EFFECT OF MERGER AND ACQUISITION ON EMPLOYEE MORALE

EFFECT OF MERGER AND ACQUISITION ON EMPLOYEE MORALE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The Nigerian banking industry has witnessed tremendous changes and expansion since the mid 1980s. Unfortunately the growth and expansion in the sector are not the manifestation of a sound or vibrant banking system known anywhere in the world. Most banks in Nigeria are characterized by inadequate capital base, poor services, huge rate of bankruptcy, and lack of management expertise, bad debt syndrome and greater exposure to fraud.

The central Bank of Nigeria on July 6th 2004, announced the recapitalization of banking sector from N2 billion to N25 billion with effect from 1st January 2006. This was with a view to make the sector internationally competitive, sound and improves its ability to provide credit to all the productive sectors of the economy. In order to meet this obligation, banks embarked on strategies of merger and acquisition, floating of new shares and so on. At the end of the exercise, 25 new banks emerged (Olaitan 2006).

Managing and maintaining employee morale is one of the most important functions of effective HR. The cliché that a happy worker is a productive worker is a cliché for a reason. While it may be more accurate to say that an unhappy worker is an unproductive worker, every HR professional knows the value in good staff morale.

As a result of the bank recapitalization process that commenced from 2005, commercial banks over a hundred had to close shops or merge with another bank to still be in business. The effects of mergers and acquisitions in the banking industry of Nigeria on employee morale can be significant if the reorganization of the business is not handled effectively. During any merger or acquisition effort, there are at least two groups of employees involved, often coming from organizations with distinctly different cultures and styles. Learning a new culture can be challenging, but is especially so when employees are faced with uncertainty about what the future may hold and whose job is on the chopping block.

Bank recapitalization which was effective from 2006 is aimed at making Nigerian banks stronger and better in-order to finance all sectors of the economy including the major drivers of the economy-Small and Medium Scale Enterprises. This effort to stabilize the banking industry of Nigeria and make it financially strong and healthy will definitely affect employee morale and productivity-either positively or negatively.

1.2 STATEMENT OF THE PROBLEM

Change is often difficult for employees, especially if they were not directly involved in decisions that impact their jobs. During mergers and acquisitions, change can be especially difficult and can lead to stress which can have a negative impact on morale if not handled effectively (Iloh, 2012). Communication is critical during these times. To the extent possible organizations should strive to share as much information about what is happening and, most importantly, how the changes will affect individual employees, as they possibly can.

When two or more organizations come together, culture clash is inevitable. Rarely do two organizations have the same culture. As these groups get to know each other there will inevitably be conflict and perceived or real losses on both sides, says Pophal. Employees may fear losing their jobs or losing opportunities that they formerly had. This fear can negatively impact productivity and may even result in employees leaving the company to seek jobs elsewhere. It is important for organizations and their managers and HR staff to recognize this and to provide opportunities for employees to get to know each other, to openly address concerns, and to work together toward the creation of a new culture that will merge the best of both worlds (Leigh, 2008).

When employees are concerned about their own job security they are more likely to become competitive with others and this competitiveness can result in conflict–sometimes even violence. During mergers and acquisitions it is important for managers and HR professionals to be alert to signs of negative competition and to ensure that employees are being kept informed about impacts on their jobs and their futures with the company. While some competition is good, competition is not good when it creates tension and negative conflict in the organization (Liegh, 2008)

1.3 OBJECTIVES OF THE STUDY

EFFECT OF MERGER AND ACQUISITION ON EMPLOYEE MORALE