Employees Perception About Merger Management Essay

Employees Perception Ab show up Merger Man successionment EssayThe present economical scenario has witnessed a large number of jointure and acquisitions in avowing industry only over the instauration. One of the principal objectives behind the spinal fusion Acquisition in banking sector is to reap the benefit of economies of scale. The growing competition has compelled banks to expand their sizing of it and to penetrate in market place it indicates the rule of the ocean that prominent fish ordain eat small fish. Consequently, one of the more(prenominal) or less wide used tools is nuclear fusions and acquisitions. However, the market situation is such that in that respect is bombardment of legion(predicate) new and divers products from large pool of bankers. For survival, deliberate decisions argon required to mitigate the diverse effects of market forces. At the time of winning decision of MAs, generally financial issues atomic number 18 taken care of and HR issues are ignored which is close to important issue for success of whatever fusion. therefore, the aim of this research paper is to assess the direct of satisfaction among employees of the integrate bank i.e. the erstwhile bank of Rajasthan ltd. This think is based on a pilot survey small taste of 30 employees, which is taken from the 14 selected growes from Udaipur city, and paired adjudicate t-test, is applied to test the signifi washbasint conflict of the sample along with burden average method. The results revealed that post merger satisfaction direct is busted and try level is high among bank employees after(prenominal) merger. The logical implication of the study is for policy makers, strategist, bankers, future researchers, and scholars.Key Words Merger, Acquisition, believe, Employees, Perception1. launchingIn recreation of organizational increase, augmenting geographic communicates, to accelerate market dowry, creating strategical fit and synergy organiz ations are adopting strategic tools same Mergers and Acquisitions (MAs). It is evident from the pages of level that MAs is the most widely used inorganic strategic tool for growth. A merger is a combination strategy of two or to a greater extent organization in which one acquires the assets and liabilities of the other in exchange for share or cash. At this point of time, it becomes imperative for strategist and policy makers to constrict the confidence of their employees, node, shareholder and subsidiaries and to understand how they apprehend any strategic run short because this surely affects the image of the company. Kotler (1997, p. 185-86) has illustrated in his book that comprehension is the handle by which an individual selects, organizes and interprets information input signals to create a meaningful picture of the world.Since the world market is shrinking and consumers are becoming aware about respective(a) products and services offered by ball-shaped players du e to the emergence of ICT, it has become strategically important for banks to understand the perception of employees under the purview of MAs, this is so, because they deliver the services. umpteen researchers devour proved that kind factor is the key element in delivery of services. Thus, we quite a little say that core reason for success and tribulation of mergers are benevolent resources i.e. personnel and behavioral issues, blends of cultures and sets of policies practices. Therefore, Transferee Company moldiness create an environment where the employees of Transferor Company can project merger as a steps towards growth. Consequently, employees impart strive to work with integration of trance and mission of Transferee Company.Thus, this study can contribute in the land of strategic management as a view point of employees and human resource management. Strategist can consider this view as an input in strategy formulation.In this scenario, this study on employees percepti on whitethorn be a modest attempt to trace the hard realities regarding employees perception of ICICI intrust Ltd. It go forth be helpful for ICICI mangers, executives, and employees, government, banking industry, RBI, research scholar, strategic managers, HR managers and policy makers.2. Review of LiteratureSchneider and Bowen (1985) report momentous relationships among branch employees perceptions of organizational human resources practices and branch customers attitudes about services.Schweiger and Weber (1989) suggested that Mergers and acquisitions (MAs) are corporate events that take the latent to create severe personal trauma and tautness which can result in psychological, behavioral, health, execution, and survival problems for some(prenominal) the individuals and companies involved. With the increasing size and number of MAs transacted and the number of employees affected, it is essential that executives and human resource professionals pay greater attention to un derstanding the sequence of actions and reactions associated with the do by.Schweiger and Denisi (1991) conducted a longitudinal depicted object look into to evaluate the various effects of a communication program on employees of an organization they called it a realistic merger preview. This study was intended to bank bill