Globalization and stiff competition in the marketplace has made business firms vulnerable to failure. There is greater integration of world economies and as a response the firms also need an integrated effort to perform in the competition. Thus, increasing numbers of firms are getting into merger and acquisition. M&A offers various benefits including the benefits of economies of scale and consolidating the firm’s market position. But the statistics reveal that most M&A deals fail and do not prove to be of much help to the firms trying to gain competitive advantage. The researchers also claim that one of the major reasons behind this failure has been the negligence of human issues while deciding for M&A. Though the firms carry out various calculations for financial and operational benefits before signing M&A deal, they hardly do any analysis for the human factors involved. ‘Soft factors’ as they are sometimes called play vital role in the success or failure of M&A. Without the support of human resources, the success of M&A deal is next to impossible.
Human Issues in M&A
M&A involves the combination of firms and if we see the human aspect, M&A involves interaction and integration of human resources from different organizational cultures and leadership. The firms usually concentrate on legal, financial, operational and strategic aspects of M&A or we can say the hard issues; while neglecting the very important soft issues. When any M&A is realized, the emotions and career of many employees may be seriously influenced. If it is a case of hostile acquisition, the acquirer sometimes gets into implicit contracts with the employees of the acquired firm regarding salary, pensions and other benefits where these employees are at a loss. Moreover, the M&A may sometimes lead to a decline in the job profile especially of the top management of acquired firm forcing many of the top management to resign. It is also common that employees of the acquired firm fail to adapt to the culture of acquiring company which makes them quit their jobs. M&A deals not only result into resignation but massive layoffs also take place leading to an increase in the attrition rate.
Why Human Issues arise in M&A
Cultural heterogeneity is a major reason for most human issues in M&A. Though cross-border mergers and acquisitions especially face this problem of cultural mismatch but domestic mergers are also not free from this. The acquiring firm many times playing dominant role try to impose their organizational culture on the employees of acquired company. Adaptation into new culture takes time and patience along with the guidance of an emotionally intelligent leader. If these are not available, the human issues are bound to arise. Thus, the availability of emotionally intelligent leadership is must. Another major reason behind occurrence of human issues relates to mismatch between human resources and the job. If the employees are not offered the job that suits their skills best in the newly created firm, there is dissatisfaction among them giving birth to negative emotions like anger, frustration and aggression resulting into organizational conflicts and mass resignations.
Role of Emotionally Intelligent Leadership in Human Issues
The concept of emotional intelligence has recently got lot of recognition in the corporate arena but it is still not aligned well in the field of merger and acquisition. M&A involves a change in leadership and if the leader is not emotionally intelligent and fails to understand the emotions of employees, there are great possibilities of employee resentment and organizational conflicts. M&A has an impact on the job satisfaction, motivation, commitment and loyalty of the employees and leader’s empathy is must to handle emotional swings during M&A. The employees undergo serious stress and anxiety during M&A deals because of the fear of losing their jobs. It is therefore very important to appoint a leader who can understand employees’ expectations and make them compatible with the changed organizational culture. The leader should convince employees that M&A deals do not only poses challenges but also provide opportunities in the form of working with a bigger firm with more resources, better technology and increased market access.
- Bhattacharyya, D. (2010). Cross-Cultural Management: Text and Cases. New Delhi: PHI Learning Private Limited.
- Kusstatscher, V. & Cooper, C. (2005). Managing Emotions in Mergers and Acquisitions. UK: Edward Elgar Publishing Limited.
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