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Employee stress and anxiety in time of merger
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Employee stress and anxiety in time of merger

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This article was written as an assignment for Com433 Corporate Communications Management at Nanyang Technological University by Jamie Foo Li Ning, Peh Yuxin, Tammie Kang Zi Ying, and Tan Deyong.

This article was written as an assignment for Com433 Corporate Communications Management at Nanyang Technological University by Jamie Foo Li Ning, Peh Yuxin, Tammie Kang Zi Ying, and Tan Deyong.

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    Employee stress and anxiety in time of merger Employee stress and anxiety in time of merger Document Transcript

    • NEWSLETTER ISSUE NO. 1 1 axis EMPLOYEE STRESSANDANXIETY INTIMES OFACOMPANY’S MERGER WHAT SHOULD MANAGERS DO? INTRODUCTION .......................................... 2 STRATEGIES AND TACTICS ....................... 3 Keeping employees in the loop.................................. 3 Using narratives to communicate............................. 4 Retain and engage talents......................................... 4 Lead with sincerity..................................................... 5 Helping employees cope with stress........................ 5 BENEFITS OF A SMOOTH M&A.................. 6 FEATURE: APPLICATION TO ASIAN CONTEXT..................................................... 7 CONCLUSION.............................................. 8 IN THIS ISSUE: PR OCTOBER 2013
    • NEWSLETTER, ISSUE NO. 1 2OCTOBER 2013 INTRODUCTION Change is stressful for most individuals, more so for organizations with hundreds to thousands of employees under their charge. When faced with the situation of mergers and acquisitions (M&A), companies not only have to deal with personal concerns like employees’ fear of being laid off, but also how to manage different organizational cultures. Things are further complicated in cross-border M&As, where national cultures are added into the equation. In view of the various factors affecting the success of companies’ transitions, this literature review hopes to help corporate communications practitioners be effective agents of change by suggesting communication strategies that can be broadly applied. To develop strategies that work, we should first understand why M&As cause stress and anxiety in employees. Hogg and Terry (2000) explain this negative reaction with social identity theory, originally posited by Tajfel and Turner in 1986. According to this theory, employees resist merger processes because they perceive it as a threat to their identities, which are in turn influenced by group values, structures, and other aspects of intra-group culture. The theory also predicts that the stronger the bond with the existing organization, the more difficult it will be for employees to identify with the merged company (Hogg & Terry, 2000). Whether employees lose their job, or experience a change in team or position, social identity theory is useful for realizing why M&As often leave employees feeling vulnerable. Corporate communications practitioners should take this hint, and try to allay employees’ fears as much as possible during the adjustment process. Besides being mindful of employees’ emotions, companies have to be careful with cultures as well. Organizational culture is defined as “the beliefs and values shared by employees within a company” (Schein, 1985), and there are four types of cultural modifications or acculturation (Nahavandi & Malekzadeh, 1988). The first is integration, where both partners change culturally and structurally without either dominating. Dominance of the acquirer leads to a one-sided process called assimilation, while minimal cultural exchange between the two is known as separation. The last type, deculturation, results in new practices and systems that are unlike those from previous organizational cultures. The authors did not make a value judgment about the best form of acculturation, since the context of each M&A differs, so corporate communications practitioners need to discern which form best advances the interests of their company. Companies often do not appreciate the importance of a smooth transition until problems surface during the process. By then, the damage would already be done, and consequences costly. Examples of consequences include loss of psychological connection with the company, feelings of unease, decreased efficiency, and increased turnover rate of employees (Rouzies, 2011). These consequences may even be harmful to employees’ physical health and psychological well-being. Such occurrences are supposedly more prevalent among employees of the subordinate pre-merger company (Makri, Hantzi & Antoniou, 2012), highlighting a demographic that practitioners should look out for. With poor integration preventing more than 50% of M&As (Cartwright & Schoenberg, 2006) from attaining their objectives, good planning is no longer an ideal but an imperative for companies. Corporate communications practitioners have a strategic role to play in maximizing the success of M&As, and the following section outlines some strategies to improve their advisory function.
