you are right I am more concern about my future than before after this take
Well you know my feeling towards company HQ is that I am more committed with my company. And the reason behind this commitment is that top management treats me fairly and they deserved it. If at any stage I found that my company or management is not treating me fairly then maybe I would not work hard as I do now and loyalty towards company HQ will not be the same as it is now. (Company HQ middle manager)
If people are happy in their job, they tend to be more committed and loyal with their company and management (company X Analyst)
Again for myself when it was company x(before merger) I think probably a lot of people who have been around long
Regarding fairness and loyalty I think it’s detrimental to both loyalty and moral fiber of the employees. I think that people feel that the company isn’t giving them the full story and therefore isn’t being loyal to its own managerial role and it makes the employee feel that they don’t necessarily have to have that same respect for the company HQ (company HQ middle manager). Well in my opinion there are two models one Extraction model where the nickel unit runs itself and takes less directions and information from other company. They are more independent to make their own decision. While in our case company X always rely on parent company HQ guidelines and information sharing. I am not saying that one is good and the other is not. I am talking of freedom and more decision making because company HQ are not physically here.……. There’s a bit of questioning as a job security and what’s going to happen when another company takes you over and, you know, are you still going to have a job or will you become redundant, or what’s the long term plan for you. These kind of questions are always bothering you.(Company X Middle Manager)
over.(company X Analyst)
I find it really difficult to be accurate. I have to get my information from Mr.xxx for coming six months. Well, he is just guessing half the time. (company X Analyst)
I find the same thing. People seems very proud to be working for company HQ (company HQ Middle manager)
I am not sure about that. I think the more common fear that I hear of is that nobody seems to really be sure that they can even count on having a long career……. You don’t feel very secure I think. I mean we have all been through times where the economy was bad and things like that, but it just seems now that even if the economy was really good, I am not sure we’d feel all that secure where we are anyway…… I am not going anywhere we are getting proper treatment from top management but still people feel insecure here.(company x analyst)
enough, let’s say , had a lot of commitment towards company x then. Even though it was a really big company, we were very close. I know it’s hard to kind of
understand probably, but like we know all our VPs and I would think nothing of picking up the phone to call my vice president or walk into his office straight and discuss the issues or problems. You know, he would come into the building and know who we were and identify us by name. so it seems to be much closer. It was more a family atmosphere and everyone was working freely. You had a feeling that you are working in a very friendly environment and they care about you. But now everything is change and it’s not the same anymore, and we don’t know our new management nature and their attitudes towards us. (company X middle manager)
On the role of management communication after post-acquisition process, we found that
management communication play an important role to reduce employees level of stress and
anxiety because both anxiety and stress are directly related with management clear and unbiased
communication. It was revealed from our interview with a middle manager of company X that
when two firms with different culture that used to be competitors are merging or one is acquired
As every organization has its own norm, rituals, dress code, reporting line and style of both
internal and external communication. Company X use emails to communicate with each other
avoiding telephone and face to face meeting. While Company HQ rely more on relationship and
communication that took place either through phone or meeting face to face.
Most of the time mangers do know what changes will occur, but they often or unwilling to share
the information related with change process with employees for a number of reason. But failure
to communicate with employees on time creates uncertainty about their future, and it is often that
uncertainty which force employee to start searching for another job. Sharing information on time
can increase employees level of trust towards management and reduced uncertainty level and
they start feeling proud of their team and organization that they are working for (company HQ
middle manager).
Both trust and commitment have a very close relationship with each other and there is a direct
impact of trust on employees’ level of commitment and loyalty. Respondent of company X
pointed out that when employees level of trust towards management is develop they feel more
satisfied with their job and their level of loyalty and commitment (e.g. key performance
indicator) increases. Lack of effective communication after post-acquisition process creates a
feeling among employees that company HQ is not treating their subsidiary fairly. Which effect employees’ moral, working motivation and loyalty towards organization directly. Managerial communication can reduce employees’ level of uncertainty and stress level and react more
adequate explanations of the basis of underlying decisions. Further, providing clear
communication and explanation for changes enhances employees level of perceived fairness
towards management, which in turn is positively related to employees level of organizational
commitment because perceived unfairness of organizational procedures and communication have
a negative impact on employees attitudes like trust and commitment.
