Background
Modern companies demonstrate professional decision-making and problem-solving to avoid unnecessary losses and gain new financial capacities. Merger and acquisition (M&A) is a business tool for organizations to join under the same owner and structure to achieve success (Soundarya, Lavanya and Hemalatha, 2018). When leaders unite their resources, they must apply multiple integration mechanisms and personal qualities (Rodríguez-Sánchez, Mora-Valentín and Ortiz-de-Urbina-Criado, 2019). The inability to establish trustful relationships between colleagues is a serious problem that provokes human resource management failures.
Change becomes inevitable for a company, and it is important to prepare people for different activities. Still, change management is not only about people; there are two more critical layers, namely organizations and projects, and several models introduced by Lewin, Kotter, and McKinsey (Galli, 2018). This process includes a transition for undertaking business and creating a favorable environment for all participants (Kang, Nantharath and Hwang, 2020). It is not enough to decide what changes are more important for a company. Attention should be paid to people, their needs, fears, and expectations.
Many leadership and management styles can be applied during mergers and other change processes. Charismatic leadership is one of the trait-based theories where people rely on their visions and use conviction to motivate and support followers (Mangundjaya and Amir, 2021). The power of persuasion and affective commitment to change is associated with positive outcomes to promote resilience, control, and order in most organizational activities.
Addressing my business management experience, I have observed how charismatic leaders showed high-level professionalism in cooperating with diverse staff. They used different models to maintain change and regularly improve communication, creativity, confidence, and vision. It is interesting to identify if this leadership style can help companies during a merger because today’s business environments are unstable, and such changes become the only solution.
The aim of this research is to examine the effects of charismatic leadership on change management during a merger. The major problem is the inability to predict organizational issues in obtaining the expected results and understand what competencies to develop. The objectives are:
- To analyze merger essence and conditions;
- To describe change management processes during a merger;
- To explain the characteristics of charismatic leadership;
- To identify the impact of charismatic leaders on employees who understand merger-related changes.
The following research questions should be answered:
- What challenges do leaders face when obtaining financial stakeholders during a merger?
- How does the charismatic leadership style affect employees’ willingness to accept change?
- What are the greatest competencies for leaders to possess during successful organizational change?
Literature Review
Introduction
Developing professional leaders during a merger is one of the possible ways to achieve successful integration and create the necessary value. Despite the level of readiness and the identification of strong reasons for change, many employees cannot avoid the “symptoms” of the “merger syndrome” (Sarala, Vaara and Junni, 2019). This condition is associated with negative reactions of people who have to participate in mergers and acquisitions and increased reports of anxiety, low commitment, poor motivation, and resistance (Sarala, Vaara and Junni, 2019). Some individuals recognize the problem and find an effective solution in a short period. However, more leaders need additional recommendations to support their followers and protect their assets. This literature review focuses on three major issues: a merger, change management, and charismatic leadership. In the end, it is expected to find the connection between these processes and clarify the roles of most business stakeholders.
Mergers in Modern Business
Today, there are situations when leaders have nothing to do but consider mergers as the only way to overcome problems and gain benefits with time. Soundarya, Lavanya and Hemalatha (2018) define a merger as a unification of two or more business organizations during which all participants are able to maintain their liabilities, assets, and authenticity. It is also important to understand the idea of an acquisition when the takeover of one company by another occurs (Soundarya, Lavanya and Hemalatha, 2018). A merger is voluntary and is characterized by a formation of a new company in most cases, while an acquisition is a condition when one party purchases another for rapid growth. Although these two concepts are usually combined as the M&A approach to introduce a way of organizational changes, these differences cannot be ignored.
The M&A may be affected by various internal and external factors. First, it is expected to observe cultural and organizational changes to sync the participants and avoid biases and controversies (Kang, Nantharath and Hwang, 2020). Second, multilayer identity dynamics is considered to mobilize people, legitimize their decisions, and reduce tensions between employees (Sarala, Vaara and Junni, 2019). Finally, financial and commercial statements in balance sheets need to be analyzed to understand new obligatory operations. Not all employees are involved in evaluating all these factors, but leaders have to gain control over each sphere and decide who should take responsibility and when.
