Teaching & Learning Guide for: Social Identity and Corporate Mergers
Authors: Giessner Steffen R. , Ullrich Johannes , van Dick Rolf 
Published: July 2011

This guide accompanies the following article: Giessner, S.R., Ullrich, J., & van Dick, R., ‘Social Identity and Corporate Mergers’. Social and Personality Psychology 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. Corporate mergers provide an interesting field to apply social psychological theory in practice and 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 strategic aims – one key reason for this failure is that human resources, that is, the needs of employees involved in the merger, are often considered less important than legal, technological or other factors by senior managers. In particular, it is often the merger’s impact on employee identities as members of the pre‐merger organizations and its consideration by change leaders that determines the merger’s failure or success.

The article ‘Social Identity and Corporate Mergers’ utilizes a social identity approach to analyze the problem zones of mergers and we provide research suggesting how to lead a merger into success. In particular, leaders should provide reasons for why the merger is necessary, they should demonstrate actual and future continuity to reduce uncertainties due to the merger situation and leaders should pay attention to status differentials (e.g., between employees of the acquiring versus the acquired organization) as employees of the lower status merger partner have different concerns than employees of the higher status 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 organizational psychology (Vol. 9, pp. 247–281). Chichester, UK: Wiley.

This paper is an early comprehensive overview of psychological processes involved in mergers and acquisitions.

Cartwright, S. (2005). Mergers and acquisitions: An update and appraisal. In G. P. Hodgkinson & 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).

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 Journal, 25, 187–200.

This article provides a strategic perspective on M&As’ (financial) performance presenting findings of a meta‐analytic summary of 93 empirical studies. Based on more than 800 effect sizes from over than 200,000 mergers and acquisitions and using a range of accounting measures of acquisition outcomes (e.g., return on investment, return on equity), the authors conclude that returns are either unaffected or slightly negatively affected after the M&A deal.

Marks, M. L., & Mirvis, P. H. (2001). Making mergers and acquisitions work: Strategic and 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 to achieve their objectives. The authors then present a hands‐on approach for managers with a 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 combined 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). Organizational identification after a merger: A social identity perspective. British Journal of Social Psychology, 41, 233–252.

This paper is one of the first articles utilizing a social identity approach to understand why issues of dominance and continuity are crucial factors for employees’ post‐merger identity. Two survey studies are presented providing support for the authors’ hypotheses.

Online Material

http://www.youtube.com/watch?v=ppYUZ1aoKYE

A 10‐minute video in which management researcher Philip Mirvis is discussing organizational culture clashes and how to integrate organizations after a merger.

http://www.london.edu/videoandaudio/facultyandresearch/organisationalbehaviour.html

Collection of inspirational short video clips by London Business School faculty, including several on organizational change.

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

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 behavior and provides lots of additional features (point‐counterpoint, exercises) and accompanying material (self‐assessments, videos).

Week 1:
Course Administration and Introduction

Week 2:
Models of organizational behavior

Week 3:
Individual Level I: Personality, perception, emotions, attitudes

Week 4:
Individual Level II: Motivation

Week 5:
Group Level I: Groups and teams in organizations

Week 6:
Group Level II: Leadership

Week 7:
Group Level III: Power and conflict

Week 8:
Organizational Level I: Organizational structure

Week 9:
Organizational Level II: Organizational culture

Week 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 in legislation, 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 change that is widely used but often fails. Based on the article ‘Social Identity and Corporate Mergers’, an overview is given on recent findings with a particular focus on social identity‐based research.

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

An excellent reading accompanying this course is: Haslam, S. A. (2004). Psychology in organizations: 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 these approaches and utilizes the social identity approach to analyze a range of relevant topics such as leadership, motivation, performance, conflict, or stress in organizations but without explicit coverage of M&As.

Week 1:
Course Administration and Introduction

Week 2:
Social Psychological Theories and Models

Week 3:
Group Decision Making

Week 4:
Group Performance and Productivity

Week 5:
Leadership and Power

Week 6:
Conflict and Conflict Resolution

Week 7:
Organizational Change I: Generic models of change and resistance

Week 8:
Organizational Change II: Mergers & Acquisitions

A transition statement could be that the concepts and models discussed in the previous session (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 of social identity theory will be outlined, then some recent figures on M&A activity will be provided (e.g., number of mergers or total financial volume) along with estimates of merger failure (see Cartwright & Cooper; Marks & Mirvis). Then studies on M&As utilizing social identity theory are summarized following the article ‘Social Identity and Corporate Mergers’ (e.g., van Knippenberg et al., 2002; van Dick et al., 2004; Giessner et al., 2006).

Week 9:
Stress and Health in Organizations

Week 10:
Diversity in Organizations

Focus Questions

Background Case: Company Alpha and Company Beta are both manufacturers of toys for children. Alpha relies on mass production of many lines of plastic toys, with an annual revenue 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‐made wooden toys, with an annual revenue of around $1 billion, around 1,000 employees and sales mostly in North America. Their slogan is ‘Nobody breaks our toys’. Imagine that Alpha 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 and Beta? Whose employees are likely to react more negatively? What does a Social Identity Approach to Corporate Mergers suggest that managers can do to cope with these reactions (describe one possible strategy)? Finally, to the extent that a merger between Alpha and Beta is responsible for negative psychological consequences, what might be the consequences of yet another merger? Can you imagine both positive and negative consequences 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 a lot of confusion, noise, fun, anger, misunderstanding, etc. Most often (especially in larger classes) 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 a group). Some students will sit next to students whom they do not know yet. After this experience, one can start a discussion about the change process.

Discussion: There are different ways of how to start the discussion. You might observe yourself who has not changed seats or ask it directly. Next, you could discuss with these students 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 different perspective. It might have to do with the fact that they changed as a team, sit together 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:

 Discussion points can be easily be pointed to feelings of their continuity. Further, the discussion 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. This is also an opportunity to point out that not every change is necessarily perceived as a sense of discontinuity.

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

 Projected continuity could be related to last discussion question listed above. Things like explaining the necessity of the change, the goals and purpose of the task beforehand etc. would all fit into this topic.

Post‐task: After you finish the task, you may experience that participants move back to their original seats. You could use this to discuss why they do so and why it might be difficult to keep changes in organizational contexts. This might lead to a discussion on post‐change management.

Variations: Some of the questions you raise might be first discussed in dyads (i.e., everybody discusses it with the person sitting next to them). This might lead to more intense discussion 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 green group, the other the blue group. Both groups are instructed to work on a project in separate rooms for 5 minutes. The project could comprise an exercise in coming up with a creative advertisement slogan for the department, for instance. Then the groups get together in one room again and told that they would merge. The merged group is called the green group, the blue group dissolves. Students are told that the ideas for the slogan of the blue group will be discarded and that the task for the new, merged group is to fine tune the ideas of the former green group.

Discussion: After the task, students can discuss continuity and power along the following questions:

 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 experienced negative emotions after the merger.