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Abstract
Merger of organizations is a major change that’s why it is necessary to focus the effects of
this merger. Organizations are built and show their performance by the human resource and
thus, it is important to find out the impact of merger on the employees. The present study
aims to study such impact in the form of motivation, satisfaction and performance of the
employees.
1. Introduction
In business, a merger is a combination of two companies into one larger company. Such actions are
commonly voluntary and involve stock swap or cash payment to the target. A merger can resemble a
takeover but result in a new company name (often combining the names of the original companies) and
in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done
for marketing reasons (http://www.yourdictionary.com/merger).
Stone (1930) states, in the context of banking, that two banks merged and operated as a single
bank or operated by single bank is called merger. Greenwood et al. (1994) define, “A merger involves
a blend of two companies, rather than mere legal enjoinment or absorption of one firm into another”.
Kithinji and Waweru (2007) describe merger as a process in which one of the two companies loses its
identity to make a one firm.
Recently, Amir et al. (2008) said that mergers are important for market concentration, merged
organizations have high profitability and efficiency than the non merged firms but it is a long term
process and at the end the merged firms are in strong position. Whatever the motives for M&A might
be, recent researches suggest that among all industries consolidation is inevitable and cannot be
escaped. A number of such studies have been carried out to evaluate the effects of merger on
organizations, for instance see, Wetherell (1996), Nguyen and Kleiner (2003), Salama et al. (2003),
Stahl (2005), Kithinj and Waweru (2007) and Chrusciel (2007), among many others.
It has been observed in Pakistan that working outcomes are different in public and private
sector. There are numbers of reasons in which environmental, situational and conditional variables are
important on which motivation, satisfaction and performance of employees depend. These three
factors; motivation, satisfaction and performance give different results in private and public sectors
because of managerial effects. Merger/acquisition also puts effects on these factors. Now a day,
numerous public and private banks are working in Pakistan with their branches and head-offices as
well. They are playing very vital role in the economy of the country. The banking sector is taken as one
of the prosperous sectors in the country. Royal Bank of Scotland (RBS) in one of these prominent
banks. The RBS Group is the second largest financial services group by profit, in the world. RBS
99 European Journal of Economics, Finance And Administrative Sciences - Issue 19 (2010)
group has more than 40 million customers worldwide and is very famous for its mobile services and
unique banking services for individuals, businesses and institutions. The RBS Ltd., after the merger of
ABN AMRO Bank (Pakistan) Ltd. in 2008, is a locally incorporated bank listed on all the Stock
Exchanges of Pakistan. It believes in empowering the stakeholders and thus investor relations provide
key financial information to our retail and institutional investors.
(http://www.rbs.com.pk/Pakistan/AboutUs/index.htm).
The present study addresses the influence and impact of merger on management/administration,
particularly focusing employees on every level of the organization by different factors which are
related to merger/acquisition. This change directly affects the employees. This study will determine the
factors that are affected by this change mainly, the impact on employees. These impacts can be studied
by the variables like job satisfaction, motivation and performance. According to different researcher
there are many factors that could affect the job satisfaction of the employees and it turn could affect the
organizational performance. It is also tried to prove that if employees are motivated and satisfied then
they performed in better and efficient manners and if employees performed well, it means organization
is performing well. Organization’s performance is directly related to the employee’s performance. This
study first determines the impact of merger/acquisition on employees and then finds the variables
which are affected by merger. For this purpose, bank is selected as research organization because banks
keep the largest human capital. The RBS is chosen so far because it is one of the largest banks,
discussed earlier, and having number of employees working in its number of branches all over the
world.
The article unfolds as Section 2 presents the methodology of conduction of the present study.
This section includes data collection methods, construction of questionnaire, and statistical tools to be
used. Section 3 reserves for the results and discussion. Both, descriptive and analytical analyses are
given in this section. Finally, Section 4 concludes the study.
venture. Motivation, satisfaction and then performance of the employees help to ensure the success of
the organization.
In order to administer the questions for motivation, satisfaction and performance, we follow
Stone, 1930; Sondermann, 1962; Costello et al., 1963; Bokeimer and Lacy 1987; Schweiger and
DeNisi, 1991; McCue and Gianakis, 1997; Pros and Johannsen 2002; Hahn and Kleiner, 2002; Salama
et al., 2003; Huang and Kleiner, 2004; Kithinji and Waweru, 2007 and Chrusciel, 2008.
The said questionnaire consists of 36 questions using closed-ended five-point Likert scale.
Table 1 shows the variable measurements.
Dimension Questions
Performance 1, 5, 6, 10, 13, 21, 24, 27, 31 and 32
Motivation 9, 14, 15, 16, 19, 26, 28, 30, 34 and 35
Satisfaction 2, 3, 4, 7, 17, 20, 22, 23, 25, 29, 33 and 36
Total scores for each dimension are used to evaluate the status of these dimensions; motivation,
performance and satisfaction.
To verify the homogeneity of the items in a measure, reliability tests are used. For this purpose,
Cronbach’s Alpha is the common estimator for internal consistency and reliability coefficient based on
average inter-item correlation between the measured scale and the underlying factor. Following
Jhonson and Wichern (2006), cluster analysis for the three dimensions, motivation, satisfaction and
performance is performed. Usual correlation coefficients are used. Mean comparisons and regression
analysis are also carried out. Following Hair et al. (2005), we also measure the degree of collinearity of
the both explanatory variables by means of variance inflation factor (VIF).
merger employees, 10% have excellent performance, 69% have good performance while 23% have
satisfactory (not much good not much bad) performance. Among pre-merger employees, 8% have
excellent performance, 89% have good performance while 3% have satisfactory (not much good not
much bad) performance. But over all result shows that 8%employees shows excellent performance,
80% show good performance while 12% show satisfactory performance.