To summarize the interview results reveal that clear communication with employees after change
process will increase their level of trust towards management (moral) and will lower stress and
anxiety level after change process. As a result of trust, employees’ organizational commitment
will increase which is a key performance indicator. The relationship between these three
variables (management communication, trust towards management and organization
commitment) is significant but little is known about the mediating effect of trust towards
management because of the limited empirical studies published in both countries.
4.3 Results and Analysis of quantitative data
4.3a Survey data analysis method
To directly test the conceptual model, a regression-based path analysis by PROCESS provided
by Preacher and Hayed (2008) is used. PROCESS is “a computational tool for path
analysis-based moderation, mediation and conditional process modeling” (Hayes and Preacher, in review;
Hayes, under contract). PROCESS can not only estimate the coefficient of the model by means
effects in mediation and mediated moderation models, conditional effects in moderation models,
as well as conditional indirect effects in moderated mediation models (Hayes, 2013).
To test the mediation effect, a bootstrapping method with (1000 interactions) suggested by
preacher, Rucker and Hayes (2007) would be applied. Comparing with sobel test, the advantages
of bootstrapping is more evident, because to avoid problems that are introduced by asymmetric
and non-normal sampling distributions of an indirect effect through the application of
bootstrapping confidence interval (CIs) (Mackmnon, Lockwood and Williams, 2004). After the
well-known stepwise approach proposed by Baron and Kenny (1986), methodologist had
questioned the necessity of correlation between the initial variables with the outcome (Shrout &
Bolger, 2002). A case in point is the fact that step first (the direction of effect from the intial,
variable or predictor to the outcome variable Y must be significant) is not necessary now in
developing mediation (Keny, Kashy & Bolger 1998). Therefore, bootstrapping is appropriate
method for testing mediation effect to overcome shortcomings of other approach used.
In short, Process is a computation tool that is used for estimating the indirect effect, with a
normal theory test (i.e SOBEL test) and with a bootstrap method for obtaining confidence
interval (CIs) in addition, it incorporates the stepwise approach proposed by Baron and Keny
4.4 Measures and validation
The measurement of variables is grounded on the multiple item method. All survey were
measured using a six point Likert scale. The response ranging from 1 to 6 with a response option “strongly disagree to not applicable”. All the items came from published scales.
Dependent variable
To measure current organizational commitment of employees who experience the change
process, an instrument developed by Mowday et al. (1982) was used. Only six items were
selected out of an original list of fifteen, because not all fifteen were suitable and relevant to our
research project. The six items scale covers employees’ level of commitment after merger and
acquisition process. Respondent are required to assess their level of commitment towards
organization after change process (1= “strongly disagree to 6 = not applicable).
Independent variable
The instrument used to measure management measure management communication with
employees after merger and acquisition was adopted from Down and Hazen (1977). The original
scale has 40 items but for the purpose of our study only six items were selected based on the
management communication between subsidiaries and headquarters in company X. The six items
were measure from (1= strongly disagree to 6 = not applicable).
Mediator: Trust towards Management
The instrument used to measure trust towards management, two items scale related with integrity
based trust and competence based trust was adopted from Mayer and Davis (1999) while one
item related with mutual trust was adopted from Scott (1980). Cook and Wall (1980) refer to
trust as “the extent to which one is willing to ascribe good intentions to and having confidence in
the actions and words of other people. The scale used was 6 point likert scale ranging from (1 =
strongly disagree to 6 = not applicable).
Control variables
In our analysis, we controlled for organization size, mode of entry and several demographic
characteristic of respondents like gender, employees organizational tenure, job position and age.
Firm size may be associated with a subsidiary number of employees working which indirectly
influence employees’ level of commitment. Existing literature also suggest that gender and
employees working tenure have impact on employees organizational commitment (Mayer,
2002). Respondent job position may also influence employees’ intention to stay or leave the new
our study gender was measured by a dummy variable coded 0 if the respondent is a male and
coded 1 if the respondent is a female. Employee organization was measured as the total number
of year the respondent working in the current organization.
4.5 Validity and reliability
Running a factor analysis in SPSS on all the questions (items). I was able to test the validity of
my research method and confirm a divide in the survey questions (items) that make up the three
core concepts. Conducting factor analysis, the correlation matrix revealed that most of the
coefficient s for each concept exceeded 0.3 and the component loadings were also greater than
0.4 for the first component.