the effects of mergers and acquisitions on employees. Their results suggested that realistic communication during a merger process in the form of a realistic merger preview can help the employees to get through the process of merger. As illustrated by the importantly lower measures on global stress and perceived un indispu display panelty and significantly higher on job satisfaction, commission and self-reported procedure for the experimental sort, exposed to the communication program.Schneider and Dunbar (1992) suggest that media plays an important role in shaping the friendly context for mergers and acquisition.Weber (1996) assessed the role of corpor ate pagan fit, autonomy removal, and commitment of managers to the merger in predicting effective integration between merger partners in variant industry sectors. He found that relationship was very composite plant they varied across industries and had different relationships with different measures of performance. Further, he found that cultural differences at the top management level were most likely to enchant the merging organizations ability to realize synergies.Literature shows that communication also plays zippy role in the success of a merger. Nikandrou, Papalexandris and Bourantas (2000) explored a number of variables which turn out an impact on managerial trustworthiness, for example frequent communication sooner and after acquisition, and already the existing qualities of employee relations seem to play the most important role. Therefore, a carefully planned, employee-centered communication programme, together with a erect level of employee relations, seem to form the basis for a successful exit as far as employee relations in the face of mergers and acquisitions is concerned. Therefore issues related to human resource management are also embossed by researchers in articles.Appelbaum, Gandell, Yortis, Proper and Jobin (2000) conclude that communications throughout the MA process plays a crucial role in its eventual success. Providing clear, consistent, existent sympathetic and up-to-date information in various ways go away increase the cooping abilities of employees, which will in turn increase their productivity. This increased productivity will positively impact on firms performance and create sustained competitive advantage by achieving the projected strategic fit and synergies. colloquy and a transparent change process are important, as this will lots determine non only how a leader will be regarded, but who will be regarded as a leader. leaders need to be competent and trained in the process of transforming organizations to m eet that individuals within the organization accept the changes prompted by a merger.Hurtt, Kreuze and Langsam (2000) suggest that growth is the primary reason for MAs.Panchal and Cartwright (2001) investigated post-merger stress in a sample of field sales employees. A survey methodology was used to examine group differences, comparing those from the two pre-merger companies and those newly merged organization. Results revealed that group differences in both sources and effects of stress existed. Those from the dominant pre-merger company reported the highest stress levels and most negative work attitudes.Lynch and Lind (2002) also suggest that mergers and acquisitions is one of the study tools for organizational growth and on the other hand Dario, Fabio and Carmelo (2002) investigated using Italian data that mergers seek to improve income from services.Bryson, (2003) reviewed the literature around managing HRM risk in a merger. He found that poor merger results are often attribut ed to HRM and organizational problems, and that several factors related to maintaining workforce stability are place as important in managing HRM risk. Schraeder and Self (2003) also found that organizational culture is one factor as a potential atom smasher to MA success.DeLong (2003) studied sample of 54 bank mergers announced between 1991 and 1995, tests several facets of focusing and diversification. The study found that upon announcement, the market rewards the merger of partners that focus their geography and activities and earning stream. Only of these facets, focusing earning streams enhances long-term performance.Shanmugam and Nair (2004) identified factors in their study on mergers and acquisitions of banks in Malaysia like globalization, liberalization and information technology developments have contributed to the need for a more competitive, resilient and robust financial systems.George and Hegde (2004) reported a case for the delicate construction of employees atti tudes, their satisfaction and motivation, which are posited as prerequisites for customer satisfaction, which is, again, sine qua non for the competitive sustenance of the organization.Chew and Sharma (2005) examined the effectiveness of human resource management (HRM) and organizational culture on financial performance of Singapore-based companies involved in mergers and acquisition activities. They used the method of field abstract to collect information on cultural set and HRM effectiveness, using Kabanoffs content analysis. Culture profiles were then assigned to organizations in the sample avocation the results from roll up analysis. Various financial