Change Management
Using appropriate change management models is an obligatory requirement for current leaders and managers during a merger. In most cases, people become disconcerted due to a number of innovative ideas, unknown environments, and unjustified expectations (Kang, Nantharath and Hwang, 2020). Therefore, it is recommended to support employees and give various explanations for change’s importance or inevitability. One of the initial steps in this process is to find reliable partners and create plans for managing change and understanding short-term and long-term goals (Soundarya, Lavanya and Hemalatha, 2018). The major areas of improvement include leadership, cultural intelligence, and the work environment assessment. People need to be properly motivated and informed about the change, not to leave behind or spend more time on clarifying tasks.
Another important aspect of change management is cultural learning for all employees. Kang, Nantharath and Hwang (2020) specify three critical phases to assess available variances, apply the most appropriate issues for collaboration, and ensure that cultural systems align with business goals. Employees from potentially merged organizations may visit each other to learn about their environments, familiarize themselves with traditions and obligations, and analyze the existing similarities and differences (Kang, Nantharath and Hwang, 2020). As soon as all concerns are outlined, clarifications are made to answer questions and offer the following steps.
Leaders must understand that change cannot be implemented without a properly developed plan. Several models are applied to understand what should be done and when. Galli (2018) investigates the characteristics of five models developed during the last 50 years. Kurt Lewin is the author of the most commonly used model that consists of three stages (unfreezing, transition, and refreezing) for learning what is working, not working, or must be improved (Galli, 2018). Kotter’s and McKinsey’s change models, the ADKAR model, and the general electric’s change acceleration processes contain more steps to be taken, which requires more time and resources but reduces employee concerns. Stouten, Rousseau and De Cremer (2018) promote the contributions of scholars and educators for a better appreciation of change management to fulfill motivation and enhance support at all levels. Practitioners are encouraged to define their principles of change processes, focusing on employee skills, working environments, and influential factors.
Charismatic Leadership
Among a variety of leadership and management styles, a charismatic approach is recognized due to the preferred behaviors and relationships. In addition to improved communication and support, a distinctive feature of charismatic leadership is strategic vision and creativity (Mangundjaya and Amir, 2021). On the one hand, organizations run by charismatic leaders benefit from an increased emotional appeal and unique critical thinking. Employees have opportunities to cooperate with their leaders, share their ideas, and promote organizational development. On the other hand, some researchers underline the existing charisma controversy because the promotion of positive effects on followers makes leaders ignore their actual attributes (Sy, Horton and Riggio, 2018; Zhang et al., 2020). According to Le Blanc, González-Romá and Wang (2021), charisma should not be considered a God-given characteristic, and wrong ends can happen, affecting the psychological safety of the team (Zhang et al., 2020). Therefore, charismatic leadership requires additional control and clarifications to predict negative outcomes and concentrate on the necessary changes.
The relationship between charismatic leadership, organizational performance, and employee satisfaction is currently examined in project management. For example, Zhang et al. (2020) explain the threats of performance pressure and unethical pro-organizational behaviors (when social values are violated to meet stakeholders’ interests), and charismatic leadership may alleviate negative outcomes. Besides, charismatic leaders concentrate on motivation for their employees because it is the only way to make them accept change and understand the importance of a merger (Le Blanc, González-Romá and Wang, 2021). Charisma may be a form of dominance with the possibility to address and control human emotions (Sy, Horton and Riggio, 2018). Thus, there are many chances for the supporters of charismatic leadership to obtain a positive impact on employee commitment to change without additional resources.
Roles and Expectations from Charismatic Leaders
In general, the success of a merger merely depends on how well all participants understand their roles and complete their responsibilities. It is hard to predict the preferred steps of charismatic leaders, but Zhang et al. (2020) underline that if leaders convey too much confidence in their followers, the latter can neglect potential threats from making mistakes. Therefore, employee control should be an adaptive response in predicting uncertainty or absurd exaggeration (Stouten, Rousseau and De Cremer, 2018). As such, the role of a charismatic leader is to use charisma, strengthen communication skills, and appeal to emotions to formulate the necessary vision of change among employees. The expectations included improved work ethics within an organization and employee resilience to change (Mangundjaya and Amir, 2021). The key points of this review include moral emotions in communication and personal qualities for establishing relationships between a leader and a team to remove controversies and concerns for successful change management during a merger.
