Mergers are a common occurrence in healthcare. The ultimate goal of this is to create more value through a greater share in the market, increased productivity at lesser operational costs, lesser taxes or cross selling (Terjesen, 2009). Mergers can be friendly or hostile; the former is welcomed while the latter is often met with resistance by the management of the company to be acquired. In the process, hard (financial) and soft (culture and human resource) issues need to be addressed. Studies note that a majority of mergers are unsuccessful in the sense that no real value is created. This is because inadequate focus is given to soft issues in the merger process (Terjesen, 2009). This paper discusses the effects of a health care merger on organizational structure, systems and culture as well as some strategies that can promote successful integration.
A merger is a process wherein two different organizations combine following an agreement by their respective board of directors (Fischer et al., 2007). It begins with selecting a company to merge with and is followed by negotiations, the exercise of due diligence and integration (Tanure et al., 2009). The choice of which company to coalesce with is determined by economic factors. In the given case, the new company had a clear advantage in terms of a greater array of health care services while the more established one’s lead was providing a higher quality of care. Combining both attributes through a merger undoubtedly will result in a greater competitive advantage in the market.
A new organizational vision and mission arises out of the merger, both reflecting the purposes of the endeavor. This necessitates changes in the size and shape of the organization. Although both companies in the given case are of generally equal status because both have a say during negotiations, the company with more resources and a stronger management inevitably becomes dominant (Reynolds, Wadsworth & Frederick, 1996). The dominant company will have the greatest influence on the final form of the organizational structure (Baughn & Finzel, 2009). A hierarchical structure may be maintained. Alternatively, restructuring into a circular form may occur depending on which shape is deemed likely to achieve the purposes of the merger. Changes in top management are expected which affect the structures of power and lines of authority (Filipovic, Sapunar & Sapunar, 2011).
Departments from both organizations may be combined into one consisting of closely-related services and new ones may be delineated to reflect the diversity of services following the merger. This may either create new managerial positions or expand existing ones into split-reporting wherein the employee is accountable to two managers (Liebler & McConnell, 2012). Finally, as the organization’s mission and vision is modified to capture the purpose of the merger, this will have repercussions on the skill sets and number of employees needed. To avoid duplication of functions in both organizations, some employees would have to go. Individual job roles may also be modified to fulfill departmental objectives.
The new vision arising from the merger and acquisition further necessitates alignment of organizational systems. Communication systems may now incorporate a much greater use of information technology, such as with EMR documentation, where face-to-face communication used to be the more common mode. Closed and largely top-own flow of communication may increasingly become more open. Knowledge transfer may be employed when it was not a practice before. Variations in methods of control of employee behaviors could be implemented in the same way that forms of control over health services outcomes may also change to some degree. The institutionalization of the use of evidence in decision making may be seen where the conventional system was reliance on professional judgment.
Although organizational structures and systems can effectively be put in place following the merger, the most problematic area of the integration process concerns culture. The aspects of organizational culture are as follows: artifacts (e.g. office attire, perks or no perks for management, private offices or cubicles), commonalities in language and concepts which facilitate communication and understanding, the allocation of status and power within the organization, group boundaries delineating membership and non-membership, systems of reward and punishment (e.g. desirable and undesirable behaviors, emphasis on individual or collective achievements), and the value of individual members (Baughn & Finzel, 2009; Whalen, 2012). Stark differences in these aspects create a situation known as culture clash.
Radical changes can render employees in culture shock as they are confronted with new ways of thinking and behaving (Whalen, 2012). When combined with the uncertainties in terms of job security and job roles, culture clash evokes a sense of powerlessness. Employees may respond negatively by resisting change to the extreme of committing outright sabotage while pessimism, high levels of stress and dissatisfaction may become pervasive (Why mergers fail, 2009). The unfavorable effects on employees reduce productivity, increase employee turnover and the loss of skills and talent, and weaken relations with clients (Pritchett, 2009). Timely decision-making in critical situations can also be impeded (Ito, Tamiya & Fujimura, 2010). In the health care setting, this could potentially cause a decline in the quality of health care services.
The main task then of a middle-level manager during the integration process is to aid in consolidating the organization so that it functions as one entity, not two different ones. In one study, a total quality initiative (TQI) was utilized to keep the organization from falling apart after the merger and instead maintain and further enhance the company’s services (Ito, Tamiya & Fujimura, 2010). Considering that culture clash can result in undesirable employee behaviors which undermine productivity and that quality care is an issue with one of the companies involved in the given case, the use of performance and quality control measures is warranted. A greater commitment to quality, when communicated as an organizational goal during and after the merger, can become a rallying point to unify all employees and redirect the focus onto the combined organization’s reason for existence (Ito, Tamiya & Fujimura, 2010). This draws attention away from differences and competition, instead highlighting the challenge of collaboration for the attainment of a common goal.
A better understanding of continued competitiveness among employees despite the merger can be gained by utilizing the social identity theory which posits that groups are able to form identities by comparing themselves to others (Fischer et al., 2007). This is evident in the given case wherein the employees of the more established company view those working for the new company as providers of low-quality health care. The group’s positive identity as proponents of a higher quality of care is based on comparing their services to those of the competing company. The individual employee’s self esteem is rooted in membership in the group that has a more positive image. The merger threatens the established company’s identity because the new company is considered the out-group, representing the opposite of what they identify with (Fischer et al., 2007). In seeking to maintain a high self-esteem from belonging to the higher status group, employees of the established company would continue to maintain their difference and superiority over the new company’s employees and are able to exercise greater control in the workplace.
A key task then for managers is to help employees from both camps transcend their distinctions, let go of their old identities and assume a new one which is now associated with the combined organization (Fischer et al., 2007). Team building followed by team work and team learning are ways to generate positive attitudes away from bias and discrimination, redefine the members of the in-group to include employees from both sides, facilitate dialogue and foster a sense of belongingness which facilitates identification (Peter Senge, n.d.). To address persistent negative feelings, it is helpful to focus on the positive attributes of each company which is being capitalized on through the merger so that in the end, the combined organization performs way better than each organization. Countering negative feelings requires promoting a fair, honest and transparent workplace atmosphere so that employees, especially those from the new company, can feel that they are valued and treated similar to the other group (Whalen, 2012).
In conclusion, a merger represents major structural, cultural and system changes in an organization. The cultural aspect is often given less consideration than it deserves during a merger considering that it is a major determinant of the viability of the undertaking. Cultural changes can adversely affect employee performance, productivity and quality of care. For instance, social identity issues maintain divisive groupings which undermine consolidation. Middle level managers can greatly influence the process by promoting a group identity compatible with the merger and supporting top management integration efforts.
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