Entropy in Postmerger and Acquisition Integration
From an Information Technology Perspective
Section 1: Foundation of the Study
Background of the Problem
There has been extensive general research related to postmerger and
postacquisition integrations. However, there is very little existing research on integration
factors and their influence on the disruption and sense of disorder experienced during the
integration process. Fish (2007) conducted a qualitative, hermeneutic phenomenological
study that explored the concept of entropy applied to postmerger and postacquisition
integrations through the lived experiences of senior managers and executives of
U.S.based, service-oriented corporations (Fish, 2007). The themes identified in Fish’s
research “suggested an underlying negative presence of the entropy phenomenon during
integration in terms of five interrelated entropy factors with an order of precedence: (a)
leadership, (b) communication, (c) organizational culture, (d) people, and (e) strategy” (p.
iii). Fish described the interrelated factors as the entropy model of postmerger and
postacquisition integration and recommended future research from different perspectives
to expand the body of knowledge. One such perspective is the influence of the entropy
factors on the post deal integration of information technology (IT) systems of
manufacturing-oriented corporations. A 2007 study by PricewaterhouseCoopers showed
the IT function is subject to some form of integration effort in 89% of merger and
acquisition cases (Polites & Karahanna, 2012). I sought to advance Fish’s 2007 study by
considering the perceptions of midlevel and first-line managers, rather than senior or
executive management with regard to integration factors that lead to entropy during the
postmerger process. Higher management may create problems during the change process
by not taking into consideration the voice of middle managers (Fronda & Moriceau,
2008). By targeting middle and line-level managers as participants, the study results
expanded the knowledge gained by Fish’s (2007) study.
Problem Statement
The integration of IT systems can be the difference between postmerger success
and failure (Banal-Estañol & Seldeslachts, 2011; Carlsson, Henningsson, Hrastinski, &
Keller, 2011; Dao, 2010; Heimeriks, Schijven, & Gates, 2012). Integrating information
technology systems is potentially one of the most complex and expensive integration
processes after an acquisition (Alaranta & Henningsson, 2008; Dao, 2010; Heimeriks et
al., 2012). A general problem exists with the high failure rate of mergers and acquisitions
(M&As) in corporate America (Banal-Estañol & Seldeslachts, 2011; Clayton, 2010; Fish,
2007; Wan & Yiu, 2009). M&As have historically experienced poor return on
investment, with failure rates from 50% to more than 80% (Carlsson et al., 2011; Connell,
2010; Fish, 2007). The specific problem addressed by this study was whether or not
integration of information technology solutions of merged business units created entropic
issues that form obstacles to the integration process. M&As are considered successful
when the integrated organization increases shareholder value faster than the two
organizations operated separately (Guangming, 2010). Incompatible technology and
software solutions, lack of required skills, and divergent IT philosophies present
challenges to the merger process and can subvert efforts to combine the companies into a
cohesive business unit (Cording, Christmann, & King, 2008).
Purpose Statement
The purpose of the qualitative, hermeneutic phenomenological study was to
extend Fish’s (2007) entropic model of postmerger and postacquisition integration by
examining the lived experiences of a purposive sample of midlevel and first-line
managers who have survived integration of U.S. manufacturing organizations. The focus
was to explore participants’ perceptions of the factors of Fish’s (2007) entropic model
during postmerger and postacquisition IT integration. Research targets included U.S.
manufacturing companies employing more than 500 that have completed the IT solutions
integration process. I extended the knowledge of Fish’s entropy model as well as
identified best practices that facilitate positive integration outcomes.
The significance of this research study was introducing a new paradigm of change
management applicable to postacquisition IT integration. The goal was to identify,
understand, and reduce entropy between the leadership, middle management, and key
employees during mergers. The study results could contribute to positive social change
and impact business practice in a positive way. Results of the study identified best
practices and factors that negatively affect achieving the organizational goals of
integrating IT solutions. The study results may provide managers with real-world
solutions to facilitate integration of computer platforms, databases, software, and
personnel. Identification of best management practices might help mitigate many of the
issues faced when cultures and technologies are integrated and provide businesses
anticipating an acquisition with insight into the effects of entropy factors on the ultimate
success of the merger process.
Nature of the Study
A qualitative study design was appropriate for data collection, analysis, and
interpretation using observation of verbal actions and behavior of participants (Creswell,
2008; Sinkovics, Penz, & Ghauri, 2008). Qualitative research methods use multiple
forms of data such as interviews, behavioral observation, and documents. A
phenomenological approach is the best choice for this study in which I performed
interviews and used observations to gather data to analyze a particular phenomenon
(Creswell, 2008; Sinkovics et al., 2008).
A number of factors pertain to successfully integrating business units following an
M&A, such as company culture, employee retention decisions, cross-border issues, level
of teamwork, openness to change, and others (Chakravorty, 2012; Katz & Miller, 2012).
A qualitative research model provided the best method for examining these diverse
factors. The strength of qualitative research is in uncovering the significant variables
involved in a complex phenomenon (Creswell, 2008; Gelo, Braakmann, & Benetka et al.,
2008; Pratt, 2009). Qualitative research is a valuable tool for uncovering causal factors of
variables in order to explain the underlying phenomenon. Qualitative research allows the
researcher to separate the factors of a complex phenomenon and determine their effect on
the construct (Alasuutari, 2010; Creswell, 2008; Pratt, 2009).
A qualitative approach was appropriate for the study because the intent is not the
measurement of variables or the re-examination of existing theories. Within the
qualitative tradition, I rejected several designs for this study. Grounded theory, which
involves generating a theory behind experiences and behaviors, was not appropriate for
this study because the study’s purpose was to examine the perceptions of the effects of
the actions taken with no attempt to assert a theory as to why the experiences and
behaviors take place. The research topic was not appropriate for an ethnographic study
because it did not focus on a population to discover the purpose behind common behavior
patterns. A phenomenological research design was appropriate for the study to describe
the structures of experiences revealed through interviews without referring to theory,
deductions, or assumptions (Scheibelhofer, 2008; Weed, 2008). The philosophical
investigation and description of experiences offered accounts of the experiences as the
interviewees perceived them to be (Scheibelhofer, 2008; Weed, 2008). I selected a
phenomenological approach for the study in order to provide an exploratory research
design framework (Glaser & Strauss, 1967).
Research Questions
Overarching Questions
The focus of this study was to seek a better understanding of entropy in
postmerger and postacquisition integration of information systems solutions by the
examination and interpretation of the lived experiences of midlevel and first-line
managerial merger survivors of U.S. manufacturing organizations. To achieve this goal, I
used Fish’s (2007) original research questions. The central research question for this
study was: What is the nature of entropy in postmerger and postacquisition integrations?
To achieve a deeper understanding of the entropy phenomenon, additional research
subquestions included:
1. What is the relationship between entropy and the five postmerger and
postacquisition integration factors?
2. What entropic relationships exist among postmerger and postacquisition
integration factors?
3. What other considerations or attributes comprise the entropy phenomenon in
postmerger and postacquisition integrations?
Interview Questions
The interview questions for this study included the 17 questions in Fish’s study. I
did not modify Fish's interview instrument to ensure correlations could be drawn between
the reactions of service organizations’ upper-level management in the original study and
manufacturing’s midlevel and first-line reactions to the entropic phenomenon in this
study. Interview Questions 1and 2addressed the main research question. Interview
Questions 11 through 13 addressed Research Sub-question1. Interview Questions 3
through 8 addressed Research Sub-question 2. Interview Questions 9, 10, and 14 through
17 addressed Research Sub-question 3.
1. Please describe how you would characterize the nature of entropy during
postmerger and postacquisition integration.
2. What specific experiences drive your views of entropy during postmerger and
postacquisition integration? Please provide examples.
3. What is the relationship between communication and entropy during
postmerger and postacquisition integration? Please provide examples.
4. What is the relationship between organizational culture and entropy during
postmerger and postacquisition integration? Please provide examples.
5. What is the relationship between leadership and entropy during postmerger
and postacquisition integration? Please provide examples.
6. What is the relationship between people and entropy during postmerger and
postacquisition integration? Please provide examples.
7. What is the relationship between strategy and entropy during postmerger and
postacquisition integration? Please provide examples.
8. When considering communication, organizational culture, leadership, people,
and strategy, how would you describe the relationship among these factors in
terms of entropy during postmerger and postacquisition integration? Why?
9. How would you characterize different states or levels of entropy during
postmerger and postacquisition integration?
10. What specific experiences drive your views of states or levels of entropy
during postmerger and postacquisition integration? Please provide examples.
11. When considering communication, organizational culture, leadership, people,
and strategy, which of these factors contributes the most to increasing entropy
during postmerger and postacquisition integration? Why?
12. When considering communication, organizational culture, leadership, people,
and strategy, which of these factors contributes the most to decreasing entropy
during postmerger and postacquisition integration? Why?
13. When considering communication, organizational culture, leadership, people,
and strategy, which of these factors contributes the most to inhibiting entropy
during postmerger and postacquisition integration? Why?
14. How would you describe the negative impacts of entropy during postmerger
and postacquisition integration? Please provide examples.
15. How would you describe the positive impacts of entropy during postmerger
and postacquisition integration? Please provide examples.
16. In your experience, what other factors or considerations contribute to or
impact entropy during postmerger and postacquisition integration? Why?
Please provide examples.
17. Do you have any other thoughts regarding entropy and postmerger and
postacquisition integrations?
Conceptual Framework
The M&A conceptual framework best suited for this study was the process school
which blends the strategic and organizational schools of thought (Finkelstein & Cooper,
2010; Nogeste, 2010). Haspeslagh and Jemison (1993) stated adopting a process
perspective moves the focus from a merger or acquisition’s results to center on the
transfer of the knowledge that will lead to a competitive advantage.
Process School
The process school comprises strategic and organizational behavior schools and
focuses on the integration process as the main factor in the success or failure of a merger
or acquisition (Finkelstein & Cooper, 2010; Haspeslagh & Jemison, 1993). The strategic
school’s primary focus is on the impact M&As have on individual companies from the
perspectives of strategic planning and performance (Finkelstein & Cooper, 2010;
Nogeste, 2010). The organizational behavior school’s primary focus is the impact of
M&As on human capital (Finkelstein & Cooper, 2010; Shin, Taylor, & Seo, 2012).
Advocates of the process school maintain that successful acquisitions achieve strategic
and organizational fit. Proponents of the process school maintain that the decision
making and integration processes can affect the acquisition’s outcome (Finkelstein &
Cooper, 2010; Haspeslagh & Jemison, 1993; Nogeste, 2010). Haspeslagh and Jemison
(1993) stated that assuming the process perspective moves the focus from the result to the
transfer of skills that can produce a competitive advantage.
A process-centric conceptual framework provided the perspective for this study.
The five post integration factors (i.e., leadership, communication, culture, strategy, and
people) identified by Fish (2007) as factors that significantly influence the entropy
phenomenon experienced during the integration process exists in the strategic and
organizational factors of the process school of thought. Figure 1 illustrates the
application of the process school of thought to the conceptual framework used by this
study. The figure graphically demonstrates the relationship of five integration factors and
the entropy phenomenon of the postmerger, postacquisition processes and the strategic
and organization aspects of the process school of thought.
permission.
Larsson and Finkelstein (1999) developed a broader, integrated, process-centric
conceptual framework that explored M&As using perspectives from strategic planning,
economics, finance, organizational theory, and human resource management. The
authors’ conceptual framework was similar to the process-centric conceptual framework
depicted in Figure 1 with the addition of finance and economic factors.
Haspeslagh and Jemison’s (1993) process-centric conceptual framework was more
appropriate for this study than Larsson and Finkelstein’s (1999) framework. The focus of
this study was on the human component of the postmerger and postacquisition process
instead of financial and economic components. The financial and economic components
do not necessarily affect Fish’s entropy model.
Definition of Terms
Acquisition: When an organization legally and financially obtains another
organization. The stocks of the acquired company are not surrendered (Rau & Stouraitis,
2011).
Communication: A bi-directional flow of information that facilitates
understanding between the parties on both sides (Karim, Ameen, & Ayaz, 2011).
Corporate culture: The deep-seated beliefs and artifacts that guide an
organization’s human infrastructure (Sebesem, 2007).
Entropy: The measure of disorder, or randomness, in a closed but changing
system (Michaelides, 2008).
Hermeneutics: A method for discovering a deeper understanding of social events
(Fish, 2007).
Integration: The combination of two or more organizations or systems
(Alaranta & Henningsson, 2008).
Leadership: In this study, it refers to an organizational role that is responsible for
guiding and shaping the company’s vision or direction (Avey, Hughes, Norman, &
Luthans, 2008).
Merger: Refers to an agreement to combine two organizations into a single
company. The stocks of both companies are surrendered and new stock is issued in the
newly formed company name (Karim et al., 2011).
Phenomenology: Refers to philosophy or study methodology that examines
objects or events, as perceived by the participants (Creswell, 2008).
Phenomenon: An observable fact, occurrence, or event (Creswell, 2008).
Synergy: Refers to a situation where the output of the group is greater than the
sum total of the output of the individuals. As the term is used in this study, it refers to the
output of the merged business units compared to the individual outputs of the pre-merger
organizations (Chatterjee, 2007).
Assumptions, Limitations, and Delimitations
Assumptions
This study relied on four assumptions. The first assumption was the terms merger
and acquisition can be used interchangeably. Acquisitions specifically involves one
company purchasing another company and assuming control of its operation, and merger
involves two companies that are relatively equal in size deciding to combine to become
one company that is singularly owned and operated. In reality, true mergers are rare, and
the two terms are typically used interchangeably (Rau & Stouraitis, 2011), as was the
case for this study.
The second assumption of the study was that a state of entropy is a normal
phenomenon that occurs during the integration process and was a valid research
phenomenon. Organizational change is a key aspect of the integration process following
a merger; with organizational change comes employee stress and the resulting disorder
(Barzantny, 2007; Bellou, 2007; Farjoun, 2010; Guerrero, 2008; Marks, 2007; Marks &
Mirvis, 2012; Shin et al., 2012; Summers, Humphrey, & Ferris, 2012).
The third assumption was the appropriateness of entropy as a central phenomenon,
which refers to a conscious awareness of an abstract concept (Fish, 2007). Entropy is a
concept that describes the essence of disorder in an environment
(Handscombe & Patterson, 2004), and in this context, entropy fits the description of a
phenomenon.
The fourth assumption was that the participants have the ability to understand the
intent of the research and to understand the concept of entropy. A related assumption was
that the study participants possessed sufficiently varied lived experiences of integration to
allow for depth and richness in the study.
Limitations
There were four likely limitations of the study. The scope of the study necessarily
included an unrepresentative sample size due to the number of businesses involved in
M&As in the United States and the qualitative method I used. The time and resources
available for the study limited participation to an unrepresentative number of businesses
and employees. Because the study was limited, the participants were from the
manufacturing field in order to maintain a homogeneous member pool and to expand
Fish's (2007) study that was limited to upper management, service organization
participants. This delimitation caused the study to have limited generalization to the
manufacturing industry. The size and makeup of the sample group was another potential
limitation of the proposed study. The study was limited to postmerger survivors whose
jobs required interaction with the information technology system. Other stakeholders had
experiences that were germane to the primary phenomenon. The third limitation was that
of qualitative data analysis. The analysis of qualitative data was limited by the
capabilities of the software package used. I discuss the limitations of the software
considered in the results section. The fourth limitation of the study was researcher bias
and data error. To mitigate the limitations caused by researcher bias and data error, I
recorded and transcribed the interviews verbatim instead of summarizing or interpreting
them.
Delimitations
The scope of this study was limited to U.S.-based M&As of manufacturing
oriented companies having more than 500 employees. The study targets were limited to
U.S. mergers due to the inevitability of entropy as a result of cultural difference in
international mergers. The study was further limited in scope by focusing on the
experiences of midlevel and first-line managers in an effort to extend Fish’s (2007) study
of entropy in postmerger, postacquisition corporations.
Significance of the Study
Reduction of Gaps
The significance of this study was to expand research on the entropy model
defined in Fish’s study. The results also expanded the knowledge available concerning
change management applicable to postmerger and postacquisition information technology
integration. The goal was to identify, understand, and reduce disruption and disorder
between the leadership, middle management, and key employees during postmerger and
postacquisition integration of information technology solutions. Achieving this goal may
alleviate problems that negatively contribute to the effective integration of information
technology solutions of merged businesses. The study results identify best practices and
factors that negatively affect achieving the organizational goals of integrating information
technology solutions. The results of the study may provide managers with real-world
solutions to facilitate integration of computer platforms, databases, software, and
personnel. Identification of best management practices may help mitigate many of the
issues faced when cultures and technologies are integrated.
Implications for Social Change
M&As are among the most common corporate growth strategies (Weber & Drori,
2011). Borchert and Cardozo (2010) referred to mergers as creative destruction and
creative combination. Although many companies downsized after September 11, 2001,
M&A activity has been on the increase for the last several years. It is likely that
individuals at all levels of an organization experience the effects of their organization’s
acquisition by another organization and the stress and disorder that accompany the
integration process (Moffat & McLean, 2010; Shin et al., 2012). The success of a merger
depends upon a process of mutual adjustments and acculturation (Marks & Mirvis, 2011).
Identifying best practices for leaders of both organizations during the integration process
potentially will reduce the intensity and length of the disorder and improve the job
satisfaction level of merger survivors. In addition, creating a blended organizational
culture will insure the sustainability of the organization (Ellis, Reus, & Lamont, 2009;
Hough, Haines, & Giacomo, 2007; Moffat & McLean, 2010). A stable organization will
be in a position to provide jobs and fund programs for the enrichment of employees and
the communities in which they have a physical presence.
A Review of the Professional and Academic Literature
In the first section, this review provides an historical overview of M&A with
various perspectives and viewpoints. The second section explores postmerger and
postacquisition integration from various perspectives. The third section examines
criticisms of M&As. The fourth section discusses gaps in the literature. The literature
review concludes with a summary. Section 2 consists of another literature review related
to postmerger and postacquisition integration factors.