Methodology
The primary research method for this project is a literature review as a part of exploratory research. The main idea of exploratory methodology is to discover something new and credible about the chosen topic (Saunders, Lewis and Thornhill, 2019). A literature search allows the researcher to identify the necessary key terms for analysis and give clear definitions to the major points. There is much information about change management, charismatic leadership, and business mergers. Some authors combine these conditions, and some scholars prefer to focus on them separately to identify as many critical characteristics as possible. Therefore, the review findings will contribute to a better understanding of a topic and create a solid background for another step in this project.
A qualitative part of this study will be based on survey findings. Rodríguez-Sánchez, Mora-Valentín and Ortiz-de-Urbina-Criado (2019) admit that the survey is a reliable source for obtaining information from employees about their states of mind, concerns, and commitment during a merger. This method focuses on individual characteristics and attributes, which is necessary for this project (O’Leary, 2017). Although qualitative surveys are time-consuming, this method is beneficial in finding out new issues on the same topics and gathering various responses from several participants simultaneously. A survey will consist of five open-ended questions about attitudes (challenges) toward mergers, charismatic leaders’ skills, leadership impact on employees, the implementation of a change management model, and the expectations from change. There will be two groups of participants who have to answer the same questions, following the principles of anonymity and confidentiality, with the position to be identified. It is planned to invite at least three leaders from different organizations who prefer the charismatic approach. Besides, 20 employees from the organizations led by charismatic leaders will be invited. If more people are eager to cooperate, their participation will be approved to the established maximum of 50 individuals.
As it is an online survey, it will not be difficult to transcribe the answers and initiate a thematic analysis. The responses will be re-read several times to identify 3-5 common themes and categorize the text regarding the already identified research questions about challenges, charismatic leadership impact on change, and leadership competencies. Attention should be paid to leaders’ qualities, the role of a change management model, the characteristics of mergers, and the attitudes of participants toward charismatic leadership in a change process. The combination of the literature review results and survey findings will help to explain all concepts and add more subjective information (which is a new practical implication).
Timeline
Limitations
The current project is limited to exploring charismatic leadership competencies under one particular condition – a merger. The literature review will contain information about three processes (charismatic leadership, merger, and change management) separately, while the survey will show how the chosen concepts may be interrelated. Several limitations can be mitigated during a research process (Table 1).
Table 1: Limitations and Mitigation
Reference List
Galli, B.J. (2018) ‘Change management models: a comparative analysis and concerns’, IEEE Engineering Management Review, 46(3), pp. 124-132.
Kang, E., Nantharath, P. and Hwang, H.J. (2020) ‘The strategic process of merger and acquisition (M&A) market using integrating change management’, Journal of Distribution Science, 18(6), pp. 57-62.
Le Blanc, P.M., González-Romá, V. and Wang, H. (2021) ‘Charismatic leadership and work team innovative behavior: the role of team task interdependence and team potency’, Journal of Business and Psychology, 36(2), pp. 333-346.
Mangundjaya, W.L. and Amir, M.T. (2021) ‘Testing resilience and work ethics as mediators between charismatic leadership and affective commitment to change’, The Journal of Asian Finance, Economics and Business, 8(2), pp. 401-410.
O’Leary, Z. (2017) The essential guide to doing your research project. Thousand Oaks: SAGE.
Rodríguez-Sánchez, J.L., Mora-Valentín, E.M. and Ortiz-de-Urbina-Criado, M. (2019) ‘Human resource management in merger and acquisition planning’, Journal of Organizational Change Management, 33(1), pp. 16-28.
Sarala, R.M., Vaara, E. and 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), pp. 307-321.
Saunders, M., Lewis, P. and Thornhill, A. (2019) Research methods for business students. 8th edn. London: Pearson.
Soundarya, M.B., Lavanya, S.M. and Hemalatha, S. (2018) ‘Merger and acquisition of business organization and its impact on human resources’, Journal of Business Strategy, Finance and Management, 1(1), pp. 69-72.
Stouten, J., Rousseau, D.M. and De Cremer, D. (2018) ‘Successful organizational change: integrating the management practice and scholarly literatures’, Academy of Management Annals, 12(2), pp. 752-788.
Sy, T., Horton, C. and Riggio, R. (2018) ‘Charismatic leadership: eliciting and channeling follower emotions’, The Leadership Quarterly, 29(1), pp. 58–69.
Zhang, X. et al. (2020) ‘Heroes or villains? The dark side of charismatic leadership and unethical pro-organizational behavior’, International Journal of Environmental Research and Public Health, 17(15).