    • 3OCTOBER 2013NEWSLETTER, ISSUE NO. 1 STRATEGIES &TACTICSWhat can managers do during M&A? KEEPING EMPLOYEES IN THE LOOP Companies should be transparent about policies when communicating with employees as this helps to reduce employee stress and anxiety during M&As. Transparency involves the provision of adequate information, and relaying this information in a way that maintains a conducive communication climate. sense of security, and affirm their place in the merged company. When employees have less reason to speculate about their fate, they can focus on performing for this merged company that they feel part of. To increase transparency, the company can circulate internal newsletters specific to the M&A. The newsletters should contain everything employees need to know about the M&A - from what changes will be taking place, to the benefits that they will still be entitled to. Employees should feel guided through times of uncertainty, and newsletters serve precisely this function. The newsletters can be distributed at town hall-style meetings, as well as made available online. Town hall-style meetings gather employees, regardless of rank, to be addressed by the CEO or someone equivalent. This is significant because flattened hierarchy shows that no one is better off than others, and that pulling through change will take a unified effort. According to Lee, Kim, Kim, Kwon and Cho (2013), high employee turnover rate during M&As is linked to relative deprivation, where employees leave because they feel worse off than others. Resentment and discontent arising from relative deprivation can affect employees’ morale more than their actual situation, pointing to a need to control these negative sentiments. By keeping employees in the loop, companies boost their “By keeping employees in the loop, companies boost their sense of se- curity, and affirm their place in the merged company.”
    • NEWSLETTER, ISSUE NO. 1 4OCTOBER 2013 USING NARRATIVES TO COMMUNICATE RETAIN AND ENGAGE TALENTS Companies communicate infor- mation differently based on what sort of M&A they are undergoing, and the desired outcomes. Roundy (2010) has four “marriage narratives” that management can use to explain this change to employees, in the least stressful way possible. The first narrative, marriage of future orientation, paints an exciting picture of both companies joining hands to reach greater heights. Marriage of familial union focuses on the combined growth of both companies to be- come dominant players in the market, whereas marriage of reason is collaboration with the intention of safeguarding tradition. The last narrative, marriage of affinity, describes merger as a business transaction made to ensure both companies’ survival. These narratives motivate employees in different ways; marriage of future orientation and affinity are more promotion- focused, and the other two prevention-focused (Roundy, 2010). What corporate communications practitioners need to do is match the narrative with the situation, and employees’ orientation towards either promotion or prevention will be strengthened. For instance, if the survival of the company is at stake, practitioners need to position the M&A in such a way that employees see it as necessary. When employees ‘need’ the M&A to happen, they will promote it through their words and deeds. They focus less on their personal resistance to change, and become indirectly accepting of it. Psychological preparation also makes it easier for management to implement new or revised policies, contributing to a smoother transition. Of course, all talk and no action can only go so far. A more concrete way of show- ing employees that they are valued is to retain talents from both companies, and offer them key positions in the merged company. Employ- ees tend to be more accepting of M&As when they perceive the new company as prestigious, and where they will have plenty of opportuni- ties to grow their career (Rouzies, 2011). Re- taining employees from both companies also prevents an ‘us against them’ mentality, since all employees are equally valued. Creating work teams with employees from both companies also encourages them to communicate openly and collaborate with each other, which Rouzies (2011) believes will promote post-merger iden- tification. Retention of talents has an added ben- efit, in that these employees bring the best of their previous companies’ cultures with them. Corporate communication practitioners should engage employees to find out about these good practices, and incorporate them into the new company. One way to do this is through fo- cus group discussions, where feedback about important decisions like resource allocation and staff training can be solicited. Practitioners must also keep other channels, such as sug- gestion boxes and social media platforms, open. This reflects a willingness to listen to employees, and to address their concerns. Perhaps more important is the desire to work alongside employees, who are likely to feel greater ownership of the new company if their feedback is sought and considered.
