Search results

The PMI Risk Framework (PRF) is introduced as a guide to classifying and identifying risks which can be the source of post-merger integration (PMI) failure — commonly referred to as “culture clash.” To provide managers with actionably insight, PRF dissects PMI risk into specific relationship-oriented phenomena, critical to outcomes and which should be addressed during PMI. This framework is a conceptual and theory-grounded integration of numerous perspectives, such as organizational psychology, group dynamics, social networks, transformational change, and nonlinear dynamics. These concepts are unified and can be acted upon by integration managers. Literary resources for further exploration into the underlying aspects of the framework are provided. The PRF places emphasis on critical facets of PMI, particularly those which are relational in nature, pose an exceptionally high degree of risk, and are recurrent sources of PMI failure. The chapter delves into relationship-oriented points of failure that managers face when overseeing PMI by introducing a relationship-based, PMI risk framework. Managers are often not fully cognizant of these risks, thus fail to manage them judiciously. These risks do not naturally abide by common scholarly classifications and cross disciplinary boundaries; they do not go unrecognized by scholars, but until the introduction of PRF the risks have not been assimilated into a unifying framework. This chapter presents a model of PMI risk by differentiating and specifying numerous types of underlying human-relationship-oriented risks, rather than considering PMI cultural conflict as a monolithic construct.

Cultures don’t clash … people do. Hidden below the veil of “incompatible cultures” is a complex network of human-to-human interaction involving information-exchange transactions that have gone awry. The multitude of these troubled exchanges results in what is often branded as “M&A failure, due to culture conflict.”

This chapter presents a theoretical discussion that features practical dynamics of the post-merger integration (PMI) process. The aim is to cultivate a deeper understanding of critical, less-acknowledged micro-level aspects of the post-merger integration stage, specifically, those which underlie the development and maintenance of an organization’s culture and lead to organization performance. It is the unseen information exchange among human actors that leads to the perceptible post-merger outcomes, such as cultural unity and task performance. The quality of these micro-exchanges leads to the value capture from the M&A transaction, thus determining the success – or not – of the combination.

Presented is a synthesis of numerous existing theories, perspectives, and ideas from various scholarly communities, combined with a drill-down to the basic human interactions that define a culture and lead to positive performance. Information flow is the sustenance of an organization, so when merging organizations restructure the information flow is abruptly disrupted, often at pronounced near-term cost. The information-flow channels must be mended for social unification and performance value goals of the combined organization to be realized. The information-transporting social networks of the organizational actors must therefore adapt and intermingle across the old-organizational faultlines. This is accomplished when individual actors alter their personal social networks and retool themselves for a new set of information-exchange interactions.

In closing, the author counsels managers to focus on the dyadic information exchange of their direct-reports as an actionable approach to PMI management. The chapter concludes by pointing researchers toward studying the micro-level aspects of PMI and offers computer modeling and simulation, and laboratory experiments as effective ways to study PMI dynamics at the micro-level of organization behavior. Such methods may also lead to an ability to forecast outcomes of specific post-merger integration scenarios.

This chapter offers a conceptual and theoretic introduction to a contemporary view of the post-merger integration (PMI) challenge: it places the organizational-members’ internal social network at the focal point. An original viewpoint is presented in this chapter – the thinking is novel to integration literature and thought, and to social networks – that advances both research and practice of PMI. Since the network-view may be a new topic to many PMI researchers, the central discussion is preceded by a brief introduction to the concepts and techniques of social network analysis. The author offers that the organizational members’ pre-existing social network can become disrupted by integration processes, which creates pressures on the individuals’ previously stable social network. The individual members will therefore strive for a re-stabilization of their localized social network towards a specific pattern that is somewhat unique to each individual. During this social realignment there is an opportunity for integration managers to embrace this “social reconciliation.” By recognizing the individuals’ imminent stabilization point of this natural process, integration managers can proactively guide the social network toward an optimal, or productive, resting space that provides organizational benefit. This chapter puts forward the particulars of this phenomenon and offers exploratory suggestions for how a practitioner might influence the re-establishment of the organizational social network in a manner consistent with individuals’ preferences and simultaneously beneficial to the organization overall. Recommendations for follow-up research are provided.

We apply a contemporary approach to study the effect of organizational complexity on post-merger integration. A computational, virtual experiment was carried out to determine how the level of structural complexity, a characteristic of all formal organizations, impacts the dynamics of organization performance during the post-merger integration period. We found that performance during this period is affected by the pre-existing complexities of the two merging organizations; surprisingly, the organizations’ size was found to be only a marginally relevant factor, instead, the number of work groups had a greater consequence. Moreover, we found that the homogeneity tendencies of the actors may be the source of an upper constraint on the merged organization's performance. Consistent to these findings, we develop hypotheses for later empirical study. Broadly, this chapter puts forth computational modeling as a vital methodology for advancing mergers and acquisitions research; in addition, this chapter uncovers previously unpronounced, phenomenological discoveries that were found using this promising approach. Throughout this chapter, we endeavor to advance the broad use of computational modeling into the fore of leading-edge post-merger integration and related research and practice.