The three concept: management communication, trust towards management and organizational
commitment were found to be suitable in the factor analysis with a Kaiser – Mayer- Olkin
(KMO) measure of 0.859 who indicate that our sample is adequate because if the value of KMO is lower than .5 it would be of concern then. While the Bartlett’s test of sphericity (BTS) of .000 for all three core concepts.
When measuring the reliability of the main concept, the cronbach’s Alpha score should be greater than 0.7(Pallant, 2007). For this research, the cronbach’s Alpha score were 0.754 for Management communication, 0.802 for Trust towards management and 0.877 for Employees
organizational commitment, which suggest that questions under each concept are reliable. I also consulted the cronbach’s Alpha if item deleted and the inter item correlation test to check whether the reliability of these item could be improve and it show that if we delete item 10 the
reliability score will change from 0.802 to 0.804 which is not too much sharp. So we will not
delete item 10 because the score does not affect the reliability level up to large extend.
Illustration of this analysis can be seen in appendix B . In sum, the measure constructs in the
study show good reliability and validity.
Validity and reliability analysis for scale items
Measure No. of
items
KMO Bartlett’s test of Sphericity Eigen value Variance explained Cronbach’s Alpha Management communication 6 .745 219.1 2.737 45.66 .754 Trust towards management 3 .694 148.6 2.160 71.99 .802 Organizational commitment 6 .872 432.4 3.749 62.48 .877 Table 1.2
4.6 Common method bias
As the survey data is collected from single informant at the same time, common method bias is a
threat to the validity of our results (podsakoff, 2003). To avoid the bias caused by common
First independent and dependent variables were allocated to different sections which makes
respondent not to easily find the logic behind this survey. Second a short introduction,
explanation or scene description to each item was added. Finally following Grewal et al; 2000, I
used various formats across distinct sections of my survey questionnaire for example, different
indices including strongly disagree/ Not applicable and rarely/ very frequently etc. were adopted
to measure the six point likert scale.
5. Analysis and results
5.1 Mean, Standard Deviation, Skewness and correlations
Before testing the hypothesis, I took the following steps. First the missing values were replaced
through maximum likelihood imputation with the aid of HOTDECK macro (Myers, 2011). Then
a normality test was conducted to access whether the variables: management communication,
trust towards management and organizational commitment were normally distributed. By
assessing the variables skewness, kurtosis and histograms it became clear that distribution was
approximately normal for each variable appendix C. Although the data was not completely
follow the symmetric bell shaped curved but I assume that with the raise of sample size the data
will tend to be distributing normally. The result of skewness and kurtosis are presented in Table
1.3. While histograms and Q-Q plots for each variables are present in appendix C. Finally I compute the Mean of each scale and created three variables which are: management
from other variables, five control variables and one dummy variable is used which shows
employees sex.
Tabel 1.3 summarizes the Mean, Standard deviation, Skewness, Kurtosis and correlation for all variables in this study. An inspection of these three variables: Management Communication,
Trust towards Management and Organizational Commitment are related to each other
significantly and positively. There was a significant positive correlation found between
Management Communication and Trust towards Management, r = .481, and p<.05. This suggests
that Management Communication with employees of acquired firm can positively affect their
level of trust. A similarly correlation between Management Communication and employees
Organizational Commitment r = .467 and p<.05, which also suggest a significant relationship
between these two variables, if level of Management Communication is increased it will have a
significant effect on employees level of organizational Commitment. These significant
relationship found between variables suggest that the hypothesis in our research are supported
and the regression analysis follows aim to confirm this. While the low correlation among
Table 1.3 Mean, standard deviations, skeweness, kurtosis and correlation
Pearson correlation
Notes: **p < 0.01; *p < 0.05. N = 149.
SD= standard deviation; skew = skewness; kur = kurtosi
Variables Mean SD Skew Kur 1 2 3 4 5 6 7 8 9
1.Age 3.56 1.01 2.Sex 1.72 .451 .125 3.Gender .24 .430 -1.0** -1.0** 4.Tenure 2.84 1.17 .003 .003 -.003 5.Job title 4.06 2.01 -.167* -.167* .167 .227** 6.Subsidiary size 2.61 1.04 -.091 -.091 .091 .252** .156 7.Mode of entrance 2.56 1.16 -.137 -.137 .137 .270** .223** .889** 8.Management communication 3.36 .659 -1.15 .33 .030 .030 -.030 -.107 .058 -.163* -.132 9.Trust towards management 3.89 .762 -2.90 3.41 .075 .075 -.075 .028 -.156 -.036 -.072 .481** 10.Organizationa commitment 4.18 .606 -3.592 3.04 -.040 -.040 .040 .009 -.104 .064 -.003 .467** .615* *
5.2 Analytical strategy and results
As emphasized in section 4.3a, I employed a regression based path analysis by using PROCESS
(preacher & Hayes, 2008). To test the mediation effect, I followed the bootstrapping method
suggested by Preacher, Hayes and Rucker (2007). According to Nevitt & Hancock (1998),
bootstrapping was used as an alternative method to test the statistical significant of the parameter
estimates. Our results in this study are based on bootstrapping with 1000 samples.