Documentation
Sources for this literature review included peer-reviewed articles, books, and
dissertations. The Internet provided a valuable resource to find literature appropriate to
scholarly research. The search for articles was accomplished using keyword searches
such as M&A, leadership, corporate culture, organizational change, and others. The
literature search process for the study yielded 127 sources grouped into the following
categories: (113) scholarly or peer-reviewed articles, (10) reference books, and (4)
dissertations. Publication dates ranged between 2007 and 2012 for 94% of the literature
used in the study. The foundational sources of reference material for the research
originated from university libraries, the EBSCOhost article database, the ProQuest article
database, and the ProQuest Dissertations and Theses database.
Mergers and Acquisitions
The three basic ways companies can grow their business are by gaining market
share, operating in fast-growing markets, and merging with or acquiring another company
(Ji-Yub, Jerayr, & Finkelstein, 2011; Vancea, 2011). Through M&As, two companies
can combine their resources in order to create a more efficient business model, leverage
capabilities, increase market share, level the playing field, or gain advantage over a
difficult competitor (Bahadir, Bharadwaj, & Srivastava, 2008; Heimeriks et al., 2012;
Nagurney, Woolley, & Qiang, 2010; Schriber, 2012 ). Ranft and Marsh (2008) stated the
acquisition of knowledge can be the only motive for the acquisition. Changing forces in
the world economy have been a catalyst for M&As (Ahern & Weston, 2007). These
changing forces include rapid technological change, reduction in communication and
transportation costs, growing international markets, increased competition, new emerging
industries, and deregulation in some industries (Ahern & Weston, 2007).
Historical Overview of Mergers and Acquisitions
Merger and acquisition waves. M&As have occurred in a series of six waves,
beginning in 1897 (Chidambaran, Shangguan, & Vasudevan, 2010; Gaughan, 2010;
Smythe, 2010). Some analysts pointed to an upward turn in M&As in 2009 as a signal
for the beginning of a seventh M&A wave (Netter, Stegemoller, & Wintoki, 2011).
Gaughan (2010) noted that the first merger wave spanned the years 1897 to 1904.
This wave included manufacturing companies with a monopoly over their lines of
production, such as railroads and electricity. The first wave of M&As involved
combining companies with similar products (horizontal merger) in an effort to increase
efficiency and reduce manufacturing costs (Gaughan, 2010; Karim et al., 2011). The
Sherman Antitrust Act of 1890 created a business environment that was not favorable to
the horizontal mergers that were typical during the first merger wave (Gaughan, 2010). A
majority of these mergers failed to achieve their goals due to an economic slowdown in
1903 and the stock market crash in 1904 (Gaughan, 2010).
The second merger wave occurred from 1916 to 1929 during the economic boom
which followed the end of World War I. Investment banks facilitated the second merger
wave (Gaughan, 2010). This wave included industries that were producers of primary
metals, chemicals, petroleum products, food products, and transportation equipment
(Gaughan, 2010). Technological developments such as railroads and motor vehicles
provided the necessary infrastructure for the mainly vertical mergers that occurred during
the second wave (Gaughan, 2010). Government policies established in the 1920s created
a business environment conducive to mergers (Gaughan, 2010). The second wave ended
abruptly with the stock market crash in 1929 and the beginning of the Great Depression
(Gaughan, 2010).
The third merger wave consisted mainly of conglomerate mergers from 1965 to
1969 (Gaughan, 2010). The nature of this wave was the result of strict enforcement of
the antitrust laws, high stock prices, and high interest rates (Gaughan, 2010). The third
wave ended due to poor conglomerate performance and the conglomerate splitting policy
adopted by the attorney general in 1968 (Gaughan, 2010).
The fourth merger wave occurred from 1981 to 1989as an outcome of the
deregulation of industries during the Carter administration and strengthened by expanded
deregulation and relaxation of antitrust policies during the Reagan administration
(Gaughan, 2010). The fourth merger wave is characterized as the period of mega
mergers, which consisted of hostile takeovers by foreign entities and mergers between big
oil companies, pharmaceutical companies, airline companies, and banking organizations
(Gaughan, 2010). A number of factors contributed to the end of the fourth wave
including the Gulf War, financial institution reform, and the enactment of antitakeover
laws (Gaughan, 2010).
The fifth merger wave occurred from 1992 to 2000. Marks and Mirvis (2011)
described this wave as a tsunami. This wave was a result of rapid technological growth
and readily available financing (Gaughan, 2010). The wave consisted of mergers within
the banking and telecommunications industries (Gaughan, 2010). The fifth merger wave
ended when the dot-com and stock market bubble burst along with the enactment of the
Sarbanes-Oxley Act, which provided strict rules for corporate governance (Gaughan,
2010).
The sixth merger wave occurred from 2004 to 2007. It consisted mainly of global
mergers (Marks & Mirvis, 2011). During this wave, the big corporations got bigger
through M&As (Marks & Mirvis, 2011). The most active industries were
pharmaceuticals and technological (Marks & Mirvis, 2011). The sixth merger wave
ended when the housing bubble burst, which resulted in a downturn in the U.S. and global
economies (Marks & Mirvis, 2011).
Merger and acquisition classifications. Fish (2007) identified three distinct
approaches for the classification of M&As. The three approaches included a historical
perspective, a motivational perspective, and a performance perspective (Fish, 2007). The
historical perspective aligns with the M&A waves; the motivational perspective
concentrates on the motive for entering into a merger or an acquisition; and the
performance perspective concentrates on the increased value created from the M&A
(Alaranta & Henningsson, 2008; Fish, 2007; Zollo & Meier, 2008).
Classifications from a historical perspective. The six merger waves occurring
from 1895 to 2010 each align into categories representing the relationships between the
combining business entities (Graughan, 2011). The first merger wave included
manufacturing companies with similar products (horizontal merger) in an effort to
increase efficiency and reduce manufacturing costs (Gaughan, 2010). The second merger
wave consisted mainly of vertical mergers (Gaughan, 2010). The third merger wave
consisted mainly of diversified conglomerate mergers (Gaughan, 2010). The fourth
merger wave consisted of hostile takeovers by foreign entities and mergers between big
oil companies, pharmaceutical companies, airline companies, and banking organizations
(Gaughan, 2010). The fifth merger wave consisted of mergers within the banking and
telecommunications industries (Gaughan, 2010). The sixth merger wave consisted
mainly of global mergers (Gaughan, 2010). Rapid technology growth and trade
liberalization have facilitated M&As on a global level (Coeurdacier, De Santis, & Aviat,
2009).
Classifications from a motivational perspective. There are four motivational
categories in which mergers and acquisitions are classified: rescues, collaborations,
contested situations, and raids. Rescue M&As offered relief for financially distressed
companies and companies threatened by raiders (Fish, 2007). In either situation, the
acquired company perceived the acquiring company as a rescuer from an almost certain
negative outcome (Fish, 2007). The recent downturn in the economy has resulted in the
increase of rescue mergers in the especially hard hit-banking sector. In this situation,
there was less resistance to change. The risk of failure was greater due to the financially
unstable position of the acquisition (Fish, 2007). Bosecke offered a seven-theory based
motivation approach for classification of M&As. These seven theories were efficiency
theory, monopoly theory, raider theory, valuation theory, empire building theory, process
theory, and disturbance theory (Hellgren, Löwstedt, & Werr, 2011).
Efficiency theory deals with achieving synergy in three different business
aspects: financial, operational, and managerial (Hellgren et al., 2011). Monopoly theory
stresses gaining market power in three ways: product cross-subsidies, competition
elimination, and market deterrence (Hellgren et al., 2011). Raider theory centers on
gaining control of a company by paying a premium for its stock until the acquiring entity
became the controlling shareholder (Hellgren et al., 2011). Valuation theory holds that an
acquiring entity considered the acquired company undervalued or estimated that the
synergy achieved as a result of the M&A would be more than the individual companies.
Uncertainty and risk play a major role in this type of merger or acquisition (Hellgren et
al., 2011). Empire-building theory describes situations in which managers pursued
M&As exclusively to further their personal interests rather than stakeholders’ interests
(Hellgren et al., 2011). The process theory describes strategic decision-making using
three influences: the ability to process available information, the existence of familiar
business routines, and politics (Hellgren et al., 2011; Polites & Karahanna, 2012).
Disturbance theory holds that M&A activity results from economic upheavals such as
merger waves (Hellgren et al., 2011).
Classifications from a performance perspective. Marks and Mirvis (2011)
described an approach for classifying M&As based on five outcome categories. The
disaster classification groups mergers initiated from unrealistic expectations,
overestimated value, nonexistent synergies, and unexpected transition costs. The lowest
common denominator classification includes mergers in cases of underperformance that
were not as extreme as disasters (Marks & Mirvis, 2011). The sum of the parts
classification occurs when businesses that lack vision and proper planning have a
tendency to break even but fall short of their potential (Marks & Mirvis, 2011). The best
of both classification demonstrates good planning that facilitates the selection of the best
features of both organizations during the integration process, resulting in a stronger
business enterprise than each company separately (Marks & Mirvis, 2011). The
breakthrough combinations classification provides the best results for M&As by creating
a combined organization with the best possible organizational model rather than adopting
the organizational model from either existing organization (Marks & Mirvis, 2011).
Collaborative and Contested Mergers
The majority of M&As are collaborative (Fish, 2007). In this type of merger, both
parties actively seek the joined business arrangement, and mutual respect exists (Fish,
2007). The risk for failure is moderate to low; however, resistance to change is slightly
higher than in the rescue mergers (Fish, 2007). In contested M&As, there is a moderate
risk factor and a clear pattern of resistance results from multiple bidders with differing
merger expectations (Fish, 2007). In raids, hostility and resistance to change are
significant because of the acquired company’s strong defensive stance and the high risk
factor (Fish, 2007).
Rational for Mergers and Acquisitions
There are five rationales for initiating M&As. These five rationales were to
resolve overcapacity, consolidate geographically separated competitors, expand into new
markets, deal with research and development underperformances, or to create a new
industry (Carbonara & Caiazza, 2009; Zhao, 2009). Additional M&A motives include
strategic corporate growth; technical, functional, or industry expansion; diversification,
improved market share, or positioning; extraordinary value added investment, cost
reductions, improved operational effectiveness and efficiency; and financial pressure
(Nogeste, 2010; Smythe, 2010; Vancea, 2011; Zhao, 2009).
Postmerger and Postacquisition Integration
M&As are a crucial business process. Integration is usually not the primary focus
when organizations decide to embark on an M&A strategy (Alaranta & Henningsson,
2008; Anderson, 2012 ). Research indicated that poorly executed postmerger or
postacquisition integration efforts were detrimental to the organization
(Alaranta & Henningsson, 2008; Anderson, 2012). Integration issues created long-term
performance issues (Francis & Shapiro, 2012; Maiga & Jacobs, 2009) as well as slightly
higher customer attrition, loss of skilled employees, slowdown of introduction of new
products, loss of momentum in quality programs, higher operating costs, inability to fill
key capability positions, and a reduction in brand identity (Fubini, Price, & Zollo, 2007).
Some causes of integration issues included weak leadership, lack of planning, poor
communication, insufficient resources, and vague process definitions (Fish, 2007; Fubini
et al., 2007; Zeffane, Tipu, & Ryan, 2011). Alaranta and Henningsson(2008) stated the
success or failure of achieving good post deal performance depends on the post deal
integration effort. The level of employee trust in the company’s leaders is a crucial factor
in the success of the integration effort (Ellis et al., 2009; Li, 2008; Van Wart, 2012).
Companies institute some form of business process improvement with one
exception when the integration process follows a merger or acquisition (Alaranta &
Henningsson,2008). Each integration effort is viewed as a unique, standalone
endeavor that must be completed in order to get back to business as usual. The
predisposition to view integration as a unique event instead of a normal business
process that can be reviewed and improved tends to perpetuate a cycle of repeated
blunders (Alaranta & Henningsson,2008). Fish (2007) identified three perspectives
to postmerger and postacquisition integration. These three approaches were a
business environment view, a culture-centric view, and a value-centric view.
Business environment view. Sirower (2007) defined five different business
environment view integration scenarios: stand-alone integration, stand-alone integration
with strategy adjustments, operational integration, full integration, and reverse
integration. Stand-alone integration occurs when the acquiring company and the acquired
company operate as they had prior to the acquisition. Stand-alone integration with
adjustments refers to making changes to the newly acquired company’s strategy.
Operational integration occurs when the acquired company adds to the acquiring
company’s business operations. Full integration occurs through complete amalgamation
of the acquiring and acquired companies. Reverse integration occurs when the acquired
company takes over the acquiring company’s business (Sirower, 2007).
Culture-centric view. A shared company culture and identity is necessary for the
success of the company strategy (Frensh, 2007; Saunders, Altinay, & Riordan, 2009).
Vancea(2011) stated that creating a common culture is frequently the biggest trouble spot
when two companies combine. Finkelstein and Cooper (2010) explained four categories
in which to classify postmerger and postacquisition integration modes: (a) integration,(b)
assimilation, (c) separation, and (d) deculturation. The integration mode combines the
companies structurally, but each company maintains its own identity and culture. In the
assimilation mode, the acquired company willingly accepts the culture and practices of
the acquiring company. Overall, the acquired company is absorbed into the acquiring
company and ceases to exist as a cultural identity (Appelbaum, Gandell, Yortis, Proper,
&Jobin, 2000). The separation mode integration is one in which there is no blending of
the business entities. The acquired and the acquiring company remain independent with
minimal cultural exchanges (Appelbaum et al., 2000; Frensch, 2007). The deculturation
mode integration is one in which the acquired company does not accept the acquiring
company’s culture or behavior, and continues with its pre-merger or pre-acquisition
culture and behavior. The result is alienation and confusion for both companies during
the postmerger and postacquisition integration period (Frensch, 2007).
Value-centric view. Frensh (2007) described four value-centric postmerger and
postacquisition integration approaches that combine organizational autonomy and
strategic interdependence. These four approaches are holding, absorption, preservation,
and symbiosis. The holding approach, which has no intent to generate value through
integration, is appropriate when there is a low requirement for both organizational
autonomy and strategic interdependence. In this approach, risk-related, financial, or
management actions generate value. The absorption approach creates value by the
acquiring company completely assimilating the acquired company. This approach is
appropriate when there is a need for low organizational autonomy and high
interdependence (Frensch, 2007). The preservation approach is used when the intention
by the acquiring company is to maintain and protect acquired benefits. Quality,
professionalism, and learning create value for the acquiring company. This approach is
appropriate when a requirement exists for high organizational autonomy and low
interdependence. The symbiotic approach is appropriate when there is a high need for
both organizational autonomy and strategic interdependence. Initially, the merging
companies coexist and then move toward independence later. The companies mutually
protect acquired benefits but cautiously manage company boundaries. Contradictory
requirements create complexity and tension (Alaranta & Henningsson, 2008; Frensch,
2007).
Information Technology Integration
IT is a function that should be normalized in order to support the strategy of the
blended organization. The complexity and cost of integrating IT functions can be
devastating to achieving long-term value (Dao, 2010). The integration of two or more
merging organizations’ IT functions can be one of its greatest assets or one of its worst
nightmares (Dao, 2010). Systems integration for business strategy has the potential to
make or break balance sheets (Dao, 2010).
Loppnow (2007) examined the factors that contributed to the accomplishment of a
successful IT implementation. Two factors were significant to achieving a successful
integration of two IT departments after a merger. Those two factors were the critical role
of leadership and the importance of integrating operational strategies and IT strategies
(Loppnow, 2007).
Cording et al.(2008) analyzed the success rates of M&As and the role of
information systems technology in the merger process. The analysis indicated that
information systems technology can be used to improve the chances of a successful
merger. Cording et al. (2008) confirmed a correlation between information systems
technology performance and the achievement of company goals. One of the performance
factors identified was the speed of integration.
Integration Factors
Fish (2007) identified five interrelated integration factors that generate entropy
during a merger or acquisition: leadership, communication, organizational culture,
people, and strategy. Misjudgments in these areas can lead to M&A failure.
Leadership. Marks (2007) indicated that leaders frequently use M&As to
achieve an organization’s strategic and financial goals. Leaders do not always recognize
the difficulty of integrating the newly acquired organization. Organizational change can
be a challenging process for leaders and organizational members, and plans need to allow
time for employee adaptation to the new organizational structure. There is a tendency for
leaders to underestimate the effort required to plan for the integration effort, especially
the attention required for the human element (Benton & Austin, 2010). Failure to
recognize the need for a well thought out integration plan resulted in distractions, which
reduce organizational efficiency (Benton & Austin, 2010; Marks, 2007; Saunders et al.,
2009; Summers et al., 2012).
An organization’s culture personifies what executive leadership defines as its
priorities, the behavior it rewards and controls, and the role model and coaching actions it
provides (Balmer, 2008). Steelman (2009) stated that corporate leadership influenced
how employees perceived the organization’s working environment following a merger.
Employees in the postmerger environment perceived negative changes in their job
performance and in their ability to meet the needs of customers, coworkers, and
stockholders (Steelman, 2009). Trust is one dimension that is required to complete a
timely postmerger or postacquisition integration (Zeffane et al., 2011). Peus, Wesche,
Streicher, Braun, and Frey (2012) stated that trust must be earned; however, leaders talk
about having trust instead of building trust (Van Wart, 2012; Zeffane et al., 2011).
During the postmerger and postacquisition integration environment, positive
organizational behavior is necessary to reduce the time required to complete the
integration (Avey et al., 2008). Transformational leaders transform employees to higher
levels of work performance through four dimensions: charisma, inspirational motivation,
intellectual stimulation, and individualized consideration (Avey et al., 2008). A positive
correlation is established between transformational leaders and positive employee
performance (Avey et al., 2008; Vasilaki, 2011).
Middle managers are integral to the success of the merger transition and play a
key role in facilitating a successful merger (Wooldridge, Schmid, & Floyd, 2008).
Schriber (2012) stated that middle managers are responsible for driving integration tasks
even though the middle managers may be suffering from low motivation, which reduces
their ability to facilitate successful integration. Meyer and Altenborg (2008) stated that
middle management has been identified as a group that is typically resistant to change.
