Managing merger and post-merger
integration
An analysis of factors influencing the level of success
Rick Sikken
University of Groningen
Faculty of Business Administration
Master Change Management
ABSTRACT
This research focuses on an evaluative case regarding the merger and post-merger integration phase of Foundation “EduQual”. Foundation “Education” and Foundation “Quality” are public school that merged because of a future decline in student numbers and to become more autonomous and effective in general. The merger was pushed through in a limited amount of time in order to benefit from dowries. Management wants to evaluate what could have been improved in this change project and how they can improve the accompaniment of the directors. The communication and sensemaking, commitment and involvement, steering and role clarity are the factors that were researched. According to theory all these factors contribute to the effectiveness of the change project. Results show that especially in the merger phase all these factors could have been improved. The main recommendations are that in future change projects management needs to enhance employee involvement and improve communications and sensemaking.
Keywords: merger and acquisition management, post-merger integration, change management
CONTENTS
1. INTRODUCTION 4
1.1 Context of the change 4
1.2 Causes for the change 5
1.3 Problem 8
2. THEORY 10
2.1 Managing mergers, integration and change effectively 10
2.2 Organizational characteristics influencing the success of the change 13 2.2.1 Communication and sensemaking (meaningfulness) 15
2.2.2 Commitment and involvement 17
2.2.3 Steering 19
2.2.4 Actors and role clarity 21
2.3 Conceptual model 22 3. METHOD 24 3.1 Literature review 24 3.2 Documents 24 3.3 Interviews 24 3.4 Data analysis 25 4. RESULTS 27
4.1 Success of the merger and post-merger integration 27
4.2 Communication and sensemaking (meaningfulness) 28
4.3 Commitment and involvement 30
4.4 Steering 32
4.5 Actors and role clarity 33
5. DISCUSSION 35
5.1 Success of the merger and post-merger integration 35
5.2 Communication and sensemaking (meaningfulness) 37
5.3 Commitment and involvement 38
5.4 Steering 40
5.5 Actors and role clarity 41
6. CONCLUSIONS AND RECOMMENDATIONS 43
6.1 Communication and sensemaking (meaningfulness) 43
6.2 Commitment and involvement 43
6.3 Steering 44
6.4 Actors and role clarity 44
6.5 Level of success of the merger and post-merger integration 44
6.6 Recommendations 45
6.7 Theoretical implications and limitations 47
REFERENCES 50
APPENDICES
1. INTRODUCTION
“Economies of scale are fatal for education”, “Schools have become educational factories” and “Level of students is declining because of merger madness” are some of the reactions found on the internet when searching in Google for “economies of scale, education”. Even the organization Better Education Holland (2009) claims that not merging is almost always better. They argue that economies of scale nearly never lead to quality preservation in a broad sense, let alone improvement. However, some claim otherwise. Arguments in favor of mergers are the need for professionals when managing schools because of too complicated regulatory, the ease and lowering of costs involved with ICT, personnel policies and purchasing and a bigger organization can take better care for quality and present a collective charisma. In general, theory regarding mergers state that: “If mergers are properly managed they can be used to replace the old structures, cultures and processes with new ones being more consistent with emerging environmental conditions and competitive challenges”. In many cases, the emphasis seems to be on managing mergers properly. In education this means that management needs to ensure short lines between themselves and the workplace in order to avoid miscommunication, irritations and misunderstandings. Furthermore, bureaucracy needs to be avoided in order to keep the organization transparent for all stakeholders. Another reason, on which surprisingly advocates and opponents of merging educational organizations agree, for merging is the necessity to deal with demographic changes and moreover, the survival of the organization. As is the case in this research, where two public primary education foundations merged. The foundations in this research will be referred to as Foundation “Education” and Foundation “Quality”. The merger between these foundations can be called a legal merger. This type of merger has the following characteristics:
• The transfer of capital under general title. The different components of the capital do not have to be transferred individually as with mergers between corporations.
• Possible cooperation of third parties is not required
• There is no risk of missing components.
• Due to the merger the disappearing foundations cease to exist.
“EduQual” wants the merger and the post-merger integration phase to be evaluated, especially regarding recommendations for the improved accompaniment of the directors.
At first, the context of the change will be clarified giving insight in both foundations before the merger. Secondly, the causes for the change will provide the reasons for initiating the merger. Lastly, the problem of the case will be discussed in more detail.
1.1 Context of the change
The context of the merger involves the factual characteristics which form the foundation for the changes. They are derived from the environment or the history of the organization (De Caluwé et al., 2002). At first, both foundations will be described before going into the merger. Secondly, the merged organization will be described.
Foundation “Education”
Foundation “Education” has been going through a lot of changes since 2008. Prior to the merge with Foundation “Quality” they have become an independent foundation. Beforehand, Foundation “Education” formed a part of the town council. They wanted to become autonomised because of the “two-hat” problems that existed within this council. On one hand the local authority was responsible for the development of the local education policy and on the other hand they were manager of the public education. Because of the autonomisation Foundation “Education” now has an improved ability to install an own, independent position and to carry out their new organization. Besides, an autonomised school board has an improved ability to develop an own policy and to manage more effectively.
Before the merger Foundation “Education” existed of fifteen schools with more than 1400 students. The installed management structure was a so-called cluster structure. This cluster structure existed of four cluster directors who were each responsible for four schools. On every school a location leader was appointed. In May 2006 this structure was evaluated through interviews with the directors by the Board of the public education foundation “Education” and the summarized results were:
• The structure was not clear for everyone, especially regarding task clarity
• Location leaders are mostly positive about the cluster domain, vision development and solidarity
• Support for starting location leaders is good
• Experienced location leaders see less value in the cluster structure
• Location leaders have too little time for their school tasks
• Performance appraisals with teachers should be performed by location leaders
• Communication could be improved
With the merging of both foundations a reconsideration of the management structure was needed. Foundation “Quality” clearly stated their wish to keep their present structure intact and if Foundation “Education” wanted to push the merger through they had to adjust to Foundation “Quality”.
