Integrated or Disconnected?Examining Formal and Informal Networks in a Merged Nonprofit
Organization
Bin Chen, James KrauskopfBaruch College of the City University of New York
This article introduces nonprofit researchers and practitionersto a social network analytical technique for assessing internalstaff relationships after a merger. We studied a case of a non-profit merger, investigating its formal and informal intraorga-nizational networks to see which parts integrated and which remained separate operationally. We discovered a prior-organizational-affiliation-based homophily within the merged orga-nization: most interpersonal relationships existing within thesenetworks remained among the employees who worked togetherprior to the merger. However, the informal and expressive net-works of mentoring, friendship, and socioemotional supportwere even more disconnected than the formal and instrumentalnetworks of work relationships and problem solving. We high-light the role of a mentoring network in bridging formal andinformal networks in a merged organization.
Correspondence to: Bin Chen, City University of New York, Baruch College,School of Public Affairs, One Bernard Baruch Way, Box D-0901, New York, NY10010. E-mail: [email protected]
This research was supported by the William Diaz Fellowship from the Non-profit Academic Centers Council and the Eugene M. Lang Fellowship fromBaruch College of the City University of New York. We are grateful to LindaManley and Barbara Krasne for sharing their professional experience on non-profit mergers and alliances. In addition to four anonymous reviewers, we thankSteven Rathgeb Smith and Karl Kronebusch for comments on earlier drafts. Anyerrors or omissions are our own.
STRATEGIC ALLIANCES ARE INTERORGANIZATIONAL, VOLUNTARY, andcooperative arrangements among organizations to share re-sources and to accomplish collective goals. Mergers are ex-
treme cases of alliances that involve the combination of all of theassets of participating organizations under common ownership. Anacquisition is a form of merger in which one or more organizationsare completely absorbed by another organization whose organiza-tional existence is preserved. Despite its relatively small scale,mergers and acquisitions (M&A) in the nonprofit sector have ex-perienced growth as nonprofit organizations grapple with manage-rial, service, financial, technological, and other environmentalchallenges (Yankey, Jacobus, and Koney, 2001).
However, we do not have a clear picture of the scope of non-profit M&A due to the limited data. We have to glean informationfrom different sources to piece together a picture of this new devel-opment. A Bridgespan study identified 3,300 cases of nonprofitmergers over a period of ten years from 1996 to 2006 in the states ofMassachusetts, Florida, Arizona, and North Carolina (Cortez, Foster,and Milway, 2009). According to that study, the cumulative mergerrate of nonprofit M&A (number of deals divided by average num-ber of organizations for eleven years) is 1.5 percent, as comparedto 1.7 percent in the for-profit sector. In a survey sponsored by theBoston Foundation, as many as 8 percent of nonprofits in Massa-chusetts reported that they had been engaged in mergers with otherorganizations (Pradhan and Hindley, 2009). To encourage collab-oration among the nonprofits, the Lodestar Foundation sponsoreda collaboration prize. As a result of this effort, a nonprofit collab-oration database was created. The dataset contains 176 differentforms of collaboration, and forty-nine of them are considered aseither partial or full mergers (Collaboration Prize, 2009). In ourown study of nonprofit M&A in the greater New York area, weidentified eighteen mergers out of ninety-eight nonprofit M&Acases from 1996 to 2009. As the U.S. economy worsens, nonprof-its face the challenges of shrinking public and philanthropic fund-ing and increasing service demands. One would expect that manynonprofits are looking at M&A as an alternative strategy to dealwith these challenges.
The existing literature on nonprofit M&A has focused on threestreams: identifying the driving forces that may determine why non-profit organizations merge, exploring the process by which organi-zations make the decision to merge, and categorizing the structuralforms through which organizations come together. Less studied,however, is how a merger affects the operation of a new organiza-tion. This article focuses on postmerger integration. Mergers createstress due to employees’ uncertainty about their changing work, theorganization’s future, and job security. The uncertainty resulting froma merger tends to change an organization’s normal, clearly definedstructures. Employees often seem to resist the change, particularly
when one organizational culture is about to undergo a major trans-formation. So after a merger, the biggest challenge facing any orga-nization, including nonprofits, is the integration of the differentorganizations.