    • NEWSLETTER, ISSUE NO. 1 5OCTOBER 2013 LEAD WITH SINCERITY On the subject of sincerity, employees’ belief in the success of M&As is partially affected by how well leaders of their company walk the talk. It is not enough for top management to plan, and delegate an- other function - usually human resources, to execute their plans. These days, employees expect CEOs and board members to be ca- pable of leading them through change. Lee et al. (2013) have observed that employees are likelier to accept the M&A when they trust that top management has the capabilities to carry it out successfully. Conversely, the perception that top management is inept will cause the M&A to fail eventually. To help leaders earn employees’ trust, corporate communication practitioners should provide regular updates about the companies’ ‘victories’. These can be anything from progress in negotiations, to potential perks that employees can enjoy as part of the new organization. Short-term wins can in- crease employees’ faith in their leaders, mak- ing them less pessimistic about M&As. Top management can also make themselves more personable through site visits, and having face-to-face conversations with employees. Having leaders that fight for them, while still caring about their well-being, breeds employee loyalty to the company. HELP EMPLOYEES COPE WITH STRESS Employees experience higher than normal stress levels during M&As, and the inordinate amount of pressure sometimes leads them to adopt an escapist approach when faced with difficulties (Amiot, Terry, Jimmieson & Callan, 2006). Running away from problems is not healthy on an individual level, and negatively impacts company performance as well. Corporate communications practitioners can minimize this unhealthy behavior by implementing coping strategies to help employees manage their emotions. For example, counseling workshops can be organized for employees to voice their worries and frustrations. Practitioners can also start a hotline for employees to call and get things off their chest. Having someone to listen to their grievances and offer sound advice can be cathartic for employees, who might not know how to find emotional release otherwise. There are many benefits associated with better emotional management, making this an area that practitioners cannot ignore. A study done by Amiot et al. (2006) found that employees who stopped avoiding difficulties, and began tackling them instead, adjusted more positively to mergers. Positive adjustment results in higher levels of job satisfaction and greater identification with the new merged company, while the reverse is true for poor adjustment. Identification is in tandem with commitment, so companies wishing to reduce the high turnover rate associated with M&A should not neglect employee stress. Happier employees are always a boon for any company, and as with health in general, organizational health should be taken care from inside out.
    • NEWSLETTER, ISSUE NO. 1 6OCTOBER 2013 BENEFITS OFASMOOTH MERGER AND ACQUISITION “When this alignment is achieved, employees feel a greater sense of belonging, and define themselves in accordance with the bigger entity that is the new compa- ny.” Companies with well-planned M&As stand to reap a host of benefits, as illustrated by the five communication strategies before. Amid this myriad of benefits - which include greater employee retention and job satisfaction, reduced absence, and a more dedicated workforce, one benefit that stands out is identification with the new organization. Organizational identification is defined as employees thinking and behaving in a manner that is “aligned with the values, norms, and interests of the company” (Rouzies, 2011). When this alignment is achieved, employees feel a greater sense of belonging, and define themselves in accordance with the bigger entity that is the new company. This is no small feat considering the numerous changes that a company’s identity undergoes throughout a M&A. Even at the transitional identity stage, which is the identity that companies adopt immediately after a M&A (Edwards & Edwards, 2013), many details are still not finalized. Corporate communications practitioners find this ambiguity challenging, especially when they have to contend with the company’s fragile image and identity simultaneously. Nevertheless, there is much to be gained in getting employees to identify with the new company. For better regulation and adaptation, practitioners must press on in their efforts to maintain uniformity in presentation, and consistency in message.