Foundation “Quality”
Foundation “Quality” existed of fifteen school and almost 2100 students. Since 1st of January 2007 Foundation “Quality” has been privatized. The interests of this foundation are, since then, represented by a new and independent Board. The main objective was to give public education a qualitative boost. Furthermore, a more professional way of working has been installed and educational renewal has made its entrance. This is pointed out by the investments in alterations in buildings and ICT, the intensive attention for the individual development of students and the cooperation with the Inspection had led to a more transparent quality process in schools. In order to keep this process going and to survive in the long run Foundation “Quality” decided it was wise and even necessary to merge with another educational foundation.
Foundation “EduQual”
MODEL 1
Organizational chart Foundation “EduQual”
The objectives of Foundation “EduQual” are:
• To create an independent position towards the community
• To realize direct and indirect involvement in the board
• To develop an own financial policy and administration
• To manage more effectively in general
The economies of scale will deliver the following benefits
• Sufficient volume to utilize the obtained autonomy
• Acquiring efficiencies
• Improved possibilities for setting up management and agency staff
• Improved dispersion financial risks
• Possibility to preserve small schools
• Improved possibilities for mobility and career planning
• Improved possibilities for profiling towards other educational institutions The project organization managing the merger existed of:
1. A steering group
The steering group is principal and steers the examination and the corresponding process. 2. A soundboard group
The soundboard group will function as a sounding board for the steering group (signal function) and advise them on diverse themes (advice function).
Supervisory Board
Board’s Agency staff
Participation Council PC)
Executive Board General Participation Council (GPC)
School
Director Director PC Director PC
3. Workgroups
If desired workgroups can be set up to prepare specific matters. 4. Project management
Two project leaders and two advisors to manage to changes. 5. Information supply
In order to inform the adherents well information meetings and special newsletters will be sent out.
Foundation “EduQual” now exists of thirty schools, with approximately 3500 students and a workforce of 350 members. A “fulltime” daily Board existing of a chairman who is integrally responsible and a board member was preferred and installed. The interlayer which was formed by the cluster directors of Foundation “Education” has been removed. The board will communicate directly with the school directors who are on their turn each integral result responsible for their own school. This construction asks for powerful, well-educated school directors who will, mainly due to time management, not be performing any educational tasks. Small schools will be paired and one school director will perform the daily management. Furthermore, they put an adequate staff administration into place with specialists in personnel policies, finance, accommodation and secretariat.
The privatization of Foundation “Education” started in 2008 and after that both Foundations would merge. In practice, these processes were much more intertwined than planned. The merger had to be pushed through before the 31st of December 2008 because of dowries that would otherwise be lost. This required a fast pace of changing.
1.2 Causes for the change
introduces another reason for merging; the objective to keep education affordable. As the Dutch government keeps economizing education plus the before mentioned decline in student numbers economies of scale and scope tend to gain importance. The defrayment of qualitative education can only be ensured in a larger foundation.
1.3 Problem
As per the first of January 2009 Foundation “Education” has merged with Foundation “Quality”. The new Foundation “EduQual” is now the authority (school board) of thirty public schools in two provinces. Foundation “EduQual” stands for quality, cooperation and equality, modern education, custom education, responsibility and openness. The merger process itself, however, did not fully meet these characteristics. Mainly because of dowries the merger had to be pushed through in a limited amount of time. This made the merger process more top-down and less participative, which is not a negative factor in itself. However, the somewhat closed character of the changes resulted in the General Participation Council to call in the help of the union. The union enforced more openness regarding finances and formations, costing management even more time to finish the merger phase. Did the short time span and the applied way of changing influence the basis of support of the workforce for the merger and if so, what could have been done to increase this?
Another objective of the merger was to create integral result-responsible directors in all schools. The directors of Foundation “Quality” are, due to a reorganization in January 2007, already two years familiar with an integral result-responsibility. The Board wants to find out whether the directors of Foundation “Education” have sufficient role clarity and which questions regarding their role are present. Therefore, in this research the changed working method of the directors of Foundation “Education” will be evaluated and compared with insights of the directors of Foundation “Quality” in order to recommend possibilities for improved accompaniment and in general, optimization of this working method. This research can help the Board manage change projects and the accompaniment of directors more effectively in the future. The presented problem has resulted in the following main question:
2. THEORY
2.1 Managing mergers, integration and change effectively
Organizations merge in order to increase competitiveness, reduce costs, create synergies or to meet changing financial and demographic challenges (Schraeder et al., 2003). Some of these mergers are successful in meeting these objectives whereas others fail. Merging is not only changing the organizational structure, but the systems, processes, cultures and people of both organizations as well (Sudarsanam, 2003). But when are mergers successful and effective?
Before looking at the theory, the objectives set by Foundation “EduQual” are the creation of an independent position in relation to the community, the realization of direct and indirect commitment in the board, the opportunity to develop an own financial system and to be more effective in general. Furthermore, they want the directors to be integral result-responsible and make sure communication runs smoothly and directly through short lines.
According to Olson (2004) the baseline requirements for a successful merger are that it has to be premised on real strategic value and that it must yield financial value in the short or long term. Walker et al. (2003) argue that a merger can be effectively implemented if vital talent is integrated and retained, commitment and performance are maintained throughout the transition, and people-related systems, processes, and organization are aligned with the new entity's strategic direction. These are all important factors which Foundation “EduQual” should have thought about before and during the merger. In a study of Epstein (2005) he formulates determinants of merger success. He states that most emphasis should be on the importance of both strategy and process instead of mainly focusing on increased (stock) value. Merging organizations should develop a clear strategic vision that leads to the creation of significantly higher long-term value. The merger should be well-designed and the integration should be executed with strong leadership, communication and alignment. All above mentioned authors seem to agree on the fact that the merger has to have strategic value and will be successful if long-term value in the broadest sense of the word is achieved.
will most probably deliver the highest potential for full integration. However, according to Batelaan and van Essen (2006), a “merger of equals” does not really exist. In this research this was the case, Foundation “Education” clearly had to adjust to the working practices of Foundation “Quality”.
