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European Journal of Work andOrganizational PsychologyPublication details, including instructions for authorsand subscription information:http://www.tandfonline.com/loi/pewo20
Perceived procedural justiceand employee responses to anorganizational mergerJukka Lipponen , Maria-Elena Olkkonen & MinnaMoilanena Department of Social Psychology, University ofHelsinki, FinlandPublished online: 17 Feb 2007.
To cite this article: Jukka Lipponen , Maria-Elena Olkkonen & Minna Moilanen(2004) Perceived procedural justice and employee responses to an organizationalmerger, European Journal of Work and Organizational Psychology, 13:3, 391-413, DOI:10.1080/13594320444000146
To link to this article: http://dx.doi.org/10.1080/13594320444000146
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Perceived procedural justice and employee responses
to an organizational merger
Jukka Lipponen, Maria-Elena Olkkonen, and Minna MoilanenDepartment of Social Psychology, University of Helsinki, Finland
This study investigated the effects of procedural justice perceptions onemployee responses to an organizational merger. On the basis of research onorganizational justice and the social psychological theory of intergrouprelations, our main hypothesis was that perceived justice of the mergerimplementation is positively related to post-merger organizational identifica-tion and perceptions of common ingroup identity. post-merger identificationand common ingroup identity, in turn, were hypothesized to be related topositive attitudes towards the employees of the merger partner and to extra-role behaviour. Results based on a sample of 189 employees from a mergedorganization indicated partial support for our hypotheses. Implications forfurther research and merger management are discussed.
During the past decade there has been a sharp increase in organizationalchanges. As the corporate environment is becoming more competitive anddemanding, organizations are being compelled to find new ways ofincreasing their efficacy and competitiveness. One of those means by whichthey aim at these goals has been through organizational mergers andacquisitions. Despite the widespread popularity of such measures, however,research has indicated that a large number of mergers never achieve theirobjectives (Cartwright & Cooper, 1993). According to Marks and Mirvis(1986), 50 – 80% of mergers fail to meet expectations, no matter whatcriteria of success are used. Thus, questions concerning the factors affectingthe success and effective management of mergers are becoming increasinglyimportant.
# 2004 Psychology Press Ltd
http://www.tandf.co.uk/journals/pp/1359432X.html DOI: 10.1080/13594320444000146
Correspondence should be addressed to Jukka Lipponen, Department of Social Psychology,
00014 University of Helsinki, P.O. Box 54, Finland. Email: [email protected]
EUROPEAN JOURNAL OF WORK AND ORGANIZATIONAL PSYCHOLOGY, 2004, 13 (3), 391–413
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PREVIOUS RESEARCH ON MERGERS
According to Cartwright and Cooper (1993), research on organizationalmergers has been traditionally dominated by the economic approach.According to this view, mergers are understood mainly as financial andstrategic alliance, and their human side has not been of interest. Recently,however, researchers have begun to devote more attention to thepsychological processes involved. Consequently, it is now well-acknowl-edged that mergers may have many harmful effects on employee well-being and behaviour, including high levels of stress, increased staffturnover, lowered job satisfaction, and reduced organizational identifica-tion (e.g., Cartwright & Cooper, 1993). These negative consequences arealso increasingly being understood as a significant reason for mergerfailures.
These individual-level responses may, however, give only partial insightinto the psychology of the merger. According to recent research, itsintergroup nature should also be taken into account (Haunchild,Moreland, & Murrell, 1994; Terry, Carey, & Callan, 2001; Terry &O’Brien, 2001). Because a merger usually involves two differentorganizations, it may have important group-based and group-levelconsequences. Recent research has provided support for this proposition.Accordingly, various case studies have shown that the mergers are apotential arena for antagonistic intergroup relations and the occurrenceof us-versus-them dynamics (e.g., Haunschild et al., 1994; Terry & Callan,1998).
Mergers and change often raise issues of fair decision-makingprocedures in reallocation of rewards, space, status, and resourcesbetween the merger partners. The main goal of the present study wastwofold. First, on basis of literature on organizational justice (e.g.,Cropanzano, Byrne, Bobocel, & Rupp, 2001), we hypothesized thatperceived justice of the merger implementation would be positively relatedto identification with the new organization and common ingroup identity.Second, drawing on the social identity approach (e.g., Hogg & Abrams,1988; Tajfel & Turner, 1979) and the common ingroup identity model(e.g., Gaertner, Dovidio, Anastasio, Bachman, & Rust, 1993) wepredicted that post-merger identification and common ingroup identitywould mediate the relationship between perceived justice and ingroup biastowards the merger partner. To our knowledge, no previous research hasbeen conducted in which procedures used to carry out a merger areexamined as affecting intergroup relations between the merger partners.In this respect, our study could be considered to provide newcontributions to literature on both organizational justice and intergrouprelations.