5.2.1 Mediation tests
A multiple regression analysis was conducted to assess each component of the proposed
mediation model. First it was found that management communication is positively associated
with organizational commitment (B = .430, t = 6.40, p = .001). Which support our first
hypothesis (H1) that after merger and acquisition management communications with subsidiary employees positively affect employees’ level of organizational commitment. Next it was also found management communication is also positively associated with employees level of trust
towards management (B = .55, t = 6.64, p = .001) which support our hypothesis (H2) that
management communication with subsidiary increase employees level of trust towards
management.
According to hypothesis 3, the focus on trust towards management mediates the relationship
between Management communication and employees organizational commitment. It is clear
indirect effect on employees organizational commitment, in support of Hypothesis 3 (B = .403; β
= .507; t = 7.032; p =.0001 < 0.05), this positive indirect effect (.2243) is statistically significant.
Sobel test also confirms the significantly indirect effect (sobel z = 4.805, p = .00001<0.05). as
both path -a and path-b were confirm significant, meditation analysis were also tested using the
bootstrapping method with bias corrected confidence estimates (MacKinnon, Lockwood &
Williams, 2004, Preacher & Hayes, 2004). In our present study, the 95% confidence interval (CI)
of the indirect effects was obtained with 1000 resample (Preacher & Hayes, 2008). Results of the
mediation analysis confirmed the mediating role of trust towards management in the relation
between management communication and organization commitment (LLCI = 0.1367, ULCI =
0.2974). In addition results indicated that the direct effect of management communication on
employees organizational commitment become less significant (c’ = 0.206, t = 3.09, p = 0.23)
show that p-value is significant after incorporating indirect paths; suggest that a full mediation of
TABLE 1. 4 Regression results for simple mediation outcomes Model 1 Model 2 Model 3
Organizational commitment Trust towards management Organizational commitment Predictor B P B P B P Management .430 .000 a-- .556 .000 c’-- .206 .23 Communication Trust towards b-- .403 .000 Management Control variables Age .027 .595 .230 .718 .018 .684 Gender .119 .248 -.047 .717 .137 .131 Tenure .048 .274 .014 .701 .042 .271 Job title -.032 .187 -.062 .045 -.009 .692 Subsidiary size .238 .010 .148 .202 -.182 .025 Mode of entrance -.163 .054 -.100 .353 -.126 .092 Model R² .261 .000 .273 .000 .458 .000
Sobel test for indirect effect Value SE z p Trust towards management .2243 .0467 4.805 .000
Bootstrap results for indirect effect M SE LL 95% percent CI UL 95% percent CI .2243 .0508 1367 0 .338
Total effect of management Effect SE t p LLCI ULCI Communication on TTM .4300 .0671 6.408 .0000 .2974 .5626 Note. n = 149. Unstandardized regression coefficients are reported. Bootstrap sample size = 1,000. LL, lower limit; CI, confidence interval = 95% UL, upper limit. Trust towards management TTM
6. Discussion and Managerial implication of Quantitative and Qualitative Results:
In general, this study attempts to explore the mediating role of trust towards management
influences the relationship between management communication and employees organizational
commitment in post-acquisition process. The research aims to answer the following three
question (1) how does management communication affect employees level of organizational
commitment (2) how does management communication influence trust level of employees
towards management (3) and does trust towards management mediate the relationship between
management communication and employees organizational commitment . The hypotheses were
formulated with the idea that management communication can motivate employees and raise
their level of organizational commitment through trust towards management.
Overall, the research results are congruent with the initial assumptions. In the following section,
our research findings are discussed, firstly presenting the results of the relationship between management communication and employees’ organizational commitment, followed by the influence of management communication on employees’ level of trust towards management, ending with the mediating effect of trust towards management on the link between management
communication and organizational commitment.