In this article, we report the findings of social network analysesof postmerger integration of a recent case of merging two nonprofitorganizations in the microfinance sector. The primary purpose is tointroduce nonprofit researchers and practitioners to a social networkanalysis (SNA) technique for assessing internal staff relationshipsafter a merger and for guiding managers on integration steps theymight want to consider implementing. We investigate the extent towhich the two merged organizations are structurally integrated. Doesintraorganizational networking among employees differ by theirprior organizational affiliations with the acquirer, the acquired, andnew hires? Does this interaction pattern vary across different typesof networks? Do different types of networks overlap with each other?In the following sections, we begin with a general survey on non-profit M&A literature. After that, we present a network approach topostmerger integration and identify five types of intraorganizationalnetworks: workflow, problem solving, mentoring, friendship, andsocioemotional support within the merged organization. We thenintroduce an empirical case of two recently merged nonprofits,describe the data collection and analytical methods, and present theresults of our analysis. We conclude with a discussion of lessonslearned from this study for effectively integrating the merged non-profit organizations, as well as directions for future research.
Literature on Nonprofit Mergers and Acquisitions
The majority of the existing literature on nonprofit M&A ad-dresses the question of “why.” Several theoretical frameworks thataddress strategic decision making in organizations help explain themotivations underlying the formation of nonprofit M&A. These frame-works include institutional theory (Meyer and Rowan, 1977; Oliver,1990), resource exchange and dependence theories (Grønbjerg, 1993;Pfeffer and Salancik, 1978), organizational learning perspective(Kogut, 1988), and transaction costs theory (Williamson, 1996).We can differentiate the driving forces of nonprofit M&A alongfour dimensions: the acquiring organization versus the acquiredorganization and internal versus external enabling conditions.
The major motivations for the acquirer to merge are to diversifyservice provision, to expand geographically, and to acquire keyresources, expertise, and/or facilities. These motivations of achievingeconomies of scale and better utilization of resources are similar to for-profit firms (Kohm and La Piana, 2003). What distinguishes nonprofitmergers from for-profit mergers is that the acquiring nonprofits are
also driven by the motivations of enhancing organizational legitimacyand helping other nonprofits sustain their programs in the commu-nity (Ferris and Graddy, 2007). The acquired organizations are usu-ally in financial difficulty and have limited access to reliable fundingsources. By merging with another well-run organization, they canachieve economies of scale by reducing administrative costs. They can also benefit from gaining more legitimacy and sustaining their programs.
External environmental complexity and uncertainty also drivethe partners toward a merger (Campbell, 2008). Such factors includepressure from funders, increased competition among nonprofits andbetween the nonprofit and for-profit sectors, and perceived or realthreat of being acquired, merged, or consolidated. Market charac-teristics favorable to nonprofit M&A include large numbers ofsmaller players and intensive competition (Cortez, Foster, and Milway,2009). Another unique motivation of nonprofit mergers is that merg-ers sometimes become possible because of internal enabling condi-tions, such as leadership departure and board fatigue (Brown, 2007;Dewey and Kaye Consultants, 2007). To open the M&A window,some nonprofit entrepreneurs, mostly executive directors and otherkey staff, play the role of catalytic agents to seize the opportunitywhen it occurs (Pietroburgo and Wernet, 2008).
No one would be surprised to find that merging two or morenonprofit organizations is a complex process. Yankey and others(2001) separated the process as states of strategic planning, partnerselection, side-by-side analysis, due diligence, implementation, andevaluation. Pietroburgo and Wernet (2008) defined four stages ofinitial partnering, informal discussion, formal negotiation, andimplementation in a case of association merger. Researchers and practitioners all agree that the merging process is very time con-suming and can take from six months to two years to complete.
Strategic decisions on the choice of M&A structures reflect theamount of autonomy that partners are willing to give up and the degreeof integration required to manage the collaborative activities. Along acontinuum of high autonomy/low integration to low autonomy/high inte-gration, strategic alliances in the nonprofit sector can be categorized asco-sponsorship, federation/coalition/consortia, joint ventures/networks/parent-subsidiaries, and mergers and acquisitions (Kohm, La Piana,and Gowdy, 2000; Yankey and others, 2001). From a legal perspec-tive, nonprofit M&A can be differentiated along a continuum of jointventures, asset transfer, sole membership/board control/parent–subsidiary, and mergers consolidation (Delany and Manley, 2003).