In order to fully benefit from the projected benefits of a merger the integration phase needs to be managed thoroughly and carefully (Haspeslagh & Jemison, 1991). Researchers found that it is far more important what happens after a merger than the merger itself. Heijltjes and ter Velde (2005) noted that when the physical integration already took place it is up to the leader to effectively guide and integrate the new organization. A merger has to be well implemented but instead of mainly focusing on what kind of merger is needed, the post-merger integration phase posts the real problems and challenges for change management. Instead of focusing on the managerial side, human relations and their complex social processes have become more important factors in analyzing post-merger integration processes.
What is interesting is that the outcomes of complex social change processes, such as post-merger organizational integration, may be conceived in different ways. One can view the changes from the perspective of different social actors. What is 'synergy' for management may be 'loss of jobs' for employees (Vaara, 2002). Therefore, management really needs to keep an eye out for the friction and resistance that can occur in the integration phase. In practice, many integration processes fail and in another study Epstein (2004) studied reasons why they failed so often and formulated five drivers for post-merger integration success. These are:
• A coherent integration strategy
• A strong integration team
• Communication
• Speed in implementation
• Aligned measurements
MODEL 2
The impact of task and human integration on acquisition and merger success
High
Level of completion of human integration
Low
Low High
Level of completion of task integration Source: Birkinshaw et al. (2002)
In order to make a merger successful both human and task integration need to be highly completed. Although many managers believe that the integration process is very important, they often bypass the post-merger integration process to line managers or functional heads of departments, who become responsible for fulfilling the synergy effects and purpose of the M&A (Haspeslagh and Jemison, 1991). Management should actively involve and motivate middle management in order to make the change successful.
The merger and post-merger integration process can be called a success when the directors of both organizations support and carry out the changes and the objectives of Foundation “EduQual” are met. They should have no ambiguity about their new role. In order to make this happen, management should try to clearly communicate the changes and involve employees in the decision making process. During the merger and post-merger integration process management needs to actively steer and support the changes.
A number of elements and characteristics for the successful management of mergers and post-merger integration are now mentioned. These elements complemented by the objectives set by “EduQual” will form the basis in defining the merger as a success. In the next part the most appropriate and important elements in determining the success of Foundation “EduQual”’s merger and post-merger integration phase will be selected.
Mixed success: satisfied employees but no operational synergies achieved
Successful acquisition
Failed acquisition Mixed success:
2.2 Organizational characteristics influencing the success of the change
When researching the post-merger integration process at Foundation “EduQual” the first thing that came to mind was that the process was mostly a top-down planned change. The planning of the change involved the Board members who were supported by two consultants. The general participation council had the opportunity to respond to and react upon the upcoming changes but during the implementation participation was kept to a minimum.
Cummings and Worley (2001) state that planned change can be qualified around three key dimensions, namely the magnitude of the changes, the level of organization and whether the setting is domestic or international. The magnitude of the changes can be qualified as a quantum change as this involves several organizational dimensions, including structure, information processes and work design. This involves changing multiple levels of the organization, from top management through departments and work groups to individual jobs. The degree of organization was over organized as the planned change is generally aimed at loosening constraints on behaviour. Changes in leadership, job design, structure and other features are designed to liberate suppressed energy, to increase the flow of relevant information and to promote effective conflict resolution. The setting of the change is domestic and therefore the change agent only needs to be aware of their own cultural values and norms.
In order to make a planned change successful management needs to design and steer the process. Which factors influence the level of success of a merger and post-merger integration process? In model 3 the elements of planned change from De Caluwé et al. (2009) state six factors derived from different sources of theory about change which all together form a fairly complete frame for naming and communicating change processes. These factors are:
• History: The cradle from which the change has risen and has been designed. It is the reason, need or motive of the change.
• Actors: The stakeholders in the change process. The people who play a role and who are given this role.
• Phases: The different process steps being made to transform the change idea to an outcome.
• Steering: Has the goal to see whether the organization stays on course during the change process or whether the course needs to be changed.
• Outcomes: The reached or to reach goal of the change. The outcome has a relation with the original change idea. However, this idea can be changed, adapted and extended during the change process.
These six factors all complement each other. In this research the outcomes were primarily focused on administrative aspects and secondary on humans, interactions and process aspects. The history, context, cause and philosophy form the basis and influence the change idea. Judging from the organizational context and cause of the change, the change agent develops a philosophy in order to give meaning to both aspects and a change idea is born. With this model, factors influencing the effectiveness/success of a planned change can be explained and therefore it is suitable for forming the basis of this research.
MODEL 3
Factors influencing the effectiveness of a planned change
Source: De Caluwé et al. (2009)
the literature about mergers and post-merger integration, these dimensions play a vital role in dealing with the complex social processes that occur when integrating a merger.
2.2.1 Communication and sensemaking (meaningfulness)
When dealing with mergers uncertainty and anxiety amongst organizational members is inevitable. Where will I go? What will I do? Can I stay? Are questions that will rise. In order to reduce this uncertainty appropriate communication is necessary. Therefore, those leading the change must explain the need for the merger as well as the effects of the merger on their personal function towards employees (Goodman and Truss, 2004).