As I expected, the results of both quantitative and qualitative analysis shows that management communication after merger and acquisition is positively associated with employees’ organizational commitment. In other words, after post acquisition process employees experience
high levels of stress, anxiety and uncertainty, and the quality and timing of communication after
post acquisition process may be more important than quantity of information shared in
influencing target firm employees. It is a creative leap to link management communication with
employees negative attitudes like stress anxiety and uncertainty level. Because no one to my
knowledge has investigated specifically the relationship between management communication
and employees organizational commitment. It provides alternative way of explaining how
management communication and affect employees stress, anxiety and uncertainty level and
increase their organizational commitment.
Merger and acquisition are associated with high degree of stress, anxiety and uncertainty. The
findings show that providing employees with credible and relevant information on time will reduce employees’ level of stress, anxiety and uncertainty level and will increase employees level of organizational commitment. A significant relationship between management
communication and organizational commitment suggest that as long as an employee are well
informed their level of organizational commitment are high and have low level of stress, anxiety and uncertainty. Employees’ organizational commitment is low only when they feel that top management is avoiding sharing information with employees of acquired firm.
Also, the study result adds to the trust factor by showing that management communication affects employees’ mutual, competent and integrity based trust. These findings demonstrate the interrelationship between management communication and trust towards management. Our
results clearly indicate that that to promote and build employees trust towards management,
senior management must communicate well with their employees honestly and directly as soon,
especially during uncertain times (whitener et al; 1998). As this kind of management style boost
employees moral and improve performance in a variety of ways only if a proper communication
channel is present between employees of acquires firm and top management of acquire firm.
Because through proper management communication after post acquisition process the level of
employees misunderstanding and misrepresentation is very low. So the results of the present
study support that the content of management communication is important as a means of
developing positive employees’ attitudes including trust towards management after post
acquisition process. Frequent communication after post acquisition process is needed for
employees to adjust to the changes in new organization.
6.3 Management Communication, Trust towards Management and Organizational Commitment:
This study confirms that trust towards management does act as a mediating variable in the
relationship between management communication and organizational commitment after change
process. But there are some other intervening variables not included in our research which may
procedural justice. Management communication may influence employees’ perception of procedural justice, which in turn can influence employees’ organizational commitment.
As trust towards management play a role of mediator between management communication and
trust towards management. In line with social exchange theory, study suggest that although firm
expects employee commitment to organizational values and goals in exchange for management
communication, it also makes themselves more vulnerable to employees attitudes. An
environment is created in which employees are more likely to trust their management. This
finding is important because very few studies have examined the role of trust towards
management as a mediator (Dirks & Ferrin, 2011). Therefore researches are encouraged to continue and explore employees’ issues that may shape outcomes indirectly through their relationship with trust.
Finally we found a significant relationship between trust towards management and
organizational commitment. As previous research that has tested the relationship between trust
and commitment has yielded some mix results (whitener, 2001). However findings from our
research are in line with whitener (2001) that suggests that trust towards management is a good predictor of employees’ organizational commitment after merger and acquisition process.
6.4 Managerial implications
Although it is clear that top management communication may result in several positive outcomes
few organizations believed that management communication was related to organization positive
outcomes, such as employees turnover and retention (IABC, 2009). The findings from our
research suggest that organizations should take a proactive role in providing clear and complete
information to employees after post-acquisition process. Management communication not only increases employees’ organizational commitment but also creates positive orientation of employees towards management. Thus employees level of trust towards management increases.
Management communication can also play a very vital role to lower down employees stress,
anxiety and uncertainty level after merger and acquisition because providing a shared purpose to
employees and their team , management communication can prevent situations where employees
can feel they have competing objectives, thus help to minimize dysfunctional conflict. Another
study show that management communication help employees to identify their organization
(Smidts et al; 2001). Management communication is very important in situations of uncertainty
(Donnellon & Becker, 2000) and in the absence of shared meaning among employees
(Donnellon, 1986). Findings justify investment in management communication in
post-acquisition process
Managers are encouraged to look at top management communication is an important element in
enriching employees jobs. In lines with theories of employees behavior, like job characteristics
theory (Hackman & Oldham, 1980), finding from our present research suggest that management
communication can help in building employees trust towards management. This, in turn can
