Mergers are critical processes in the business environment. The merger between the Eastern Bank Corporation and First Bank & Trust Company was expected to be complex and generate several human resource issues that needed better resolution strategies. Compared to Eastern Bank Corporation, the First Bank & Trust Company is a large commercial bank specializing in personal and real estate lending, with more than 45% of its total revenue coming from this venture. The bank operates 83 branches with over 1800 employees. Its net income is approximated at $18.7 million. On the other hand, the Eastern Bank Corporation is a large commercial bank that offers a diverse range of banking services. With a net income of $101.3 million, 35% of this is generated through corporate loans. The bank operates 201 branches in different states and employs over 7500 employees. The growth of Eastern Bank Corporation is attributed to previous mergers with other smaller banks within the same lending field. All these mergers have been straightforward, and no employees lost their jobs throughout these mergers. However, the merger between these two large commercial banks is anticipated to lead to human resource problems.
Problem Identification
Mergers are common in most market economies with conflicting effects on competition and business growth. The conventional economic theory is critical of competition and economic efficacy, citing that a merger reduces competition to favor monopolistic powers in business management (Kaufman, 2015). However, a realistic perspective of a monopolistic approach to business management can also increase competition and the efficiency of a firm. In a competitive marketplace where small companies are unable to influence the market share, mergers are effective in boosting their ability to compete with other large corporations. The Eastern Bank Corporation has effectively achieved this competitive advantage by merging with other smaller banks over the years. Increased competition, especially in the banking sector, forces companies to change their operational processes, vision, and objectives and adapt to the changing environment. Remaining focused on customer needs and expectations should be one of the driving forces behind the merger.
Delegate your assignment to our experts and they will do the rest.
Human resource management plays a critical role in coordinating the organization's activities. However, during mergers, the human resource faces several issues that can impact the success and overall outcomes of the merger. According to Schwind et al. (2019), human resource management focuses on attracting talented employees, improving customer service, fostering better workforce performance, and influencing workplace culture and behavior. However, as different companies exhibit varying cultural and management styles, the differences led to human resource challenges. Jack Ramsey, the Senior Vice President of Human Resources at Eastern Bank Corporation, was cautious of the challenges the merger would bring, more so since he felt that the First Bank & Trust Company would protect its employees against job losses. Mergers are different, and while in some cases, massive personnel changes can be anticipated, in other cases, there could no changes to the combined workforce.
Downsizing and talent retention is a common human resource challenge affecting mergers. Jack Ramsey I right to pace doubt on the merger, especially if no communication is done to address the underlying issues surrounding employees and job security (Sung et al., 2017). When companies opt to merge with other organizations, downsizing and talent retention are expected, leading to organizational restructuring. However, a critical factor in job restructuring and redesign is communication. Without communicating the merger and the subsequent impact on job roles and responsibilities, employees will become less motivated to work. Moreover, they will develop the feeling of uncertainty, further impacting their performance levels (Sung et al., 2017). The human resource committee is mandated to optimize the restructuring and ensure that talented employees remain within the new company and achieve job security.
Negative employee reactions should be expected during the merger. Larry McDonald, Chief Executive Officer of Eastern Bank Corporation, also asserts that communication and organizational philosophy will play a critical role in the merger. Considering employee motivation, the lack of communication can adversely lead to resistance to change. While the Human Resource Steering Committee is focused on addressing the difference in organizational philosophy from both banks, understanding the current underlying employee problems is essential to identifying a workaround. Since both banks operate under a similar business environment, merging processes would mean that some job descriptions would become obsolete. The committee is faced with the challenge of deciding on what to do with the employees under this category. At the same time, Schwind et al. (2019) note that their feelings towards inequality can impact employee motivation. Following Adam's equity theory, employees can feel demotivated if their input and output ratios do not match their colleagues. In most workplaces, and especially during mergers, job inequalities impact employees. Tension builds up, and employees become demotivated to perform.