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PROCEDURAL JUSTICE AS A PREDICTOR OFMERGER RESPONSES
The concept of procedural justice has been defined in the literature onorganizational justice as the perceived fairness of the formal procedures usedin allocation decision-making. Traditionally, it has been distinguished froma second form of justice, distributive justice, which in turn refers to theperceived fairness of the allocation outcomes (Cropanzano & Greenberg,1997; Folger & Cropanzano, 1998). Recently, also a third justice concept,interactional justice, has emerged in the literature, which refers to theperceived fairness of the interpersonal treatment received from the decision-makers or supervisors (e.g., Bies, 2001; Bies & Moag, 1986; Masterson,Lewis, Goldman, & Taylor, 2000). There is currently an ongoing debateamong justice researchers about whether interactional justice is anindependent form of justice (e.g., Bies, 2001; Harlos & Pinder, 1999;Masterson et al., 2000) or just a component of procedural justice (e.g., Tyler& Blader, 2000; Tyler, Degoey, & Smith, 1996). Given that many recentstudies have provided evidence for the empirical distinctiveness ofprocedural and interactional justice (e.g., Cropanzano, Prehar, & Chen,2002; Masterson et al., 2000), in this study their effects are investigatedseparately.
Despite the conceptual disagreement, however, researchers have longbeen unanimous in that both procedural and interactional justice have animportant impact on employee behaviour and attitudes, such as organiza-tional commitment, extra-role behaviour, and turnover intentions (seeCohen-Charash & Spector, 2001; Colquitt, Conlon, Wesson, Porter, & Ng,2001, for reviews). Nowadays it is also increasingly acknowledged thatprocedural and interactional justice may have differential effects on attitudesand behaviour. More specifically, it is suggested that procedural justice is abetter predictor of organization-related outcomes, whereas interactionaljustice is a better predictor of supervisor-related outcomes (e.g., Cohen-Charash & Spector, 2001; Masterson et al., 2000). Specifically, given thatorganizations often establish general formal procedures, procedural justiceperceptions tend to have the organization as a whole as their source.Interactional justice perceptions, in contrast, tend to focus on theinterpersonal behaviour of one’s immediate supervisor (e.g., Masterson etal., 2000). Consequently, procedural justice perceptions should be mainlyrelated to reactions towards the organization as a whole (i.e., organizationalcommitment), whereas interactional justice perceptions should be mainlyrelated to reactions towards one’s supervisor (i.e., satisfaction with one’ssupervisor) (Cropanzano et al., 2001, 2002; Masterson et al., 2000). Severalstudies have provided support for these predictions (e.g., Cropanzano et al.,2002; Masterson et al., 2000). Therefore, in this study we can assume that
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procedural justice is more strongly related to identification with the neworganization and common ingroup identity than is interactional justice.
To date, however, very little research has been conducted on the effects ofprocedural justice perceptions specifically in an organizational-mergercontext (but see Meyer, 2001, as an exception). Still, the literature does givesome interesting suggestions about the importance of the fairness of themerger implementation process (Citera &Rentsch, 1993; Lind, 2001; Novelli,Kirkman, & Shapiro, 1995). For example, Lind (2001) suggested in hisfairness heuristics theory that procedural justice perceptions are especiallypotent predictors of attitudes and behaviour during dramatic organizationalchange, of which the merger can be cited as (probably) the most dramaticexample (see also van den Bos, Lind, & Wilke, 2001). Similarly, van den Bos(2001) found in his experimental studies that procedural justice becomesimportant especially when people experience uncertainty.
Mergers inevitably entail many changes, which employees often judge asunfavourable and threatening, and this, in turn, may lead to uncertainty andreduced post-merger identification and rejection of the imposed commoningroup identity (van Leeuwen, van Knippenberg, & Ellemers, 2003). Citeraand Rentsch (1993) suggested that procedural justice considerations shouldbe included in both planning and implementing organizational acquisitions.They also argue that it is especially the fairness of the procedures forimplementing the changes, rather than the changes themselves that mattersto employees. Thus, it could be argued that the use of fair decision-makingprocedures and fair treatment could provide an effective way of managingand mitigating negative reactions to mergers. Based on van den Bos (2001),it is also possible that there is a significant interaction effect between fairprocedures and the amount of change, and that fair procedures matter morefor those who have personally experienced drastic changes (uncertainty) intheir work than for those who have experienced only minor changes.
THE GROUP VALUE MODEL: CONNECTING FAIRPROCEDURES AND MERGER OUTCOMES
When the focus is on the relation between procedural justice and mergeroutcomes, it is interesting to ask why procedural justice affects attitudes andbehaviour in the first place. One answer to this question has been offered bythe group value model (later renamed the group engagement model) ofprocedural justice developed by Tyler and his colleagues (Lind & Tyler,1988; Tyler & Blader, 2000, 2001; Tyler et al., 1996; Tyler & Lind, 1992).According to this model, perceived fairness of procedures and treatment isimportant because it conveys important identity-relevant information aboutthe quality of one’s relationships with authorities and group members. Inparticular, fair procedures and treatment indicate a positive, respectful
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position within the group and promote pride in the group membership.These feelings of respect and pride, in turn, are suggested to relate to groupidentification and further to other group-related attitudes and behaviours.Consistent with this proposition, a number of studies have found thatprocedural fairness is positively associated with group identification andthat this effect is at least partially mediated by feelings of pride and respect(e.g., Tyler & Blader, 2000; Tyler et al., 1996).