Communication during a merger or acquisition must address not only the “whats,” but the “whys” and “hows.” People at the top may have already spent months or years assessing the situation and understanding the need for this business decision. While they should not expect everyone else in the organization to come to the same level of understanding in just a few days or weeks, it is possible to do so; if you choose your communication tools with care (Barchan, 2006). Research of Doyle et al. (2000) resulted amongst other things in the conclusion that organizations should adept an innovative, focused approach to organizational communication, particularly targeting employee involvement, management-employee relations, cross-functional communications and communications between senior and middle managerial ranks. But how should they communicate?
communication is necessary. “If we are to gain a deeper understanding of the situation and of the experience, which by its nature is subjective, we need to listen more carefully to the accounts uttered by the individuals who are in the front line of the announced change” (Fronda et al., 2008). More practically, how should one apply these forms of communications? Forms of communication include presentations, general information meetings, memo’s, newsletters, informal small group meetings and word of mouth. Leaders need to be engaged in retaining and motivating employees because they are more likely to successfully lead the post-merger integration phase (Graebner, 2004). Two types of communication are needed in an integration process:
• Factual information - handling rational issues; and
• Identity communication - handling cultural and identity questions. (Balle, 2008)
When only communicating the actual changes employees can easily fall back in old behaviours and communicate, for example, only with members of their own organization. In order to make the merger/integration process successful, management needs to further address the factual changes and explain the reasoning behind the changes. In other words, they need to give meaning to the changes. When De Caluwé et al. (2009) refer to meaningfulness this can be explained as sensemaking and the next paragraphs will elaborate on this factor.
As already mentioned a merger and its integration will put forward a lot of questions and uncertainties amongst all the different actors. They will discuss and speculate upon all the different changes in the post-merger process, especially issues concerning their own work and environment, thereby creating their own socially constructed reality (Vaara, 2003). The ambiguity that comes with these processes can lead to an increase in resistance. An important tool of management in order to reduce this resistance is sensemaking. Why do things happen as they do? Through communication and actions an organization must ensure every member of a clear vision of the future and a decent understanding of why and how they want to change.
perspective opens up the possibility to understand the complex socio-political processes involved in post-merger decision making (Vaara,2003).
Vaara (2003) continues that changes in organizations can and mostly will cause inherent ambiguity, cultural confusion, organizational hypocrisy and issue politicization. Whereas the first two are pretty much self explaining, organizational hypocrisy stands for the deviation between intended plans, supporting communication and the new reality which actually exists. Issue politicization means how the different actors will communicate their own most preferable or favourable issues. The role of middle management is important because they have to further address the issues as stated by top management. Middle management will construct their own meanings to the changes and therefore it is important that top management pays attention to how well they will inform and make sense of the future changes. The reality of all members of the organization should not deviate too much from the intentions of top management. Therefore, meeting minutes and constant information sharing are important. Steensma et al. (2000) found that their experience in working with mergers has clearly shown that the effectiveness and rapidity, as well as management of the inevitable stress, of post-merger integration largely depends on the role middle management takes in the process.
In any case, communication is key. But how should this communication take form? Weick et al. (2005) see communication as an ongoing process of making sense of the circumstances in which people collectively find themselves and of the events that affect them. Paying special attention to internal communication or creating different types of discussion forums are not guarantees of effective integration, but they are likely to help people understand the differences in their views and commit to joint action (Vaara,2003). The process begins by considering sensemaking to the different actors involved in strategic change processes. These individuals can have a profound influence on how organizations adapt, and the sensemaking literature highlights the interpretive processes that undergird this adaptation (Maitlis et al., 2010).
2.2.2 Commitment and involvement
In order to make the change successful every organization member must feel involved and committed. Otherwise, the biggest threat for success will be the members themselves because they can obstruct and even sabotage the whole change project by not cooperating and telling others their frustrations leaving whole departments with mixed feelings and confusion. As Navahandi et al. (1988) already mentioned: Merger integration patterns can provide employees with expectations about the contact conditions of the merger and perceptions of organizational support which, in turn, can influence expectations regarding organizational unity, employee threat, and, ultimately, employee commitment to the merged organization.
The level of resistance will decrease and the level of motivation will increase if the workforce is committed and involved, thereby increasing the level of success of the merger and post-merger integration process. Therefore, the influenced expectations should be influenced in a positive way and negative expectations, feelings and attitudes should be coped with. Judson (1991) stated that any management's ability to achieve maximum benefits from change depends; in part on how effectively they create and maintain a climate that minimizes resistant behaviour and encourages acceptance and support. There is nothing more manipulative to involve and ask staff for recommendations about the upcoming changes while the outcome has already been set. Therefore, top management should really listen to the staff’s ideas and try to implement the useful ones before, during and even after the change project. But how can the project team create and retain commitment and involvement?
Kanter (1984) suggests that, in order to build commitment to change, managers should: allow employees to participate; provide a clear picture or vision of the future; share information; demonstrate commitment to the change; tell people exactly what is expected of them; and offer positive reinforcement. Furthermore, staff involvement serves as a guarantee of cooperation and support for the immediate post-merger phase. Staff involvement includes exchanging ideas, concerns, proposals and feedbacks. Research suggests that participation in the decision-making process will improve employees’ resistance to change and will better prepare them to a possible variation in the corporate culture and acceptance of those changes. (Appelbaum et al., 2007)
Furthermore, the level of success of the merger and post-merger integration process can influence the level of commitment and can motivate the workforce or increase resistance.
2.2.3 Steering
It is becoming increasingly clear that post-merger and acquisition (M&A) performance, especially in terms of achieving the integration of merging firms, is strongly affected by organizational factors, such as leadership (Waldman et al., 2009).
In order to make the change happen, things need to be set in motion. A project leader, or a project team should motivate and steer the forthcoming changes in the way they want to. But what does this leading entail? Following De Caluwé et al. (2002) leading is influencing the performance of employees through personal contact. Furthermore, leading is a combination of steering and supporting behaviour. Steering meaning the one sided form of communication as in telling the employee what to do and supporting meaning a two sided form of communication involving them in the decision making. In both cases, the leader must anticipate on the employees characteristics and adjust his own behaviour accordingly. Other theory found that the situation plays a vital role in determining leader effectiveness and that, to be effective, leaders must behave differently in different situations (Stogdill, 1974; Yukl, 2009).