Cultural differences are another human resource problem that will arise from the merger. Organizational culture defines the set beliefs, norms, and values that guide all members of the firm. Both Eastern Bank Corporation and the First Bank & Trust Company have different philosophies that guide their internal processes and procedures. While both banks operate within the same jurisdiction, they possess different organizational cultures. For instance, while First Bank & Trust Company took a more conservative approach in its processes, the Eastern Bank Corporation employed a more flexible employee-centric approach. The key to a successful organizational culture, especially during a merger, is to employ one that is focused on shared goals and vision that is supported by better organizational structure and strategies. According to Sarala et al. (2019), cultural differences have been equated to the values and attitudes of different firms in mergers and acquisitions. However, the "human side" of sociocultural dynamics among employees in a merger is not exploited.
Assessing cultural differences and creating a workaround plan to merge two conflicting cultures is part of human resource management. A common challenge is integrating different organizational cultures to align and function as one. While the two banks operate within the same demographic, their unique cultures have been a sentiment of their success in the past. Vulture and diversity in the workforce should be an issue the Human Resource Steering Committee should address immediately. The merger should be built upon a working culture that encompasses both companies' values, attitudes, and beliefs. Sung et al. (2017) believe that creating a conducive workplace environment after the merger will significantly improve individual and group performance. The committee should also assess the values of both companies to foster a smooth transition. Organizational conflicts and workplace issues must also be assessed and analyzed to develop a concrete foundation for the merger.
The human resource team also faces the challenge of designing and maintaining employee contracts and benefits. These benefits include insurance covers, annual leave, pension allowances, among others. Benefits and contracts are handled differently in both organizations, and the human resource team should be wary of the complexity of the situation. While different organizations have varying policies surrounding benefits and contracts, Schwind et al. (2019) acknowledge that they can create conflicts during the merger. Compensation management is critical, and several challenges impact the process. For instance, government constraints, unions, productivity, and policies on salaries can impact human resource management (Schwind et al., 2019). As earlier noted, employee input and output ratio can also impact compensation management. According to Adam's Equity Theory, employees will want to be compensated following how much they have invested in their inputs and achieved as outputs (Schwind et al., 2019). However, tradeoffs can impact the process, especially where employees from one company do not want to lose some of the perks they receive.
Nature, Causes, and Potential Consequences
Mergers are driven for different reasons, including globalization, an ever-changing economic landscape, and competition. When companies merge, the decision is geared towards producing a product or service to fit the market. However, Chang-Howe (2019) notes that most mergers ignore employee differences expressed by both firms. Leaders and managers often assume that employee challenges can be overcome easily once the merger goes through. Instead, more problems are created, and the merger fails. The nature of mergers must begin with a communication plan. Despite the need to address questions and uncertainties surrounding the acquisition process, most companies fail to communicate the process and its implications to the employees. Chang-Howe (2019) agrees that communication in the workplace empowers employees and creates a thriving culture for human resource integration. Without communicating the merger process, consequences are bound to happen.
Resistance and conflicts are common consequences of mergers, more so where communication was not established. Resistance to change is a common factor that affects a company's productivity. In essence, companies that strive to create a conducive work environment motivate the employees to improve their performance and overall productivity (Zagelmeyer et al., 2016). According to the expectancy theory, an employee's strength to work hard is driven by the notion that they expect a reward at the end of the service (Schwind et al., 2019). The tendency to improve performance or behave in a particular way is achieved when the employee believes the outcome satisfies their personal goals, followed by a reward for their effort. However, leaders fail to realize the significance of communicating the change to the employees. As such, confusion and conflicts occur during the merger.
