Mergers and acquisitions has become an important part of the American commerce, which communication plays an important role in reducing the negative impacts. While Schweiger agrees that failure to communicate with employees during a merger will increase employee uncertainty and anxiety, he highlights that previous researchers (Napier et al., 1989) did not measure uncertainty nor any of the supposed dysfunctional outcomes said to follow uncertainty.
Communication is also suggested by others to be avoided, as it might alert competitors or cause employees to leave an organization rather than endure painful changes (Buono & Bowditch, 1989). It can also threaten management’s ability to respond flexibly to changes during a merger or acquisition process (Eisenberg and Witten, 1987).
To examine the impacts of a merger and determine if communication with employees could mitigate the expected negative effects of mergers and acquisition on them, a field experiment was conducted with the focus to provide a clearer picture of the effects over time of the merger and communication with employees.
Two non-unionized companies were chosen for the experiment. Employees in the experimental plant were given information and media tools, held weekly meetings with regards to the merger - how it would affect them, and answers to questions regarding restructuring. Employees in the control plant were only given information that was normally distributed by the CEO. No other formal communications was given to the employees or the plant manager, and were only told information will be given “as soon as it was available”.
Initially upon merger, employee uncertainty and dysfunctional outcomes in both plants increased rapidly as predicted. However, as time passed, the experimental plant started to show signs of recovery, while the situation in the control plant continued to worsen. The preview of the experiment was deemed effective that the vice president of the human resource immediately introduced it to the control plant at the end of the experiment. As opposed to Buono & Bowditch’s worry that employees will be unable to cope with the change and thus resign, only two employees resigned from both plants, out of the 126 employees employed in the experimental plant and 146 employees in the control plant.
Schweiger concluded that communications can help employees cope with the effects of mergers and acquisitions to reduce the negative impacts to the organizational effectives, as should it be left unchecked, it could become costly to an organization and undermine the initial aspects and objectives of the merger or takeover.
The case study talks about the proposed takeover of Bushwhacker Mining Pty. Ltd. by Coongan River Ltd. (CRL). With the decline in gold prices, CRL has considered the option as Bushwhacker’s success in the gold industry was due to its highly skilled management team. Majority of the Bushwhacker staffs were formerly CRL staffs, which had left CRL because they did...