In change processes conscious steering takes place. Interventions are set up, performed, controlled and if necessary acted upon. It forms the glue between all the other aspects. (De Caluwé et al., 2009). But which form of steering or leadership is most appropriate? They continue stating that a situational approach to leadership is most successful when dealing with post-merger integration. This approach exists of directing and guiding the change, meaning steering on tasks and relations. Steering is the glue of the elements; it makes everything work and makes it possible. A climate of positive feelings toward the leader is necessary if employees are to change their ways of working as required. Furthermore, leaders of organizational change should be competent and trained in the process of transforming organizations if mergers are to succeed (Kavanagh, 2006).
Yellow print thinking: How to unite interests? Blue print thinking: How to reach results?
Red print thinking: How to employ the right HR tools? Green print thinking: How to learn how to learn? White print thinking: How does the natural way flow?
In change processes all colours can be present. There is no best way and most of the times it is a combination of multiple colours. This separation can be very helpful in identifying and being aware of the colours applied in the steering process. Management can become more aware about which strong and weak points their change strategy entails and use this to their advantage.
The way of steering and the way of seeing change are important factors in guiding changes. Management should possess certain skills as well. Planning skills for example. An important part in planned change is that thoughts go out to future structures and employee positions. As Ashkenas (2000) noticed: “The management team had not finalized its thinking on many issues, including the structure of several business units and the candidates for some leadership assignment”. These inaccuracies causes ambiguity, insecurity and stress amongst employees and should therefore be avoided. Furthermore, Searby (1970) already stated the importance of giving the project leader time to determine the ultimate organization structure and selecting the right individuals to fill the key positions. Otherwise, during the change process these shortcomings could form the basis for increased uncertainty and role ambiguity thus causing more stress and resistance than necessary. But apart from planning skills, which skills should the change leader possess?
According to Goleman (1998) the emphasis of the change agent should be on emotional intelligence. He states that IQ and technical skills are important, but “softer” skills like awareness, self-regulation, motivation, empathy and social skills are required for the success of the merger.
All in all, it would seem impossible to possess all skills and utilize all opportunities for a change leader, but the above writings do give a clear indication of what attributes are important. Generally, communication and involvement are important and project leaders should have empathy for employees and their situations. One last thing mentioned by Kavanagh et al. (2006) is that during times of change, it is important that the leaders of the organization create an atmosphere of psychological safety for all individuals to engage in the new behaviours and test the waters of the new organization.
2.2.4 Actors and role clarity
The actors of the change project can be seen as the stakeholders. This includes, as the word explains, all actors who have a stake in the project and will be affected by the changes taken. Pinto (2007) identifies stakeholders in two categories, namely internal and external. Internal stakeholders are top management, accountants, functional managers and project team members and external stakeholders are clients, competitors, suppliers and environmental, political, consumer and other intervener groups. In order to manage the stakeholders, Block (1983) developed a framework with exists of six steps, being:
• Assess the environment
• Identify the goals of the principal actors
• Assess your own capabilities
• Define the problem
• Develop solutions
• Test and refine the solutions
When done well, these six steps form an important method for acknowledging the role that stakeholders play in successful project implementation. Because of the organizational nature of the changes this research will focus mainly on the internal stakeholders, being top management, directors and employees. However, as shown by the objectives of the merger, the community is an important external stakeholder.
organizational effectiveness, and task-oriented leadership. Furthermore, Posner et al. (1978) already found that role ambiguity, generally defined as lack of information or as uncertainty about expected job behaviour, is usually seen as having negative effects, while role clarity is associated with positive outcomes. Therefore, in order for the merger and post-merger integration process to be successful all different stakeholders need to have sufficient role clarity.
Furthermore, the project leader and team need to possess an appropriate level of expertise. The project team should, according to Bennis (1993) possess a broad knowledge of the intelligence from the behavioural sciences and theories and methods of change, operational and relational skills, such as the ability to listen, observe, identify and report, and to form relationships based on trust, sensitivity and maturity, including self recognition of motivators and the perceptions that others have of these motivators and authenticity in living and acting in accordance to humanistic values.
Not only the project team should have a high level of role clarity, the other stakeholder must be very well aware of the next role they will fulfil in the organization as well. High role clarity ameliorates the aspects of high work overload, but only in groups where there was supportive leadership (Bliese et al., 2000). As Bandura (1997) noted, If one does not know what demands must be fulfilled in a given endeavour, one cannot accurately judge whether one has the requisite abilities to perform the task. Discrepancies between efficacy belief and performance will arise when either the tasks or the circumstances under which they are performed are ambiguous. These authors stress the importance of role clarity and this factor should not be underestimated by management.
2.3 Conceptual model
Based on the above literature and findings a research statement and conceptual model (see model 4) are developed. The main objective is to research the context of the merger and especially the effectiveness of the post-merger integration phase leading to specific recommendations for improvement, in particular for the directors in Foundation “Quality”.
Research question
Sub-questions
To what extent does the level of communication and sensemaking have an influence on the level of success of the merger and post-merger integration process?
To what extent does the level of commitment and involvement have an influence on the level of success of the merger and post-merger integration process?
To what extent does the level of steering have an influence on the level of success of the merger and post-merger integration process?
To what extent does the level of role clarity of the directors have an influence on the level of success of the merger and post-merger integration process?
To what extent does the level of success of the merger and post-merger integration process have an influence on the level of commitment and involvement?
MODEL 4 Conceptual model
Factors influencing the level of success of the merger and post-merger integration process
Level of success of the merger and post-merger integration process Level of communication and
sensemaking
Actors and role clarity Type of steering
3. METHOD
This research exists of a case being the merger and post-merger integration at Foundation “EduQual”. This research could provide insights in the problems that could occur when merging educational foundations and guidelines in how these problems can be overcome.