ratios were used to measure organizational performance. Finally, regression analysis was performed to test various hypotheses. The key finding of the study suggests that organizations with elite and potential leader, when complemented by human resource effectiveness, had a die financial performance as compared to other organ izations. At the end it was concluded that to achieve better financial results by undertaking merger and acquisition activities organizations need to have elite or leadership value profile.Seo and Hill (2005) identified sixer theories viz. anxiety theory, social identity theory, acculturation theory, role difference theory, job characteristics theory, and organizational justice theory to explain problems in managing the merger and acquisition and organizational change process. These theories have implicitly or explicitly formed the basis for the past MA literature. The authors integrate these theories into one abstract framework that clearly delineates unique sources of problems that can emerge in different stages of MA integration, their psychological and behavioral effects on employees, and prescriptions to address the problems. jibe to Mylonakis (2006a) an important parameter in the relationship between the number of branches and physical exertion is branch size. He has used most well-known indicators for the evaluation of module efficiency in banking sector i.e. operating revenue per employee, personnel expenses per employee and pre-tax bread to personnel expenses. He observed that operating revenue either blow over or remains stable, administrative expenses per employee increase for any examined bank and pre-tax simoleons to personnel expenses indicator showed how many Euros are gained by the bank for every euro spent in staff payroll.Mylonakis (2006b) has examined in his article that how bank employees perceive bank MAs and how it is expected to affect their personal and professional career. The results showed that bank employees olfactory property personally threatened by mergers and acquisitions, which are not considered to be justify and necessary entrepreneurial activities conducive to enhanced, quality banking services. Mergers and Acquisitions often have a negative impact on employee behavior resulting in counterproductive practices, abse nteeism, low morale and job dissatisfaction. It appears that an important factor affecting the successful impression of acquisitions is top managements ability to gain employee trust.Wickramasinghe and Chandana (2009) took views of 109 employees of two banks of Sri Lanka, which had undergone an extension merger and a collaborative merger and reported that employee perceptions are affected by the caseful of the merger and employees are less satisfied in the collaborative merger than in the extension merger. Further findings revealed that age, gender, and marital status influence the perceptions of the respondents and among those age is the most influential.DeYoung, Evanoff and Molyneux (2009) have found in their study that the changes in deregulation, allowed commercialised banks and other financial services firms to expand through mergers and acquisition into geographic markets and product markets.Marmenout, K (2010) conducted experimental study to examine how employees make sen sation of a merger announcement and investigates the relationship between deal characteristics (culture light touch potential, degree of integration, set in deal structure) and employee attitudes. As employees make intellect of the merger, higher perceived uncertainty is associated with greater dysfunctional outcomes.Calipha, Tarba and Brock (2011, p. 1-24) have reviewed MA motives and success factors in their article such as entering a new market, gaining new scarce resources, achieving synergies and other managerial and organizational factors that are associated with MA i.e. relative size of MA partner, managerial involvement, culture and organizational structural issues etc.Goyal and Joshi (2012a) identified the general sentiments, challenges and opportunities for the Indian beveling Industry. They concluded challenges and opportunities like rural market, transparency, customer expectations, management of risks, growth in banking sector, human factor, global banking, environm ental concern, social, ethical issues, employee and customer retentions. They further concluded that banks are nisus to combat the competition and the competition from global banks and technological innovation has compelled the banks to reconsideration their policies and strategies. (2012b) studied the growth of ICICI vernacular Ltd. through mergers, acquisitions, and amalgamation. The article concluded that a firm must devise a strategy in terce phases i.e. Pre-merger phase, acquisition phase and post-merger phase.3. Research Methodology3.1 Objectives of the StudyTo identify the factors creditworthy for employees satisfaction.To assess the satisfaction level of employees, after merger.To assess the stress level of employees (post merger).3.2 Sampling Distribution3.2.1 Universe append 463 branches of BoR were operating across India beforehand merger and out of this replete(p) 293 disunitees were operating in Rajasthan. Out of these 293 branches, there were total 31 branches o perating