Including middle managers early in the integration planning could minimize resistance to
change (Meyer & Altenborg, 2008). Klendauer and Deller (2009) recommend
transparency during the integration process to avoid feelings of injustice among
managers. Information should be shared as completely as practical and in a timely
manner. Avoiding a perception of injustice among managers will yield the best outcomes
in a merger (Klendauer & Deller, 2009).
Communication. Clayton (2010) stated that timely and sufficient communication
of information is vital to a successful M&A process. The study results revealed that
management at times overlooked communicating information that could change
employees’ jobs and that good communication is a factor in successful M&As (Clayton,
2010). Appelbaum et al. (2000) also noted the most important factor in the entire M&A
process is communication. More often than not, when news about an M&A appears,
emotions range from fear and confusion to acceptance and excitement (Balle, 2008;
Clark, Gioia, Ketchen, & Thomas, 2010 ). Clark et al. (2010) stated early communication
that was honest, direct, and detailed a rational assessment of the challenges and
opportunities the integration process offered reduced the risk of the fear, stress, and
negativity that misunderstandings and rumors created. Marks and
Mirvis(2011) emphasized effective and timely two-way communication along with staff
involvement was crucial during the M&A process. Staff involvement in the
decisionmaking process decreased the level of resistance to change and effective
communication increased staff’s ability to adopt a new culture and reduce stress levels
(Clayton, 2010; Marks & Mirvis, 2012).
Tucker, Reiter, and Yingling (2007) suggested communication should extend
beyond the staff members of the two merging companies. Antitrust regulations may be
violated if customers are not involved in the merger review process (Tucker et al., 2007).
Customer testimony can be used in a number of ways during the merger review. The
customer testimony can result in benefit or problems in the merger review. If the
customer testimony is problematic for the merger, it is still important to include the
testimony in order to avoid antitrust violations (Tucker et al., 2007). Customers are in a
position to provide necessary information for a thorough merger analysis. This
information includes industry features, product demand, and potential new market
entrants. Tucker et al. (2007) warned about potential problems with customer testimony.
Customers may lack information, provide biased testimony, and may not be
representative of the market (Tucker et al. 2007).
Culture. Over the past 20 years, M&As have steadily increased
(Alaranta & Henningsson, 2008). The failure rate of these mergers is very high with
cultural distance identified as one of the main reasons for the failures (Marks & Mirvis,
2011, 2012). Allen (2012) stated that although the technical integration is difficult, the
integration of organizational culture and the reaction of the human element in postmerger
integration is even more difficult. M&As with two or more distinct corporate cultures
must be successfully integrated and fused in order to align the goals and strategy of the
post integration organization and create value for the stakeholders
(Alaranta & Henningsson,2008). Baughn (2009) examined the correlation between
corporate culture and the perceived success of organizational mergers. Cultural
disconnects were found to be a critical element in merger failures (Baughn, 2009).
Disruption in the cultures of the merged businesses had a high probability of reducing
stakeholder value. Weber, Belkin, and Tarba (2011) stated that a difference in
organizational cultures inhibits productive communication between members of the two
organizations. Baughn (2009) concluded that organizations with similar cultures were
more likely to have a successful merger. Culture clash is one of the most common causes
for an M&A to fail to realize its full potential or achieve expected results (Badrtalei &
Bates, 2007; Green & Colton, 2012; Marks & Mirvis, 2012). The authors concluded that
prior acknowledgement of culture differences should be studied prior to beginning any
integration initiative and should be approached with respect and understanding (Badrtalei
& Bates, 2007; Marks & Mirvis, 2012; Saunders et al., 2009).
People. Chreim (2007) stated that employees’ interpretation of the impact on
their organizational identity could encourage or obstruct their acceptance of the changes
needed to perform acquisition integration. Giessner, Ullrich, and van Dick (2011) stated
that one of the key reasons for a merger’s failure is the lack of consideration of the human
element. The authors stated that more often than not more consideration is given to the
legal and technological aspects of a merger by senior management (Giessner et al., 2011).
Chreim (2007) stated that employees look for organizations that will allow
selfenhancement and growth opportunities. Guerrero (2008) reiterated the importance of
focusing on all aspects of the M&A process, including the human element. Often, the
single most significant obstacle in integration efforts was the failure to obtain employee
commitment (Briscoe & Tsai, 2011; Giessner et al., 2011; Shin et al., 2012). A common
concern of employees during an M&A was security in terms of loss of jobs or closure of
facilities (Khalid & Rehman, 2011). Jetten and Hutchison (2011) stated that a break in
continuity, such as an M&A, negatively affected people both individually and as a
collective by increasing resistance to change. Summers et al. (2012) revealed a flux in
coordination when core personnel changes are made, which led to a loss of
communication.
M&As have often left employees feeling threatened and vulnerable (Bellou, 2007;
Saunders et al., 2009). Siegel and Simons (2010) stated M&As have a traumatic effect on
workers who lose their jobs as well as merger survivors. Harrison-Walker(2008) stated
that merger survivors must progress through a multi-stage recovery process before their
productivity improves. Studies have revealed five major issues of employees involved in
an acquisition: loss of identity, lack of information and anxiety, obsession with survival,
lost talent, and family repercussions (Guerrero, 2008). The employees of the acquired
(dominated) organization reported more insecurity and unfavorable attitudes toward their
jobs than did the employees of the acquiring (dominate) organization (Feiler & Camerer,
2010).
Harrison-Walker (2008) stated that low performance of merger survivors is often
the cause for a decrease in shareholder value following an M&A. The author described
the period following an M&A as a multistage psychological and emotional recovery
period. Employees must progress through all stages before work productivity returns to a
point where shareholder value is increased (Alaranta & Henningsson, 2008;
HarrisonWalker, 2008; Marks & Vansteenkiste, 2008; Siegel & Simons, 2010).
Giessner, Ullrich, and van Dick (2011b) stated that proper human resource
management is vital to merger success and to reduce the negative effects on the
employees. Understanding the employees' identification with the merged organization is
vital; a higher level of identification with the merged organization results in less conflict
and an increase in motivation (Giessner et al., 2011b). Giessner et al. (2011b) stated that
people identify themselves personally (personal identity) and through the organizations
with which they belong (social identity). The organization with which they are a member
of is a significant part of the self-concept (Bartels, Pruyn, & de Jong, 2009; Giessner et
al., 2011b). Finkelstein and Cooper (2010) discussed the psychological impact of M&As
on the individual. The risks in mergers affected individuals employed by the business
units involved. M&As have come to be associated with low morale, job dissatisfaction,
unproductive behavior, sabotage, theft, increased absenteeism, and higher accident rates
(Finkelstein & Cooper, 2010). Even successful mergers between companies with similar
cultures were stressful on the employees (Finkelstein & Cooper, 2010). Employees
tended to hide doubts about the merger in order to fit in (Finkelstein & Cooper, 2010).
Recognizing and addressing these misgivings helped improve employee performance and
improved chances for a successful merger (Finkelstein & Cooper, 2010).
Retention of intellectual capital is vital for the successful operation of an
organization (Allen, Bryant, & Vardaman, 2010; Norris, 2009). This point is especially
true during the integration process following an M&A. Rowlett (2006) stated that
approximately 25% of top-performing employees leave unexpectedly within 90 days of a
major change such as an M&A. Rowlett (2006) concluded that the behaviors and traits of
leaders who positively influenced key employee retention during an M&A fell into the
five categories: communications, leadership, employee involvement, culture
identification, and key employee identification (Rowlett, 2006).
Ozag (2006) examined the nature of the relationship between merger survivors’
hope and trust. The analysis showed a positive and significant relationship between
merger survivors’ trust and their normative commitment to the organization, and merger
survivors’ perceptions of hope and their normative commitment. Although there was a
significant relationship between merger survivors’ hope and continuance commitment,
there was no significant relationship between merger survivors’ trust and continuance
commitment (Ozag,2006). Based on these results, Ozag (2006) recommended that work
on employee relations should take place in advance of M&As in order to facilitate a
smooth transition.
Strategy. Some analysts advocated the integration of business functions and
creation of common strategies as a means to create value (Ahern & Weston, 2007;
Alaranta & Henningsson, 2008; Chatterjee, 2007). M&As have historically experienced
poor return on investment performance with failure rates up to 83% (Fish, 2007). One of
the main reasons identified for the high-failure rates was inconsistencies in corporate
strategy (Chatterjee, 2007; Fish, 2007; Fubini et al., 2007). Cording et al. (2008)
identified a merger strategy as necessary in order to facilitate a successful transition.
Cording et al. (2008) stated that strategy development should occur well in advance of the
actual merger. It is advisable to start formulation of the merger strategy when due
diligence is conducted (Francis & Shapiro, 2012). Key personnel should be involved
from the start in order to get their buy-in to the integration effort (Bellou, 2007).
Criticisms of Mergers and Acquisitions
Hostile takeover acquisitions have received substantial criticism over the years
(Goranova, Dharwadkar, & Brandes, 2010). Even friendly M&As have encountered
criticism. Much of this criticism was a result of ethical and social concerns. A history of
disappointing outcomes has left many people skeptical about the value of M&As. High
profile M&A failures over the years left many shareholders with huge financial losses
(Finkelstein & Cooper, 2010). It often took years to complete an M&A. In the
meantime, the process usually disrupted company operations. While waiting for the deal
to be completed, managers and employees often experienced feelings of insecurity and
apprehension about the future. Reported instances of ethical misconduct doubled in
companies undergoing M&As (Goranova et al., 2010; Martin, Johnson, & Cullen, 2009).
Some critics of M&As were concerned about combining the power of the companies.
The larger company had the potential power to influence the market, set prices, or affect
consumers (McNamara, Haleblian, & Dykes, 2008). Integrating companies often created
duplicate leadership roles and duties, resulting in conflicts and power struggles. These
struggles created internal corporate turmoil. The associated disruption generally lasted
until new territory lines were drawn or leadership roles resolved (Finkelstein & Cooper
2010). Some organizational managers believed that M&As were costly and ineffective as
a business strategy. This line of thinking made it difficult to create support within the
organization (Finkelstein & Cooper, 2010). M&As were often motivated by the desire to
acquire technology possessed by the other organization. Complex businesses integrations
often failed, however, especially those involving high technology (Finkelstein & Cooper,
2010).
Qualitative Research Design
Minichiello and Kottler (2009) posited that most humans are born qualitative
researchers. They explained that people are born with an innate curiosity to find out
about the world around them and to discover how they fit into that world. Qualitative
research is conducted daily in the course of normal personal activities. Minichiello and
Kottler (2009) stated that this daily qualitative research takes place as people gather
information to make decisions such as purchases, selecting service providers, or
investigating subjects of interest.
There are many research designs that can be used when performing qualitative
research such as case study, ethnography, narrative, grounded theory and phenomenology
(Bryman, Becker, & Sempik, 2008; Creswell, 2008). Creswell (2008) described a case
study as a research approach for which the researcher explores, in depth, a specific
activity, process, event, or individuals over time, using a variety of collection procedures.
Lee and Broderick (2007) described ethnography as a research approach focused on the
description and interpretation of a particular cultural or social group’s behavior. Creswell
(2008) stated that narrative research is an approach in which the researcher studies the
lives of individuals by asking the participants to tell stories about their lives. The stories
are collected and retold in a chronological narrative format intertwining stories from the
research’s life (Creswell, 2008). A grounded theory design involves generating a theory
behind experiences and behaviors. The philosophical investigation and description of
experiences without reference to the question of whether the experiences are objectively
real does not produce empirical or theoretical observations or accounts. Instead, it offers
accounts of the experiences as the interviewees perceived them to be (Scheibelhofer,
2008; Weed, 2008). Grounded theory originated with Glaser and Straus in 1967. The
term referred to a theory that is developed inductively from a quantity of data gathered
through observation, conversation, and interviews (Lee & Broderick, 2007). The goal of
grounded theory research was the creation of a new theory. This method uses numerous
data collections and repeated theory refinement (Fish, 2007). Charmaz identified two
grounded theory methodologies (Urquhart, Lehmann, & Myers, 2010). The constant
comparison method coded and analyzed the data simultaneously. The theoretical
sampling method collected, coded, and analyzed data, refining the theory using multiple
intervals or cases (Urquhart et al., 2010).
Experts concurred that the phenomenological approach is appropriate for a study
using interviews or observations to gather data to analyze a particular phenomenon
(Creswell, 2008; Cassidy, Reynolds, Naylor, & Souza, 2011). The researcher then uses
inductive data analysis in order to define patterns or themes. A phenomenological
research design describes the structures of experiences revealed through interviews
without referring to theory, deductions, or assumptions (Scheibelhofer, 2008; Weed,
2008). A phenomenological approach provides an exploratory research design
framework (Urquhart et al., 2010). In phenomenological studies, the interview method of
data collection is a proven effective data collection technique (Bystad, Fylkenses, Oleke,
& Tumwine, 2007). Cassidy et al. (2011)described phenomenology as a research
approach where the goal of the researcher is to describe a particular phenomenon as
accurately as possible from the perspectives of the people involved, without adding
personal bias or preconceived outcome (Cassidy et al., 2011). The goal of
phenomenological research was to disclose the essence or root of the phenomenon itself
(Creswell, 2008). Husserl, recognized as the founder of phenomenology, performed his
research using an epistemological or eidetic approach (Moustakas, 1994). Morse (1994)
described the hermeneutic approach as the science of textual interpretation. Eidetic
phenomenology attempted to describe the meaning of a phenomenon through human
experiences, and hermeneutics centered on an interpretive analysis of the same human
experiences (Haroon & Nisar, 2010). Researchers used the hermeneutic approach to
identify the inner relatedness of the phenomenon and the change process using a
qualitative research method (Haroon & Nisar, 2010 Focused on uncovering hidden
meanings in the phenomena by using an interpretive method, which goes beyond
descriptions was introduced by Heidegger (Morse, 1994). The hermeneutic method
focused on rigorous examination of textual material in many forms such as words,
pictures, or recorded conversation to establish a thorough understanding of the
association between the whole and its parts (Haroon & Nisar, 2010).
Alternative Research Designs
Prior to selection of a phenomenological research design, thorough consideration
was given to different and compatible research methodological designs. Examination of
alternative research designs showed potential to adequately explore the central research
question. Alternative designs proved either inefficient or fail to deliver optimal
outcomes.
Gap in the Literature
There is limited academic research relative to the effects of entropy on the
postacquisition or postmerger integration of information technology departments. The
literature review indicated that the integration of technology departments is extremely
important to the success of the M&A process; however, previous M&A research has not
focused on this specific aspect. The gap in the literature resided in a need to understand
the entropy factors that affect postacquisition or postmerger integration of information
technology departments. Better understanding of these entropy factors will optimize
information technology department integrations, which will facilitate a greater chance for
success of M&As.
Literature Review Conclusion
The literature review supported the central research question and sub-questions,
which examine the effects of entropy on successful IT integration after an M&A. The
literature review showed several observable trends. There is a trend to look past the
financial and economic factors. Researchers are beginning to examine the human
element in M&As. There is also a trend to hold management accountable for problematic
mergers. In the past, top management would blame the shortcomings on uncontrollable
outside influences. Recent literature indicates a tendency to look deeper and find the real
reasons for integration issues that arise. Pertinent topics explored in the literature review
include human elements, information systems technology, customer input, organizational
culture, premerger preparation, strategies, and organizational justice. Further research
was necessary in order to refine models designed to analyze M&A success. A commonly
held assumption in the field is that positive financial impact indicates a successful
merger. The central research interest was the role and effect of management actions on
the integration process of the information technology solutions of merged organizations.
There was a gap in research with regard to the causes of disorder during the integration of
information technology solutions of manufacturing organizations.
Transition and Summary
In Section 1, a thorough review of peer-reviewed literature examined various
perspectives related to the main theme. These perspectives included previous studies,
relevant theories, and analysis of strategies. The aim of the literature review was to gain
an understanding of the internal and external forces that affect the merger integration
process and the role of the human element in dealing with those forces.
Research related to postmerger and postacquisition integrations has been limited
to success factors relating to business elements. The human element is generally ignored
as a determination factor in achieving organizational goals in the postmerger environment
(Fish, 2007). The majority of acquisitions completed since 1998 have resulted in failure
in terms of increasing shareholder value (Alaranta & Henningsson,2008). The failure
reason is often attributed to the failure to achieve synergies in the information technology
departments of the merged business units (Carlsson et al., 2011). The objective of the
study was to explore the role of entropy affecting the merger process by examining
strategies, patterns, and themes that emerge from the experiences and perceptions of
postmerger survivors whose jobs require interaction with information technology. The
use of a qualitative phenomenological research model facilitated an understanding of the
multifaceted phenomena (Sinkovics et al., 2008). The research has wide-ranging
implications for organizations contemplating or currently involved in M&As. Failure to
consider the human element in a postmerger integration, often results in undesired
outcomes (Barzantny, 2007; Farjoun, 2010; Kusstatscher, & Cooper, 2005).
Section 2 expounds upon the purpose of the research, and the role of the
researcher. In this section, I detailed the research methodology, the method of selecting
research participants, the research data collection process, and the analysis methodology.
Section 3 presents the research findings. This section also provides implications of the
study for business and recommendations for further study.
Section 2: The Project
Purpose Statement
The purpose of this qualitative, hermeneutic, phenomenological study was to
identify the lived experiences of a purposive sample of merger and acquisition survivors
of U.S. manufacturing organizations. The focus was to explore their perceptions of the
entropy phenomenon during the integration process of information technology solutions
after an M&A. Target participants were from U.S. manufacturing companies that
employed more than 500 and that have completed the postmerger integration of
information systems solutions. The results of the study identified factors that create
disorder as well as best practices that facilitate positive outcomes. The study results
could be used to identify the effects of disorder on the human element in the merger
process. The goal was to provide businesses anticipating an M&A with insights into the
effects of entropy factors on the success of the integration process. A secondary goal was
to provide a framework for change management to facilitate the achievement of merger
goals and objectives.