The most suitable research method for this research is a qualitative research (Flick, 2006) which exists of analyzing experiences of individuals or groups, analyzing interactions and communications and analyzing documents. This approach facilitates exploration of a phenomenon within its context using a variety of data sources. This ensures that the issue is not explored through one lens, but rather a variety of lenses which allows for multiple facets of the phenomenon to be revealed and understood. The data collection exists of a literature review, available documents and interviews.
3.1 Literature review
For this research I have conducted a thorough literature study including all theory about mergers, especially post-merger integration. These theories contributed to the development of the research statement and formed the basis for the theoretical framework. Furthermore, the in my opinion most appropriate and suitable theories formed the conceptual model.
3.2 Documents
In addition to the literature I looked at all available and appropriate documents from before, during and after the merger. These documents provided valuable information about for example the plans, schedules and meeting minutes during the whole merger phase. Furthermore, these documents supported preparing for the interviews and the qualitative research.
3.3 Interviews
with the principal and form a representative and diverse selection of participants. In total there were thirty directors. The directors were contacted by email about the upcoming interviews and told they would be called in order to set a date in a three week period. The email informed them with the goal and the main topics of the research. All directors accepted the invitation for the interview. Before and during the interview they were informed about the confidential character of the research and explained that the results would be anonymous and only used for this study. This secured no or less information would be held secret and they would be more open about the events during the merger and post-merger integration phase. The interviews lasted about 1.5-2 hours each. The conversations were recorded with a mp3-player making sure no information would be lost, the information could be heard again making the interviewer less busy with writing notes thus having more time to carefully listen to and interact with the interviewees.
3.4 Data analysis
Emans (2002) states the interviews should be valid, complete, relevant and intelligibility. For the interviews to contribute to a solid qualitative content analysis the received data needs to be labelled (Baarda et al., 2005). Furthermore, Flick (2006) mentions coding interviews as a good method for analysis. After that, connections should be organized, interpretations and structure should be made and the validity of the labels should be determined. Finally, central labels should be defined. These labels are then analyzed. In this research the labels are derived from the conceptual model and these are:
• Success of the merger and post-merger integration - Expectations
- Personal goal and function - Level of success
• Level of communication - Style of communication - Focus of communication - Level of information sharing - Level of sensemaking - Influence on success - Points of improvement
- Level of perceived commitment - Level of perceived involvement - Influence on success
- Points of improvement
• Type of steering - Level of feedback
- Decisions and responsibility - Problem solving
- Level of accompaniment - Influence on success - Points of improvement
• Level of role clarity - Role actor
- Level of skills and knowledge - Level of task clarity
- Influence on success - Points of improvement
4. RESULTS
The directors of Foundation “EduQual” were all interviewed about the factors of the conceptual model and their influence on the level of success. Below the results are presented.
4.1 Success of the merger and post-merger integration
The interviewed directors were asked about their expectations about the merger and post-merger integration process and to what extent this was a success. These findings are presented in table 1.
TABLE 1
Expectations and level of success
Success Directors Foundation “Education” Directors Foundation “Quality” Expectations - “positive critical” (4)
- not very excited about changes (2)
- anxious because of former restructuring (3) - “what will happen to us?” (3)
- necessary because of students decline (4) - improved agency staff (5)
- shorter lines (4)
- positive (5)
- increased opportunities (3) - improved agency staff (5) - more effective operations (2) - shorter lines (3)
- “let it happen” (4)
Level of success - not yet a complete success (5) - needless management layer gone (4) - positive about autonomisation (4) - positive about Foundation “Quality” (3) - lack of interpersonal relations (1) - new tasks challenging but motivating (4) - bad accompaniment during change (5) - need more knowledge and skill (4) - good agency staff (5)
- it will be a success (5) - everything goes faster (3) - more professional (4) - more knowledge sharing (3) - good agency staff (5)
“Education” felt the merger was forced upon them and they were still stressed by the last structural changes when they got a cluster structure, which caused a lot of unrest. “Do we really have to change again?” was their opinion. In general, they are trying to make the merger happen and to carry out a positive feeling about the merger towards the employees.
All directors see their new tasks, being integral result responsible, as challenging but motivating. They now see all money flows and have more responsibility and room for decisions as they work in frameworks. Most of the directors still want some additional knowledge and skill in order to fulfil their job even better. They are a bit reserved when it comes to calling the whole merger a success yet, but they all think this will be a matter of time as they are on the right way. Success factors were they have gotten good assistance by Foundation “EduQual”, more intensive contact with other directors, more quickly feedback, more knowledge sharing and in general the directors of Foundation “Education” are happy they now belong to Foundation “EduQual”. Fail factors were the unrest the whole process caused, some felt they were being thrown in the depths, some felt they could have gotten more assistance by Foundation “EduQual” and miss a certain interpersonal relation they shared in the cluster structure.
4.2 Communication and sensemaking
TABLE 2
Influence of communication and sensemaking on success and points of improvement Communication Directors Foundation “Education” Directors Foundation “Quality” Influence on success - mostly general information (4)
- future remained unclear (4) - lack of openness (5)
- not enough involvement (3) - better involvement in GPC (2) - easy to call/email colleague (4)
- mostly general information (3) - lack of communication between management and teachers (3)
- communication did address concerns (2) - easy to call/email colleague (5)
Points of improvement - more openness (5) - more involvement (3) - more frequent (3)
- more and sooner security (4)
- more bottom-up (4) - more frequent (3)
The directors were informed mainly through newsletters and meetings at the town-hall with relevant stakeholders. Though these meetings would inform the directors about the forthcoming changes the directors of Foundation “Education” did not know if they would form part of the new organization making the meetings less valuable. No real two-way communication was applied during these meetings.