A SOCIAL IDENTITY APPROACH ON MERGERS
The social identity approach provides an interesting theoretical startingpoint for examining group-level reactions to mergers. It represents atheoretical framework for the relationship between the individual and thegroup, which has been under continuous development since the 1970s.Specifically, it consists of two distinct theories: the original social identitytheory (e.g., Tajfel & Turner, 1979), and the more recent self-categorizationtheory (Turner, Hogg, Oakes, Reicher, & Wetherell, 1987). Despite certaindifferences both theories share the same fundamental assumption thatindividuals define themselves in terms of their social group memberships andthat group-defined self-perception produces distinctive effects on socialbehaviour and intergroup relations (Hogg & Abrams, 1988; Turner, 1999).This means that the more an individual conceives of him- or herself in termsof membership in a group or, in other words, identifies with the group, themore his or her attitudes and behaviour are governed by this groupmembership (Hogg & Abrams, 1988; van Knippenberg & van Schie, 2000).
During the past 5 years, social identity principles have been increasinglyapplied in studying organizational psychological processes (e.g., Haslam,2001; Hogg & Terry, 2000). In this context, organizational membership isunderstood to reflect on the self-concept in the same way that other socialmemberships do (Ashforth & Mael, 1989; Hogg & Terry, 2000). Thus,organizational identification is often defined as ‘‘the perception of onenesswith or belonging to an organization, where the individual defines him orherself in terms of the organization(s) in which he or she is a member’’ (Mael& Ashforth, 1992, p. 104). Moreover, this organization-based self-conception is proposed to lead to activities that are congruent with thisidentity. Accordingly, empirical studies on organizational identificationhave linked it to various important outcomes, such as high levels of extra-role behaviour (Tyler & Blader, 2000, 2001), support for the organization(Mael & Ashforth, 1992), and low levels of turnover (e.g., Abrams &Randsley de Moura, 2001).
Although organizational identification has recently attracted a lot ofattention in the literature, there are only a few studies concentratingspecifically on identification in the context of organizational merger. Yet,
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these studies have shown that employee identification with the neworganization is a critical factor contributing to the success of the merger(Terry et al., 2001). For instance, a study by Terry et al. (2001) showed thatstrong identification was related to reduced ingroup bias and high levels oforganizational commitment, job satisfaction, and emotional well-being. Inaddition to considering the effects of post-merger identification, thesestudies have typically focused on investigating the role of status differencesbetween pre-merger organizations as the main predicting variables ofidentification. For example, the results of two studies by Terry (Terry et al.,2001; Terry & O’Brien, 2001) indicated that employees of the low-status pre-merger organization had lower levels of post-merger identification than theemployees of the high-status organization, and they also engaged in moreingroup bias.
Although of wide relevance and interest as such, the focus on status mayhave some limitations, especially if we think about the managerialimplications of the previous studies. Because of their static and unchange-able nature, factors such as organizational status and size are things thatcannot necessarily be actively managed and affected during the mergerprocess. Procedural and interactional justice, in contrast, are areas overwhich those who manage mergers have some control, and therefore, thepotential practical implications of this kind of research are appealing.
THE COMMON INGROUP IDENTITY MODEL
The common ingroup identity model (CIIM) developed by Gaertner et al.(1993) tries to explain by what prerequisites and in what way contactbetween groups leads to positive intergroup relations. Moreover, its coreassumption is that if members of different groups are encouraged torecategorize themselves as members of one superordinate category thatencompasses both the ingroup and the outgroup in a single social group,attitudes towards former outgroup members will become more positive.
Theoretically, the model is based on the social identity approach (Tajfel& Turner, 1979; Turner et al., 1987) and on the work of Brewer (1979).According to Brewer, intergroup bias seems to primarily represent pro-ingroup rather than anti-outgroup orientation. In fact, it is possible foroutgroup members to be regarded positively, but ingroup members areregarded and treated even more positively. Group formation brings ingroupmembers closer to the self, whereas the distance between the self andoutgroup members (non-ingroup members) remains relatively unchanged.Thus, circumstances that promote one-group representation are able toextend the cognitive and motivational processes that produce positivefeelings towards ingroup members to former outgroup members. The modelproposes that through a revised, more inclusive common ingroup identity,
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former outgroup members may also become beneficiaries of theseconsequences (Gaertner et al., 1993).
The model also proposes that contact conditions such as positiveinterdependence, equal status, egalitarian norms, and the degree ofinteraction may influence the extent to which members of different groupsperceive that they (1) share a common ingroup identity or (2) continue tohave completely separate group identities. Changing the representation fromtwo groups to one should reduce intergroup bias by producing more positivefeelings towards former outgroup members (Gaertner et al., 1993).
Empirical support for the common ingroup identity model comesprimarily from laboratory experiments. Thus, the major challenge it offersto the applied psychologist is to investigate whether it is realistic to expectrecategorization to overcome powerful intergroup boundaries outside thelaboratory. As proponents of the common ingroup identity modelthemselves pointed out (Gaertner et al., 1993), inducing a common ingroupidentity would certainly be more difficult in naturalistic settings. Due to thepotentially strong intergroup boundaries between two pre-merger organiza-tions, the organizational merger provides an interesting research site fortesting this.