The limited research on assessment of nonprofit M&A reflectstwo schools of views. One stream of research argues that M&Awould lead to reduced competition between partnering organizationsfor financial support, legitimacy, and political power (Kirkpatrick, 2007).The other stream cautions about issues such as clash of organizationalcultures and scaled-back funding (Gammal, 2007). When integrating
two different organizations, managing different organizational cul-tures is crucial in determining the success of a merger. Researchershighlight the importance of creating a new cultural identity for themerged organization by preserving and valuing the past traditions,values, and key cultural elements from the partnering organization(Pietroburgo and Wernet, 2008).
A Network Approach to Postmerger IntegrationTraditionally, the merger literature in the for-profit sector focuseson the strategic or financial aspect of merger outcomes at the lev-els of transaction and firm. These strategic and financial ap-proaches ignore interpersonal relationships in the integrationprocess. In this article, we shift the focus of assessing postmergerintegration from individual and organizational levels to a dyadiclevel: patterns of interactions among employees within the mergedorganization. A structural/relational school brings a social networkperspective to the study of postmerger integration. A network con-sists of a set of individuals and the connections among them. Bydrawing on SNA, we can track formal and informal relationshipsexisting or developing among the employees within the mergedorganization (Cross and Parker, 2004). SNA as a methodology hasbeen employed to facilitate the merger process through measuresaligned to the conceptualized structural characteristics of themerger. SNA can help identify the structural characteristics of theinteractions between and among the members of the two previ-ously different organizations to further a successful integration(Durland, 2005).
Following a structural/relational approach, we assess the post-merger integration by looking into five different types of intraorga-nizational networks in this study: workflow, problem solving,mentoring, friendship, and socioemotional support. We chose toexamine these network ties because they are common exchange rela-tionships in an organizational setting. They represent different formsof networks and reflect the different nature of exchange relationshipsbetween individuals within organizations. These five types of net-work relationships can be classified along two continua: formal toinformal networks and instrumental to expressive networks. Formalnetworks are prescribed networks that consist of formally definedrelationships between superiors and subordinates and people fromdifferent functional departments interacting to perform a particulartask, whereas informal networks are “more discretionary patterns ofinteractions, where the content of relationships may be work-related,social or combination of both” (Ibarra, 1993, p. 58). The nature ofrelationships between individuals in networks can be treated as frominstrumental to expressive. Instrumental ties include exchanges ofjob-related resources, information, expertise, career direction, andguidance. Expressive ties cover relationships that involve the
organizationalcultures is crucialin determining the
success of amerger.
exchange of friendship, trust, and socioemotional support (Ibarra,1993). On the basis of these two dimensions, we created a frameworkthat includes five intraorganizational networks (see Figure 1).
Workflow Network. As a manifestation of formal organizationalstructure, the workflow network includes the most formal andinstrumental network ties within an organization. We here defineorganizational structure as “the configuration of the hierarchical lev-els and specialized units and positions within an organization andformal rules governing these arrangements” (Rainey, 2003, p. 183).The workflow network reflects the formally prescribed set of taskinterdependencies between organizational members as a result of thedivision of labor in the organization. Employees exchange inputsand outputs on the basis of the flow of work through the organiza-tion (Brass and Burkhardt, 1992). An examination of interactionswithin the workflow network will tell us if there is a smooth flow ofwork from one person to another to get the job done.
Problem-Solving Network. The problem-solving network refersto the instrumental interactions among organizational members whoseek information and advice on addressing challenging problemsthey encounter in doing their jobs (Cross and Parker, 2004). Thesenetwork ties are channels through which employees obtain resourcessuch as information, assistance, and guidance to complete a chal-lenging task. The problem-solving network can help identify expertsand therefore is crucial in the functioning of a merged organization.The problem-solving network is less formal than the workflow net-work because it may not necessarily follow the formally prescribedworking relationship. Information-seeking theory suggests that people are more likely to seek work-related information and advicefrom others whom they perceive to be reliable and knowledgeable(Borgatti and Cross, 2003; Morrison, 2002; Nebus, 2006).
intraorganizationalnetworks in thisstudy: workflow,problem solving,
mentoring,friendship, andsocioemotional
support.
