teaching & learning guide for: social identity and corporate mergers

Teaching & Learning Guide for: Social Identity andCorporate Mergers

Steffen R. Giessner1, Johannes Ullrich2, and Rolf van Dick2

1Erasmus University2Goethe University

This guide accompanies the following article: Giessner, S.R., Ullrich, J., & van Dick, R., ‘Social Identity and Corporate Mergers’. Social and PersonalityPsychology Compass 5/6 (2011): 333–345, doi: 10.1111/j.1751-9004.2011.00357.x

Authors’ Introduction

Social psychology is concerned with people interacting as members of social groups. Cor-porate mergers provide an interesting field to apply social psychological theory in practiceand also provide a context for the test and development of such theories.Mergers and acquisitions have been shown to often fail their financial and other strategicaims – one key reason for this failure is that human resources, that is, the needs ofemployees involved in the merger, are often considered less important than legal, techno-logical or other factors by senior managers. In particular, it is often the merger’s impacton employee identities as members of the pre-merger organizations and its considerationby change leaders that determines the merger’s failure or success.The article ‘Social Identity and Corporate Mergers’ utilizes a social identity approach toanalyze the problem zones of mergers and we provide research suggesting how to lead amerger into success. In particular, leaders should provide reasons for why the merger isnecessary, they should demonstrate actual and future continuity to reduce uncertaintiesdue to the merger situation and leaders should pay attention to status differentials (e.g.,between employees of the acquiring versus the acquired organization) as employeesof the lower status merger partner have different concerns than employees of the higherstatus merger organization.

Authors’ Recommend

Hogan, E. A., & Overmyer-Day, L. (1994). The psychology of mergers and acquisitions.In C. L. Cooper & L. T. Robertson (Eds), International review of industrial and organiza-tional psychology (Vol. 9, pp. 247–281). Chichester, UK: Wiley.This paper is an early comprehensive overview of psychological processes involved inmergers and acquisitions.

Cartwright, S. (2005). Mergers and acquisitions: An update and appraisal. In G. P. Hodg-kinson & J. K. Ford (Eds.), International review of industrial and organizational psychology(Vol. 20, pp. 1–38). Chichester, UK: Wiley.This paper provides an update of the classic overview by Hogan and Overmyer-Day(1994).

Social and Personality Psychology Compass 5 ⁄ 7 (2011): 500–504, 10.1111/j.1751-9004.2011.00359.x

ª 2011 The AuthorsSocial and Personality Psychology Compass ª 2011 Blackwell Publishing Ltd

King, D. R., Dalton, D. R., Daily, C. M., & Covin, J. G. (2004). Meta-analyses of post-acquisition performance: Indications of unidentified moderators. Strategic Management Jour-nal, 25, 187–200.This article provides a strategic perspective on M&As’ (financial) performance presentingfindings of a meta-analytic summary of 93 empirical studies. Based on more than 800effect sizes from over than 200,000 mergers and acquisitions and using a range ofaccounting measures of acquisition outcomes (e.g., return on investment, return onequity), the authors conclude that returns are either unaffected or slightly negativelyaffected after the M&A deal.

Marks, M. L., & Mirvis, P. H. (2001). Making mergers and acquisitions work: Strategicand psychological preparation. The Academy of Management Executive, 15, 80–94.Marks and Mirvis start their paper with the notion that three out of four mergers fail toachieve their objectives. The authors then present a hands-on approach for managers witha number of straightforward suggestions (e.g., ‘define the end state’; ‘cards-on-the-table’).Further, they provide a classification of integration end-states which can be nicely com-bined with the discussion of the representation of organizational identity in the article‘Social Identity and Corporate Mergers’.

van Knippenberg, D., van Knippenberg, B., Monden, L., & de Lima, F. (2002). Organi-zational identification after a merger: A social identity perspective. British Journal of SocialPsychology, 41, 233–252.This paper is one of the first articles utilizing a social identity approach to understandwhy issues of dominance and continuity are crucial factors for employees’ post-mergeridentity. Two survey studies are presented providing support for the authors’ hypotheses.

