Identifying the Driving Factors for Employee Retention in Mergers and Acquisitions: An In-depth Literature Review Analysis

Nakis Atoniou, Demetris Vrontis,

Alkis Thrassou, and Ioanna Papasolomon

School of Business, University of Nicosia,

  • 46 Makedonitissas Ave., P.O. Box 24005,
  • 1700 Nicosia, Cyprus

Background and Problem Identification

Researchers have been exploring mergers and acquisitions (M&A) for more than forty years and there has been a heightened interest in this topic for the last ten to fifteen years (Alam & Ng, 2014; Hajbada & Donnelly, 2013; Hughes, 2015; Srivastava & Prakash, 2014; Wagner & de Hilal, 2014). Several authors claim that M&As is in fact the easiest and quickest way for business growth (Burghardt & Helm, 2015; Kyriazopoulos & Drymbetas, 2015), and even during a recession (Baghai et al., 2008; Epstein, 2004; Fairfield-Sonn & Ogilvie, 2002). The success of M&As depends on different tangible and intangible factors with the most important intangible factor being the human factor that is an organisation’s workforce, and, in fact, this factor should not be neglected during the entire process of M&As (Maimunah et ah, 2016).

There is a need for more empirical evidence to help managers understand the ways in which the workforce is affected by the M&As process and in turn affects the process success (Maimunah et ah, 2016; Newton, 2015; Stahl & Voigt, 2008). Researchers highlight the need to find the tools that can help employees deal with the insecurity and uncertainty that arises during M&As (Nemanich & Keller, 2007) and also find those variables that can encourage employees to stay with the organisation following a merger or an acquisition (Maimunah et ah, 2016). M&As increase insecurity and uncertainty among employees (Lawlor, 2013; Lupina-Wagener, 2013; Maimunah et ah, 2016; Riviezzo, 2013; Wagner & de Hilal, 2014) and these in turn create high levels of anxiety among employees (Hogg, 2007). During M&As, employee commitment to the organisation is reduced (Uhlenbruck et ah, 2016), there is a decrease in rhe employees’ trust towards the organisation and its management (Schweiger & Denisi, 1991) and increases the employees’ desire to leave the organisation (Erickson, 2015).

There is inconsistency in relation to the outcome of M&As since each merger has its own specific characteristics (Chiriac & Georgescu, 2015), whereas the outcome is often inconclusive and contradictory (Bradt, 2015; Chiriac & Georgescu, 2015; Trichterborn et al., 2016). Similarly, the employees’ reactions to M&As depends on the workforce, and should be investigated according to various industries (Edwards & Edwards, 2013).

In M&As several human resource issues and concerns tend to be neglected (Maimunah et al., 2016). For example, the employees’ emotions (Naz & Nasim, 2015), the employees’ culture (Ahmad et al., 2015; Bradt, 2015), as well as employee empowerment, motivation, recognition, involvement, communication, job enrichment, training, autonomy and fair treatment (Kummer, 2008; Nikandrou & Papalexandris, 2007; Sanda & Benin, 2011; Weber & Tarba, 2012). Reus and Lamont (2009) highlight the need for more research into these and other factors that could facilitate employee retention during M&As (Maimunah et al., 2016).

The existent literature highlights the importance of using human resource management to manage issues that usually arise and have a negative impact on the effectiveness of M&As. Several authors claim that HRM should be implemented proactively in the early stages of the process (Antila & Kakkonen, 2008; Hughes, 2015; Konstantopoulos et al., 2009; Mavrides & Hadjichristodoulou, 2008; Schweiger, 2002; Shook & Roth, 2011; Xing & Liu, 2015).

According to Garver (2006) and Edwards 2013, the M&A process is destined to fail if the newly formed organisation fails to retain and motivate employees. It is clear that there is a need to investigate through academic research how organisations can retain employees during M&As (Maimunah et al., 2016; Mavrides & Hadjichristodoulou, 2008; Raukko, 2009; Schuller & Jackson, 2001). Lee et al. (2009) emphasise the necessity to study what influences the turnover intention among top managers, middle level managers and key employees of the acquired company (Krug et al., 2014).

Overarching Aim and Objectives

The aim of this chapter is to identify and analyse the existent literature on M&As in order to identify the key variables/tools and the role that HRM plays in retaining employees during the difficult implementation process of M&As. The literature review is not industry specific and rather aims to explore current knowledge in this specific field. Specifically, the following objectives guide the literature search:

• To uncover the key challenges and concerns faced by employees during M&As that subsequently lead to high employee turnover rates;

  • • To identify the reasons that lead firms towards mergers and acquisitions;
  • • To highlight the important role that the HRM department should play in retaining employees during M&As.
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