Effect Of Merger And Acquisition On Employee Morale In The Banking Industry

Project and Seminar Topics with material for Banking and Finance

Effect Of Merger And Acquisition On Employee Morale In The Banking Industry


Abstract


The study set out to examine the effect of mergers and acquisitions on employee morale using First City Monument bank, Calabar main branch as a case study. The need for the study arose from the prevalence of information in the branch that indicated low morale and dissatisfaction among the staff due to various corporate restructuring in form of mergers and acquisitions. Among problems investigated in the study are job stress, role conflicts and frustration among staff. This scenario revealed poor management of the restructuring process by the administrators. Four hypotheses were formulated and tested at 99 percent confidence interval using a linear regression analysis technique and correlation. The research design used was a case study approach. From a target population of 65 respondents, a random sample of 30 was selected using simple random sampling. Data pertaining to the study was collected using a self administered questionnaire. The findings revealed that mergers and acquisition was a positive significant predictor of staff morale in the bank. On the other hand, working environment, corporate governance policies had a significant positive effect on staff confidence, zeal to take up newer tasks, employee engagement/retention and job satisfaction.


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

The main objective of this study is to examine the effects of mergers and acquisitions on employee morale in First City Monument Bank (FCMB), Calabar Main branch.

Specific objectives of the study are:

  1. To examine the effect of merger and acquisition on employees’ confidence on a given task in FCMB.
  2. To appraise the effect of merger and acquisition on employees’ will to remain with current employer.
  3. To examine the effect of merger and acquisition on employees’ zeal to take on newer task.
  4. To examine the effect of merger and acquisition on employee job satisfaction with respect to new company policies, reviewed employees’ benefits and working condition.

1.4 Research Questions

In-order to guide the study and achieve the research objectives stated above, the following research questions apply to the study:

  1. What effect do merger and acquisition have on employees’ confidence on a given task in FCMB?
  2. What effect do merger and acquisition have on employees’ will to remain with current employer?
  3. What effect do merger and acquisition have on employees’ zeal to take on newer task?
  4. What effect do merger and acquisition have on employee job satisfaction with respect to new company policies, reviewed employees’ benefits and working condition?

1.5 Research Hypotheses

  1. Ho: There is no significant relationship between merger and acquisition and employee confidence on a given task.
    Hi: There is a significant relationship between merger and acquisition and employee confidence on a given task.
  2. Ho: There is no significant relationship between merger and acquisition and employee retention.
    Hi: There is a significant relationship between merger and acquisition and employee retention.
  3. Ho: There is no significant relationship between merger and acquisition and employee Zeal to take up newer tasks.
    Hi: There is a significant relationship between merger and acquisition and employee to take up newer tasks.
  4. Ho: There is no significant relationship between merger and acquisition and employee job satisfaction.
    Hi: There is a significant relationship between merger and acquisition and employee job satisfaction.

1.6 Significance of the Study

The study will aid organizations currently undertaking strategic changes through mergers and acquisitions to design and implement corporate governance policies that will benefit both employees in the acquired firm and that of the parent company. Various insights into how confidence, zeal, commitment and overall productivity of employees can be affected by mergers and acquisitions will be clearly highlighted in the study to further enlighten managers of various organizations on proper ways to go about merging and acquiring other firms without risking productivity of employees.

Furthermore, the study will serve as guide to student researchers who may wish to explore more into the effects of mergers and acquisitions on overall performance of an organization.


1.7 Scope of the Study

The study is delimited to First City Monument Bank Plc, Calabar main branch. All findings and recommendations from the study are based on issued questionnaires to employees of the bank. A wider scope could not be covered by the researcher due to time and financial constraints.


1.8 Limitation of the Study

Funds were in very short supply to the researcher and the researcher could not purchase some valuable print materials needed for this project at the time they were most needed. The expenses on transportation to FCMB are so enormous because of many occasions the researcher was not attended to and would have to leave without the information required.

Another constraint faced by the researcher was limited time for the completion of the project and engagement in other academic activities which occupied most of the researcher’s time.

The research was faced with some restrictions in the area of the case study; this is due to bureaucratic reasons in the administrative procedures in the Organization. It was not possible to get all the necessary information that would have helped in finishing the work on stipulated time. The process of going through some records to get data was very tedious and formidable task as some materials needed are tagged “TOP SECRET”.


1.10 Definition of Terms

Merger and Acquisition (M&A):

Mergers and acquisitions (M&A) are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.

Employee:

An employee is anyone who has agreed to be employed, under a contract of service, to work for some form of payment. This can include wages, salary, commission and piece rates.

Employee Morale:

Employee morale, in human resources, is defined as the job satisfaction, outlook, and feelings of well-being an employee has within a workplace setting.

FCMB:

First City Monument Bank

Productivity:

Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it.


1.9 Plan of the Study

This study comprise chapters one to five. The chapter one is the introduction which entails the statement of problems, the objectives, the research questions as well as the hypotheses of the study amongst others. The second chapter is the relevant literature to the study. The theoretical, empirical as well as the conceptual framework were examined in this chapter. The third chapter, chapter three is the methodology in which the sample size and technique were highlighted. In this chapter, the method of data collection and analysis were indicated. The second to the last chapter, chapter four is the data analysis, presentation and interpretation. Lastly, chapter five comprise the summary, conclusion and recommendations of the study


Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to examine the effect of merger and acquisition on employee moral in the banking industry.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of merger and acquisitions on employee moral in banks in Nigeria.


5.2 Summary

Mergers and Acquisitions in the insurance industry is increasing globally as shareholders seek alternative ways to boost revenue growth, build economies of scale and ultimately increase profitability. In the Nigerian insurance industry a number of factors have influenced M&A decisions; these include the changes in regulation, technology and distribution. Statutory demands for a stronger capital base and solvency margins will see mergers and acquisition as the only viable strategic option to Nigerian banks who want to remain competitive and profitable in the long– run.


5.3 Conclusion

From the study findings, the study concludes that employee pay and remuneration affect employee performance in the merged organization. With this regard, wages and benefits, allowances/bonuses, as well as terms of employment and performance based pay affect the employee performance in the current merger setting. The study concludes that mergers affect the sense of ownership and belonging among the employees in the Bank hence their performance. The study established that employee contributions, employee composition, shareholder wealth and merger satisfaction and communication affect employee performance in the Bank. The study also concludes that employees understood the procedures, policies, and responsibilities that are part of their job in the merged bank setting and job security affects the employee performance in the Bank. It was made clear that same job satisfaction, job skills and traits, employee retention and organizational commitment affects employee performance. The study finally deduces that chain of command affects the employees’ performance in the Bank. It was also ascertained that personal relationship, task conflicts, coordination, workloads, cultural compatibility, management support, working conditions, employees’


5.4 Recommendations

From the findings and conclusions, pay and remuneration is a major factor of mergers that affect the employee performance in ECB. The management of the Bank should also check the quantity of work and compare with the salary given to the employees. Employees are highly motivated by monetary value which in turn affects their performance. The management should therefore increase the pay of employees for better performance. Promotions of the qualified employees should also be put into consideration. Performance appraisal exercise should be taken seriously in organizations to check the performance of employees hence take the necessary actions towards the strengths and weaknesses of employees in the merger setting. This study recommends that bank increase formal and informal training programs to their staff so as to enhance their sense of ownership and hence performance through mergers and acquisitions. In this regard, communication should be enhanced and more structured approach to the process should be established. It will also enable them acquire relevant knowledge and skills that lead to increased efficiency of the staff working at the Bank. This will in turn affect the performance of commercial banks in Nigeria


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