The significance of this research study was introducing a new paradigm of change
management applicable to postacquisition IT. The goal was to identify, understand, and
reduce entropy between the leadership, middle management, and key employees during
mergers. The study results could contribute to positive social change and impact business
practice in a positive way. Results of the study identified best practices and factors that
negatively affect achieving the organizational goals of integrating IT solutions. The
study results may provide managers with real-world solutions to facilitate integration of
computer platforms, databases, software, and personnel. Identification of best
management practices might help mitigate many of the issues faced when cultures and
technologies are integrated and provide businesses anticipating an acquisition with insight
into the effects of entropy factors on the ultimate success of the merger process.
Role of the Researcher
I have experienced the integration process following an M&A on four separate
occasions at two different employers. Each integration effort had unique aspects;
however, there were similarities in terms of opportunities for improvement. I included
management from both of these organizations among the participants for this research
study. I identified participants from other similarly sized manufacturing organizations
using professional organizations and other reputable sources. My professional
relationship with participants from two of the organizations, from which participants I
selected, was vigilantly managed to eliminate researcher bias and prevent participants’
hesitation to provide completely truthful responses to interview questions. None of the
employees who currently report to me were selected as study participants. The
participants were assured that the interviews are confidential and administered without
disrupting business (Creswell, 2008).
Participants
Selection
In phenomenological research, participants are selected based on their experiences
related to the phenomena being studied (Wilson & Washington, 2007).
Phenomenological inquiries typically include an in-depth interview with participants as
the primary data collection method (Wilson & Washington, 2007). Participants for this
study were selected from U.S. manufacturing organizations that have completed the
integration process of information systems solutions after an M&A within the past 5
years and that employ more than 500 people. I gathered business profile information to
ensure the target organizations qualified as a source for participates (Appendix A). To
qualify as a participant in the study, the employee must have been a mid-level or first-line
management merger survivor who had experienced the postmerger entropy phenomenon.
Participants were required to complete a demographic questionnaire (Appendix B).
Midlevel and first-line managers represented a suitable population for this study because
of their direct responsibility for coordinating and performing the integration process.
Upper level and executive management are not typically involved directly in the
integration efforts. Mid-level and first-line managers have direct knowledge of any
conflict or disruptive forces impeding the integration effort.
Strategies for Gaining Access to Participants
Once target organizations were identified, I contacted the organizations’ president
or Chief Operating Officer (COO) in order to elicit permission to select participants from
the organizations for the study. I assured the organizations’ management the identities of
the organizations and the participants would never be revealed. I provided a brief
overview of the study and explained the criteria for participation to the president or COO
of the targeted organizations. After the introduction, I asked the president or COO to
propose mid-level and first-line managers who met the participant criteria of experiencing
the entropy phenomenon during the integration process of an M&A.
Establishing a Working Relationship with Participants
I used a purposive sampling approach for this study. A purposive approach
implies that participants are purposively selected based on their uniqueness, commonness,
convenience, or for their maximum dissimilarity (Creswell, 2008). I selected the
participants purposively based on their having experienced the entropy phenomenon
while in a mid-level or first-line management position in a U.S. manufacturing
organization employing more than 500 during a postmerger or postacquisition integration
of information systems solutions. The original sample size was6 to 10 participants. The
study participant selection process also used snowball sampling, which increased the
number of participants to 14. I added participants until a saturation point was reached.
The number of participants in a qualitative study should be large enough to provide
information up to the saturation point without becoming redundant (Green, Chung-Chin,
& Larsen, 2010; Pratt, 2009).
Once potential participants were identified, I sent a letter requesting demographic
information and their willingness to be a voluntary participant in the research study.
Upon review of the demographic information, I asked each qualifying manager to sign a
letter of consent (Appendix C) that detailed the research study, why the participant was
chosen, how the interviews would be administered without disrupting business, how the
results would be reported, and requested authorization to conduct a private interview.
The interview setting was a conference room or any other location of the participant’s
choosing which provided an assurance of privacy in which the participant felt
comfortable and able to speak freely without fear of being overheard. The participant
pool included employees from the mid-level and first-line management of the
organizations during the integration process whose job required some level of interfacing
with the information system solutions (Creswell, 2008).
Ethical Considerations
In the initial phase of the research project, I developed a checklist (Appendix D)
in order to ensure that the project met all ethical standards and reduced the likelihood that
the project would encounter setbacks or end prematurely. I reviewed the checklist prior
to each interview to have each point refreshed in my mind to ensure ethical conduct and
avoid researcher bias.
Confidentiality
Confidentiality was maintained according to federal guidelines. All interviews
were conducted in a controlled environment that insured privacy and confidentiality.
During the interview process, all notes, recordings, transcriptions, and electronic data was
stored in a locked cabinet in my home office or stored electronically on a password
protected folder on my home office computer, with myself as the single source of access.
Each organization and participant was assigned untraceable numerical representations to
protect their identities. Any reference made in the study results was by numerical
representation only, and their true identities will never be revealed. The key to the
numerical representations was secured in a locked filing cabinet in my home office or
stored electronically in a password secured folder on my home computer. The key to the
locked storage device and the password to the electronic storage device are known only to
me. In five years after the completion of this study, the key to the numerical
representations along with all study documents will be destroyed to ensure
confidentiality.
Research Approval
A research project that uses a data collection method that involves human
participants must be reviewed by the Institutional Review Board (IRB) to ensure
standards set by federal guidelines are met. The interview instrument was the one used
by Fish in his 2007 study on which this study is based. I submitted the interview
instrument to be reviewed and received approval by the Walden University IRB with
approval number 11-21-11-0185187. This approval was received prior to the beginning
of any research activity.
Research Method and Design
The research used qualitative methodology. The research strategy employed a
hermeneutic phenomenological design. This section begins with a brief description of the
three research methods: quantitative, qualitative, and mixed. This section also includes
the rationale behind the selection of the qualitative research method and its
appropriateness to this study. The section ends with a description of the hermeneutic
phenomenological design used for this study.
Research Methods
Qualitative research. A qualitative research method does not have dependent
and independent variables. Instead, it employs such methods as life histories, historical
narratives, ethnographic first-person accounts, and biographical and autobiographical
accounts (Ryan-Nicholls & Will, 2009). Qualitative data usually consists of words,
images, or symbols (Creswell, 2008). Cronbach (1975) maintained that purely statistical
research cannot take full account of the various interaction effects that take place in social
settings.
A qualitative research method uses multiple forms of data for analysis such as
interviews, behavioral observation, and documents. The research method emerges as the
study progresses. There are many research strategies that can be used when performing
a qualitative study such as a case study, ethnography, narrative, grounded theory and
phenomenological (Creswell, 2008). Among the qualitative research strategies, the
phenomenological approach is the best choice for a study where the researcher performs
interviews or observations to gather data to study and analyze a particular phenomenon.
The researcher uses inductive data analysis in order to define patterns or themes.
Quantitative research. A quantitative research method uses surveys and
experimental designs for collection of objective data to analyze variables (Creswell,
2008). Quantitative data consist of sets of numbers (Creswell, 2008). Quantitative
research has a hypothesis that is formulated by the researcher prior to the start of the
study. Quantitative research can use an experimental design that includes a control group
and variables can be changed to test theories. The goal of the quantitative research is to
collect data in order to deductive data analysis to prove or disprove the hypothesis
(Creswell, 2008). An objective of the research performed was to explore the lived
experiences of merger and acquisition survivors’ integration of information systems and
the entropy phenomenon within the framework of Fish’s entropic model.
The research performed did not have variables that can be manipulated in order to prove
or disprove a hypothesis. Therefore, the use of a quantitative research method was not
appropriate for this study.
Mixed methods research. Mixed methods research is a combination of
qualitative and quantitative research methods. A mixed methods study has a
quantitative phase and a qualitative phase. The order in which the phases are conducted
can vary; however, some researchers prefer to perform the research phases concurrently.
The lack of a quantitative method for the research study performed made the mixed
methods approach inappropriate.
Research model selection. A variety of perspectives were examined to determine
the best research model for this research. There are a number of factors that pertain to a
successful postmerger or postacquisition integration. These factors include company
culture, employee retention decisions, cross-border issues, and others (Fish, 2007).
Examination of these diverse factors would best be achieved using the strengths of a
qualitative research model. The strength of qualitative research is in uncovering the
significant variables involved in a complex phenomenon (Creswell, 2008). Qualitative
research is a valuable tool for uncovering causal factors of variables in order to explain
the underlying phenomenon (Creswell, 2008). Qualitative research allows the researcher
to separate the factors of a complex phenomenon and determine their effect on the
construct (Creswell, 2008).
Qualitative Research Design
Phenomenology. Phenomenology is a research approach for which the goal of
the researcher is to describe a particular phenomenon as accurately as possible from the
perspectives of the people involved without adding personal bias or preconceived
outcome (Cassidy et al., 2011). Phenomenological research strives to disclose the
essence or root of the phenomenon itself (Creswell, 2008). Husserl, recognized as the
founder of phenomenology, performed his research using an epistemological or eidetic
approach (Moustakas, 1994). In contrast to the epistemological approach to
phenomenology, an alternate approach of hermeneutics, the science of textual
interpretation, was introduced by Heidegger (Morse, 1994). Eidetic phenomenology
endeavors to describe the meaning of a phenomenon through human experiences, and
hermeneutics centers on an interpretive analysis of the same human experiences (Haroon
& Nisar, 2010). The hermeneutic approach is used when the researcher seeks to
recognize the inner relatedness of the phenomenon and the change process using a
qualitative research method (Haroon & Nisar, 2010). Focused on uncovering hidden
meanings in the phenomena by using an interpretive method that went beyond
descriptions was introduced by Heidegger (Morse, 1994). The hermeneutic method
focuses on rigorous examination of textual material in many forms such as words,
pictures, or recorded conversation to establish a thorough understanding of the
association between the whole and its parts (Haroon & Nisar, 2010). There are a number
of qualitative research strategies from which to choose (Wolcott, 2008), and among these
the phenomenological approach is the best choice for a study in which the researcher
performs interviews or uses observations to gather data to analyze a particular
phenomenon (Creswell, 2008; Sinkovics et al., 2008), which made the phenomenological
approach the most appropriate research design for this study.
Case study. Case study is a research approach for which a researcher explores, in
depth, a specific activity, process, event, or individuals over a time period (Creswell,
2008). Research data is collected using a variety of collection procedures (Creswell,
2008). The research topic was not appropriate for a case study, which focuses on specific
cases.
Grounded theory. Grounded theory originated with Glaser and Straus in 1967
and referred to a theory that is developed inductively from a quantity of data gathered
through observation, conversation, and interviews (Urquhart et al., 2010; Lee &
Broderick, 2007). The goal of grounded theory research is to create a new theory using
an iterative refinement of data collections (Fish, 2007). There are two grounded theory
methodologies constant comparison, for which data is coded and analyzed at the same
time, and theoretical sampling, for which data is collected, coded, and analyzed refining
the theory using multiple intervals or cases (Urquhart et al., 2010). The proposed study
was not appropriate for the use of a grounded theory model, which involves generating a
theory behind experiences and behaviors.
Ethnography. Ethnography is a research approach focused on the description
and interpretation of a particular cultural or social group’s behavior (Kriyantono, 2012).
This approach typically requires that the researcher to become embedded and accepted in
the group’s everyday environment only as a participant observer with minimal or no
influence on the group (Kriyantono, 2012; Lee & Broderick, 2007). The research topic
was not appropriate for an ethnographic study, which focuses on a population to discover
the purpose behind common behavior patterns.
Narrative. Narrative research is an approach where the researcher studies the
lives of individuals by asking the individuals to tell stories about their lives (Creswell,
2008). The stories are collected and retold in a chronological narrative format
intertwining stories from the research’s life (Creswell, 2008). The research topic was not
appropriate for a narrative study in which researchers collect stories and retell stories
intermingled with their own stories.
Selection of research design. The nature of the study incorporated a hermeneutic
phenomenological qualitative research methodology. The semi-structured interview
questions were designed to develop a comprehensive model based on the participants’
responses. A qualitative data collection design was appropriate for data collection,
analysis, and interpretation using observation of verbal actions and behavior of
participants (Sinkovics et al., 2008). My intent was not to measure the impact of
independent variables on dependent variables. Nor was it the re-examination of existing
theories. Rather, my intent was to explore the perceptions of workers with regard to the
entropy phenomenon experienced during the postmerger or postacquisition integration of
information technology solutions.
There are many research strategies that can be used when performing a qualitative
study such case study, ethnography, narrative, grounded theory and phenomenology
(Creswell, 2008). The goal of the study was to explore the experiences and perceptions
of postmerger and postacquisition survivors to discover the nature of the entropy
phenomenon during information systems solutions integrations. This study included an
examination of their perceptions of the effect of actions taken during the integration of
information technology solutions that either furthered or hindered the goals of the
organization. A hermeneutic phenomenological approach was the appropriate selection
for the study in order to discover the essence of entropy in postmerger and postacquisition
and to provide an exploratory research design framework. To achieve a thorough
understanding of the phenomenon, it was necessary to search for the true meaning by
analyzing textual material accumulated from merger survivors who have lived through
the integration process. Merger survivors from manufacturing organizations that employ
more than 500 and have completed the integration process of information systems
solutions within the past 5 years comprised the sources for interview subjects.
Employees from mid-level and first-line management positions of the companies were
chosen and interviewed via telephone or face to face.
Population and Sampling
The goal of sampling is to select a subset of the population that will enable the
researcher to draw conclusions to accurately reflect the entire population (Creswell,
2008). Berg purposed the one common sampling method used in qualitative research was
the nonprobability sampling method (Abowitz & Toole, 2010). Onwuegbuzie and Leech
(2007) stated the nonprobability sampling method was a suitable method for selecting
participants for a study seeking participants with a shared, lived experience. The
sampling approach for this study was a combination of purposive and snowball sampling
techniques, two types of nonprobability sampling.
A purposive approach implies that participants are purposively selected based on
their uniqueness, commonness, convenience, or for their maximum dissimilarity. The
evolving qualitative research design allows the use of snowball sampling as well. For
this method, like a snowball rolling downhill, the size of the participant pool grows based
on recommendations for inclusion by the original participant pool (Creswell, 2008). The
number of participants in a qualitative study is usually small. The proper sample size is
dependent upon the information requirements of each study and methodology (Creswell,
2008). The number of participants in a qualitative study should be large enough to
provide information up to the saturation point without becoming redundant (Creswell,
2008). A small sample size is typical in qualitative study because the goal is to
understand a phenomenon in depth, not to discover what is generally true in a large
population (Creswell, 2008).
I conducted a phenomenological study which required all participants to have
experienced the entropy phenomenon during the postmerger or postacquisition
integration of information systems solutions. The purposive selection of organizations
included U.S. manufacturing organizations employing at least 500 which had completed a
postmerger or postacquisition integration of information technology solutions. Thirtyfive
individuals were invited to be a participant. Fifteen individuals did not respond, 5 were
not qualified, and 1 declined. Fourteen selected participants were midlevel or firstline
managers who work in IT or whose job required a high level of interface with
information systems.
Each potential participant from the targeted organizations was required to provide
demographic information, which was examined to ensure the perspective participants met
the eligibility requirements for being selected as part of the population. Individuals from
the targeted organizations, who met the requirements for participation in the study, were
selected as primary participants, and signed a participant informed consent letter
(Appendix C). During the interview process, each selected participant was asked if they
would recommend another individual to be considered for participation in the study. The
recommended individuals completed the demographic questionnaire to ensure they are
eligible to be included in the population and as a participant in the study. If approved,
each recommended individual signed a participant informed consent letter (Appendix C).
By using the snowball technique, the sample size grew from the original 6 to 10
participants to 14. The total sample size was determined during the research process
when data saturation had occurred.
Ethical Research Practices
Consent Processes
Participants completed a demographic information form (Appendix B). Upon
review of the demographic information, each qualifying individual signed a letter of
consent (Appendix C) that detailed the study, why the participant was chosen, how the
interviews would be administered without disrupting business, how the results would be
reported, and would request written authorization to conduct a private interview. If the
individual wished to participate in the study, they were assigned an untraceable numeric
identifier.
Participant Withdrawal
Participants were informed orally when presented with the consent form
(Appendix C) that their participation in the study was voluntary, and that they could
withdraw from the study at any time during the process without penalty. The consent
form (Appendix C) also contained a statement that withdrawal clause. Only one
individual withdrew from the study.
Participant Compensation
Participants were informed that participation in the study was strictly voluntary
and that there were no identifiable risks resulting from participation in this study. The
participants were also informed that there would be no compensation or specific benefits
resulting from participation in the study. However, the participant was informed that this
will afford them an opportunity to share their experiences, and to have their voice heard
anonymously.
Data Storage
The raw data collected during the interview process was stored in a locked filing
cabinet in my home office with access only by me. All recorded conversations were
immediately personally transcribed by myself. Once the recordings had been transcribed,
the recording was permanently erased from the recording devise. The transcripts were
then stored in a password protected folder on my home office computer. All
electronically stored data was backed up daily to a flash drive, which was stored in the
locked filing cabinet accessible only to myself. All transcripts and notes will be saved in
the locked filing cabinet in my home office or in a password secured folder on my home
computer. Five years after the completion of the study, all physical and electronic data
will be destroyed.
Confidentiality
Confidentiality must be maintained to ensure the research meets the requirement
of ethical behavior. During the interview process, all notes, recordings, transcriptions,
and electronic data was stored in a locked cabinet in my home office or password
protected folder on my home office computer, with myself as the single source of access.
Each organization and participant was assigned untraceable numerical representations to
protect their identities. The key to the numerical representations was secured in a locked
filing cabinet in my home office and in electronic form on my home office computer in a
password protected folder. The key to the locked storage device and the password to the
electronic storage device will be known only to myself. The key to the numerical
representations along with all study documents, both physical and electronic, will be
destroyed five years after the completion of the study to ensure confidentiality is
maintained. All interviews were conducted in a controlled environment that insured
privacy and confidentiality.