Reliability of data is calculated by Cronbach’s alpha that is used to measure internal
consistency. According to Nunnaly and Bernstein (1994), alpha value of 0.70 is considered a desirable
threshold while a value of 0.60 is acceptable as the minimum acceptable standard. Following Table 1
poses the reliability of the study. It is noted that all the values of alpha are greater than 0.70 (a desirable
threshold for alpha).
Dimension Alpha
Motivation 0.877
Satisfaction 0.815
Performance 0.770
Test Scale 0.904
The cluster distribution (Table 2) of pre-merger employees shows that there are two obvious
clusters; one having 42.9% and other having 57.1% of the respondents. These two clusters are
distributed with respect to their similarities and dissimilarities in the three dimensions; motivation,
satisfaction and performance.
Table 3 reports that Cluster 2 has mean score 42.31 in motivations, 51.19 in satisfaction and
42.50 in performances. This table shows that among pre-merger employees, Cluster 2 has higher
scores.
The cluster distribution (Table 4) of post-merger employees shows that there are two obvious
clusters; one having 18.10% and other having 81.80% of the respondents. These two clusters are
distributed with respect to their similarities and dissimilarities in the three dimensions; motivation,
satisfaction and performance.
When we note results in Table 5, we see that Cluster 1 has mean score 45.50 in motivation,
52.25 in satisfaction and 44.50 in performances. This table shows that among post-merger employees,
Cluster 1 has higher scores. It is concluded that among post-merger employees, the cluster with lower
scores is about four times in size as compared to that of cluster with higher scores. Similar findings can
also be depicted from Fig. 1.
102 European Journal of Economics, Finance And Administrative Sciences - Issue 19 (2010)
Table 4: Cluster Distribution of Post-Merger Employees
Table 6 shows that all the three factors are highly and positively correlated and these correlation
coefficients are also highly significant. The correlation between satisfaction and performance is highest
i.e., 0.857. It shows that as the satisfaction level increases, the performance of the employees also
increases at high rates.
Table 7 shows that both the explanatory variables have smaller VIF for both regression models
so there is no case of significant multicollinearity.
VIF
Variables
Pre-merger Post-merger
Motivation 2.297 2.105
Satisfaction 2.297 2.105
103 European Journal of Economics, Finance And Administrative Sciences - Issue 19 (2010)
Figure 1: Cluster Formation
Simultaneous 95% Confidence Intervals for Means Simultaneous 95% Confidence Intervals for Means
50 50
45 45
Performance
Performance
40
40
35
35
1 2
1 2
Cluster
Cluster
Reference Line is the Overall Mean = 37
Reference Line is the Overall Mean = 37
46
47.5
44
45.0
42
42.5
Motivation
Motivation
40
40.0
38
37.5
36
34 35.0
32 32.5
1 2 1 2
Cluster Cluster
Reference Line is the Overall Mean = 39 Reference Line is the Overall Mean = 36
60
54
52 55
50
Satisfaction
50
Satisfaction
48
45
46
44
40
42
35
40
1 2
1 2
Cluster
Cluster
Reference Line is the Overall Mean = 43
Reference Line is the Overall Mean = 47
104 European Journal of Economics, Finance And Administrative Sciences - Issue 19 (2010)
Table 8 shows that among pre-merger employees, motivation is not significantly contributing
factor for performance of the employees. But the same variable is highly significant in case of
regression for post-merger employees. The comparison of Table 8 and 9 show that motivation is very
contributing factor for the employees who had joined RBS and were not working earlier in ABN Amro
Bank. In determination of performance score, the role of satisfaction is almost equal for both types of
the employees.
The mean scores of satisfaction (Table 10) for post-merger and pre-merger employees differ
with high significance that shows that pre-merger employees are more satisfied than post-merger ones.
The mean scores of motivation (Table 11) for post-merger and pre-merger employees are not
much different statistically at usual level of significance that shows that there is not notable difference
in the motivation level of pre-merger and post-merger employees.
The difference in mean scores of performance (Table 12) for post-merger and pre-merger
employees is statistically significant that shows that pre-merger employees show more performance as
compared to their post-merger counterparts.
4. Conclusion
This study discusses impact of merger with reference to human resource aspect, it has actually
integrated most of the significant management subjects under considerations into the judgment. The
results of this study are derived from organization of banking sector namely, RBS of Pakistan. This
makes the conclusions more sectors oriented. The results of this study provide relatively strong support
for the existence of a positive relationship between employee participation from top to bottom with the
105 European Journal of Economics, Finance And Administrative Sciences - Issue 19 (2010)
employee satisfaction, motivation and performance. Since the basic aim of the study is to examine the
impact of any major change like merge on the management. Here in this study the organizational
performance is measured by means of employee performance and employee performance is measured
by their motivation, satisfaction of employees towards the job and the organization. Empirical evidence
appears to support the view that human capital practices like employee participation after merger can
influence the organizational performance and growth. Organizations interested in the growth and in
high performance must involve their employees in decision making process to motivate, satisfy and
better and performance of the employees. The research provides proofs for the organizations that
whenever the workforce is not satisfied and motivated with their jobs, performance is affected. The
conclusion also suggests that after a merger happened, the management might be able to increase the
level of commitment in the organization by increasing satisfaction and motivation of employee with
compensation, policies, and work conditions.
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