Online Material

http://www.youtube.com/watch?v=ppYUZ1aoKYEA 10-minute video in which management researcher Philip Mirvis is discussing organiza-tional culture clashes and how to integrate organizations after a merger.

http://www.london.edu/videoandaudio/facultyandresearch/organisationalbehaviour.htmlCollection of inspirational short video clips by London Business School faculty, includingseveral on organizational change.

Sample Portion of an Organizational Behavior Syllabus (for a BSc or MBAclass)

An excellent reading accompanying this course is: Robbins, S. P., & Judge, T. A. (2011).Organizational behavior (14th edn). New York: Prentice Hall.This is a comprehensive, accessible textbook covering all areas of organizational behaviorand provides lots of additional features (point-counterpoint, exercises) and accompanyingmaterial (self-assessments, videos).

Week 1: Course Administration and IntroductionWeek 2: Models of organizational behaviorWeek 3: Individual Level I: Personality, perception, emotions, attitudesWeek 4: Individual Level II: Motivation

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ª 2011 The Authors Social and Personality Psychology Compass 5 ⁄ 7 (2011): 500–504, 10.1111/j.1751-9004.2011.00359.xSocial and Personality Psychology Compass ª 2011 Blackwell Publishing Ltd

Week 5: Group Level I: Groups and teams in organizationsWeek 6: Group Level II: LeadershipWeek 7: Group Level III: Power and conflictWeek 8: Organizational Level I: Organizational structureWeek 9: Organizational Level II: Organizational cultureWeek 10: Organizational Level III: Organizational change – Mergers & Acquisitions

A transition statement could be that strong organizational cultures often prevent change –but that change is necessary to cope with changes in the environment (such as changes inlegislation, market environment, globalization, aging workforce, new technology, etc.).In this final session of the course, first Lewin’s three-stage model of unfreezing-change-refreezing and Kotter’s eight-step model of organizational change are introduced.Throughout the session M&As are introduced as an example of organizational changethat is widely used but often fails. Based on the article ‘Social Identity and CorporateMergers’, an overview is given on recent findings with a particular focus on social iden-tity-based research.

Sample Portion of an Advanced Course Social Psychology in OrganizationsSyllabus (for an MSc class)

An excellent reading accompanying this course is: Haslam, S. A. (2004). Psychology inorganizations: The social identity approach (2nd edn). London: Sage.This book first provides an overview of traditional approaches to organizational behavior(e.g., Tayloristic, Individual Differences, Human Relations), identifies limitations of theseapproaches and utilizes the social identity approach to analyze a range of relevant topicssuch as leadership, motivation, performance, conflict, or stress in organizations but with-out explicit coverage of M&As.

Week 1: Course Administration and IntroductionWeek 2: Social Psychological Theories and ModelsWeek 3: Group Decision MakingWeek 4: Group Performance and ProductivityWeek 5: Leadership and PowerWeek 6: Conflict and Conflict ResolutionWeek 7: Organizational Change I: Generic models of change and resistanceWeek 8: Organizational Change II: Mergers & Acquisitions

A transition statement could be that the concepts and models discussed in the previoussession (e.g., Lewin; Kotter; Organizational Learning) will now be applied to a specific –but widespread – type of change, namely M&As. In this session, first the fundamentals ofsocial identity theory will be outlined, then some recent figures on M&A activity will beprovided (e.g., number of mergers or total financial volume) along with estimates of mer-ger failure (see Cartwright & Cooper; Marks & Mirvis). Then studies on M&As utilizingsocial identity theory are summarized following the article ‘Social Identity and CorporateMergers’ (e.g., van Knippenberg et al., 2002; van Dick et al., 2004; Giessner et al.,2006).

