Cross-Border Mergers: The Use of Employment Engagement Tools in Overcoming Challenges of Workforce Cultural Diversity

ABSTRACT

Diversity will increase significantly in the future years. Successfill organizations recognize the need for immediate action and be ready and willing to spend resources on managing diversity in the workplace now. Companies today are combining in record numbers. Executives pursue mergers, acquisitions, and joint ventures as a means to create value. Cultural diversity has emerged as one of the dominant barriers to effective integrations. The chapter focuses on the challenges of cultural diversity in firms after merging and addr essing them using employee engagement tools. The chapter explores on what are the challenges faced and how human resour ces (HRs) personnel or leadership through employee engagement interventions mitigate challenges that diversity can spring forth.

INTRODUCTION

Workplace diversity refers to differences between people hi an organization with respect to race, gender, ethnic group, age, personality, cognitive style, tenure, organizational function, education, background, etc. Diversity is about people’s perception of self and others. Those perceptions affect their interactions and conversations in an organization. For such a diverse workforce to function effectively in an organization together, human resource (HR) professionals need to deal effectively with issues such as communication, adaptability, and change. Successfill organizations recognize the need for immediate action and are ready and willing to spend resources on managing diversity in the workplace now (Josh Greenberg, 2004). Executives pursue mergers, acquisitions, and joint ventures as a means to create value by (1) acquiring technologies, products, and market access, (2) creating economies of scale, and (3) establishing a global brand presence. Cultural diversity has emerged as one of the dominant banders to effective integrations. In one study, culture was found to be the cause of 30% of failed integrations. Companies with different cultures find it difficult, if not often impossible, to make decisions quickly and conectly or to operate effectively (Miller and Fernandes, 2009). Given that culture will seldom stop a proposed transaction, it becomes the responsibility of the people managing the deal to stop cultur e from undermining their desired goals. The most widely used approach to managing the cultural issues is to define a set of desirable cultural attributes (a typical set being: customer-focused, innovative, entrepreneurial, decisive, team-oriented, respectfill of others) and then to exhort employees to adopt these attributes in their daily behavior (Miller and Fernandes, 2009). It is important for management to respond to changes brought about such as restructuring and transfer of employees in order to address challenges confr onted due to different caliber of employees as well as induction of new staff to the organizational culture.

NEED FOR DISCUSSING THIS THEME

The chapter explores on what are the challenges faced and how HRs personnel or leadership through employee engagement interventions mitigate challenges that diversity can spring forth. Managing diversity enables organizations to derive excellence and talent out of its workforce since the workforce will feel accommodated from diverse countries and cultures. It is, therefore, the responsibility of the management and HRs personnel to introspect and work into their policies of integration of employees fr om different backgrounds in order to bring about a correct divergence of these cultures. However, challenges brought by diversity can be turned into the str ength of enter-prises such as transfer of skills and affirmative action. A narration and literature of qualitative study will seek to address issues of diversity in newly established organizations through mergers and acquisitions (Reuben, 2017). If issues of diversity are not carefully redressed, they can end up spiraling to legal frictions which may impact the organization negatively. The chapter covers:

• • Mergers & acquisition (M&A)-concept, psychological issues related to M&A.
• • Employee engagement-concept, employee engagement during change, employee engagement, and organizational culture.
• • Role of employee engagement in merged entities.
• • Case studies.

REVIEW OF THIS THEME

MERGERS & ACQUISITION (M&A)

M&A provides means to acquire expertise, technology, and products. Over the past two decades, M&A have become a global phenomenon and a popular strategic choice for company growth and expansion (Hansen et al., 2004). Many researches were done to examine human and cultural aspects of M&A and it was found that the real problem is not financial issues but the lack of intercultural synergy and sensitivity between the organizations. The organizational cultural issues create communication breakdowns and therefore act as a barrier for successfill integration of the two organizations (Epstein, 2004). Cartwright and Cooper (1993) reinforced the previous findings by stating that the financial and other strategic benefits expected from M&A are undermined by the cultural conflicts (Cartwright and Cooper, 1993). Michelle (2006), in her article “Post-merger Culture Clash: Can Cultural Leadership Lessen Casualties?,” states that post-merger cultural clashes are often the main reason for the disappointing M&A outcomes and that unfortunately poor research exists to conduct the merged organizations to a suitable cultural integration. Therefore, she underlines that the cultural leadership is the most important and influential factor in order to achieve a sustainable culture. The article includes a qualitative study exploring an analysis of the interviews with 42 post-merger employees in order to put in evidence the role of the leader during the post-merger culture adaptation. The findings of the study have some implication for leaders who are desired to anticipate the post-merger culture clashes (Michelle, 2006). The psychological issues arising out of the merger process is shown in Figure 8.1 and described as under:

Pre-Merger To Stabilisation Psychological Issues

|~| Uncertainty

|~| Loss of Identity

|~| Intergroup Conflict

□ Perceived Unfairness

□ Acculturation Stress

|~| Job Changes

□ Role Conflict

FIGURE 8.1 Pre-merger to stabilization psychological issues.