Formal Networks
Workflow
Problem Solving
Mentoring
Friendship
Informal Networks
ExpressiveNetworks
InstrumentalNetworks
SocioemotionalSupport
Figure 1. Five Intraorganizational Networks Within a Merged Nonprofit
Mentoring Network. We situate the mentoring network in themiddle of continua of formal-informal and instrumental-expressivenetworks because it combines instrumental and expressive elements.Kram (1985) has identified two major functions of mentoring: careerfunctions and psychosocial functions. The career functions includesponsorship, exposure and visibility, coaching, production, and challenging assignments. The psychosocial functions are role mod-eling, acceptance and confirmation, counseling, and friendship. It isimportant to examine the mentoring relationships within a mergedorganization because they can help employees adjust themselvesduring the periods of stress as a result of mergers and restructurings(Siegel, 2000).
Friendship Network. One of the expressive functions that a socialnetwork can serve is to build friendship. The friendship network ismore informal because it represents more individual choice and ini-tiative. People have more discretion in the choice of friends fromthose who have mutual liking or similarity of attitudes. Many socialinfluence processes are carried on between friends. Knowledge aboutfriendship relations is useful in determining who can trust whom,who is more likely to cooperate with whom, and who is likely to goto whose defense in conflicts (Krackhardt, 1992).
Socioemotional Support Network. The socioemotional networkis the most informal network. It has the expressive function of help-ing employees cope with personal life crises or emergencies. Sourcesof socioemotional support to the focal individual in his or her personal network may come from a variety of people or institutions,such as spouse, parent, child, sibling, friend, neighbor, or colleague,as well as the various kinds of professionals and work organizations.Relatively few studies have examined networks of social support inorganizational contexts. Hurlbert (1991) used egocentric networkdata from the 1985 General Social Survey and found that member-ship in a coworker network was positively associated with job satis-faction because the network may provide resources to help theindividual cope with job stress.
Mergers and acquisitions pose special problems of intergrouprelations for intraorganizational networks. When two organizationsmerge, or, more commonly, one acquires the other, employees of oneorganization tend to have negative responses and feelings toward theemployees of the other organization. Because of such an “us” versus“them” dynamic, interpersonal interactions are likely to be subject toa pattern of homophily, a natural desire to connect with those who aresimilar. Social support theory suggests that individuals motivated toseek emotional support will most likely seek it from others whomthey perceive as sharing or having shared a common stressor (Cohen,Underwood, and Gottlieb, 2000). The literature suggests that animportant facilitator of helping behavior is the perceived interper-sonal similarity between the support provider and recipient. Sup-portive behaviors tend to occur within strong and homophilous ties
(Brief and Motowidlo, 1986). Homophily has been studied on thebasis of similarity in age, gender, education, prestige, social class,tenure, and occupation. In the context of merger, we examinewhether the five intraorganizational networks identified earlier fol-low a homophily on the basis of prior organizational affiliation.
Although we discuss each type of network tie separately, theyare by no means mutually exclusive. It is very likely that multiplenetwork ties connect two people in an organizational setting. Forexample, a mentoring network tie can first start from a formal work-ing relationship and then facilitate the development of an informalfriendship. The presence of multiple exchange relationships istermed as multiplexity, referring to a structural property of a dyadicrelationship that occurs when the two parties are involved in morethan one relationship with each other (Wasserman and Faust, 1994).Multiplex relationships are signs of strong relations and are associ-ated with high trust and reliability because both parties have theopportunity to interact and get to know each other in a variety ofcontexts (Ibarra, 1995). In this study, we also explore the extent towhich the pattern of interactions for one network aligns with that ofinteractions for another network among organizational members ina merged nonprofit.
A Case of Merging Two Nonprofit Microfinancing Institutions
A recent merger of two nonprofit organizations in the microfinanc-ing sector was selected as a case study for a network analysis ofpostmerger integration. The dialogue between the two organiza-tions started in 2007. Yet not until early 2008, when the CEO ofthe acquired organization was going to leave his position, did theacquired organization approach the acquirer and begin the processof negotiating a merger.