in Udaipur before merger and that 14 branches were situated in Udaipur city.3.2.2 Sample unitThere were total 14 branches of erstwhile BoR, which are now functioning as ICICI lingos branches after merger, Employees of these branches are considered for sampling purpose.3.2.3 Sample SizeA small sample of 30 bank employees from erstwhile BoR is drawn by using severalize purposive sampling.3.2.4 selective information TypePrimary and Secondary data will be used to achieve the objectives.3.2.5 Research InstrumentSchedules (structured) and personal interviews methods are used for primary data collection.Publications from company, books, journals, magazines and various websites are referred for secondary data collection.3.2.6 Research ToolsPaired sample t-test and is used to test the hypothesis and process the data. Data processing is done by SPSS 13 software (student version) and weighted average method is used.Whered = x -y3.2.7 Limitation of the StudyThe terminus ad quem of the study is that it is based on small sample size with geographic constraint and time. The respondents were contacted at the respective bank and appointments were taken. Then, they were contacted as per their convenience and ease. The work out was a major constraint for this study.3.2.8 HypothesesH01 There is no significant difference between employees satisfaction level (pre-merger and post merger).H02 There is no significant difference in stress level of employees between pre-merger and post-merger.4. Conceptual poserMergers and acquisitions is a phenomena which has been used as a tool for growth and a tool for survival of sick units in banking industry. There are certain provision in the Banking Regulation Act 1949, which helps us to understand the primary concept of mergers and acquisition. 44A of Banking Regulation Act 1949 clearly defines procedure for amalgamation of banking companies. concord to it a draft of amalgamation intent should be produced before shareholders o f severally banking company. If the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the victual of this section, the sub-section (4) states that it shall be submitted to the Reserve Bank for sanction and shall, if okay by the Reserve Bank by an enounce in composition passed in this behalf, be binding on the banking companies concerned and also on all the shareholders thereof.Section 45 of the act defines the power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation in certain antecedent like public interest, depositors interest, for the interest of banking system and reconstruction of the banking company.5. Conceptual synopsis of Merger of the Erstwhile Bank of Rajasthan Ltd. and ICICI Bank Ltd.5.1 Historical BackgroundThe Bank of Rajasthan Ltd. (BoR) was incorporated on May 7, 1943 as a Company delimit under the Companies Act, 195 6 and has its Registered Office at Udaipur, Rajasthan. The Bank of Rajasthan had a network of 463 branches bump into 31, 2009. The primary object of the Transferor Bank was banking business as set out in its Memorandum of Association. For over 67 years, the Bank of Rajasthan had served the 24 states with 463 branches as a profitable and well-capitalized Bank in India. It had a unwavering aim in Rajasthan with branch network of 294 which is 63 percent of the total branches of BoR in India. The men power strength of BoR was more than 4300 employees across India.The balance public opinion poll of the Bank shows that it had total assets of Rs. 173 one million million, deposits of Rs. 150.62 billion and advances of Rs. 83.29 billion as on action 2010. The profit and loss account of the bank shows the net profit as Rs. -1.02 billion as on March 2010, which shows that bank, was not in dandy financial condition.On the other hand The ICICI Bank Ltd. was incorporated on January 5, 1994 under the Companies Act, 1956 and has its Registered Office at Landmark, Race Course Circle, Vadodara, Gujarat. The Transferee Bank, as on May 21, 2010, has a network of 2,000 branches and extension counters and has over 5,300 modify teller machines (ATMs). At present the bank has 79,978 employees with strong financial position like total assets of Rs. 3634 billion, total deposits of Rs. 2020.16 billion, advances of Rs. 1812.06 billion and net profit of Rs. 42.25 billion as on March 2010.5.2 Scheme of AmalgamationAccording to the scheme of amalgamation of the Transferor Bank with the Transferee Bank, it is clearly stated that the Scheme was hypothecate as per the Section 44A of the Banking Regulation Act, 1949, as per the guidelines of Reserve Bank of India for merger/amalgamation of private sector banks and in accordance with the applicable provisions of the Companies Act, 1956, and the Memorandum and Articles of Association of the Transferor Bank and the Transferee Bank and oth er applicable provisions of laws.5.3 Strategic IntentThe objectives and benefits of this merger are clearly mentioned in the scheme of this merger by ICICI Bank that its customer centric strategy which places branches as the focal points of relationship management, sales and service in geographical micro markets. As it is evident that the BoR had deep penetration with huge disgrace value in the State of Rajasthan where it had 294 branches with a market share of 9.3% in