Week 9: Stress and Health in OrganizationsWeek 10: Diversity in Organizations

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Focus Questions

Background Case: Company Alpha and Company Beta are both manufacturers of toysfor children. Alpha relies on mass production of many lines of plastic toys, with an annualrevenue of more than $10 billion, more than 10,000 employees and worldwide sales.Their slogan is, ‘Nobody beats our price’. Beta concentrates on high-quality hand-madewooden toys, with an annual revenue of around $1 billion, around 1,000 employees andsales mostly in North America. Their slogan is ‘Nobody breaks our toys’. Imagine thatAlpha and Beta have announced that they are going to merge in order to create synergies(no further details were made public so far).Focus Questions: What are some of the likely reactions of the employees of Alpha andBeta? Whose employees are likely to react more negatively? What does a Social IdentityApproach to Corporate Mergers suggest that managers can do to cope with these reac-tions (describe one possible strategy)? Finally, to the extent that a merger between Alphaand Beta is responsible for negative psychological consequences, what might be the con-sequences of yet another merger? Can you imagine both positive and negative conse-quences of Alpha–Beta merging with, say, Gamma?

In-Class Exercises

1. Change Your Seat

Concept to discuss: Sense of continuity, uncertainty, change, projected continuity.Time: 5–30 minutes (depends on the length of the discussion part).Number of participants: More than 5.Material: Discussion questions.Task: Before discussing the concept of sense of continuity, uncertainty, and ⁄or change,ask the students to stand up, take all their belongings and swop seats. This will create alot of confusion, noise, fun, anger, misunderstanding, etc. Most often (especially in largerclasses) some students will actually not change their seats (i.e., they show resistance).Some students will change seats, but keep their friends around (i.e., they change as agroup). Some students will sit next to students whom they do not know yet. After thisexperience, one can start a discussion about the change process.Discussion: There are different ways of how to start the discussion. You might observeyourself who has not changed seats or ask it directly. Next, you could discuss with thesestudents why they have not changed. Other potential questions are listed below:

• How did you feel doing this task?• On a scale from 1 (=no change at all) to 7 (=a strong change), how would you evaluate your

experience? (Next you could discuss with the ‘extreme’ cases, why they have such a dif-ferent perspective. It might have to do with the fact that they changed as a team, sittogether with other people, or got disrupted with their work, etc.)

• What factors caused resistance to this task?• Did you feel uncertain? Why?• Is there a way to make this task a pleasant experience? How?How to relate to concepts:

(1) Discussion points can be easily be pointed to feelings of their continuity. Further, thediscussion might be used what factors influence this sense of continuity in the class-room exercise, but also what factors might be predictive in organizational mergers.

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This is also an opportunity to point out that not every change is necessarily perceivedas a sense of discontinuity.

(2) Uncertainty can be discussed in terms of its antecedents and effects. The uncertain sit-uation might have take more time to decide where to go, or uncertainty might haveled to leadership (i.e., one person decides to go for one other seat, and studentsfollow). Also uncertainty might have resulted for the discontinuity experienced.

(3) Projected continuity could be related to last discussion question listed above. Thingslike explaining the necessity of the change, the goals and purpose of the task before-hand etc. would all fit into this topic.

Post-task: After you finish the task, you may experience that participants move back totheir original seats. You could use this to discuss why they do so and why it might bedifficult to keep changes in organizational contexts. This might lead to a discussion onpost-change management.Variations: Some of the questions you raise might be first discussed in dyads (i.e., every-body discusses it with the person sitting next to them). This might lead to more intensediscussion and more participation.

2. Merger Representation ⁄Continuity and Power

Concept to discuss: Merger continuity and power.Time: 15–30 minutes (depends on the length of the discussion part).Number of participants: Two groups of 5–10 participants each.Material: Discussion questions.Task: Divide class into two roughly equal sized groups. One group is called the greengroup, the other the blue group. Both groups are instructed to work on a project in sep-arate rooms for 5 minutes. The project could comprise an exercise in coming up with acreative advertisement slogan for the department, for instance. Then the groups gettogether in one room again and told that they would merge. The merged group is calledthe green group, the blue group dissolves. Students are told that the ideas for the sloganof the blue group will be discarded and that the task for the new, merged group is to finetune the ideas of the former green group.Discussion: After the task, students can discuss continuity and power along the followingquestions:

• How did you feel doing the first task?• How well did you like the other members of the group during the first task?• After the merger, how did you feel? How did you like the larger group?

It should become apparent that the former blue group was dissatisfied and experiencednegative emotions after the merger.

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teaching & learning guide for: social identity and corporate mergers

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