Problems resulting from the merger of Eastern Baptist Medical Center (EBMC) and St. Rupert Hospital (SR) are no surprise. Researchers, like KPMG suggest that over eighty percent of all mergers and acquisitions failed to deliver positive outcomes in the future. The main cause for this failure is cultural differences. Up to the date when the signing of papers is formalized, everything is financially driven. However after the merger transaction is finalized, other non-financial difficulties arise.
Problems encountered by mergers and acquisitions (M & As) are based on cultural situation, especially when the firms involved are from two different geographical locations, as is the case between EBMC and SR. The difficulties are likely to be amplified along areas of human resource, patient care and the community at large. This study attempts to extrapolate and foresee the difficulties resulting from the merger of the two hospitals and suggests possible tactical solutions.
The merger of these two hospitals has implications for the workforce of the two. Poorly managed Human resource issues in mergers and acquisitions have contributed to failure of the merger to bring desired outcomes. HR issues in mergers may be categorized into two; the pre-merger phase and post-merger phase. This article is focused on the later-post acquisition phase. HR planning, turnover, performance appraisal, employee relations and employee development are some of the important issues to the HR management in mergers.
The merger activity could lead to duplication of certain departments. Compensation wrangles is also expected; for instance EBMC’s (acquired firm) employees would expect a possible increase in compensation in relation to what SR’s Staff are likely to receive. This could lead to the involvement of the legal system with possible suits.
EBMC and SR, each has different set of beliefs and culture. These differences in corporate culture lead to a psychological state known as culture shock (Pande & Krishnan 1). This means that the employees are forced to abandon and adopt a new culture, causing stress among employees.
Culture shock can evoke hostility and discomfort among the employees which can lower their commitment and cooperation. This in turn affects the patients; mistakes in diagnosis and prescriptions become frequent. Patients would fail to receive care on time. The strong reputation based on customer care the two hospitals, when they operated separately before the merger, enjoyed would be crashed.
The uncertainty brought about by the integration would divert the focus of the medical staff from productive work to issues like career path, fear of working with new colleagues and job security. The merger activity may lead to relocation and assignation of new jobs to the medical staff leaving the staff in a different position which changes in job profiles and work mates. This could have an impact on the level of care patients get from the hospital.
Changes in productivity, low level of patient care and letting go of employees inevitably has an impact on the community at large. Customers of the acquired firm (EBMC), who were indigent and Medicaid, would face possible rejections from the new organization.
The letting go of unproductive employees would certainly increase levels of unemployment in the community. The previously satisfied middle and upper class patients would change their doctors and sort alternative health care from other institutions; the new hospital would lose most of its client base.
If I was a member of the senior management the following would be my proposals. Take time to spend with the staff and get to know them. Bring together employees from both hospitals (acquired and acquiring). Discuss the potential benefits of the merger with the employees honestly. Since SR’s employee relations were better, I would get EBMC’s staff to listen to SR’s staff. Release employees who are less equipped to contribute to the new hospital.
In conclusion, the management should expect such difficulties and plan for low productivity as the staff takes time to deal with the changes. Expect to release some employees. There is a possibility for a merger success; however, this success should be based on the creation, concentration and acceleration of operational change.
Pande Amit and Krishnan Sandeep. Management Personnel and Industrial Relations. Raipur: Indian Institute of Management, 2010. Print.