Employee conflicts disrupt business operations and create an unconducive environment for both companies. The Human Resource Committee should be cautious about the impact conflicts and resistance can impose on the merger's success. Sung et al. (2017) assert that employees can adversely impact a merger if their underlying challenges are not resolved. Additionally, Sarala et al. (2019) believe that ignoring the socio-cultural issues surrounding mergers and acquisitions can lead to more conflicts and confusion. All these challenges arise due to miscommunication or the lack of it. Leaders who fail to communicate to employees about the merger miss out on instilling relationships moving forward (Zagelmeyer et al., 2016). Simultaneously, these companies will miss on opportunities to retain the most talented employees, assure them of their job security, and improve organizational performance. In the long run, communication will play a vital role in mitigating these issues and setting the merger in motion.
Decisions and Actions Necessary to Implement the Merger
The Human Resource Steering Committee should analyze the above challenges and decide to safeguard the merger and employees. One way to minimize the consequences of the merger on employees is communicating effectively throughout the process. Employees become demotivated when they are uncertain of their job and future. The committee should restructure the culture and define each job description. According to Schwind et al. (2019), job restructuring involves analyzing the available jobs after the merger and creating a vivid description of each opportunity. As such, the committee should communicate to the employees about the new roles and any downsizing activity that will follow. Minimizing uncertainties will prevent future conflicts and resistance once the merger is complete.
The committee should also communicate the merged corporate culture and what each employee is expected to achieve. As earlier noted, corporate culture helps to integrate different human resource functions from both companies (Chang-Howe, 2019). Having one corporate culture overtake the other during the merger will result in conflicts between employees and managers. The committee should deliberate on the best philosophy they wish to follow and how the merger needs to go. The decision should encompass views from both sides of the merger. Agreeing on the merged corporate direction and governance will help create strong relationships within the workforce. Ultimately, the Human Resource Committee should collect views from employees and managers of both banks before embarking on any decisions or actions needed to implement the merger successfully.
Handling Staff Reductions in the Trust Centre
Many employees view mergers as a period of uncertainty and insecurity. The merger between the Eastern Bank Corporation and First Bank & Trust Company will lead to creating a new corporate culture, human resource policies, and management teams. Zagelmeyer et al. (2016) note that employees experience guilt and loss of confidence during downsizing. When faced with these perceptions, most employees opt to seek employment elsewhere before the management assures them of the job security. The Human Resource Steering Committee should offer the employees they want to retain incentives or a retention agreement to overcome such issues. According to Cherep et al. (2019), compensation and employee benefits can help eradicate attrition. However, the committee should be cautious not to use incentives as a major focus on the retention program. This is because building trust and strong relationships with employees does not only entail using incentives.
Incentives and retention benefits are motivating factors that help retain employees. According to Maslow's hierarchy of needs theory, an employee can be motivated when all the five physiological, safety, social, esteem, and self-actualization needs are satisfied (Schwind et al., 2019). The committee should ensure that employees they wish to retain have achieved self-actualization and their social needs have been addressed. For instance, creating a conducive workplace environment will ensure that employees feel safe. The committee should also put in place measures that safeguard the well-being of these employees, such as benefits and compensation perks. In the long run, creating an effective retention program will mandate combining financial incentives with other strategies that promote employee safety, engagement, and trust.
The Human Resource Committee must conduct thorough background research on both companies to identify employees to retain and those to downsize. Employee performance plays a key role in this process, and the committee should be cautious on which employees to select. Without conducting background research on the employees, it will be difficult for the committee to justify their selection and why they are more suitable for the new roles than others. Understanding the significance these employees will play in shaping the merged corporate culture is essential to preventing employee turnover. Embracing a merit-based approach to performance will help build trust and acquire employees worthy of the opportunity the merger brings.
Leaders and managers influence employee decisions to leave an organization or remain. In essence, employees value a leader who is transparent and trustworthy. Such leaders are not afraid to communicate with their employees, receive feedback, and act on decisions that promote organizational continuity. Sung et al. (2017) note that transparency is a key factor to employee retention. Therefore, the committee should formulate an effective leadership team that can attract and retain performance-savvy employees. Additionally, this leadership team should embrace communication to improve overall performance and mitigate conflicts that could arise from the merger. The team should also strive to promote a corporate culture that aligns with the merger's vision and goals. Transparency among the leadership team will further help build trust between the management and employees (Sung et al., 2017). The team should foster employee training and development sessions to help cement trust, honesty and offer them the opportunity to air their concerns.