total deposits of scheduled commercial banks.It was presumed that the merger of BoR in ICICI Bank will place the Transferee Bank among the top trine banks in Rajasthan in terms of total deposits and significantly augment the Transferee Banks presence and customer base in Rajasthan and it would significantly add 463 branches in branch network of ICICI Bank along with increase in retail deposit base. Consequently, ICICI Bank would get sustainable competitive advantage over its competitors in Indian Banking.5.4 Issues EmergedWhen the information about this merger was communicated to the employees, they did not accept this merger. All the employees were against this merger as it was evident from the strike and agitation by all the three major employee unions i.e. All India Bank of Rajasthan Employees Federation, All India Bank of Rajasthan Officers Association and Akhil Bhartiya Bank of Rajasthan Karmchari Sangh, subsequently demanding the immediate termination of the ICICI-BoR merger proposal. It is a very strong phenomenon from the behavioral aspects of employees in the growth strategy like mergers and acquisitions. It is quite feasible that this human aspect may hamper the whole strategic challenges of the bank or any other organization adopting the strategic tool.5.5 Future importeeThe issue of employees perception towards mergers needs special attention from researchers and thinkers in order to convert mergers as synergy. At this juncture, the prevalent challenge for ICICI Bank Ltd. was to encounter the agitation from the 4300 BoR employees.Now, since the merger has taken place the critical issue for news is the management of Human Resources in the course of Mergers and Amalgamation. The mist of human aspect in the process of MAs can be removed by the act the pages of available literature for better vision in strategy formulation.6. Data Analysis and InterpretationDemographicsTable 1 Age * Gender hybridization tabular matterGenderTotalMaleFemaleAge20-3012331-4027941-5035851-608210Total141630Table 2 Designation of the Employees * Gender Cross tabulationGenderTotalMaleFemaleMaleDesignation of the EmployeesBranch Manager10010 ripened Manager213Manager235 senior Executive347Executive235Total191130In analysis, following scale (Table 3) will be used to interpret the mean values of ranks.ResultsInterpretation1.00-1.80 real poor1.81-2.60 pitiable2.61-3.40Moderate3.41-4.20Good4.21-5.00 genuinely goodTable 4 Pre-Merger Rank AnalysisS. No.Factors angleTotalWeightedTotalWeig htedMeanRank12345Very PoorPoorModerateGoodVery Good1Satisfaction Pre-Merger08129130936.2092Work Culture Pre-Merger07166130916.07123Quality of steering Pre-Merger07185030885.87174Infrastructure Pre-Merger07912230996.6025Salary Pre-Merger07176030895.93166Time Schedule Pre-Merger07194030875.80187Communication with Senior Pre-Merger04214130926.13118 pronouncement Provided by the Bank Pre-Merger07175130906.00139Responsibility Level Pre-Merger09183030845.602110Designation Provided by the Bank Pre-Merger010155030855.672011Benefit Provided Pre-Merger07167030906.001412Involvement In Decision Making Pre-Merger06222030865.731913Job Security Provided Pre-Merger07167030906.001514Opportunity for Advancement Pre-Merger03216030936.201015Working simulate Pre-merger03186330996.60316Stress Level Pre-Merger04196130946.27517 air Pre-Merger04204230946.27618Training Development Pre-Merger04178130966.40419Compatibility Pre-Merger04196130946.27720Perks Responsibility Pre-Merger04204230946.27821Redressal Pre-Merger0314121301016.731Table 4 reveals the ranks of the variables used in the study and derived by weighted average method. The responses were taken from bank employees on five-point Likert scale and as per the above table it can be observed that the most ranked variables are redressal, infrastructure, working pattern, develop and development, stress level, and ambience and so on. Thus, we can say that employees were on the doorstep of merger and they were in ambiguous situation what to do.On the contrary, in table 5, the employees rated one of the most important factor is Benefit Provided Post-Merger, infrastructure, compatibility, working pattern, stress level, perks and responsibility and so on. Thus, it can be said that financial benefits provided by the transferee banks like salary hike has affected employees. Some more variables rated by employees like working pattern which has also affected the employees. BoR employees were not exposed to high end technologies in banki ng sector. Stress management in the course of mergers and acquisition is one of the most debatable issue as MAs brings new working culture, new technology, infrastructure, colleagues and peers and it takes time to make adjustments with these.Table 5 Post-Merger Rank AnalysisS. No.FactorsWeightTotalWeightedTotalWeightedMeanRank12345Very PoorPoorModerateGoodVery Good1Satisfaction Post-Merger028164301127.47122Work Culture Post-Merger027147301167.7383Quality of Management Post-Merger1211115301077.13194Infrastructure Post-Merger113196301187.8725Salary Post-Merger138144301077.13206Time Schedule Post-Merger038145301117.40137Communication with Senior Post-Merger0211134301097.27168Authority Provided by the Bank Post-Merger066612301147.60109Responsibility Level Post-Merger049125301087.201810De