Although the majority of studies have been laboratory experiments, somefield studies, for example, on the multicultural high school (Gaertner, Rust,Dovidio, Bachman, & Anastasio, 1994) and on bank mergers (Gaertner,Dovidio, & Bachman, 1996), have also been carried out in order to test theempirical validity of the common ingroup identity model. Generally, thesestudies have provided at least partial support for the model. Similarly, intheir merger study, Terry and her colleagues (2001) found evidence for themediating role of the common ingroup identity between favourableconditions of contact and positive employee reactions. However, in manyprevious studies, the representational mediators have accounted for rathersmall variance in intergroup bias. For example, in Gaertner et al.’s (1994)survey of 1357 high-school students, common ingroup identity accountedonly for 2% of the variance in affective intergroup bias. Moreover, there arealso studies showing no evidence for the mediating role of common ingroupidentity (e.g., Terry & O’Brien, 2001; Wittig & Molina, 2000). It, thus, seemsclear that further testing of the model, especially in real-world settings, isstill needed.
As already mentioned, the common ingroup identity model proposes thatcontact conditions are an important prerequisite for inducing perceptions ofa common identity, and further for improving intergroup relations.Although there are certain conceptual connections between proceduraljustice rules (e.g., consistency across people and situations) and positivecontact conditions proposed by the CIIM (e.g., egalitarian norms), it hasnot been tested previously whether the way in which the merging groups are
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combined in practice affects the development of the common ingroupidentity. Yet, it is quite logical to argue that the procedures through whichthe merger is implemented are a relevant part of the contact conditionsunder which the perception of a common ingroup identity either develops ordoes not.
THE PRESENT STUDY
The present study focused on the merger between two Finnish serviceorganizations. According to the organizations, the purpose of the mergerwas to reduce competition and to clear the structure in the field. There wereno marked differences in size, market position, or power between the pre-merger organizations. Further, the name given to the post-mergerorganization was a combination of the names of both pre-mergerorganizations, thus emphasizing their equality. Therefore, according to allavailable information, the merger in question could be considered a mergerbetween two equals. In addition, no layoffs were made during or due to themerger; on the contrary, more personnel were recruited during therestructuring process.
The main purpose of our study was to examine the role of perceivedfairness of the merger implementation process as a predictor of employeeresponses. On the basis of justice research and the common ingroup identitymodel, it was proposed that perceived justice will be positively related toorganizational identification and common ingroup identity, while theamount of changes will be negatively related to these DVs. Second, it wasproposed that organizational identification and common ingroup identitywill be positively related to extra-role behaviour and outgroup evaluationsand negatively related to ingroup bias. It was also predicted thatidentification and common ingroup identity will mediate the effects of thepredictors (procedural and interactional justice and amount of changes) ongroup evaluations and behaviour. In addition, the effect of perceived justiceon identification and common ingroup identity was predicted to bemoderated by the amount of experienced changes (see Figure 1, for asummary of hypotheses).
METHOD
Design and procedure
The data were collected by a self-administered questionnaire approximately11 months after the official merger announcement in 1998. At that time theactual merger process—the restructuring and implementation of changes—was just ending. Therefore, it was likely that during the data collection all
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merger-related issues were salient to employees and they could be expectedto be able to report them with reasonable accuracy.
On the request of the organization, questionnaires with preaddressedenvelopes were distributed to all 560 employees. All of the participants wereassured that the replies to the questionnaire would be anonymous and thatthey would not be made available to company personnel. Of the 560employees, 233 took part in the research (41.6%). Of these questionnaires,however, 44 were excluded either because the respondent had been hired lessthan a year ago and therefore had not been a member of either of the twomerging organizations (N=25) or because of too many missing answers(N=19). Of the remaining 189 respondents, 110 were from organization Aand 79 from organization B. The age of the respondents varied from 21 to 61years (M=43.9) and 76.2% of them were women. The mean tenure at theircurrent work was 13.9 years, ranging from 1 to 38 years. Most of therespondents were relatively highly educated: 78% had completed at least acollege-level degree.
Measures
Procedural justice. Employees’ perceptions of the fairness of the mergerprocess were assessed with the Finnish version (developed and tested byElovainio, Kivimaki, & Vahtera, 2002) of Moorman’s (1991) seven-itemprocedural justice scale. These items are based on Leventhal’s (1980) sixprocedural justice criteria (representativeness, consistency, bias suppression,accuracy, correctability, and ethicality) and focus on the structural aspects
Figure 1. Summary of hypotheses.
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of the decision-making process (e.g., ‘‘Everyone who was affected by thedecision had a chance to voice their opinion’’). In order to focus therespondents’ attention specifically on the merger, they were instructed tothink about the structural arrangements and the implementation of changesspecifically relating to the merger process. The descriptives and reliabilitiesof our scales are presented in Table 1.