Data Collection
Instruments
The research design included interviews of mid-level and first-line managers from
U.S. manufacturing companies employing more than 500 that had completed the
information technology integration process following an acquisition or merger within the
past 5 years. The instrument that was used in this study was the same interview questions
created and used by Fish (2007). Using these previously used questions adds validity to
the study. In order to maintain the validity of the data collected using this instrument, the
sample size was large enough to produce rich data for analysis and, the employees
selected to be interviewed were chosen and recruited in such a way that eliminated bias
and provided a diverse variety of perceptions. Participants were chosen from a wide
variety of departments in the organizations in order to collect data from multiple,
functional viewpoints. Merger survivors from the acquired and the acquiring companies
who work in IT or whose job requires a high level of interface with information systems
were eligible for participant selection. Including members from both sides of the merger
or acquisition added multiple perspectives, and therefore added depth to the data
collected. The selection of participants with differing perspectives from multiple
departments enabled the generalization of results which provided external validity to the
study. In contrast to Fish’s population of senior-level executives from service
organizations, the selection of a population that excludes this level of management
extended the results of the study and increased the external validity by increasing the
ability of the study to be generalized to other populations.
Data Collection Technique
An interview instrument consisting of open-ended questions was used to collect
data from the employees selected. The interviews were conducted face to face when
possible. When not possible, the interviews were conducted via telephone. Each
interview was electronically recorded. The interview instrument that was used was the
same interview instrument that Fish used for his 2007 study. The interview instrument
must be free of bias and robust enough to collect data that can be analyzed effectively
(Ryan-Nicholls & Will, 2009). Fish’s interview instrument has been reviewed and
approved by the University of Phoenix IRB. This prior verification ensures the
instrument is valid, robust, and bias free.
The length and setting of the interviews was well thought out in order to ensure
that the interviewee feels comfortable and able to speak candidly and privately to ensure
protection from recrimination (Ryan-Nicholls & Will, 2009). The interview setting was a
private setting such as a conference room, which ensured the participants could talk
freely. The participants were ensured by me that answers would be kept confidential.
Each interview was approximately one hour in duration. If a face-to-face meeting could
not be arranged, the interview was conducted via telephone and was approximately one
hour in duration. Each participant chose a location and time that ensured the interview
was conducted at the participant’s convenience. Regardless of the setting, each interview
was recorded for later transcription. An interview checklist (Appendix E) was developed
that will captured the date, time, and participant information on the electronic recording
device. The script also included instructions that were read to the interviewee in order to
provide a standard instruction to all participants. During the interview, I took notes
between each question to describe any participant reaction (facial expressions, body
language, etc.) that would not be captured on the electronic recording of the interview.
Additional probing questions were asked to elicit more detail answers and specific
examples from the participants. Any additional probing question did not exceed the
boundaries of the original interview question. At the end of the interviews, the
participants were asked if they have a recommendation for a potential participant that
could add to the information collected. The participants were thanked for their
cooperation, and at the end of each interview, the time was stated for the record. The
participants were given a copy of the transcribed interview for their review and approval.
Any changes required by the participant were made immediately and the transcribed
interview was again given a fresh copy for their review and approval.
I was aware there was a potential for unintentional bias as a result of my tone of
voice, body language, or other method. I practiced interviewing members from a
nonparticipant population. At the end of each pre-interview session, I asked the
interviewee for feedback about what I needed to change in order to reduce the
introduction of bias. In addition, I verified that the one hour time limit was sufficient to
collect meaningful data or if the length of time needed to be increased or decreased.
Immediately following each interview, the electronic recording was transcribed by
myself to a textual format. After the transcription was complete, a copy was provided to
the participant for additional information and correction of errors or misinterpretation of
statements by me. Once the participant made corrections, the interview document was
stored in a locked filing cabinet in my home office, or electronically in a password
protected folder on my home office computer.
Data Organization Techniques
The electronic data created or collected during the study was stored in Word 2007,
Excel 2007, and PDF format. A folder hierarchy was established in order to easily find
and access data. The electronic data was organized into four basic categories. The first
category was research documents, such as correspondence with Walden staff, research
targets, research participants, and copyright owners. The second category was study
population and participant information, which included participant keys, participant
interview transcripts, and researcher notes. The third category was research articles,
which included literary review articles, dissertations, web articles and notes from books.
The fourth category was data analysis which included codes, groups, themes, data
produced from a data analysis software package, graphs, and charts. Figure 2 details the
hierarchy structure.
Figure 2. Data storage hierarchy structure.
The use of a data analysis software package alleviates time constraints and could
reduce the chance of researcher bias during the coding process (Atherton & Elsmore,
2007). For this study the software package used was NVivo 9 which facilitates
phenomenological data reduction, and coding data into themes. A description of the
setting, people, and categories was generated after the coding process. An initial design
was based on how the coded descriptions were presented in a qualitative narrative. The
transcribed data was processed using NVivo 9 until a saturation point was reached and
data became redundant.
Data Analysis Technique
The purpose of the study was to identify the nature of entropy experienced during
the process of integrating IT solutions after a merger or acquisition. The interview
instrument contained open-ended questions that would elicit responses from participants
that would provide their perceptions of the phenomenon. The central research question
that directed the research was as follows:
What is the nature of entropy in postmerger and postacquisition integrations (Fish,
2007)?
The additional sub-questions that directed the research was as follows:
1. What is the relationship between entropy and the five postmerger and
postacquisition integration factors?
2. What entropic relationships exist among postmerger and postacquisition
integration factors?
3. What other considerations or attributes comprise the entropy phenomenon in
postmerger and postacquisition integrations?
Interview questions 1 and 2 addressed the main research question. Interview
questions 11, 12, and 13 addressed research sub-question one. Interview questions 3, 4,
5, 6, 7, and 8 addressed research sub-question two. Interview questions 9, 10, 14, 15, 16,
and 17 addressed research sub-question 3.
Interview questions:
1. Please describe how you would characterize the nature of entropy during
postmerger and postacquisition integration.
2. What specific experiences drive your views of entropy during postmerger and
postacquisition integration? Please provide examples.
3. What is the relationship between communication and entropy during postmerger
and postacquisition integration? Please provide examples.
4. What is the relationship between organizational culture and entropy during
postmerger and postacquisition integration? Please provide examples.
5. What is the relationship between leadership and entropy during postmerger and
postacquisition integration? Please provide examples.
6. What is the relationship between people and entropy during postmerger and
postacquisition integration? Please provide examples.
7. What is the relationship between strategy and entropy during postmerger and
postacquisition integration? Please provide examples.
8. When considering communication, organizational culture, leadership, people, and
strategy, how would you describe the relationship among these factors in terms of
entropy during postmerger and postacquisition integration? Why?
9. How would you characterize different states or levels of entropy during
postmerger and postacquisition integration?
10. What specific experiences drive your views of states or levels of entropy during
postmerger and postacquisition integration? Please provide examples.
11. When considering communication, organizational culture, leadership, people, and
strategy, which of these factors contributes the most to increasing entropy during
postmerger and postacquisition integration? Why?
12. When considering communication, organizational culture, leadership, people, and
strategy, which of these factors contributes the most to decreasing entropy during
postmerger and postacquisition integration? Why?
13. When considering communication, organizational culture, leadership, people, and
strategy, which of these factors contributes the most to inhibiting entropy during
postmerger and postacquisition integration? Why?
14. How would you describe the negative impacts of entropy during postmerger and
postacquisition integration? Please provide examples.
15. How would you describe the positive impacts of entropy during postmerger and
postacquisition integration? Please provide examples.
16. In your experience, what other factors or considerations contribute to or impact
entropy during postmerger and postacquisition integration? Why? Please provide
examples.
17. Do you have any other thoughts regarding entropy and postmerger and
postacquisition integrations?
The analysis began with a preparation of the data. Audio interviews or diaries
were transcribed verbatim and research notes were typed. All data and notes were
thoroughly reviewed looking for general patterns. The data was then coded. The coding
process was an iterative one in which new codes were added until I felt comfortable that
the coding had reached a viable level of granularity. Notes taken during the review
process were used to identify patterns and themes. The data was then categorized based
on the patterns and themes identified during the review process. The use of data analysis
software packages for qualitative research has gained credibility and acceptance in the
research community. Technology has progressed rapidly and has matured to a point
where several reliable software packages are now available to assist researchers
(Atherton & Elsmore, 2007).
There are software packages available to assist in the coding process such as QSR
NVivo. The use of a data analysis software package alleviates time constraints and could
reduce the chance of researcher bias during the coding process (Atherton & Elsmore,
2007). For this study the software package used was NVivo 9. A description of the
setting, people, and categories were generated after the coding process. An initial design
was based on how the coded descriptions were presented in a qualitative narrative. The
final step was to interpret the data collected (Creswell, 2008). The study results were
then compared to Fish’s 2007 study to determine if the results are consistent with Fish’s
findings.
Reliability and Validity
Scholarly research must be both reliable and valid. Sandelowki (1986) identified
the categories associated with tests of rigor for qualitative research. They include
credibility (internal validity), transferability (external validity), dependability (reliability
and objectivity), and confirmability (reliability and objectivity) (Sandelowki, 1986;
Walden, 2010).
Reliability
Reige (2003) suggested several techniques to increase reliability. These are
paying attention to detail when recording observations and actions, using a research
method that fits the research problem, using pilot studies, repeating examination of
interview questions structure and tone, using mechanical interview recording methods,
developing a logical data organization method, and having results reviewed by peers.
The interview questions used for this study were the same as the questions used in 2007
by Fish. The set of questions had been reviewed by the University of Phoenix and
deemed reliable, free of bias, and able to generate appropriate data for analysis. The
interviews were recorded electronically and then transcribed verbatim into a Microsoft
Word 2007 documents. Notes were taken during the interviews to record any significant
facial or body language clues that would not be captured on the recording.
The data were organized in such a manner for input into the NVivo 9 software for
classifying.
The data analysis should be done in such a way that the techniques used are
sound and analysis can be justified. The method of weighing, grouping, and assigning to
categories must be free of researcher bias and defensible. The use of triangulation can
lend credibility to research by getting the same results using different methods such as
interviews, observations, surveys, case studies, focus groups, and others (RyanNicholls
& Will, 2009).Using multiple methods to code qualitative data will reduce researcher
bias and validate findings (Jonsen & Jehn, 2009). The recordings and word documents
were inspected and reviewed as part of an iterative process of refining the data analysis.
The results were reviewed and critiqued by peers. This process should reduce the
possibility that errors in interpretation or researcher bias, which ensured defensible and
confirmable results.
One risk that must be mitigated was the influence of the interviewer on the
interviewee as a result of question wording, tone of voice, and other possible influences.
Particular attention was given to the elimination of influence on interviewees that would
affect the credibility of the study and the reputation of the researcher (Creswell, 2008;
Ryan-Nicholls & Will, 2009). Another risk that was addressed was the interviewee’s
unwillingness to give honest answers in lieu of trying to say what they think the
organization wanted them to say (Creswell, 2008). The interviewees were assured that
their identities, and the company identity, would not be revealed at any time. All names
were eliminated and replaced with a numerical representation with appropriate safeguards
against any unauthorized access. The key to the numerical representation was stored in a
locked filing cabinet in my home office or stored electronically in a password protected
folder on my home computer which can be accessed only by myself. To ensure reliability
in the study, a) the data set consisted of verbatim electronic recording transcriptions, b)
NVivo 9 software was used as a time saving instrument for coding and analysis, and c)
only myself performed the transcription process of participant interviews and data coding.
Validity
The concept of validity is not easy to isolate in qualitative research and does not
have the same meaning as it does in quantitative inquiry (Creswell, 2008). Riege (2003)
suggested several techniques to increase validity. These are the use of multiple data
sources, establishment of a chain of data that can be cross-checked and cited, participant
and peer review of drafts to ensure the data collected supports the conclusions made, use
of illustrations and diagrams to supplement data analysis, cross-checking results, and
thoroughly defining the scope and boundaries of the research to increase generalization.
The research design included interviews of managers from U. S. manufacturing
companies that had experienced the entropy phenomenon during a postmerger or
postacquisition integration of IT solutions. The interview instrument must be free of bias
and robust enough to collect data that can be analyzed effectively. The interview
instrument used in this study was the interview instrument used in Fish’s 2007 study.
The set of interview questions were reviewed by the University of Phoenix IRB and
deemed free of bias and valid.
In order to maintain the validity, a sample size not only needs to be large enough
to produce rich data for analysis, the employees selected to be interviewed must be
chosen and recruited in such a way that will eliminate bias and provide a diverse variety
of perceptions. The study targets included at least three and no more than four targeted
organizations from which participants was selected. The purposive selection of
organizations included U.S. manufacturing organizations employing more than 500
people and having completed a postmerger or postacquisition integration of information
technology solutions.
Transition and Summary
The study incorporated a qualitative hermeneutic phenomenological design to
examine the nature of entropy experienced during the information technology solution
integration by postmerger survivors. This study focused on the integration factors of
communication, culture, leadership, personnel, and strategy identified by Fish’s 2007
study upon which this study was based, and the nature of entropy during the integration
process of U.S. manufacturing organizations. The study used verified phenomenological
qualitative methods. The construction of the research design was consistent with
established phenomenological research methodologies and incorporated procedures to
maintain the validity of data collection and interpretation. Section three includes data
collection, analysis, and interpretation. The section also discusses the study results,
implications for business, and recommendations for further research.
Section 3: Application to Professional Practice and Implications for Change
The purpose of this qualitative hermeneutic phenomenological study was to
extend Fish’s (2007) entropic model of postmerger and postacquisition integration by
examining the lived experiences of a purposive sample of mid-level and first-line
managers who have survived an M&A of U.S. manufacturing organizations. The study
was an attempt to identify factors that create disorder as well as best practices that
facilitate positive outcomes. The study results could be used to identify the effects of
disorder on the human element in the merger process. The goal was to provide
businesses anticipating a merger or an acquisition with insights into the effects of entropy
factors on the success of the integration process.
This section includes data collection, analysis, and interpretation. The section
provides a detail presentation of the study results, implications for business, and
recommendations for further research.
Overview of Study
This phenomenological qualitative study was conducted to explore the perceptions
and lived experiences of mid-level and first-line managers in a manufacturing business
environment about entropy when merging business units after an acquisition. Data was
collected using open-ended questions in audio-recorded interviews. I used NVivo 9
software to analyze the data in order to identify themes and patterns. The research was
focused on one central research question; What is the nature of entropy in postmerger and
postacquisition integrations? I used this central question, along with subquestions, to
discover what factors caused disruption and disorder during the integration process. IT
was identified as a significant point of interest in the majority of M&As (Alaranta &
Henningsson, 2008). This study was conducted to examine entropy issues in the merger
process from the IT perspective and expand the knowledge base established though
studies in other business environments, particularly the research conducted by
Fish (2007).
Presentation of the Findings
Data Collection Review and Outcomes
Participant selection. The purposive selection of organizations included U.S.
manufacturing organizations that employed at least 500 workers and have completed a
postmerger or postacquisition integration of information technology solutions. Selected
participants were mid-level or first-line managers who work in information technology or
whose job required a high level of interface with information systems.
Participant selection outcomes. Four manufacturing organizations were
selected, comprising a total work force of 4,734. From this number there were 340
firstline and mid-level managers, of which 102 managers worked in information
technology or a job that involved a high level of interface with their company’s
information systems. The qualified participants were reviewed and the number of
potential participants was narrowed to the managers with the most significant interface
with information systems, which reduced the population to 35 potential participants, who
were invited to be participants.
Each potential participant from the targeted organizations who responded to the
invitation was required to provide demographic information, which was examined to
ensure the perspective participants met the eligibility requirements for being selected as
part of the sample. Ten individuals from the targeted organizations, who met the
requirements for participation in the study, were selected as primary participants, and
signed a participant informed consent letter (Appendix C). During the interview process,
the selected participants were asked if they would recommend another individual to be
considered for participation in the study, constituting snowball sampling. The
recommended individuals completed the demographic questionnaire to ensure they were
eligible to be included in the sample as a participant in the study. Four recommended
individuals signed a participant informed consent letter (Appendix C). By using the
snowball technique, the sample size grew. The total sample size was determined during
the research process when data saturation had occurred. Figure 3 graphically illustrates
the potential participant distribution.
Interviews. The interviews were conducted over a 2-month period of January and
February, 2012. An interview instrument consisting of 17 open-ended questions was
used to collect data from 14 first-line or mid-level managers who worked in information
technology (IT) or had significant interaction with the computer software solutions after
the postacquisition IT software integration. The interviews were all conducted face to
face. The interview setting was a private setting such as the participant’s private office or
a conference room, which ensured the participants could talk freely. Regardless of the
setting, each interview was recorded and transcribed by myself, and reviewed and
approved by the interviewee.
Interviews outcomes. Most of the interviewees were enthusiastic about having
been selected as a participant, although one participant withdrew from the study prior to
being interviewed. This person was replaced with one of the original respondents who
was qualified but not selected as a primary participant. The responses to the interview
questions varied, but were similar in some aspects depending on the side of the
acquisition with which the interviewee was associated.
Data Analysis Review and Outcomes
The data collected fell into two categories: (a) demographic data, and (b) data
recorded and transcribed from the participants’ responses to 17 open-ended interview
questions. The purpose of the study was to identify the nature of entropy experienced
during the process of integrating information technology solutions after a merger or
acquisition. The interview instrument contained open-ended questions that would elicit
responses from participants that would provide their perceptions of the phenomenon.
For this study the software package used to aid in coding and grouping the data
was NVivo 9. The use of a data analysis software package alleviates time constraints and
could reduce the chance of researcher bias during the coding process (Atherton &
Elsmore, 2007). The transcribed data was processed using NVivo 9 until a saturation
point was reached and data became redundant.
The analysis began with the preparation of the data in Nvivo 9. All data and notes
were thoroughly reviewed looking for general patterns. The data was coded using an
iterative process into four high level nodes; 1) Participants, 2) Entropy Factors, 3)
Interview Questions, and 4) Research Question.
Participants coding. A parent node was created for participants. A sub-node was
created for each of the 14 participants with each participant’s responses aggregated to the
parent node. A classification node of person was added to store the descriptive data
collected on the Participant Demographic Questions document (Appendix B).