• • Uncertainty: Fear in the minds of employees as to what is going to happen next? What will be the merged entity like? What lies in future for them? Ar e all possible issues of anxiety in the minds of the employees.
• • Loss of Identity: When the merger takes place, a lot many positions are dissolved and the employees occupying such positions are in a situation of a fix, i.e., which new position will be given to them and whether it would be at a par with the previous one.
• • Intergroup Conflict: New merged firms face a lot of friction due to lack of communication, understanding between the employees. Various groups are formed based on common interests and such gr oups take care of their mutual rights.
• • Perceived Unfairness: The workforce might not agree on suitability of the merger and for the proposed changes. They might fear post-merger adjustment, i.e., changes in the job requirement, duties, salaries, and equitable distribution of these.
• • Acculturation Stress: Acculturation is the process of social, psychological, and cultural change that stems fr om mixing between cultures.

The effects of acculturation can be seen at multiple levels in both the original and newly adopted cultures. Acculturative stress refers to the stress response of employees in response to their experiences of acculturation, i.e., blending of new cultures. Stressors can include but are not limited to the pressures of learning a new language, main-taming one’s native language, balancing differing cultural values, and brokering between native and host differences in acceptable social behaviors. Acculturative stress can manifest in many ways, including but not limited to anxiety, depression, substance abuse, and other forms of mental and physical maladaptation (Berry, 2006; Davis, 2016). When members of two cultures meet in the stressful situation of a merger each perceives members of the other culture as foreign and intrinsically mistrusts them. Regardless of how much effort is made to welcome the new group on board, working with them leads to a natur al tendency to be critical of “their” values, the way “they” work, “their” attitudes, how “their” priorities and methods impact on “our” aspirations, “our” security. Consequently, there are three major cognitive processes that take place when employees consider the “other” cultur e during the merger process.

■ Polarization: People describe the two cultures in a way that highlights the differences or contrasts. Unchecked this becomes “stereotyping,” a belief system about the other cultrue that is difficult to change.

■ Evaluation: People place a positive value on their culture and a negative one on the other.

■ Ethnocentrism: Unwillingness to see behaviors and events from the point of view of the other.

These distorted perceptions and hostile feelings toward employees from the other organization may become common. As employees experience cultural differences in their daily operations, failures are typically attributed to members of the other company. The result is post-merger conflict or “culture clash” (People and Culture, 2009).

• Job Changes: WithM&As the positions, duties, work profile, coworkers might change leading to anxiety and tension.

These issues are predictable and manageable. It is important to build the communication and engagement activities around their emergence. It is also important to have employee attitude measures in place that surface when and where these issues are emerging. Transition speed around key decisions is essential to maintain motivation-beware of organizational drift.

Managers need to pay careful attention to signs of stress. Managers need to be aware of “merger syndrome” and have effective methodologies for relieving team stress (People and Culture, 2009). The degree to which these issues are experienced will in part be determined by the cultural congruence of the two organizations, however, inherent cultural differences are exposed and culture-related stress, tension, and resistance are likely to be highest when employees are pushed to abandon their old culture and learn a new one (People and Culture, 2009).

Douglas D. Ross, Managing Director, Square Peg International Ltd (2005) is the author of the article “Culture Management in M&As: A focus on culture and people is critical to make integration strategies work.” The author was invited to speak to the Telecom Finance Conference in London, Creating Value through M&A, about managing cultural transition issues in M&As and joint venture situations. During this discussion, the author emphasized that management from the acquiring company usually is unprepared to deal with post-merger politics that can lead to a reduction of the outcomes, the cause are the underestimation of the culture integration challenges or the human factor. So in order to tackle directly with the cultural factors, the author stressed the importance to develop an “integration plan.” In this plan, advices are given to the leaders to constitute and implement a new corporate culture. Indeed, once the new organization knows what it wants to be, aligns its systems, processes, and procedures to reinforce the desired culture, the next stage is the most difficult one; it concerns the alignment of the employees and leadership team with the new culture. So, according to Douglas D. Ross once the culture is defined it is important to:

• • Obtain individual buy-in from leaders;
• • Address the “me” issues;
• • Identify integration risk factors;
• • Avoid deadly sins of M&A’s;
• • Learn from best practices.

He concluded his article by pointing out that “the time to make change is limited but the way in which cultural integration is handled will make the difference between success and failure of the deal” (Douglas, 2005). Thus, the organization who addressed cultural issues properly during mergers and acquisitions experienced good results as compare to other organizations who neglected this aspect, for instance, Adidas-Reebok merger, and Nissan-Renault merger. Hence, there exists a strong need to consider the cultural issues as critical during the M&A and address them properly. This may be addresses well using Employee engagement tools. What is Employee engagement? Which tools of engagement may be used during the merging process to overcome various psychological issues?