Interactional justice. Employees’ perceptions of supervisory interac-tional justice during the merger process were assessed with the Finnishversion (Elovainio et al., 2002) of Moorman’s (1991) six-item interactionaljustice scale. The items focus on the sensitivity of the behaviour of thesupervisor and the justifications provided for his/her behaviour (e.g., ‘‘Mysupervisor showed concern for my rights as an employee’’). As with theprocedural justice scale, the employees were instructed to focus theirattention specifically on the behaviour of their supervisor relating to themerger process. In order to test the empirical distinctiveness of proceduraland interactional justice, a principal-component analysis (PCA) withvarimax rotation was computed. As expected, the PCA yielded two factors(Eigenvalue of factor 1: 6.3, factor 2: 2.1, variance explained by factor 1:45.3%, factor 2: 14.8%), which accounted for 60.1% of the variance. All theinteractional justice items loaded highly on the first factor and proceduraljustice items on the second, and there were no cross-loadings of .35 orhigher.
Change index. Each merger is a unique case and the actual changesthat take place during the restructuring process may considerably varyfrom merger to merger. In order to reliably assess the amount ofchanges a context-sensitive measure was needed. Therefore the amountof changes that each employee had experienced as a result of the mergerprocess was assessed on a cumulative index developed for this study incollaboration with the representatives of the focus organization. Thefinal measure consisted of a list of the seven most common, and in thisparticular context, most-relevant changes: (1) new work mates, (2) a newsupervisor, (3) a new IT system, (4) new work settings, (5) new jobtasks, (6) new job equipments, (7) the nature of the job had changed.The respondents were instructed to indicate whether they had (= 1) orhad not (= 0) experienced the change in question as a result of therestructuring.
Organizational identification. The extent to which the employeesidentified with the post-merger organization was measured on Mael andAshforth’s (1992) six-item organizational identification scale, e.g., ‘‘Whensomeone criticizes (name of the organization), it feels like a personal insult’’
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TABLE 1Means, standard deviations, and correlations of the measured variables (N=189)
Variable M SD 1 2 3 4 5 6 7 8 9
1. Procedural justicea 2.94 0.79 (.86)
2. Interactional justicea 3.64 1.00 .52*** (.91)
3. Change index 3.39 1.61 7 .13 7 .01 (—)
4. Common ingroup identitya 2.83 0.96 .39*** .21** 7 .18* (.71)
5. Identificationa 3.84 0.73 .44*** .32*** 7 .08 .33*** (.80)
6. Ingroup evaluationsb 5.52 0.71 .07 .16* .02 .24*** .15* (.88)
7. Outgroup evaluationsb 4.82 0.85 .34*** .29*** 7 .12 .43*** .20** .44*** (.88)
8. Ingroup biasc 0.70 0.73 7 .29*** 7 .16* .13 7 .23** 7 .07 .41*** .64** (—)
9. Extra-role behavioura 2.76 0.79 .05 .09 .11 .07 .27*** .07 7 .16* .22** (.80)
Alpha coefficients are on the diagonal. a5-point scales (1 – 5); b7-point scales (1 – 7); cIngroup bias scores were computed by subtracting the outgroup
evaluations from the ingroup evaluations, range from 7 6 to +6 (observed range from 7 1.1 to +3.5).
*p5 .05; **p5 .01; ***p5 .001, two-tailed.
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and ‘‘When I talk about (name of the organization), I usually say ‘we’ ratherthan ‘they’’’.
Common ingroup identity. This was measured using three items, twoof which were taken directly from previous studies on common ingroupidentity (e.g., Gaertner et al., 1994): ‘‘Despite the fact that the employeesof (name of the organization) consist of employees from both pre-mergerorganizations, I consider we all are just one group’’, and ‘‘At (name ofthe organization) it still feels as though employees originating from thedifferent organizations belong to two different groups’’. In the third itemthe options were ‘‘Two groups on the opposite sides (in competition)’’(= 1) to ‘‘Two groups, which are in cooperation (in the same boat)’’ (=5), separated on a 5-point scale. In order to test the distinctiveness of theorganizational identification and common ingroup identity scales, a PCAwith varimax rotation was computed. The PCA yielded two factors(Eigenvalue of factor 1: 3.5, factor 2: 1.5, variance explained by factor 1:38.4%, factor 2: 17.1%), which accounted for 55.5% of variance. All theorganizational identification items loaded clearly on the first factor andcommon ingroup identity items on the second, and there were no cross-loadings of .35 of higher.
Ingroup bias. Ingroup bias was operationalized in terms of thedifference between the evaluative ratings of the ingroup (respondent’s ownpre-merger organization) and of the outgroup (other pre-merger organiza-tion). Both evaluations were measured on a 7-point scale that required therespondents to rate the employees of the ingroup and outgroup on 16different work-related characteristics. Both scales consisted of eight positive(e.g., motivated, skilled) and eight negative (e.g., incompetent, lazy)adjectives.
Extra-role behaviour. Extra-role behaviour was conceptualized here‘‘as behaviour which benefits the organization and/or is intended tobenefit the organization, which is discretionary and which goes beyondexisting role expectations’’ (van Dyne, Cummings, & McLean Parks,1995, p. 218). Self-reported extra-role behaviour was measured on a six-item scale. The items were translated and modified from items used inprevious scales on extra-role behaviour by O’Reilly and Chatman,(1986), and on organizational altruism by Smith, Organ, and Near(1983), e.g., ‘‘I have volunteered for tasks that benefit (name of theorganization), even though not required’’, and ‘‘I have oriented newpeople at (name of the organization), even though not required’’. Therespondents were asked to report extra-role behaviour during the lastone-year period.
