How big is the psychological impact of M&A's on employees?

A study carried out by KPMG in 2004, involving 700 mergers & acquisitions, showed that between 50 and 70 percent of M&A's fail to achieve their objectives. Not only did they fail to achieve revenue and cost synergies, but in many cases the failed M&A diluted shareholder value! What some people don't realise is that the human dimension of M&A's plays a large part in their failure or success, with studies showing the cause of over half the failures being down to not addressing the human dimension.

“Mergers and acquisitions represent a significant and potentially emotional and stressful life event because they change an individual’s working life significantly but fail to provide an individual with any control over the event”
                                 (Cartwright and Cooper 1992) 

In addition to this, there are also a number of direct commercial impacts of M&A's including a rise in unwanted turnover and loss of good staff, significant decrease in employee engagement which therefore leads to a fall in productivity and performance and an increase employee stress levels which quickly manifests into increased sickness and absenteeism.

Throughout the M&A process, there are typically four key problems which arise, these being:

1. Neglect of psychological issues
2. Inadequate communication throughout the merger process
3. Cultural clashes between both organisations
4. Ambiguous company direction and unclear roles and responsibilities

M&A's can actually cause what is identified as "merger syndrome", creating uncertainty and widespread psychological effects on employees throughout the business. Am I stable in this position? Will I be moved? and will I get along with my new colleagues? are some of the questions employees are faced with as a result of M&A activity. This so called "merger syndrome" has the following psychological impacts on employees:

• Social Identity - employees can lose their old organisational identity. This can have detrimental effects as employees who identify themselves to their previous organisation may feel lost, angry and will be less inclined to accept the change
• Anxiety - employees become uncertain of their future job prospects and their career which results in a decline in productivity as they begin to show 'survival-seeking behaviours'. In the long term, anxiety can begin to cause psychological and physical illness, leaving employees with a lack of motivation and a rise in stress levels which can cause operational tension
• Acculturation - typically arising in most horizontal mergers, adapting to a new culture can cause a serious increase in resistance and have serious inter-organisational culture conflicts
• Role Conflict - employees may struggle to see where they stand after M&A activity, as their existing roles and reporting structures may have been disrupted 
• Job Characteristics - In many cases, employee job circumstances decline post-merger, resulting in a decline in job satisfaction and engagement
• Organisational Justice - organisations need to be transparent with who they are laying off and must be honest in the decision-making process as employees will begin to lose trust if they are not. This is shown to have the largest impact on employee attitudes and their behaviour post merger

Although these issues are manageable, organisations need to ensure they build the communication and engage with their employees when these issues arise, with employee attitude measures in place in order to try prevent it. One of the most important factors is the attention they pay to employee stress, managers need to beware of "merger syndrome" and have effective methodologies in place to tackle it. Neglecting these issues can have major consequences on productivity, eventually destroying shareholder value - the last thing a business needs!