Furthermore, there was a sense of us and them and a director of Foundation “Quality” remarked: “there was a lot of suspicion amongst the directors of Foundation “Education””. Another remark was: “we received a lot of general information in officalese but what would really happen after the changes and what a result responsible director would entail remained unclear”. Generally, most information about the changes would be received and discussed by directors who were members of the GPC. In here they could express their opinions and concerns and although management listened to their input they believed not much was actually changed with respect to the initial plans. Members of the GPC found that communication during GPC meetings was more like two-way communication.
influence on the success. Furthermore, the lack of openness and the suspicion of preference regarding the to be filled positions, however, formed a reason for the GPC to involve the union. There was a lot of insecurity about who would fill which position and how the money of the dowries would be divided. The union forced more openness in these processes, thereby unintentionally slowing down the process thus increasing insecurity. The focus of the communications was mainly on the new structure. Both management and GPC decided upon the new control philosophy. There would be more responsibility for the integral result responsible directors and lines would be made shorter in order to operate more effectively.
Another point of improvement was the lack of communication between management and lower workforce members, mainly being the teachers. These teachers could have been made more aware of their new employer and the organizational changes their organization would be going through. The communication did address concerns of fear, uncertainty and doubt but failed to truly involve employees. The perception of the directors of Foundation “Education” was in general more like “we must follow the new organization and we will see what will happen” than “we are happy to transform”. The directors agreed that more time should have been spent on meeting minutes and constant information sharing. Not all directors were fully aware of the changes and had trouble communicating and carrying out the changes with all employees. As a result of the new structure including the director meetings, more and easy communication has been made possible. All directors agreed they are not reluctant to pick up the phone or send an email.
4.3 Commitment and involvement
TABLE 3
Influence of commitment and involvement on success and points of improvement Commitment Directors Foundation “Education” Directors Foundation “Quality” Influence on success - enough room for making
mistakes (2)
- positive about coach (2)
- positive about director meetings (5) - positive about responsibility (4) - teachers not involved (3) - not through alderman (2)
- depends on own attitude (2) - advice when needed (3)
- structure supports development (3) - involvement mainly through GPC (2) - improved agency staff (5)
Points of improvement - more involvement (5)
- reduce negative expectations (3) - act upon suggestions (4)
- less top-down (3)
- director meetings more effective (4) - explain benefits change (3)
In general, the directors did feel a certain amount of commitment and involvement, partly because they had no choice in following the changes and partly because they saw more opportunities for cooperating with colleagues and an improved agency staff. They found that there was enough room for making mistakes and that they would not be punished immediately but were given information and advice when needed. Some directors found that commitment and involvement is there, but that it depends on their own attitude. The GPC is a good example where directors can discuss policies and directors found this to become more important. They pointed out that members do have to realize the GPC is disconnected from specific schools in order to keep clear boundaries between the normal PC and the GPC. Most directors of Foundation “Education” felt more commitment due to their new role and their increased responsibility. Some directors were assigned a coach and this gave them a feeling that management cared about their work, thus increasing commitment. The new structure and way of operating does motivate directors to develop themselves.
good example of how management tries to create more involvement and commitment. In here directors can express their feelings towards policies and ask management and colleagues for advice. In general the directors felt that the commitment and involvement before and during the process was too little to make the merger a success. However, from hindsight, most directors think of the new structure and way of working as a success in the long run and this helps them to feel committed and involved.
4.4 Steering
The interviewed directors were asked about the steering during the merger and post-merger integration process and to what extent this contributed to the success of the change project. Furthermore, they were asked what could be improved regarding to communication. These findings are presented in table 4.
TABLE 4
Influence of steering on success and points of improvement
Steering Directors Foundation “Education” Directors Foundation “Quality” Influence on success - problem solving variable (4)
- not sufficient feedback (4) - too much insecurity (5) - fast pace changes negative (4) - most information through GPC (2) - discussions in good harmony (3)
- problem solving sufficient (3) - use expertise better (2) - good accompaniment (4) - enough room for mistakes (2)
Points of improvement - involve more stakeholders (4) - more feedback (both ways) (2) - deal with questions quickly (3) - deal with insecurity (5)
- more feedback (both ways) (3) - develop documents quickly (4)
harmony. There remained a lot of questions surrounding finances and the formation of the new directors enhancing uncertainty. Hence, the union was called in order to clear up these factors. Problem solving was, according to the directors of Foundation “Education”, variable. The directors of Foundation “Quality” found that the problem solving was sufficient, however, they did not have to change as many. In general, the directors claimed the fast pace of which the changes took place as a negative factor. They found that the accuracy of the relevant documents should have been better and implemented more quickly.
Leadership was a combination of both steering and supporting although some directors claimed more emphasis was on steering. There was enough room for making mistakes though some mistakes could have been prevented by adequate feed forward. Some directors of Foundation “Quality” found that the available expertise could be utilized better during the merger and in the future. “Every school is different and being in a constant dialog helps a lot”, was one of the director’s remarks.
4.5 Actors and role clarity
The interviewed directors were asked about their role clarity during the merger and post-merger integration process and to what extent this contributed to the success of the change project. Furthermore, they were asked what could be improved regarding to communication. These findings are presented in table 5.
TABLE 5
Influence of role clarity on success and points of improvement
Role clarity Directors Foundation “Education” Directors Foundation “Quality” Influence on success - too much ambiguity (4)
- excited about new role (5) - good agency staff (5)
- problematic time management (4) - some tasks questionable (3)
- not many changes in role (5) - “quality cards” improvement (2) - good agency staff (5)
- documents more specific (4) - problematic time management (3) - some tasks questionable (2)
Points of improvement - avoid overload (3) - rethink task package (3)
- avoid overload (4) - rethink task package (2)
clear that Foundation “Education” would adjust to the working methods of Foundation “Quality”. Because the directors have been working with the new method for some period now they all have adapted well and most clarity problems seem to be fixed. However, according to some directors some documents could use more specificality like the integral personnel policy.