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RESULTS
Before the main analysis is introduced, a brief description of the sample isgiven. According to our organizational identification measure, therespondents relatively highly identified with the new organization(M=3.84, SD=0.73), whereas the common ingroup identity (M=2.83,SD=0.96) was rated somewhat below the scale mean. On the group-evaluation measure they rated both their ingroup (M=5.52, SD=0.71)and the outgroup (M=4.82, SD=0.85) above the scale mean, but theynevertheless significantly favoured their ingroup over the outgroup,t(188)=11.59, p5 .001 (two-tailed). Our measure of experienced changesrevealed, in turn, that most of the employees were affected by therestructuring process. Of the respondents, 97.9% reported at least onechange due to the merger (M=3.39, ranging from 0 to 7). More specifically,the most often-witnessed changes were getting new work mates (81.5%), anew supervisor (61.4%), and new work settings (56.1%). Further, the natureof the job had changed for 49.7% of the employees, 41.3% of them had anew IT system, 29.6% had new job tasks, and the job equipment waschanged for 19.6% of the respondents
Before conducting the main analysis, mean comparisons betweenemployees from the two pre-merger organizations were computed for allmeasures. The results indicated no differences between the employees fromthe two organizations.
The correlations between all the variables are presented in Table 1.All of the independent variables correlated significantly with commoningroup identity, and similarly with organizational identification, exceptthe number of changes. Common ingroup identity, in turn, was relatedto more positive outgroup evaluations, ingroup evaluations, and lowerlevels of ingroup bias, but it was not related to extra-role behaviour.Organizational identification was positively related to outgroup evalua-tion, ingroup evaluation, and extra-role behaviour, but it was not relatedto ingroup bias. In general, the variables used in the study showedstronger correlation with the outgroup than with the ingroup evalua-tions.
Multiple regression mediation analysis (Baron & Kenny, 1986;Kenny, Kashy, & Bolger, 1998) was used to test the mediating roleof organizational identification and common ingroup identity betweenthe predictors (procedural justice, interactional justice, and changeindex) and the dependent variables (group evaluations, ingroup bias,and extra-role behaviour). According to Kenny et al. (1998), in order tofind support for mediation, the following conditions should be met. Inthe first equation, it should be shown that the predictors aresignificantly related to the potential mediators. In the second equation,
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the predictors should be shown to be significantly related to thedependent variables. Finally, in the third last equation in which boththe predictors and the mediators are entered, the relationships betweenthe predictors and the dependent variables should have becomesignificantly smaller, indicating partial mediation, or nonsignificant,indicating full mediation.
Interactional justice, procedural justice, and number of changes as a setwere strong predictors of both mediators: common ingroup identity,R2=.170, p5 .001, and organizational identification, R2=.201, p5 .001.However, of the predictors procedural justice was the only one, which wassignificantly related to common ingroup identity and organizationalidentification (Table 2). In order to test whether the number of changesmoderated the relationship between justice variables and the outcomevariables, the regression analyses were also conducted by adding the(Change index 6 Procedural or Interactional justice) interaction termamong the predictors. Interactions were tested separately for each justicevariable, and the interaction term turned out to be nonsignificant in all fouranalyses (see Table 2).
Because the common ingroup identity model holds that the develop-ment of common ingroup identity reduces bias, especially through itseffect on outgroup attitudes, the mediating role of common ingroupidentity and post-merger identification were tested separately here foringroup evaluations, outgroup evaluations, and ingroup bias (Table 3).Interactional justice, procedural justice, and number of changes as a setwere strong predictors of outgroup evaluations, R2=.141, p5 .001, andwhen common ingroup identity and identification were added into theequation together with the predictors, R2=.236, p5 .001, the result wasan R2 change of .095 (9.5%), p5 .001. However, of the two potentialmediators only common ingroup identity was significantly related tooutgroup evaluations, b=.342, p5 .001. None of the predictorsremained significant after identification and common ingroup identitywere added into equation.
Identical mediation analysis was applied to ingroup bias, ingroupevaluations, and extra-role behaviour. Of the five predictors of ingroupbias (interactional justice, procedural justice, change index, and the twomediators) only one was significant: procedural justice was negativelyrelated to ingroup bias, b=– .253, p5 .01. Neither of the potentialmediators, common ingroup identity, or organizational identification, wererelated to ingroup bias. Of the five predictors of ingroup evaluations onlycommon ingroup identity was significant, b=.245, p5 .01, and of the fivepredictors of extra-role behaviour only one was significant: Organizationalidentification was positively related to extra-role behaviour, b=.290,p5 .001.
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TABLE 2Regressions predicting organizational identification and common ingroup identity
Identification (b) Common ingroup identity (b)
Step 1 Step 2 Step 3 Step 1 Step 2 Step 3
Independent variables
Interactional justice .13 .06 .13 .02 .02 .02
Procedural justice .37*** .37*** .37*** .37*** .37*** .37***
Change index 7 .09 7 .03 7 .03 7 .13 7 .13 7 .13
Interaction terms
Procedural6Change 7 .09 .01
Interactional6Change 7 .10 7 .00
R2 .20*** .21*** .21*** .17*** .17*** .17***
R2changea .01 .01 .00 .00
aR2 change compared to the same model without the interaction term.