Consistent with literature on motivations of nonprofit M&A, forthe acquirer the reasons for merger were strategic—scaling up andincreasing its leading role in the microfinancing community. For theacquired, in addition to the leadership departure, the primary dri-ving force was financial instability. The acquired organization hadtoo much financial leverage. It grew its portfolio of $2 million in2004 to $8 million in 2007. Yet its repayment rate fell from 97 per-cent to 81 percent. Funding agencies, like foundations, also encour-aged the merger. Funders would like to have fewer organizations tocompete for a limited amount of resources. It was expected thatunder a single brand name, the merged organization would be in abetter position to compete for limited funding.
This is a complicated merger case in the sense that the transac-tion occurred across two states. To avoid the lengthy legal process,
acquires the other,employees of oneorganization tendto have negativeresponses and
feelings towardthe employees of
the otherorganization.
the acquired organization first changed its bylaws to become a mem-bership organization under section 501(c)(3) and the acquirerbecame a controlling member of the board of the acquired. Themerger started in June 2008 and was completed in January 2009.There are sixty-two managers and staff in the merged organization.Among them, twenty-four are from the acquirer, twenty-one fromthe acquired, and seventeen are new hires.
This is a so-called scale-up merger in which two nonprofits thatwere operating in the same nationwide market and serving identicalclients with the similar services come together. A scale-up mergerusually requires extensive and full integration of all activities due tothe duplicating functions and structures in the partnering organiza-tions (Harding and Rovit, 2004). During the integration stage, thepartnering organizations still kept their separate boards, and a newexecutive team was put in place. The CEO of the acquirer becamethe new president and CEO of the merged organization. Two vicepresidents are from the acquired. The merged organization is namedafter the acquired organization. In September 2008, they began tomerge the different departments. While maintaining multiple officesites throughout the country, all the administrative and personnelfunctions were transferred to the headquarters. They restructuredthe product portfolio, integrated the software platform, and stan-dardized guidelines of collections, accounting and finance, andunderwriting. The work process was structured in a way that exten-sive communications and virtual working relationships were estab-lished across different office sites. A three-day retreat was organizedat which staff members worked and socialized together. Since then,biweekly department meetings and a monthly organization-widemeeting have been mandated. A series of newsletters about theprogress of integration was circulated throughout the organization.
The cultures of the two organizations are different. The micro-financing sector is struggling with the debate about competing socialand commercial goals—creating positive social impacts alongsidefinancial returns. The acquiring organization was run more as a busi-ness, while the acquired one paid more attention to its social mis-sions. Employees from the acquired organization are concerned thatthe merged organization has moved away from almost entirely work-ing with the mom-and-pop shops to supporting highly establishedbusinesses with strong credit and complex financials. They perceivethat the acquirer’s policies and culture have filtered through the orga-nization top-down. They feel that they are subordinate to the acquir-ing group and are not treated with respect.
We commissioned this postmerger integration study eightmonths after the completion of the merger. Eight months is the righttiming for this study. If the time frame were too short, one would not expect significant integration to occur. If the assessment were doneyears later, employees unhappy about the merger would have already
left. Damages to the new organization, such as loss of key personneland expertise, would have already occurred.
Data Collection and Analytical MethodsWe are university-based researchers. We discussed a social net-work study of postmerger integration with leadership of themerged organization. With their support, we invited all the em-ployees in the merged organization to participate in a Web-basedsocial network survey from August 2009 to January 2010. It tookrespondents about twenty to thirty minutes to complete the sur-vey. Fifty-seven participants completed the network survey, consti-tuting a response rate of 92 percent.
In the survey, we asked the respondents to nominate the col-leagues with whom they work, ask for assistance in solving difficultwork-related problems, receive mentoring, befriend, and seek socioe-motional support in the merged organization. For example, for theworkflow network, we asked:
“On the list below, please select names of the people at Xorganization who you would consider to have been your pri-mary work partners over the last six months.
Work partners are people who provide you with your work-flow inputs, as well as the set of people to whom you provideyour workflow output. Workflow inputs are any materials,information, clients, tasks, etc, that you might receive in orderto do your job. Workflow output is the work that you send tosomeone else when your job is complete.”1
Because people may have different understandings of what con-stitutes a friendship, when asking employees to nominate their friends,we defined friends as “people with whom you like to spend your freetime, people you have been with most often for informal social activ-ities, such as visiting each others’ homes, having lunch together often,attending concerts or other public performances, going out to bars andclubs, etc.” (Kilduff and Krackhardt, 2008, p. 141).