Entropy factors coding. A parent node was created for the entropy factors. A sub-node
was created for each of the 5 entropy factors. Data pertaining to each factor was coded to
the appropriate sub-node during the coding process. In addition, a sub-node was created
for the entropy factor ranking which contained sub-nodes for factors that 1) most increase
entropy, 2) most decrease entropy, and 3) most inhibit entropy. Interview questions
coding. A parent node was created for the interview questions. A sub-node was created
for each of the 17 open-ended questions. Interview question responses from all of the
participants were coded under the appropriate interview question nodes, which were used
to collect all of the answers for each question from all participants under the appropriate
question sub-node which was aggregated to the parent node.
Research question coding. A parent node was created in Nvivo9 for the central
research question and a sub-node was created for each of the 3 sub-questions. Interview
questions 1 and 2 from all 14 participants were coded in the node for the central research
question. Interview questions 11, 12, and 13 from all 14 participants were coded in the
node for research sub-question 1. Interview questions 3, 4, 5, 6, 7, 8 from all participants
were coded in the node for research sub-question 2. Interview questions 9, 10, 14, 15, 16,
17 from all participants were coded in the node for research sub-question 3.
Demographic findings. The participant pool was made up of 10 male (71.4 %)
participants and 4 female participants (28.6%); 10 participants (71.4%) had experienced
being on both sides of an acquisition. Six of the participants were first-level managers
(42.9%) and eight were mid-level managers (57.1%). Figure 4 graphically illustrates the
relationship between male and female managers in terms of managerial level.
Figure 4.Participant Demographics
Research question findings. The central research question that directed the
research was as follows:
What is the nature of entropy in postmerger and postacquisition integrations (Fish,
2007)? To achieve a deeper understanding of the entropy phenomenon, additional
research sub-questions include:
1. What is the relationship between entropy and the five postmerger and
postacquisition integration factors?
2. What entropic relationships exist among postmerger and postacquisition
integration factors?
3. What other considerations or attributes comprise the entropy phenomenon in
postmerger and postacquisition integrations?
Central Research question. Interview questions 1 and 2 centered on eliciting
participants lived experiences to the research question, “What is the nature of entropy in
postmerger and postacquisition integrations?” The participants’ perceptions of entropy in
postmerger and acquisition integrations ran the gamut of negative feelings, negative
reactions, and negative working environments. The answers to the questions were
explored by using a word frequency query. The list was reduced to include only the
words that were entropy descriptors. The participants whose interview answers included
each of these descriptors were then identified. The number of times the participants used
the descriptors was not used as a basis for identification of major entropy descriptors;
instead the participants’ use of a descriptor was counted only once. Once the number of
participants who used each of the words identified was tallied, any descriptor which was
used by four or more participants was considered a major entropy descriptor. Any
descriptor which was used by fewer than three was considered a minor entropy
descriptor. The descriptors were classified into three entropy descriptor categories: (a)
feeling, (b) reaction, and (c) environment.
The 35 major entropy descriptors identified during the word count analysis are
illustrated in alphabetical order in Table 1. All participants’ responses contained at least
1 descriptor in each entropy descriptor category. Twelve participants (86%) perceived
entropy in terms of loss (Participants 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, and 14). The 80
minor entropy descriptors identified are listed in alphabetical order in Appendix F.
Anger. Anger was a major entropy descriptor for seven participants (Participants
4, 6, 7, 9, 11,12,and 14). Participants felt angry when they perceived they were not taken
seriously or felt their leaders had betrayed them. Feelings of anger were not limited to
the members of the acquired organization.
Arrogance. Arrogance was a major entropy descriptor for six participants
(Participants 2, 3, 4, 9, 11, and 14). The main concern of participants was the arrogant
manner in which the members of the acquiring company interacted with people from the
acquired company. However, not all postacquisition integrations perceived originated
from the acquiring company. One participant commented on the arrogance of the
acquired company in terms of its effect on the merged organization.
Chaos. Chaos was a major entropy descriptor for four participants (Participants 2,
3, 4, and 12). The primary perception by participants was that chaos was a direct result of
poor leadership during the system integration effort.
Clash. Clash was a major entropy descriptor for six participants (Participants 1,
3, 4, 7, 12, and14). Clash was perceived as a result of differing organizational cultures
and the inability for either side to embrace change.
Complaining. Complaining was a major entropy descriptor for five participants
(Participants 2, 3, 6, 11, and 14). Participants felt the main reason for the constant
complaining was it served as a means for getting one’s own way despite the fact that it
may not be the most beneficial way for the company.
Conflict. Conflict was a major entropy descriptor for four participants
(Participants 5, 6, 7, and 12). Participants perceived conflict as a result of dissimilar
cultures, management styles, and personalities.
Confusion. Confusion was a major entropy descriptor for five participants
(Participants 2, 3, 7, 11, and 14). Participants’ perception of confusion was a result of
communication discrepancies, the lack of timely, honest communication by leadership,
and the short integration timeline.
Difficult. Difficult was a major entropy descriptor for 11 participants
(Participants 1, 2, 3, 4, 5, 7, 8, 9, 11, 12, and 14). Participants’ perception of difficult
centered around the inability of the leadership to make a decision and stand behind that
decision, and dealing with people who are not team players.
Distrust. Distrust was a major entropy descriptor for seven participants
(Participants 1, 4, 7, 10, 11, 12, and 14). Participants’ perception of distrust centered
upon having to work with people from the other organization. People become distrustful
of new people, especially when they are nervous about possibly losing their jobs to these
same people.
Egotism. Egotism was a major entropy descriptor for seven participants
(Participants 1, 2, 7, 9, 11, 12, and 13). Participants’ perception of egotism was based on
the actions of people from both sides of the acquisition. Participant 1 stated, “There were
a couple of people on real ego trips that seemed to come in and demand that their
directions should not be questioned. Respect and loyalty have to be earned, not dictated.”
Fear. Fear was a major entropy descriptor for seven participants (Participants 1, 2, 6, 7,
10, 11, and 12). Participants’ perception of fear centered upon the fear of losing their
jobs and security.
Fighting. Fighting was a major entropy descriptor for six participants
(Participants 1, 6, 8, 9, 10, and 11). Participants’ perception of fighting was based on the
actions of company leaders’ in-fighting and attempts to provide themselves a position in
the integrated organization, as well as preserve the systems and policies for which they
felt ownership.
Friction. Friction was a major entropy descriptor for six participants (Participants
1, 4, 6, 7, 9, and 13). Participants’ perception of friction was based on interaction with
personnel from the other company during the integration decision making process and
while trying to work together to accomplish the day-to-day tasks required to keep the
company running.
Frustration. Frustration was a major entropy descriptor for nine participants
(Participants 4, 5, 6, 9, 10, 11, 12, 13, and 14). Participants’ perception of frustration was
a result of the length of time it took to get anything accomplished and the unwillingness
of some people to accept any kind of change.
Hurt. Hurt was a major entropy descriptor for five participants (Participants 3, 8,
9, 11, and 12). Participants’ perception of hurt focused on two distinct aspects: (a) hurt
feelings, and (b) hurting the company.
Loss. Loss was a major entropy descriptor for 12 participants (Participants 1, 2, 3,
4, 6, 7, 8, 9, 10, 11, 12, and 14). Participants’ perception of loss emerged as a central
theme resulting from post integration loss of coworkers, friends, family, home, and
systems in which they took ownership and pride. Participant 1 stated, “It seemed to come
in waves; the loss of our system, the loss of some of our best employees, the loss of our
physical location, and the move to a totally unfamiliar location working with people we
didn’t know.”
Misunderstood. Misunderstood was a major entropy descriptor for four
participants (Participants 8, 12, 13, and 14). Participants’ perception of misunderstood
focused on the loss of productivity resulting from misunderstandings either real or bogus.
Participant 13 stated, “I’m not sure if they misunderstood the instructions or if they were
just outright ignoring us and being defiant.”
Painful. Painful was a major entropy descriptor for eight participants
(Participants 1, 2, 4, 5, 6, 7, 9, and 10). Participants’ perception of painful was expressed
in both physical and mental pain. Participant 1 stated, “I felt like I had to prove myself
every single day. I felt that I was being rejected because I was not part of the clique. It
was physically and emotionally painful.”
Pressure. Pressure was a major entropy descriptor for seven participants
(Participants 1, 2, 4, 6, 9, 11, and 13). Participants’ perception of pressure resulted from
their sense of achieving outcomes despite the numerous roadblocks that they faced.
Resentment. Resentment was a major entropy descriptor for four participants
(Participants 1, 4, 6, and 9). Participants’ perception of resentment was that it resulted
from the reaction of people who felt that they should have kept their jobs.
Resistance. Resistance was a major entropy descriptor for seven participants
(Participants 2, 3, 4, 10, 12, 13, and 14). Participants’ perception of resistance was
focused on reactions from the personnel of the acquired company.
Shock. Shock was a major entropy descriptor for four participants (Participants 1,
5, 12, and 13). Participants’ perception of shock was the unexpected announcement that
the acquiring company would be moving to the acquired company’s ERP system
followed by terminations and relocation of employees from the acquiring company.
Strained. Strained was a major entropy descriptor for four participants
(Participants 3, 6, 8, and 13). Participants’ perception of strained centered on
relationships between people of the acquiring and acquired organizations.
Stressful. Stressful was a major entropy descriptor for nice participants
(Participants 1, 2, 3, 4, 5, 6, 8, 9, and 14). Participants’ perception of stressful centered
on the state of the environment in which they had to work. So much needed to be done,
but there was chaos, which resulted in increasing stress levels.
Suffering. Suffering was a major entropy descriptor for five participants
(Participants 1, 6, 7, 8, and 12). Participants perception of suffering was that it is a
sideeffect of loss of talent, pressure, and the disconnect between employees and company
leaders.
Tough. Tough was a major entropy descriptor for 5 participants (Participants 1, 2,
4, 11, and 13). Participants’ perception of tough resulted from difficulty in the
relationships between people from the two sides of the integration, and the work
environment they created.
Troubling. Troubling was a major entropy descriptor for four participants
(Participants 1, 7, 9, and 12). Participants’ perception of troubling grew out of not
understanding or being able to rationalize the actions of leadership.
Turmoil. Turmoil was a major entropy descriptor for four participants
(Participants 1, 2, 3, and 10). Participants’ perception of turmoil was described the
environment in which they worked during the integration process.
Uncooperative. Uncooperative was a major entropy descriptor for five participants
(Participants 4, 6, 9, 10, and 11). Participants’ perception of uncooperative resulted
from interaction with people from one particular acquisition.
Unknown. Unknown was a major entropy descriptor for four participants
(Participants 1, 10, 12, and13). Participants’ perception of the unknown focuses on the
people’s fear of the unknown and their ability to plan correctly when the process is
unknown.
Waste. Waste was a major entropy descriptor for six participants (Participants 2,
4, 8, 9, 10, 11, and 14). Participants’ perception of waste centered upon wasted effort by
employees, and the resulting unproductive efforts by all involved.
Worry. Worry was a major entropy descriptor for four participants (Participants
1, 5, 9, and 11). Participants’ perception of worry was closely associated with the loss of
employment after the integration.
Research Sub-question 1. Interview questions 11, 12, and 13 centered on
eliciting participants’ lived experiences concerning the research sub-question “What is
the relationship between entropy and the five postmerger and postacquisition integration
factors?” All 14 participants responded to the interview questions. The factor
interviewees perceived as having most increased the entropy phenomenon was
communication (35.7%), especially the lack of honest, timely communication, followed
by leadership (28.6%). Participant 1 stated, “The communication needs to be on a regular
basis and should reflect the truth about what is going on and what the future changes
might be.”Participant 3 stated, “In my opinion, leadership contributes most to increasing
entropy. The leadership of the company establishes the organizational culture and
determines the strategy of the company. In addition, the level of communication is also
established by the leadership and culture.”
The factor the interviewees perceived as the one that most decreased the entropy
phenomenon was leadership (57.1%), followed by communication (28.6%). Participant
10 stated, “Communication just in the boardroom when all of the suits are sitting around
the table hashing it out is not good enough. Participant 11 stated, “Leadership is the
factor that contributes the most to decreasing entropy. If you have good leadership, you
will have good communication and they will support an organizational culture that allows
them to meet the company’s goals.”Participant 13 stated, “Leadership is the factor that
most contributes to decreasing entropy during the integration. If the leadership is behind
it and you don’t see any hesitation in their talk, there is no room for modifications.”
Participant 14 stated, “A good leader will make sure that there is a proper level of
communication and will promote a culture where creative ideas are welcome and people
will adapt to the environment.” Participant 9 stated, “I think if you have good leadership
that communicates to the right people what they need to, when they need to go a long
way to decreasing the amount of entropy that is experienced.”
The factor the interviewees perceived as the one which most inhibited the entropy
phenomenon was leadership (42.9%). Participant 14 stated, “Leadership is the factor that
contributes most to inhibiting entropy. Good leadership sets the direction of the company
and the tasks that must be accomplished to make the company profitable. When the
direction is clear, there are no misunderstandings.” Participant 3 stated, “The leaders
should be aware that they are not just buying a company, but they are setting strategy for
the newly acquired company’s employees who have the ability to affect your
organization’s profitability.”
Communication factors findings. Interview question 3 focused on the
interviewees’ perception of the relationship between communication and entropy. All 14
participants (100%) experienced entropy as a result of communication. The participants’
responses were grouped into four themes: (a) two-way communication, (b) quality of
communication, (c) lack of communication, and (d) honest, timely communication.
Two-way communication was a concern for two participants (14.3%, Participants
3 and 13). The effects of not having two-way communication resulted in distrust,
misunderstandings, and suspicion on the part of the employees that feel they have no
voice in the process. Participant 3 stated, “without honest, two-way communication there
is guaranteed to be entropy...because the members of the acquired company had no
input...it actually seemed like they tried to make the system integration fail.” Participant
13 said, “Most of the communication was by phone or email...without really being able to
see them face to face, it was hard to tell if they were really getting what we were trying to
communicate to them.”
Quality of communication was a concern for six participants (42.9%, Participants
1, 5, 6, 9, 10, and 12). Incomplete or inaccurate communication became a source of
anxiety, frustration, and a sense of abandonment by the leadership of the company. There
existed a perception that some managers were withholding information because of control
issues. The perception was that IT personnel was usually the last to know about any
initiative, that meetings were held without an IT presence, and decisions were made and
communicated to IT personnel when it was too late to take appropriate action to ensure
that the company’s infrastructure would support current and future endeavors. Participant
9 stated, “There are things that go on that people should be informed about and they are
not, because certain personnel want to control information.” Participant 10 stated, “There
are some people in a room who know what’s going to happen during the merger, but
everyone downstream does not; especially IT...if the communication was better...it would
help us out tremendously on planning for future.”
Lack of communication was a concern for five participants (35.7%, Participants 1,
2, 8, 11, and 14). Participants experienced a lack of communication, which resulted in
stalling initiatives and a reduction in synergies. Decisions were being made that affected
all locations without any input from anyone from the locations. Participant 1 stated, “the
lack of communication was staggering and debilitating. If there was an integration plan
by upper management, it was not communicated to employees from either side of the
acquisition.” Participant 2 stated, “We were not informed about things until we stumbled
on it. We had to deal with the consequences after changes had been made”. Participant
11 stated, “The team had now become two teams; one for the acquired company and one
for the acquiring company and there was no communication between the two even though
critical decisions were being made that affected us all.”
Honest, timely communication was a concern for four participants (28.6%,
Participants 2, 4, 7, and 11). Participants described the communication during integration
as cryptic, confusing, and at times suppressed altogether. Some experienced delayed or
dishonest commutation resulting from some company members’ private agendas.
Participant 2 stated, “Sometimes I felt that information was being withheld just waiting
for me to make a mistake and fall...some people would sit back and wait till you failed
before they would provide information that would have made you succeed.” Participant 4
stated, “Open and timely communication conveys ‘You are trusted and valued enough
that you should know the upcoming plans.’ Lack of communication is the opposite. It
fosters distrust which propagates rumors and speculation, which propagates ill will.
”Participant 11 stated, “We should have everything coming down to us so we are all on
the same page. We're not individual companies; our goal is to make money for our
stakeholders and at the same time be good corporate citizens...not our private agendas.”
Leadership factor findings. Interview question 5focused on the interviewee’s perception
of the relationship between leadership and entropy. Thirteen of the participants (92.9%)
experienced entropy as a result of leadership. One participant
(7.1%), Participant 9 was neutral as a result of being shielded by their manager. The
participants’ responses were grouped into 5 themes: (a) engagement and commitment, (b)
vision, (c) flexibility, (d) accountability, and (e) communication.
Engagement and commitment was a concern for four participants (28.6%,
Participants 4, 10, 11, and 13). Participants experienced the perception that the
integration effort was not fully supported by the senior members of the organization
during the integration. They also perceived senior leaders were not fully engaged and
committed to the integration process and the decisions they had made, and when they got
push back from the acquired company, they just let them have their way rather than deal
with the problems. Participant 4 stated, “The project lacked the required support of the
senior leaders...none of the synergies that would have been realized from the elimination
of one ERP system was lost...it turned into a game of wills with the overall company
being the biggest loser.” Participant 10 stated, “I think a lot of times leaders really don’t
want to think about this, and they want business as usual; they haven’t committed to
merging the companies together and becoming one...that filters down to every level of the
organization.” Participant 13 stated, “We still haven’t consolidated nearly as much as we
should have...leaders wouldn’t commit to stick by their decision...when members of the
acquired company started complaining about having to change, the leadership caved and
let them have their way.” Participant 11 stated,” At this point, we had advised the
leaders that the people from the acquired company were purposefully trying to kill the
system integration project and all we got was deaf ears and no support from our leaders.”
Vision was a concern for three participants (21.4%, Participants 2, 3, and 14). The
participants perceived that the acquiring company lacked a well defined vision and a well
thought-out roadmap to enable achieving the vision. Instead, the perception was the
leaders were arrogant and unwilling to listen to any ideas from members of the acquired
company; this perception was shared by some of the members of the acquiring company.