*p5 .05; **p5 .01; ***p5 .001, two-tailed.
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TABLE 3Hierarchical regressions predicting ingroup and outgroup evaluations, ingroup bias, and extra-role behaviour
Ingroup evaluations(b) Outgroup evaluations (b) Ingroup bias (b) Extra-role behaviour (b)
Step 1 Step 2 Step 1 Step 2 Step 1 Step 2 Step 1 Step 2
Independent variables
Interactional justice .17 .15 .16 .15 7 .02 7 .03 .08 .04
Procedural justice 7 .01 7 .14 .25** .13 7 .27** 7 .25** .02 7 .09
Change index .02 .05 7 .08 7 .04 .10 .08 .12 .13
Mediating variables
Common ingroup identity .25** .34*** 7 .14 .03
Identification .09 7 .02 .10 .29***
R2 .03 .09** .14*** .24*** .09*** .11*** .02 .09**
Adjusted R2 .01 .06** .13*** .22*** .08*** .09*** .01 .07**
R2change .06** .10*** .02 .07**
Predictors were entered into regression equation procedure in blocks. Although not presented, tolerance values indicated no signs of multicollinearity
problems.
*p5 .05; **p5 .01; ***p5 .001, two-tailed.
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DISCUSSION
The main purpose of the present study was to test the role of proceduraljustice in explaining employee reactions to organizational merger. Morespecifically, it was hypothesized that procedural justice would be positivelyrelated to post-merger identification and the common ingroup identity,which in turn were predicted to affect outgroup evaluations, ingroup bias,and extra-role behaviour. As noted before, the effects of procedural justicehave not been previously tested in the context of organizational merger.Therefore, our results offer interesting insights into the psychology ofmergers, which have both theoretical and practical importance.
In general, the results of this study supported our prediction concerningthe importance of perceived procedural justice. As expected, proceduraljustice turned out to be a strong predictor for both post-mergerorganizational identification and the common ingroup identity. If theemployees perceived that the implementation process during the merger wasfair, the degree of identification and perceptions of the common ingroupidentity increased.
The final analysis revealed no significant relationships between interac-tional justice and the criteria variables in this study, although there weresignificant direct correlations. Even though this result is in line with ourhypothesis and with recent source-effect thinking (Cropanzano et al., 2001;Masterson et al., 2000), we should take into account one possiblemethodological weakness of this study, namely, the fact that for 61.4% ofrespondents their supervisor had changed during the restructuring. Thus,when making judgements about their supervisor, they may have actuallybeen evaluating more than one, which, in turn, could have caused difficultiesfor at least some of the respondents.
We also tested whether the amount of experienced change due to themerger was related to the merger outcomes. A weak negative correlation wasfound between change and the common ingroup identity. In the finalanalysis, however, change did not significantly predict any of the variablesstudied. Our results, thus, supports Citera and Rentsch’s (1993) reasoning,for example, that it is the degree of how fairly the changes are implementedrather than the changes themselves that matters.
In accordance with the work of van den Bos (2001; van den Bos et al.,2001) on uncertainty and justice, we also hypothesized that the effect of fairprocedures on post-merger identification and common ingroup identitywould be moderated by the number of changes, but our results indicated nosupport for this. It should be noticed, however, that we did not directlymeasure experienced uncertainty during the restructuring. We merely usedthe number of personally experienced changes in the work and workenvironment as an indicator of uncertainty based on the assumption that
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changes and uncertainty are often highly interrelated. There is, however, onepossible weakness in doing this, especially if we think about thecomparability of our findings to previous studies, in which uncertainty hasusually been negatively (e.g., van den Bos & Miedema, 2000) or neutrally(van den Bos, 2001) framed. Our measure, in turn, assessed the number ofexperienced changes, whereas the direction of change (positive or negative)was not separately assessed. It is possible that some of the changes ourrespondents reported were generally judged as negative, and others positive.In addition, even the same type of change may have been experienceddifferently by different respondents. It is, thus, possible that positively andnegatively framed uncertainty may have quite different consequences, whichis an interesting topic for future studies.
We also found that post-merger organizational identification waspositively related to self-reported extra-role behaviour. This result is in linewith the findings of many previous studies (e.g., Tyler & Blader, 2000, 2001),and it is important for at least two reasons. First, extra-role behaviour couldbe considered to be especially important in the merger context, becauseorganizations often lag behind on productivity directly afterwards. Second,in an uncertain situation after a merger, the duties and responsibilities ofindividual employees (in-role behaviour) could well be quite vague, whichalso underlines the importance of extra-role behaviour.
In this study, extra-role behaviour was measured by the self-ratings of therespondents. Many previous studies, in turn, have used supervisory ratingsfor assessing extra-role behaviour, and according to Organ and Ryan (1995),there is the danger that self-reports may partly contaminate the relationshipswith the common-method variance. Although self-rating was the onlyoption in this study because other-ratings (peer and supervisor) could not beused due to the restructuring, we must nevertheless be careful not to drawtoo strong a conclusion from our sample.