We used these data to construct the workflow, problem-solving,mentoring, friendship, and socioemotional support networks withinthe merged organization. We employed four social network analyt-ical methods from UCINET 6 (Borgatti and others, 2002)—networkdiagram, network density table, E-I index, and network correlations—to examine whether the staffs from two different organizations areintegrated into the newly merged one.
A social network diagram allows us to visually determinewhether the network is split into subgroups on the basis of certainindividual attributes, such as prior organizational affiliation beforethe merger. To demonstrate the interaction patterns between the
acquirer and acquired, between the acquirer and new hires, andbetween the acquired and new hires, we applied a graphic layoutfunction of “Group by Attribute” in NetDraw, a network visualiza-tion software tool embedded in UCINET. We chose prior organiza-tional affiliation as an attribute for visualization.
Network density is expressed as the percentage of the actualnumber of relationships over the possible number of ties. It mea-sures the connectivity of the entire network. We divided respondentsinto subgroups by their prior organizational affiliation and calculatedtheir density figures within and between subgroups. We applied anE-I index to measure how externally versus internally oriented eachsubgroup is in its networking relationships. The E-I index isexpressed as follows:
E-I Index � EL � ILEL � IL
where EL represents the number of external working relationshipsand IL the number of internal working relationships. The indexranges from �1 to �1. An E-I index close to �1 indicates that thegroup is totally focused on itself, while an index near �1 indi-cates that the group is totally focused outside itself. An E-I rationear 0 suggests that the group has a balance of internal versus ex-ternal interactions (Krackhardt and Stern, 1988). UCINET pro-duces E-I indexes at three levels: entire network, subgroup, andindividual.
To further examine the extent to which multiplexity was pre-sent, we did a number of correlation analyses across the five net-works of relationships within the merged organization. Because theunit of analysis was dyad, the test for the significance of associationswas based on nonindependent observations. We used quadraticassignment procedure (QAP) in UCINET to generate correlationcoefficients and their significance tests. The QAP is a permutation-based procedure specifically designed for interdependent data insocial network research (Krackhardt and Stern, 1988).
ResultsIn Figures 2 to 6, we provide visual presentations of five formaland informal networks identified in the merged organization. Thecircle nodes are managers and staff from the acquiring organiza-tion, located on the upper center. The square nodes refer to thosefrom the acquired organization (left bottom), and the upper trian-gle nodes (right bottom) represent new hires after the merger. Thelarger the size of the nodes, the more central the person is in the network. They are clearly distinguished by the number of rela-tionships they have. The small nodes are those located at the pe-riphery of the network.
Figure 2 is the network diagram of the work relationships. Thisis the most connected network among the five, as no node is left iso-lated in the network. The diagram reveals many interactions occur-ring across the three subgroups. Yet the density table below thediagram suggests that more working relationships formed within thegroup than across the groups. In Table 1, the percentages down thediagonal show the within-group network density scores: 42 percentfor the acquiring organization, 46 percent for the acquired organiza-tion, and 17 percent for new hires. The off-diagonal percentages indi-cate the between-group network density scores. For example, thenetwork density score between the acquiring and acquired organiza-tions is 23 percent. The E-I indexes further demonstrate that the man-agers and staff from the acquiring organization primarily interact withtheir former colleagues with an E-I index of �0.14, while the groupof employees from the acquired organization has a more balancedcombination of external versus internal interactions (an E-I index of0.03). The new hires are the most externally oriented (an E-I indexof 0.54). Although the whole network E-I index of 0.06 indicates arelatively balanced pattern of external and internal interactions, theindex value is not statistically significant.2 It suggests that at the net-work level, the prior organizational affiliation may not explain thepatterns of interactions we observed in the merged organization.
In Figure 3, the problem-solving network does not look as denseas the workflow network. There are also fewer interactions acrossthe three subgroups. The within-group density scores in Table 2 areall lower than in the workflow network: 24 percent for the acquirer,
30 percent for the acquired, and 10 percent for new hires. There areeven smaller density scores between the subgroups, for example, 9percent between the acquirer and acquired. Both the acquirer andacquired groups exhibit a propensity to in-group ties (�0.20 for the acquirer and �0.13 for acquired). It also shows a slight tendencyto in-group exchange for the whole network with a statistically sig-nificant E-I index of �0.02 (p � 0.05).