Participant 3 stated, “We, the acquiring company’s leaders, were arrogant; we thought we
knew it all. We came in and started breaking up departments that had been working
together well for years. We cut loose some folks that we should not have.” Participant 14
stated, “The leaders of the company should be guiding the company and all of its
employees down a path that will ensure the company vision will be achieved.”
Flexibility was a concern for two participants (14.3%, Participants 8, and 12).
The participants’ perception was that the acquiring company’s leaders were unable to
take advantages of opportunities due to the rigidness of their leadership style. At a time
when the company leaders needed the flexibility to become change masters, they held on
to their old ways. Participant 8 stated, “When the decision was made to go to the
acquired company’s ERP system it was...get on the train or get run over. Instead of
taking time and doing it right, they were in a hurry to get it done.” Participant 12 stated,
“They were very rigidly structured and expected their employees to do their job as stated.
At this point in time, we all need to embrace change and be change masters.”
Accountability was a concern for two participants (14.3%, Participants 2 and 11).
The participants’ experiences demonstrated that leaders of the company were not held
accountable for their actions. In some cases, the leadership pushed the decision making
down to the people who reported to them so that if something went wrong it would not be
their fault; they would just fire the person who was forced to make a decision.
Participants also perceived that some leaders were not fully committed to the company
and they were preparing for their next employment opportunity. Participant 11 stated,
“Some leaders are afraid to make a bad decision, but some seem to be looking for their
next adventure; some leaders are looking to make a mark so they are promoted up the
corporate ladder or find other employment.”
Communication was a concern for six participants (42.9%, Participants 1, 5, 6, 7,
8, and 9). Participants perceived a lack of communication from leadership. In the
instance of one acquisition, the lack of communication resulted in the acquired company
still operating on its own ERP system and a loss of any synergy that could have been
achieved. Participant 1 stated, “Leaders sometimes do not realize that their decisions
drastically affect the lives of the people who work for them. We were blindsided with the
news that we were migrating to the system of the acquired company.” Participant 6
stated, “The leadership team does a very poor job of communicating to the facilities about
the direction they want to go as well as a clear directive of the type of organizational
culture they would like for the company.” Participant 8 stated, ”Leadership’s inability to
communicate what their plans were for the integration of the second acquisition caused
the project to stall for an extended period and ended up being only a minimal integration
that left them on their ERP system.”
Organizational culture factor findings. Interview question 4focused on the
interviewee’s perception of the relationship between organizational culture and entropy.
All 14 participants (100%) experienced entropy as a result of organizational culture. The
participants’ responses were grouped into four themes: (a) public v. private, (b) old
school culture, (c) resistance to change, and (d) cultural pride.
Public v. private was a concern for 10 participants (71.4%, Participants 1, 3, 5, 7,
8, 9, 10, 12, 13, and 14). Participants perceived the clash of publically owned acquiring
company and privately owned acquired company as one of the hardest cultural difference
with which to contend. Participant 5 stated, “The difference in organizational cultures
was striking. The publically held company acquired a privately held company which had
employees that had worked for this organization their entire lives...they didn’t know how
a publically traded company functioned.” Participant 7 said, “From a cultural standpoint,
the acquired company was a private company and acquiring company was a public
company. There are different requirements for both types of companies.” Participant 10
stated, “As we have seen, although we are in the same type of business, the culture differs
greatly from organization to organization. Especially when it’s a privately held
organization and the other is a publically held organization.” Participant 13 stated,
“There were differences in the organizational culture from us and the acquired company.
Not only were they privately held and we were publically traded, they were almost
completely focused on retail sales where we were mostly focused on wholesale with a
medium sized retail side.”
Old school culture was a concern for four participants (28.6%, Participants 2, 9,
11, and 12). Participants’ perception of the acquiring company’s culture was that it was a
very old school, chain of command culture. In addition, the culture was riddled with red
tape that stifled creativity and collaboration. Participant 2 stated, “The acquiring
company’s culture was ‘get it done or get out of the way.’ The man that drove all this is
no longer here, but during his time, he was a tyrant who managed by fear, loathing, and
ego.” Participant 9 stated, “The organization cultures of the first acquisition differences
were huge…because of their old school mentality, and the fact that they liked to go
around and beat their chests, and stroke their egos.” Participant 11 stated, “During the
first acquisition the corporate culture was more of a strict chain of command, arrogant
culture, which required a person to go through the chain of command to get information.”
Resistance to change was a concern for five participants (35.7%, Participants 1, 2, 4, 10,
and 14). Participants’ perception of resistance to change came from the acquired
company’s employees not embracing the practices and policies of the acquiring company.
In addition, after the decision was made to migrate the acquiring company to the acquired
company’s system platform, the resistance was two-sided. Participant 2 stated,
“Organizational change is difficult. The integration efforts were met with a lot of
resistance from the acquired company…when the platform of the acquired company was
chosen over the company’s current platform…then the resistance came from both sides.”
Participant 14 stated, “There was a clash of cultures…they were just so scared that their
world was going to change. It really got to be an us versus them kind of situation.”
Cultural pride was a concern for four participants (28.6%, Participants 6, 8, 12, and 13).
Participants’ perception of cultural pride resulted from being told that they needed to
move off the system that they had expended time and effort building; they were proud of
the system they had created and the culture they had built for their organization. The two
organizations had been rivals for many years and it seemed almost impossible to
suddenly think of them as part of their team. Participant 8 stated, “With our first
acquisition, the company had been one of our archrivals for many, many years. Suddenly
thinking of them as part of the team was almost impossible.” Participant 12 stated, “With
the second acquisition, a new management crew had come in and turn the company
around. Because the management team is still intact, there was a feeling of ownership
and pride associated with their business model and their systems.”
People factor findings. Interview question 6focused on the interviewee’s
perception of the relationship between people and entropy. All 14 participants (100%)
perceived people as a contributor to entropy. The participants’ responses were grouped
into six themes: (a) attitude and conflict, (b) buy-in, (c) empowerment, (d) leadership, (e)
trust, and (f) resistance to change.
Attitude and conflict were concerns for five participants (35.7%, Participants 3, 7,
9, 11, and 14). Participants’ perception of attitude and conflict was based on strained
relationships between the acquiring and the acquired personnel, the differing cultures,
personality conflicts, and people on both sides of the acquisition who had not bought in to
the integration changes. Participant 3 stated, “The relationship between people from the
two acquired organizations and the acquiring company management was a real source of
entropy. Working relationships were difficult and strained. I felt outnumbered and on
the defensive all of the time.” Participant 9 stated, “The relationship between people and
entropy was directly related to the arrogance and old school management style of the
people who came from the acquiring company. Most of them are not with the company
anymore.”
Buy-in was a concern for two participants (14.3%, Participants 1 and 5).
Participants’ perceived a lack of buy-in from individuals from both sides of the
acquisition. One problem was the feeling from members of the acquired company that
the leaders from the acquiring company could not be trusted and that every change had to
be scrutinized to determine if they were up to something. Participant 5 stated, “At first
there were some real conflicts between the personnel between the two organizations.
There were opposing expectations from the two sets of people.”
Empowerment was a concern for three participants (21.4%, Participants 6, 8, and
11). Participants perceived the employees from the acquired company from one
acquisition were just not adequately intelligent because they did not have the corporate
image that was expected of them. As a consequence, the participants felt the people from
the acquired company were not empowered to perform to the best of their ability; they
felt their input was neither needed nor appreciated. Participant 8 stated, “They don’t lift
up those people who have excelled. There is an annual award that is given to one project
and the people who worked on that project.”
Leadership was a concern for four participants (28.6%, Participants 1, 8, 11, and
12). Participants from the acquiring company perceived a lack of support and
appreciation from their leaders. They felt they had been betrayed when the decision was
made to move the corporate offices. Participants from both sides of the acquisition
perceived a lack of leadership ability to promote a combined organizational culture;
instead they turned a blind eye to the in-fighting and posturing that was killing
productivity. Participant 1 stated, “I had given up a lot moving over a thousand miles
away from my friends and family in order to continue working for the company. It was
not an easy decision and I felt like my sacrifice meant nothing to my boss.” Participant 8
stated, “The relationship was strained and the leaders did not do a super job of trying to
assimilate people from both organizations.”
Trust was a concern for four participants (28.6%, Participants 4, 10, 11, and 12).
Participants described the issue of trust in terms of not trusting the members of the
acquiring company due to the potential loss of their jobs. During the integration process,
new people were added to the organization; the participants tended to distrust until
proven trustworthy rather than trust until proven otherwise. Participant 4 stated, “The
stress of not knowing whether their job is secure-- their family’s livelihood will be safe—
brings distrust and other negative emotions to the situation.” Participant 11 stated, “We
used to have upper management who cared and protected their people; I don't feel that
way anymore.”
Resistance to change was a concern for two participants (14.3%, Participants 2
and 13). Participants on both side of the acquisition experienced resistance to change.
The acquired organization's employees resisted the change imposed on their processes
and procedures, and the acquiring organization's employees resisted because they were
being forced to give up their system and platform to migrate to the acquired
organization's system. Participant 2 stated, “There was a lot of resistance to the new
changes on our side of the organization. The opposition on the acquiring company’s
personnel for having to go to a new system was quite evident.
Strategy factor findings. Interview question 7focused on the interviewee’s
perception of the relationship between strategy and entropy. All 14 participants (100%)
perceived strategy as a contributor to entropy. The participants’ responses were grouped
into six themes: (a) lack of a comprehensive strategy, (b) vision, (c) unrealistic
expectations, (d) synergy, (e) secrecy, and (f) commitment to strategy.
Lack of a comprehensive strategy was a concern for 6 participants (42.9%,
Participants 4, 7, 9, 10, 12, and 14). There was a perception by many participants on both
sides of the acquisition that leadership did not actually have a long term as well as a
short-term strategy. Participant 4 stated, “No strategy means no goal, no defined steps,
and results in chaos.” Participant 7 stated, “I think the strategy was ‘Hey we need to buy
them, so we’re going to buy them, and then we’ll figure it out after the deal is closed’. If
they had a strategy they didn’t communicate it to anyone.”
Vision was a concern for four participants (28.6%, Participants 7, 10, 12, and 13).
Participants’ perception of a lack of vision was driven partially by the old school
mentality in addition to having leaders who had never been exposed to alternate methods
for achieving the end goal of the company. In addition, there was a perception that the
leaders had not given enough time during the discovery period to actually know how
difficult it would be to integrate the two organizations. There was a general perception
that none of the leaders actually had a good understanding of the big picture. Participant 7
stated, “We have talented people in the organization. However, some have no vision
because they have only worked for one company. In addition, they have not taken any
courses to keep themselves up to date with new methods and strategies.”
Participant 10 stated, “Maybe there isn’t a big picture because there is no vision about
where we are headed. Maybe the leadership members are not seeing eye-to-eye on what
we are trying to do.”
Unrealistic expectations were a concern for 2 participants (14.3%, Participants 2
and 3). Participants’ perception of the integration process timeline was that it was too
aggressive considering the complexity of the project. The time period in which one of the
integration efforts was done was during a time of federal regulation changes and new
product launches. Participant 2 stated, “There was a lot of disarray in the way things
were planned out. It felt like there was an unnecessary expedience to the process.”
Participant 3 stated, “We had strategy, but it was too big too fast. It appeared that we can
do everything at one time and we should have done a lot more than we did. We did not
execute it right.”
Synergy was a concern for 2 participants (14.3%, Participants 7 and 9).
Participants experienced a great deal of expectation from upper management for huge
synergies without having a plan to leverage synergies. Participants felt that the synergies
that could have been leveraged were not; especially any type of synergies from the
second acquisition. Participant 7 stated, “I don’t think they really did their due diligence
very well. With our second acquisition, they have been so hands off that none of the
synergies have been realized.”
Secrecy was a concern for six participants (42.9%, Participants 1, 5, 6, 8, 11, and
12). Participants experience a high level of secrecy that ended up affecting the
productivity of the company. Most participants acknowledge that a certain level of
secrecy is necessary especially prior to announcing the company's intention of purchasing
another company, especially when the company is publically traded. Participant 1 stated,
“The company strategic plans were kept very confidential. It was like waiting for the axe
to come down and chop you off the team. Not knowing what the company’s strategy was
unnerving as well as painful.”
Commitment to strategy was a concern for two participants (14.3%, Participants 9
and 11). Participants perceived an inability for leaders to commit to their strategy.
Participants experienced a lack of commitment by leaders to make the tough call when
necessary and achieve all of the synergies that had been promised to their stakeholders.
Participant 9 stated, “In our second acquisition, the strategy was to consolidate as much
as possible and to take advantage of the synergies available after the acquisition. When
individuals from the acquired company complained, our leaders caved to avoid conflict.”
Participant 11 stated, “You could see the smirks on their faces during the migration
sessions; they knew they could artificially drive the costs so high, that they would be safe
and stay on the antiquated system that only they could support.”
Research Sub-question 2. Interview questions 3, 4, 5, 6, 7, and 8 centered on
eliciting participants’ lived experiences concerning the research sub-question 2, “What
entropic relationships exist among postmerger and postacquisition integration factors?”
All 14 participants responded to the interview questions. All 14 participants perceived
the 5 entropy factors of communication, leadership, organizational culture, people, and
strategy to be interrelated. The consensus was that leadership would be the driving force
behind the other factors. Leadership establishes the organizational culture, sets the
strategy, determines the level of communication, and sets policies that guide the hiring of
the company’s workforce.
Participants’ perceptions of communication and entropy were grouped into 4
categories: (a) two-way communication, (b) quality of communication, (c) lack of
communication, and (d) honest, timely communication. Two-way communication was a
concern for two participants (14.3%, Participants 3 and 13). The effects of not having
two-way communication resulted in distrust, misunderstandings, and suspicion on the
part of the employees that feel they have no voice in the process. Quality of
communication was a concern for six participants (42.9%, Participants 1, 5, 6, 9, 10, and
12). Incomplete or inaccurate communication became a source of anxiety, frustration,
and a sense of abandonment by the leadership of the company. There existed a
perception that some managers were withholding information because of control issues.
The perception was that IT was usually the last to know about any initiative; meetings
were held without an IT presence, and decisions were made, and IT found out when it
was too late to take appropriate action to ensure the company’s infrastructure would
support current and future endeavors. Lack of communication was a concern for five
participants (35.7%, Participants 1, 2, 8, 11, and 14). Participants experienced a lack of
communication, which resulted in stalling initiatives and a reduction in synergies.
Decisions were being made that affected all locations without any input from anyone
from the locations. Honest, timely communication was a concern for four participants
(28.6%, Participants 2, 4, 7, and 11). Participants described the communication during
integration as cryptic, confusing, and at times suppressed altogether. Some experienced
delayed or dishonest commutation resulting from some company members’ private
agendas.
Participants’ perception of leadership and entropy was grouped into 5 categories:
(a) engagement and commitment, (b) vision, (c) flexibility, (d) accountability, and (e)
communication. Engagement and commitment was a concern for four participants
(28.6%, Participants 4, 10, 11, and 13). Participants experienced the perception that the
integration effort was not fully supported by the senior members of the organization
during the integration. There was also the perception that senior leaders were not fully
engaged and committed to the integration process and the decisions they had made, and
when they got push-back from the acquired company, they just let them have their way
rather than deal with the problems. Vision was a concern for 3 participants (21.4%,
Participants 2, 3, and 14). The participant’s perceived that the acquiring company lacked
a well defined vision and a well thought-out roadmap to make that vision achievable.
Instead, the perception was the leaders were arrogant and unwilling to listen to any ideas
from members of the acquired company; this perception was shared by some of the
members of the acquiring company. Flexibility was a concern for 2 participants (14.3%,
Participants 8, and 12). The participants’ perception was that the acquiring company’s
leaders were unable to take advantages of opportunities due to the rigidness of their
leadership style. At a time when the companies needed the flexibility to become change
masters, they held on to their old ways. Accountability was a concern for two
participants (14.3%, Participants 2, and 11). The participants’ lived experiences were that
the leadership of the company was not held accountable for its actions. In some cases, the
leadership pushed the decision making down to the people who reported to them so if
something went wrong it would not be their fault, they would just fire the guy who was
forced to make a decision. Participants also perceived that some leaders were not fully
committed to the company and they were preparing for their next employment
opportunity. Communication was a concern for six participants (42.9%, Participants 1, 5,
6, 7, 8, and 9). Participants perceived a lack of communication from leadership. In the
instance of one acquisition, the lack of communication resulted in the acquired company
still operating on their own ERP system and the loss of any synergy that could have been
achieved.
Participants’ perception of organizational culture and entropy was grouped into
four categories: (a) public v. private, (b) old school culture, (c) resistance to change, and
(d) cultural pride. Public v. private was a concern for 10 participants (71.4%, Participants
1, 3, 5, 7, 8, 9, 10, 12, 13, and 14). Participants perceived the clash of publically owned
acquiring company and privately owned acquired company as one of the hardest cultural
difference with which to contend. Old school culture was a concern for four participants
(28.6%, Participants 2, 9, 11, and 12). Participants’ perception of the acquiring
company’s culture was that it was a very old school, chain of command culture. In
addition, the culture was riddled with red tape that stifled creativity and collaboration.
Resistance to change was a concern for five participants (35.7%, Participants 1, 2, 4, 10,
and 14). Participants’ perception of resistance to change came from the acquired
company’s employees not embracing the practices and policies of the acquiring company.
In addition, after the decision was made to migrate to the acquired company’s system
platform, the resistance was two-sided. Cultural pride was a concern for four participants
(28.6%, Participants 6, 8, 12, and 13). Participants’ perception of cultural pride resulted
from being told they needed to move off the system they had expended so much time and
effort building; they were proud of the system they had created and the culture they had
built for their organization. The two organizations had been rivals for many years and it
seemed almost impossible to suddenly think of them as part of their team.