The committee should develop an integration plan that will guide the merger. More often, after a merger, employees feel unwelcomed to the new organization or feel out of place if they do not understand their new roles and responsibilities (Sung et al., 2017). Instead, the plan should allow the employees to be integrated into the new culture and work ethics. The plan can identify and define new job descriptions, stipulate human resource policies that all employees should abide by, and contractual incentives and benefits. More importantly, the leadership team should seek and act on feedback from the employees. The feedback can include the progress of the integration or areas that can potentially impact the merger. While most organizations acknowledge that employee retention is challenging, the success in achieving it is employing strategies that keep the employees happy and engaged. Such strategies include constant communication, training and development, providing support for professional growth, and financial remuneration.
Conclusion
The merger between Eastern Bank Corporation and First Bank & Trust Company will bring significant changes to the operations of both commercial banks, impacting their human resource management. The Human Resource Steering Committee must assess the human resource management from both companies and develop an integration plan. The merger faces several human resource issues that pose a threat to its success. Challenges in personnel management, especially in downsizing and employee retention, are critical in this merger. Employees experience uncertainties over job security during mergers, more so when the management fails to communicate the change process. As such, employees seek employment elsewhere rather than waiting for the merger to take place.
On the other hand, differing employee contracts and benefits form another challenge during the merger. While both companies have different human resource policies and procedures, the committee should develop an integration plan that addresses contracts and compensation management. Corporate culture also plays a significant role in the merger. Each bank has a unique culture that defines its values and philosophy. Creating a corporate culture that encompasses both values and philosophies will go a long way in boosting employee retention engagement and trust. Ultimately, the Human Resource Steering Committee should implement human resource strategies of communicating and acting on feedback, conducting background research on both companies, and create a leadership team to ensure the merger is successful.
References
Chang-Howe, W. (2019). The challenge of HR integration: A review of the M&A HR integration literature. Journal of Chinese Human Resource Management , 10 (1/2), 19-34. https://doi.org/10.1108/jchrm-03-2019-0009
Cherep, A., Helman, V., & Lynenko, A. (2019). Development of approaches to personnel management before the phase of the merging process of enterprises. Baltic Journal of Economic Studies , 5 (1), 233. https://doi.org/10.30525/2256-0742/2019-5-1-233-238
Kaufman, B. E. (2015). Market competition, HRM, and firm performance: The conventional paradigm critiqued and reformulated. Human Resource Management Review , 25 (1), 107-125. https://doi.org/10.1016/j.hrmr.2014.08.001
Sarala, R. M., Vaara, E., & Junni, P. (2019). Beyond merger syndrome and cultural differences: New avenues for research on the "human side" of global mergers and acquisitions (M&As). Journal of World Business , 54 (4), 307-321. https://doi.org/10.1016/j.jwb.2017.10.001
Schwind, H. F., Uggerslev, K., Wagar, T., & Fassina, N. (2019). Canadian Human Resource Management: A Strategic Approach (12th Edition). McGraw-Hill Ryerson Limited: Toronto. ISBN: 13: 978-1-25-965492-3
Sung, W., Woehler, M. L., Fagan, J. M., Grosser, T. J., Floyd, T. M., & Labianca, G. (2017). Employees' responses to an organizational merger: Intraindividual change in organizational identification, attachment, and turnover. Journal of Applied Psychology , 102 (6), 910-934. https://doi.org/10.1037/apl0000197
Zagelmeyer, S., Sinkovics, R. R., Sinkovics, N., & Kusstatscher, V. (2016). Exploring the link between management communication and emotions in mergers and acquisitions. Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l'Administration , 35 (1), 93-106. https://doi.org/10.1002/cjas.1382