The mentoring network in Figure 4 has even fewer network tiesthan the problem-solving network. Comparing to the problem-solvingnetwork, the mentoring network has fewer in-group and out-groupties. In Table 3 the within-group density scores are 11 percent for theacquirer, 7 percent for the acquired, and 1 percent for new hires. The between-group density scores decrease to 1 percent between theacquirer and acquired, 4 percent between the acquirer and new hires,and 5 percent between the acquired and new hires. At an E-I indexvalue of 0.89 it comes as no surprise that the new hires find theirmentors outside their own group. Yet both the acquirer and acquiredincrease their tendency to establish mentoring relationships withintheir own groups (E-I indexes at �0.42 and �0.15, respectively).The whole mentoring network E-I index is �0.06 (p � 0.05), sug-gesting slightly more propensity toward in-group ties.
In Figure 5, we observe that a few nodes are connected to thefriendship network by a single tie; they are called “pendants.” Thesependants are located in the periphery of the diagram. One node,called an “isolate,” is completely disconnected from other nodes. In
Table 4, all three groups—the acquirer, acquired, and new hires—increase their in-group ties in the friendship network to 14 percent,16 percent, and 10 percent, respectively. But the density scorebetween the acquirer and acquired remains at 1 percent. While thenew hires group has more friends outside their group (an E-I indexof 0.30), the acquirer and acquired groups exhibit a preponderance offriendships within their groups (E-I indexes of �0.53 and �0.28,respectively). The whole friendship network is much more internallyoriented (an E-I index of �0.22, p � 0.05).
The socioemotional network in Figure 6 is the most discon-nected among the five networks. We see many more pendants andisolates in the diagram. Almost all the socioemotional exchangesremain among staff who worked together prior to the merger. Thecircle nodes mostly interact with the circles and the square nodeswith the squares. Such disconnectedness between the acquiring andacquired organizations is even more obvious when we look at Table 5.Statistics in Table 5 confirm the findings from the visual inspection.Intergroup exchanges in the socioemotional network between theacquirer and acquired is only 0.4 percent. With E-I indexes of �0.73and �0.63, the two groups all demonstrate a strong bias toward in-group connections, and the whole socioemotional network has the strongest internal propensity among the five networks with anE-I index at �0.53 (p � 0.05).
To ascertain the phenomenon of multiplexity, the correlationcoefficients among the five networks and their significance tests are
reported in Table 6. The correlations vary in their magnitudes, rang-ing from 0.21 to 0.49, and all achieved statistical significance at thelevel of 0.01. The results support the presence of multiplexity. Forexample, a correlation coefficient of 0.30 between the socioemo-tional support and workflow networks indicates that if employee A seeks socioemotional support from employee B, there is a 30 percentchance that the employees also have a formal working relationship.
Table 6 reveals three patterns of interactions. First of all, relativehigh correlations are seen between more formal networks (0.49between the workflow and problem-solving networks) and betweenmore informal networks (0.35 between the friendship and socioe-motional support networks). This pattern is expected because theformal networks are all work related and reflect a formally desig-nated organizational structure, while the informal networks are morebased on individual choice. Second, the correlations between the for-mal and informal networks are relatively low. For instance, thefriendship network has much smaller correlations with the work-flow, problem-solving, and mentoring networks (0.25, 0.27, and0.21, respectively). It suggests that enjoying friendship relations inan organizational setting is not necessarily the same as mentoring,nor is it the same as working together. Third, the mentoring networkhas relative high correlations with both formal networks (0.32 withthe workflow network and 0.45 with the problem-solving network)and informal networks (0.37 with the socioemotional network). Thisfinding is consistent with the previous research that found that amentor has a dual role of providing professional and social supports.
Lessons LearnedBy employing SNA to determine how formal and informal net-works were established eight months after completion of themerger, we found that the two nonprofit organizations had not integrated structurally as one single organization. The practical
implications of our study for nonprofit leaders and managers arethreefold.