Participants’ perception of people and entropy was grouped into six categories:
(a) attitude and conflict, (b) buy-in, (c) empowerment, (d) leadership, (e) trust, and (f)
resistance to change. Attitude and conflict was a concern for five participants (35.7%,
Participants 3, 7, 9, 11, and 14). Participants’ perception of attitude and conflict was
based on strained relationships between the acquiring and the acquired personnel, the
differing cultures, personality conflicts, and people on both sides of the acquisition who
had not bought-in to the integration changes. Buy-in was a concern for two participants
(14.3%, Participants 1 and 5). Participants’ perceived a lack of buy-in from individuals
from both sides of the acquisition. One problem was the feeling from members of the
acquired company that the leaders from the acquired company could not be trusted and
that every change had to be scrutinized to determine if they were up to something.
Empowerment was a concern for three participants (21.4%, Participants 6, 8, and 11).
Participants perceived the employees from the acquired company from one acquisition
were just not that bright because they did not have the corporate image that was expected
of them. As a consequence, the participants felt that the people from the acquired
company were not empowered to perform to the best of their ability; they felt their input
was neither needed nor appreciated. Leadership was a concern for four participants
(28.6%, Participants 1, 8, 11, and 12). Participants from the acquiring company
perceived a lack of support and appreciation from their leaders. They felt they had been
betrayed when the decision was made to move the corporate offices. Participants from
both sides of the acquisition perceived a lack of leadership ability to promote a combined
organizational culture; instead they turned a blind eye to the in-fighting and posturing that
was killing productivity. Trust was a concern for four participants (28.6%, Participants 4,
10, 11, and 12). Participants described the issue of trust in terms of not trusting the
members of the acquiring company due to the potential loss of their jobs. During the
integration process, new people were added to the organization; the participants tended to
distrust until proven trustworthy rather than trust until proven otherwise. Resistance to
change was a concern for two participants (14.3%, Participants
2 and 13). Participants on both side of the acquisition experienced resistance to change.
The acquired organization’s employees resisted the change imposed on their processes
and procedures, and the acquiring organization's employees resisted because they were
being forced to give up their system and platform to migrate to the acquired
organization’s system.
Participants’ perception of strategy and entropy was grouped into six categories:
(a) lack of a comprehensive strategy, (b) vision, (c) unrealistic expectations, (d) synergy,
(e) secrecy, and (f) commitment to strategy. Lack of a comprehensive strategy was a
concern for six participants (42.9%, Participants 4, 7, 9, 10, 12, and 14). There was a
perception by many participants on both sides of the acquisition that leadership did not
actually have a long-term as well as a short-term strategy. Vision was a concern for four
participants (28.6%, Participants 7, 10, 12, and 13). Participants’ perception of a lack of
vision was driven partially by the old school mentality in addition to having leaders who
have never been exposed to alternate methods for achieving the end goal of the company.
In addition, there was a perception that the leaders had not given enough time during the
discovery period to actually know how difficult it would be to integrate the two
organizations. There was a general perception that none of the leaders actually had a
good understanding of the big picture. Unrealistic expectations were a concern for two
participants (14.3%, Participants 2, and 3). Participants’ perception of the integration
process timeline was that it was too aggressive considering the complexity of the project.
The time period in which one integration was done was a time when federal regulation
changes had to be met and new product launches. Synergy was a concern for two
participants (14.3%, Participants 7, and 9). Participants experienced a great deal of
expectation from upper management for huge synergies without having a plan to leverage
synergies. Participants felt that the synergies that could have been leveraged were not;
especially any type of synergies from the second acquisition. Secrecy was a concern for
six participants (42.9%, Participants 1, 5, 6, 8, 11, and 12). Participants experienced a
high level of secrecy that ended up affecting the productivity of the company. Most
participants acknowledge that a certain level of secrecy is necessary especially prior to
announcing the company’s intention of purchasing another company, especially when the
company is publically traded. Commitment to strategy was a concern for two participants
(14.3%, Participants 9, and 11). Participants perceived an inability for
leaders to commit to their strategy. Participants experienced a lack of commitment by
leaders to make the tough call when necessary and achieve all of the synergies that had
been alluded to their stakeholders.
Research Sub-question 3. Interview questions 9, 10, 14, 15, 16, and 17 centered
on eliciting participants’ lived experiences concerning research sub-question 3 “What
other considerations or attributes comprise the entropy phenomenon in postmerger and
postacquisition integrations?” Participants’ perceived that there are positive impacts of
entropy in addition to the negative impacts. The levels or states of entropy were
perceived as being high and somewhat debilitating at times.
Participants’ perception of the states or levels of entropy during postacquisition
was the level was extremely high, running the full scale of negative emotions. None of
the participants viewed the integration process as having little or no entropy. The states
of entropy were equated by two participants (Participants 1 and 4) to the grieving process.
Participant 1 stated, “I could equate it to sitting in a dunking booth. You know you are
going to get hit eventually, but there’s always the shock of the water when you are.”
Participant 2 stated, “The different levels can be characterized as nervous anticipation to
complete and utter melt down.” The driving force behind the high levels of entropy was
weak leadership. Participants felt abandoned and betrayed by the leaders they had
supported. Participant 3 stated, “There were coos, revolutions, and back-biting just to
mention a few. The chaos got extremely high. On go-live everyone was so confused and
weary that we probably could be classified with posttraumatic stress syndrome.”
Participants’ perceptions of negative impacts of entropy was wasted time and
money, loss of productivity, damaged relationships, negative employee morale and sense
of security, loss of talented people, missed opportunities, loss of customers, and the real
dollar based cost to the company. Participant 2 stated, “People have lost their sense of
company pride and self worth.” Participant 3 stated, “The negative impact can be
described as loss of market share, loss of profitability, loss of credibility, and loss of some
valuable employees.”
Participants’ perceptions of positive impacts of entropy were forming new
relationships with former enemies, feeling empowered by enduring and completing the
project, building a stronger, more agile team, opening new opportunities for career
growth, developing strategic thinkers, and it has made us a stronger company. Other
factor findings. Interview questions 16 and 17focused on the interviewee’s perception of
factors other than communication, leadership, organizational culture, people, strategy that
contribute to entropy during the postacquisition integration process. All 14 participants
(100%) perceived strategy as a contributor to entropy. The participants’ responses were
grouped into six themes: (a) economy, (b) age, (c) middle management, (d) geography,
(e) secrecy, and (f) commitment to strategy.
The economy was noted by two participants (14.3%) in terms of the economic
climate in which the integration is being done. It is a very real factor due to the
limitations of cash available if the integration is done in a period of economic downturn.
Age was noted by one participant (7.1%) in terms of the number of years an individual
has been in their current job. This participant reflected that staying with a company out
of loyalty or convenience may actually hurt an individual's ability to compete with
younger, fresher IT personnel from companies that are being acquired.
Middle management was noted by one participant (7.1%) in terms of not having
a vested interest in making the integration effort successful and could be a source of
entropy by not providing complete, honest information to our leaders, which would
enable them to make decisions that are good for the company instead of good for the
individual. Participant 4 stated, “Middle managers who do not have a vested interest in
seeing the integration project succeed may in fact subtly derail the integration in order to
protect their world as they know it.” Geography was noted by two participants (14.3%)
in terms of not having the entire staff available when needed due to weather related issues
and in terms of cultural differences between people from different regions of the USA.
Applications to Professional Practice
The study results may expand the knowledge available concerning change
management applicable to postmerger and postacquisition information technology
integration. The goal was to identify, understand, and reduce disruption and disorder
between the leadership, middle management, and key employees during postmerger and
postacquisition integration of information technology solutions. The study results
revealed several areas in which management can make advance planning strategies to
promote minimal entropy and maximize productivity during the integration of postmerger
and postacquisition information technology integration.
Best Practices
Discovery period activities. There are several opportunities for reducing entropy
when information pertaining to the potential acquisition is discovered prior to the
acquisition. Although access is usually limited, as much information that can be gleaned,
will aid in the integration planning and execution. These opportunities are (a) systems
platform and infrastructure compatibility, (b) database compatibility, (c) organizational
culture compatibility, (d) departmental structure and relationships, (e) quality of the
working relationships between mid-level and upper level management, and (f) identify
key personnel and talent.
Systems platform and infrastructure compatibility. As a part of the discovery
period prior to the acquisition, the information technology systems should be given more
than a cursory look. The platform as well as the software choice of the potential
acquisition should be thoroughly considered in terms of compatibility with acquiring
company's platform and software. The ability to easily communicate between the two
facilities is critical. The less compatible the two platforms and infrastructures are the
higher the investment will be to link the two. The similarity of the software solution is
also critical to easing the integration effort and cost. The knowledge of the amount of
software that has been written or customized by the potential acquisition's personnel will
be a precursor to the amount of resistance to change that will be met during the
integration process. Personnel have developed systems in-house or have highly
customized purchased software have a sense of pride and ownership in the systems they
have created. The amount of push-back and negative emotions should be anticipated and
planned accordingly. Mitigating damage before it is done will enable the project to
complete on schedule with more buy-in from merger survivors from the acquired
company.
Database compatibility. The type of database should be investigated. If the
company is using a proprietary database, the options for interrogating the data will be
limited. Most mainstream database solutions have the ability to interrogate data from
other relational databases. The ability to share data directly will simplify the merging of
data in the period after the acquisition is finalized and prior to the integration process.
Organizational culture compatibility. The true organizational culture should be
determined in order to analyze the cultures to determine the potential level of
postacquisition culture clash. Determine the true culture as opposed to the culture that is
stated on the company web site or in its vision and mission statements. There are
companies that purport to be agile, empowering, and other enlightened culture types, but
under the covers the assessment does not match reality. Rather than saying 'our
employees are our greatest assets', really mean it and put it into practice.
Departmental structure and relationships. Determine the departments in the
company that have a collaborative relationship and ensure the relationship is maintained
postacquisition. Breaking apart collaborative relationships will hinder efforts to achieve a
successful acquisition.
Quality of managerial working relationships. Determine the quality of the working
relationships between the various levels of management. The good relationships should
be maintained and the strained relationships should part of an immediate improvement
initiative postacquisition.
Key personnel and talent. Identify key personnel and talented people in the
potential acquisition's organization and make plans to ensure that these people are
retained. Part of the assets of an organization is its people; an acquisition is not just about
buying technology or market share.
Postacquisition activities. There are several opportunities for reducing entropy
when activities that are typically the cause of entropy are well planned, well
communicated, and well executed. These opportunities are (a) honest, timely
communication, (b) strong leadership, (c) creating a blended organizational culture, (d)
developing an over-arching strategy, and (e) dealing with people problems timely and
fairly.
Honest, timely communication. Communications with regard to merger activities
should begin early in the process. Transparency and open communications may help
alleviate some anxiety among employees and possibly prevent negative rumors.
Strong leadership. Employees may be more accepting of changes when
management demonstrates a clear commitment to the postmerger integration. Top-down
support for the merger may help gain support of the employees and minimize the
resistance to change.
Blended organizational culture. Early identification of organizational culture
differences and taking steps to blend the cultures may help prevent conflict that could be
detrimental to the merger process. Talking to employees about differences in
organizational culture and involving them in developing a plan to blend the
organizational cultures may help prevent a culture clash. Leadership must clearly define
the preferred culture for an organization and follow-up with personal actions that
reinforce the culture.
Over-arching strategy. An over-arching strategy may help assure that the merged
business units are a good strategic fit. The over-arching strategy should identify benefits
of the merger as well as possible challenges that will be faced.
People problems. Failure to address any of the postmerger activities could result
in people problems. Employees that feel they have been left out of the merger process
may respond by withholding their support. This could result in problems for the merger
process or loss of key personnel.
Implications for Social Change
M&As are among the most common corporate growth strategies (Chakravorty,
2012). Borchert and Cardozo (2010) referred to mergers as creative destruction and
creative combination. Many companies downsized after September 11, 2001. Merger
and acquisition activity, however, has been on the increase for the last several years. It is
likely that individuals at all levels of an organization experience the effects of their
organization’s acquisition by another organization and the stress and disorder that
accompany the integration process (Chakravorty, 2012). The success of a merger
depends upon a process of mutual adjustments and acculturation (Marks & Mirvis, 2011).
Identifying best practices for leaders of both organizations during the integration process
potentially will reduce the intensity and length of the disorder, and improve the job
satisfaction level of merger survivors. A merger is not just about market share or
technology; it is also about the people who work for both organizations. Reducing the
entropy experienced during the integration efforts will allow people to been seen in a
positive light and increase the potential of new career opportunities for people from both
organizations. The possibility of career advancement allows people to focus on the future
possible outcomes of all their hard work and effort. Mergers also open up the opportunity
for educational advancement. In addition, creating a blended organizational culture will
insure the sustainability of the organization (Marks & Mirvis, 2011). A stable
organization will be in a position to provide secure jobs and fund programs for the
enrichment of employees and the communities in which they have a physical presence as
part of the corporate social responsibility actions of the organization.
Recommendations for Action
Based on analysis of the data, 35 major and 80 minor entropy factors associated
with mergers were identified. The entropy factors appeared to be interrelated. Therefore,
a change in one entropy factor was likely to affect other entropy factors. The primary
recommendation for action is creation of a merger team, prior to commencement of
merger activities, which will be responsible for creating a comprehensive merger plan.
The team should be cross functional, with members from all departments.
Communications issues are inherent in several of the 35 major entropy factors.
Therefore, the next recommendation for action is to establish a protocol for open and
transparent communications between the merged business units and with all employees.
The next recommendation for action is that managers at all levels should be aware that
non-commitment to the merger integration would be detrimental to the overall success of
the merger and the organization. Any philosophical or strategic differences should be
settled prior to the integration effort; the time for debate is during the discovery phase,
not the integration phase. The integration plan will evolve as the integration progresses
as a result of oversights and identification of new opportunities. Management should
demonstrate complete support for the merger integration efforts and be a change masters
instead of enabling behavior that, in effect, sabotages the integration. The next
recommendation for action is that employee relations management, during the merger
process, should include organizational culture integration. The study results demonstrate
the negative effects of organizational culture clash. The upper management of an
organization is responsible for determining the organizational culture of the company,
either by policy or as a result of their own behavior. Creating a blended organizational
culture will insure the sustainability of the organization (Marks & Mirvis, 2011). The old
school method of stating that nothing will be changing is untrue; the one that that is true
when a merger is completed is that everything is going to change. Employees should be
informed about changes prior to and during implementation. An employee education
program should be implemented prior to the integration process to provide timely, honest
information about the merger, including benefits as well as challenges. The possibility of
career advancement should be communicated as one of the possible benefits. This allows
people to focus on the future possible outcomes of all their hard work and effort. Another
benefit that should be communicated is the opportunity for educational advancement.
The results of this study should be of interest to anyone contemplating, or involved in a
merger or acquisition. The findings of this study will be disseminated though trade
journals, or industry publications.
Recommendations for Further Study
Further research on entropy factors in postmerger and postacquisition integration
from various perspectives is recommended. This study was from an Information
Technology perspective in a manufacturing environment. Further study is necessary to
determine if similar entropy factors exist in different operational environments.
Identification of similar entropy factors during merger activities in diverse settings could
indicate that may be possible to create a single effective merger strategy framework.
Such a merger strategy framework basic plan, combined with situation specific details,
could help improve the chances for a successful merger process. This study used a
phenomenological qualitative approach. Additional studies, using a mixed-methods
approach could be provide valuable insight. A mixed-methods approach could be used to
examine the perceptions of the participants and analyze the quantitative data to evaluate
the success of the merger process.
Reflections
This phenomenological qualitative study was performed to identify entropy
factors that may have a negative effect on the mergers and acquisition process. The study
involved the collection of data about the perceptions and lived experiences of IT
professionals in a manufacturing business environment. I am an IT professional and have
been involved in 2 mergers as an employee of the acquired company. The experiences
gained during these two mergers formed the catalyst for selection of the study topic.
Previous experience with the merger process also increased the possibility of personal
bias affecting the research. Preconceived ideas and values that could introduce bias into
the study were identified. Recognition of preconceived ideas and values was necessary in
order for me to maintain vigilance against introducing bias. The data collection method
used in the study was selected because it contained elements that helped minimize the
introduction of researcher bias. Body language and tone of voice could affect the
participants’ responses. Practice interview sessions were conducted with non-participants
and feedback was solicited in order to reduce the chances of introducing bias. Measures
were incorporated throughout the data collection and analysis process to prevent bias. I
had experienced the effects of entropy during mergers. The previous ideas about the
effects of entropy on the mergers process were reinforced by the study results.
Additional studies into merger dynamics may provide the tools to increase merger
success rates both in terms of increased shareholder value and employee satisfaction. I
look forward to participating in future studies that will increase the knowledge base and
improve understanding of the mergers and acquisition process.
Summary and Study Conclusions
M&As represent an important part of the business world. The reasons for M&As
are varied. This tactic may be used to gain competitive advantage, increase shareholder
value, leverage synergy, or for continued survival of the company. Whatever the reason,
M&As effect and are affected by the employees. This study was conducted to examine
the effects of entropy on a merger from the perspective of mid-level and first-line
management in a manufacturing business environment. This study was guided by one
central research question: What is the nature of entropy in postmerger and
postacquisition integrations? I used three sub-questions research questions to explore the
entropy phenomenon:
1. What is the relationship between entropy and the five postmerger and
postacquisition integration factors?
2. What entropic relationships exist among postmerger and postacquisition
integration factors?
3. What other considerations or attributes comprise the entropy phenomenon in
postmerger and postacquisition integrations?
Data were collected using interview questions from a similar study, with
permission from the owner. NVivo 9 software was used to analyze the data. The results
indicated that 35 major entropy factors and 80 minor entropy factors existed in the study
population. The information gained from this research into the perceptions and lived
experiences of IT professionals provides valuable information into the effects of entropy
on the merger and acquisition process. This research would be useful to managers
responsible for merger and acquisition activities to help provide an understanding of the
effects of entropy on the process. Merger and acquisition managers may use the data
from this research to put measures in place to help mitigate the effects of entropy during
the merger process. The number and variety of entropy factors identified during this
research suggests that additional research in different business settings would add
significantly to the body of knowledge and increase understanding of the entropy factor
in the merger process. Added knowledge about the extent of entropy and the effects on
mergers outcomes may increase the chances for achieving the desired results.