Another claim of some directors was they found they had a lot of policy space but thought they should not have a say in everything. For instance, they should not be responsible for things like the building or fire extinguishers as they had some shortage of time already in their education related tasks. The shortage of time and the ability to divide the available time was something almost all directors claimed to be a problem. A lot of time can be soaked up by things which are not on the agenda. Causing less time for truly motivating employees and visiting teachers in their classes. Management, some directors said, should try to avoid overloading them.
5. DISCUSSION
The results of the interviews are compared with the theory in this chapter. The focus of the discussion is on the relations in the conceptual model.
5.1 Success of the merger and post-merger integration
For evaluating the success of a merger a valuable place to look are the objectives as stated by Foundation “EduQual”. These are the creation of an independent position in relation to the community, the realization of direct and indirect commitment in the board, the opportunity to develop an own financial system and to be more effective in general. Furthermore, they want the directors to be integral result-responsible and make sure communication runs smoothly and directly through short lines. When these goals are met Foundation “EduQual” will call the merger successful. The results of the interviews along with the new organizational structure show that all these objectives have been met. However, some directors of Foundation “Education” claimed that the cluster structure and the frequent communications between location leader and cluster director gave a more interpersonal “touch” whereas the new structure has increased the distance from director to management.
In the theory chapter Olson (2004) claimed that the baseline requirements for a successful merger were real strategic value and financial value in the short or long term. In the case of Foundation “EduQual” the real financial and strategic value lies in the fact that, without the merger, in the long run they would not be able to keep up with the demographic changes, as the number of students is declining. Furthermore, for more direct communication, clear and short lines and thus more effective management a new organizational structure was needed.
direction and the creation of relevant documents are processes which are taking place but still need time to be fully incorporated.
For the successful integration of the merger five drivers for success mentioned by Epstein (2004) were a coherent integration strategy, a strong integration team, communication, speed in implementation and aligned measurements. In this case the integration strategy gave room for mistakes and adjustment but made sure there was no ambiguity in which direction Foundation “EduQual” was going. Management formed the integration team and when desired, workgroups could have been set up. The communication has been increased by the director meetings and management strongly encourages communication between directors. Whereas the high speed in which the merger took place contributed to negative feelings the speed in implementation reduced ambiguity amongst directors regarding their new tasks. The aligned measurements are partially there and still being implemented. These underline the new strategic direction.
Following Birkinshaw et al. (2000), the integration of the merger can be called a successful one because the level of completion of both task and human integration is high. In the beginning there was a sense of “us” and “them” but now everyone is sitting along everyone in director meetings. Furthermore, the directors are less resistant to call or email colleagues from both Foundations with questions. In the face of task integration, most tasks have been taken over by Foundation “Education” but some, like quality cards, are now used by the directors of Foundation “Quality”. The directors of Foundation “Education” are seeing the benefits of the new structure and embrace their increased task package and responsibilities.
5.2 Communication and sensemaking
The influence of the communication and sensemaking on the level of success of the merger and post-merger integration is two-sided. At first, communication and sensemaking before and during the merger was regarded to as one-way and incomplete having a negative influence on the level of success. Secondly, communication and sensemaking in the integration process was regarded to as two-way and open having a positive influence on the level of success. Furthermore, the directors of Foundation “Quality” were less bothered by the one-way communications and lack of openness than directors of Foundation “Education”.
The results of the interviews show that communications before and during the merger between management and directors mainly went top-down. Management planned some meetings in which mostly general information was handed out. Directors were informed about the need for the merger as well as the effects of the merger on their personal function. However, a lot of questions remained unanswered creating feelings of fear, uncertainty and doubt. The directors felt they were inadequately involved in communications. Meaning, the directors were asked for their opinion but they had a feeling that hardly anything changed regarding the initial plans of management. The communication meetings were perceived more closed than open and more formal than informal. The theory section showed that, according to Barrett (2002), for the success of the merger and post-merger integration process effective two-way and meaningful communication is needed and although meetings were set up, the directors perceived these more as one-way informational meetings. The communications did not contribute in reaching consensus or galvanizing the necessary support amongst the directors, which is stated necessary by Appelbaum et al. (2000). The directors generally had a feeling of: “we can not stop it, so we will see what it brings”.
As part of the new structure management aimed at what Doyle et al. (2000) called more employee involvement, improved management-employee relations and internal communications. This is recognized by the directors, who favor the new structure. Cross-functional communications can be improved as some directors found their expertise could be utilized better.
From the sensemaking perspective it can be said that more time should have been spent on meeting minutes and constant information sharing. Not all directors were fully aware of the changes and had trouble communicating and carrying out the changes with all employees. All directors shared some sense of ambiguity but cultural confusion, organizational hypocrisy and issue politicization as Vaara (2003) mentioned did not form a real barrier in changing the organization. The directors of Foundation “Education” did have to get used to the new ways of working but since most of them enjoyed and aspired their new role of integral result responsible director they went along with the changes. Because at the time of the information meetings no one was really sure who would form part of the new organization and thus less attention was paid to what would exactly entail their new job. Therefore, organizational hypocrisy did play a role as they were not really sure what the changes would bring. Management should have spent more time in communicating the changes well in order to make the directors further address the issues towards all other employees. Furthermore, the directors should have played a more active role in the process according to Steensma et al. (2000). They are the ones who work with other employees on a daily basis and therefore they need to know and support all ins and outs of the change increasing the effectiveness and rapidity as well as the management of the inevitable stress. The director meetings are a good example of a discussion forum in which all directors can explain their views of reality and commit to joint action.
5.3 Commitment and involvement
The influence of commitment and involvement and the level of success of the merger and post-merger integration process differs in both phases. The post-merger phase clearly lacked the necessary instruments to create commitment and involvement. The directors did not feel they participated, no clear picture of the future was provided, information was not shared sufficiently and they found their new role still vague. They were mostly committed due to the fact that they had no choice in following the changes if they wanted to keep their job. During the integration phase the directors started noticing that management did care about their fate and they were seeing the benefits of this new structure with increased responsibilities, more effective operations and shorter lines.