First, SNA is a very useful tool for leadership of merged non-profits to employ when following the trajectory of postmerger inte-gration and assessing internal staff relationships. We found that thetwo nonprofit organizations had not integrated structurally as onesingle organization. Our study reveals that five intraorganizationalnetworks of workflow, problem solving, mentoring, friendship, and socioemotional support exhibit a prior organizational affiliation–based homophily. That is, most interpersonal relationships exist-ing within these networks remained among the employees whoworked together prior to the merger. Researchers and consultantswith expertise in social network analysis will be able to assist inthe transition and examine how formal and informal relationshipbuilding are proceeding. The findings of network analysis may alsobe shared with employees in a focus group in which they can helpinterpret the results and brainstorm how to better integrate theorganizations.
Second, we suggest that nonprofit executives seeking to effec-tively integrate merged nonprofit organizations should focus notonly on integrating formal structure but also pay more attention tocultivating informal networks among employees. In our study, theinformal and expressive networks of mentoring, friendship, andsocioemotional support are even less integrated than the formal and instrumental networks of workflow and problem solving. In anyorganizational setting, it is informal networks through which muchof the actual work is accomplished. These informal relationships canbe cultivated in the premerger stage through retreats, consultations,and joint planning.3
Third, nonprofit executives in a merged organization shouldencourage employees from the different partnering organizations toreciprocate the support they receive from others, whether theseinteractions are work related or non-work related and thereby facil-itate the formation of mutually beneficial relationships. We highlightthe importance of the mentoring network in bridging different typesof networking ties in a merged organization. We recommend thatorganizational socialization practices may increase opportunities foremployees with different organizational affiliations to build rela-tionships with each other. Because of the bridging role of mentoringnetworks, organizations may want to employ formal mentoring pro-grams. Matching employees across prior organizational affiliationsin these mentoring programs will increase employees’ comfort withseeking, and their likelihood of receiving, valuable support fromtheir mentors. We also found that new hires were well connected toboth groups. Although they might be too new to have sufficient sta-tus to connect people who have been there longer, new hires havethe potential of playing a brokering role.
Eight months aftercompletion of themerger, we found
that the twononprofit
organizations hadnot integrated
structurally as onesingle
organization.
ConclusionThis study used a social network analytical tool to investigate theextent to which two nonprofit organizations have integrated their work-force through formal and informal intraorganizational networksafter a merger. We discovered a prior organizational affiliation–based homophily within the merged organization: most interper-sonal relationships existing within these networks remainedamong the employees that worked together prior to the merger.However, the informal and expressive networks of mentoring,friendship, and socioemotional support are even more discon-nected than the formal and instrumental networks of work relationships and problem solving. We also discussed the bridgingrole of a mentoring network in connecting formal and informalnetworks in a merged organization. The results of our analysishelp guide managers on integration steps they might want to con-sider implementing.
Although our findings provide nonprofit organizations withsome guidance on how to effectively integrate the merged organiza-tions, we must be cautious about generalizing the findings from asingle case study to all nonprofit mergers. We conducted this studyeight months after the merger. It will be important to follow up withthe changes of these networks in a longitudinal study. The sametechnique presents a potential tool for use by researchers and non-profit managers for other cases and at different times. How employ-ees build interpersonal ties in a merged nonprofit is a complexphenomenon. We should recognize the broader context and morequalitative factors that are also important to understand in doing anoverall assessment of a merger. In the future, we will explore howthese networks influence individual employees’ perceived effective-ness of postmerger integration and investigate whether the efforts tocultivate ties among employees and improve integration processeswill help increase employees’ job satisfaction and sense of organiza-tional identity. Finally, a more comprehensive framework of post-merger assessment should include organizational outcomes, such aspreservation of services in the communities affected, range andbreadth of services provided, financial health of the merged organi-zations (budget size, staff numbers, and so on), and reputations ofthe merged organizations.
Notes1. The survey question on the workflow network was adopted from Brass (1981,
p. 332).2. UCINET cannot calculate the significance tests for E-I indexes at subgroup
and individual levels.3. We are grateful to Steve Smith for this suggestion.
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BIN CHEN is an assistant professor in the School of Public Affairs, BaruchCollege of the City University of New York.
JAMES KRAUSKOPF is distinguished lecturer and director of the Center forNonprofit Strategy and Management in the School of Public Affairs,Baruch College of the City University of New York.
