EFFECT OF MERGERS AND ACQUISITIONS ON EMPLOYEE MORALE (A CASE STUDY OF FIRST CITY MONUMENT BANK PLC, CALABAR)
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EFFECT OF
MERGERS AND ACQUISITIONS ON EMPLOYEE MORALE (A CASE STUDY OF FIRST CITY
MONUMENT BANK PLC, CALABAR)
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. For that reason, the study concluded
that merger and acquisition have a significant effect on staff morale. Basing
on the findings of the study, the researcher recommended a uniform treatment
(in terms of employee benefits, contracts and promotions) for both employees of
the acquired firm and parent company in-order to boost productivity and avoid
conflict of interest among both employees and management of the parent company
and subsidiary.
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:
To examine
the effect of merger and acquisition on employees’ confidence on a given task
in FCMB.
To appraise
the effect of merger and acquisition on employees’ will to remain with current
employer.
To examine
the effect of merger and acquisition on employees’ zeal to take on newer task.
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:
What effect
do merger and acquisition have on employees’ confidence on a given task in
FCMB?
What effect
do merger and acquisition have on employees’ will to remain with current
employer?
What effect
do merger and acquisition have on employees’ zeal to take on newer task?
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
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.
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.
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.
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
CONCEPTUAL FRAMEWORK
1.9
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.
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