We can also compare our results with those of previous research oncommon ingroup identity model conducted in an organizational-mergercontext. As noted before, this research has produced mixed evidenceregarding the roles of post-merger organizational identification andcommon ingroup identity as mediators (Terry et al., 2001; Terry & O’Brien,2001). This research, like the study of Terry and O’Brien, provides onlypartial support for the model’s predictions. The common ingroup identitycorrelated positively with outgroup evaluations and negatively with ingroupbias just as expected, and it also turned out to be a mediator between theindependent variables and outgroup evaluations. However, neither commoningroup identity nor organizational identification was a mediator betweenthe independent variables and ingroup bias. This, in turn, was partly a resultof the unexpected significant positive relationships between commoningroup identity and ingroup evaluations. Thus, it is evident that the
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applicability of the common ingroup identity model in the organizational-merger context requires further research. Nevertheless, the results of thisstudy support our suggestion that perceived fairness of the way in which themerging groups are combined in practice is an important part of theconcrete intergroup contact conditions in which identification and percep-tions of unity develop.
Our results also have some connections to the recent research by vanLeeuwen et al. (2003), which was based on an idea that a sense of continuitycan preserve the pre-merger group identity and transfer it onto the post-merger group. Van Leeuwen et al. showed that the perceived continuation ofthe pre-merger identity in the post-merger group strengthened the positiverelationship between pre-merger identification and identification with thepost-merger group. It is possible to argue that the perceived continuation ofthe pre-merger identity reflects, at least to some degree, both the actualchanges that a merger entails and the procedures through which the changeswere carried out. For example, the perceived continuation of pre-mergeridentity in the post-merger group could be expected to be especially lowamong those employees who have experienced drastic changes together withunfair procedures. Consequently, an interesting line for further researchwould be to investigate the effects of changes and procedures on the sense ofcontinuity.
As with all research, this study has certain limitations. First, the merger inquestion was a merger of two equals with no layoffs, and we might ask if theresults can be generalized to acquisitions with drastic layoffs, for example.Second, although the reliabilities of our scales were generally very good,there are some reservations, which should be made especially regardingour measure of the experienced change. Although the respondents wereinstructed to report the changes they experienced specifically relating to therestructuring process, we cannot be absolutely sure if they were really able todifferentiate between these changes and the changes happening in theirworkplace in general.
One additional weakness of this study is that we did not measuredistributive justice, which alongside procedural justice probably also playsan important role in many mergers (e.g., how the resources or layoffs areallocated between the merger partners), and which may also profoundlyshape the post-merger intergroup climate (see, e.g., Meyer, 2001) andemployee responses (Citera & Rentsch, 1993). Together with the practicallimitations of the data collection, one reason for the omission of measuringdistributive justice here was the previous findings according to whichdistributive justice has a stronger impact on reactions directly related toallocation outcomes (e.g., pay satisfaction) than on attitudes towards theorganization as a whole (such as organizational identification) (e.g.,McFarlin & Sweeney, 1992; Sweeney & McFarlin, 1993). It should be
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noted, however, that the effects of distributive justice on employee attitudesmay be more pronounced in the context of an organizational merger orespecially an acquisition, due to the large number of allocation decisionsthey usually entail. According to the findings of the fair process effect, it isalso possible that distributive and procedural justice have interactive effectson employee responses (Brockner & Wiesenfeld, 1996). More specifically,distributive justice may be important especially if the procedures areperceived as unfair. Therefore, the role of distributive justice as a predictorof merger responses should be taken into account in future studies.
In addition, we cannot be absolutely sure about the causal direction ofthe variables in correlational studies like this one. For example, based on thegroup value model by Tyler and his colleagues (e.g., Tyler & Blader, 2000) itis quite plausible to argue that fair treatment increases identification.However, this causal direction can be reversed. According to Hinkle andBrown (1990), social identity theory (e.g., Tajfel & Turner, 1979) holds thatidentification with a certain group should lead to ingroup favouritism and topositive attitudes towards the group (Hinkle, Taylor, Fox-Cardamone, &Crook, 1989). Based on this line of reasoning it is possible to think thathighly identified employees would also be prone to evaluate theirorganization as fair, because fairness is generally considered as a positivegroup characteristic. Although the causal order cannot be as easily reversedin the case of procedural justice and common ingroup identity, it is clear thatwe need both controlled laboratory experiments and longitudinal fieldstudies to get a clearer picture of the role of fair procedures in mergers.
Leaving these limitations aside, we believe that our results are interestingnot only theoretically but also regarding their practical implications formerger management. Specifically, the findings concerning the importance ofprocedural justice may be used as a fruitful starting point in the planningand implementation of an organizational merger. Thus, it seems likely that ifthe merger is implemented in a fair manner using fair decision-makingprocesses, many negative outcomes (e.g., lowered identification andorganizational unity and negative outgroup attitudes) often associated withmergers could be mitigated.
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Manuscript received September 2003
Revised manuscript received January 2004
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