    • NEWSLETTER, ISSUE NO. 1 7OCTOBER 2013 FEATURE: APPLICATION TOASIAN CONTEXT The rise of the Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) in the 1960s, followed by China and India in recent years, have made Asia an attractive region for business opportunities. The potential of these developing economies has led multinational corporations (MNCs) to look east to grow their businesses, resulting in more cross- border M&As. But transitions in these merged companies are rarely without they tend to emphasise hierarchy, behave as a collective, prefer cooperation and consensus, and are uncomfortable with ambiguity. Most of the earlier strategies are adaptable to the Asian context (looking to leaders, creation of work teams), but Asians’ desire to control what they can about the future is trickier. After all, organizational and individual uncertainty felt during M&As is commonplace (Schweiger & DeNisi, 1991). The issue here is not letting uncertainty spiral out of control, as it will ultimately hurt organizational identification. As such, elaboration is required on how to soothe Asians’ discomfort with ambiguity. Western managers need to realize that talks by leaders, and the distribution of newsletters, can only do so much to assuage Asian employees. The first can be problematic if leaders of the other company are speaking, since employees would tend to trust their kind. The second may be deemed as impersonal, and lowers the likelihood of employees buying into the M&A. What corporate communications practitioners can do is convince Western managers to involve employees more in the pre-merger process, because their input reduces cultural discontinuity between M&A problems, because of the significant cultural differences involved (Brahma & Srivastava, 2007). There are two cultures involved - national and organizational, but this section focuses on the former, since the latter has already been discussed. According to Hofstede’s culture dimensions theory (2001), Asian countries are characterized by high power distance, low individualism, low masculinity, and high uncertainty avoidance. This means that “Western managers need to realize that talks by leaders, and the distribution of newsletters, can only do so much to assuage Asian employees.”
    • NEWSLETTER, ISSUE NO. 1 8OCTOBER 2013 help Asian employees cope with ambiguity is through training. Whether or not employees are let go as a result of the M&A, equipping them with skills is the best preparation for restructuring or for moving on to the next job. Skills make employees feel employable, and heightens their sense of security. In the unfortunate event that their employment is terminated, companies should include training workshops and help in job search as part of employees’ severance packages. Personal transitions are as important as organizational transitions, and helping employees move on is the least a company can do to repay their service. Besides cultural dimensions, which are admittedly generic, it is essential that Western companies be sensitive to Asian employees’ religious beliefs. Asia has a rich variety of religions, and corporate communications practitioners need to be versed in their basics to avoid unintentionally offending employees. From making sure that the company canteen has a halal stall, to including a prayer room within the building, employees do pay attention to these gestures in cross-border M&As. Practitioners must also communicate tactfully; narratives used during organizational storytelling cannot insult, mock or degrade any religious belief. A study done in Brunei by Clarke and Salleh (2011) found that religion played an important role in “influencing how [employees] made sense of the change and managed their emotional responses”. Bruneian culture is a fusion of Malay and Islamic values, and part of Islamic ideology promotes “loyalty and obedience to the ruler”, and pre-determined destiny (Clarke & Salleh, 2011). Bruneian employees felt that merger was their fate, and they willingly accepted it. They also believed that working past this stressful situation would improve their spiritual health, and make them better people. Clarke and Salleh’s study posits a link between religion and emotional regulation in an organizational context, proving that companies need to be sensitive to all faiths to not jeopardize the success of their M&A. partners. Lessening the culture shock leads to higher levels of identification with the new organization, as well as feelings of support (Creasy, Stull & Peck, 2012). Another way to “it is essential that Western companies be sensitive to Asian employees’ religious beliefs. Continued from p.7 Employees are key stakeholders of any com- pany, and the success of any event - not just M&As, hinges on them. In times of change and high stress, companies must be mindful to not pursue strategic goals at the expense of employees’ well being. Communication strat- egies need to show that management values the company’s greatest asset - its people. While strategies are generally feasible on a macro-level, corporate communications prac- titioners should be flexible enough to adopt an individualized approach where feelings are concerned. This case-by-case basis is evi- denced by cultural and religious sensitivity in Asia, but there is still a lack of literature on successful cross-border M&As (as compared to domestic ones). Future research can provide insights into this area, since Asia’s economic growth does not look to be slowing in the fore- seeable future. CONCLUSION
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