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2007

Mergers and Acquisitions: Team PerformanceAntonie J. JetterPortland State University, ajetter@pdx.edu

Richard SperryPortland State University

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Citation DetailsSperry, Richard; Jetter, Antonie J: Mergers and Acquisitions: Team Performance, in: Proceedings of PICMET 2007: Management ofConverging Technologies, pp. 211-218 August 5-9, 2007, Portland, OR

PICMET 2007 Proceedings, 5-9 August, Portland, Oregon - USA © 2007 PICMET

Mergers and Acquisitions: Team Performance

Richard Sperry, Antonie JetterDept. of Engineering and Technology Management, Portland State University, USA

Abstract-Many mergers and acquisitions in hightechnology do not yield the expected results and acquiredtechnologies fail to create value as planned. One explanation isthe difficulty to transfer and integrate the tacit components oftechnological knowledge, when work groups and teams aredisrupted. Mergers force work group and team members toredefine their roles, change their working approaches, anddevelop a shared vision and culture. The paper thereforeresearches high-tech mergers from a team perspective throughan exploratory case study of two formerly separate QualityAssurance groups that were integrated into one. The case studyidentifies three factors that impact team performance after amerger: strong vision, clear communication, and operationalsynergy built on an open team culture and a common workingapproach

I. INTRODUCTION

Technological innovations are the key to business successin high-tech industries. Corporations do not only create theminternally, but also use outside sources and "buy" innovationthough licensing, R&D contracting and consulting, hiringaway of key personnel or by taking over or merging withother companies. Mergers and Acquisitions (M&A) play amajor part in the business world. In 2006, over 3.8 trilliondollars were announced in transactions in the United Statesalone [15]. For major corporations, M&A are not singleevents, but integral part of their business strategies. Since2000, for example, Microsoft has acquired over 37companies, EMC has acquired 17 companies, Google hasacquired 25 companies, and Yahoo has acquired 27companies. [3].M&A yields control over the existing assets (patents,

product lines, and buildings) of the acquired company as wellas the future value created through the capabilities(employees and their intellectual property) of the acquiredcompany [7].

Studies indicate that somewhere between 50% and 80%of M&A fail [22]. While some of these failures can beattributed to a misjudgment of the value of the acquiredtechnologies [17], others are caused by the inability to fullyexploit the intellectual property of the employees in theacquired companies, as teams are disrupted and team roleshave to be redefined. Accordingly, Schweiger and Weberstate synergy is a factor that contributes to the success orfailure of a merger [21]. They also indicate people areaffected by M&A and there is often trauma and performanceimplications for both companies, as the integration ofworkforces means change that affects employee moral,

especially when layoffs, turnover, and loss of key personnelare at stake. The acquiring company must therefore properlyplan for change while sustaining value it acquired. Transitionteams are essential in the integration [14], however they donot suffice, especially since change often appears successfulat first, but after time it fails [10]. Larrson and Lubatkinindicate that in the long-term, fundamental change isnecessary for M&As to be successful and they state"Acculturation in mergers and acquisitions (M&As) is theoutcome of a cooperative process whereby the beliefs,assumptions, and values of two previously independent workforces form a jointly determined culture" [13]. They furtherstate "achieving acculturation represents a major post-acquisition challenge to acquiring firms."

This case study researches operational synergy betweentwo independent work forces working together through themelding of cultures with two high technology companies.Specific emphasis is on the Quality Assurance (QA)organization because it was the first functional organizationto merge work forces. The merger exceeded financialexpectations of market share but failed in meeting theoperational and budgetary objectives. The findings from thisexploratory research support the notion of acculturation andsynergy as important factors of the success of M&A. Thepaper presents these findings with specific focus on workteam performance. In addition to the introduction (Part I), itis structured in four parts: In part II, the characteristics andattributes of work group and team performance are defined.Part III describes the case study methodology for datacollection and summarizes the observations in the QAorganization. Part IV analyzes the findings and comparesthem to current supporting research. Part V discusses thefindings and gives recommendations for areas for furtherempirical research.

II. TEAMS

In this case study, the members of the work forceparticipate on project teams that produce new technologyproducts or upgrades to the existing product line.Understanding what disciplines or characteristics that createsoperational synergy was necessary for this research.Katzenbach and Smith identified basic disciplines thatdetermine team performance. They indicate teamperformance depends on having a common purpose, commonset of performance goals, a commonly agreed upon workingapproach, and they must hold one another mutuallyaccountable [9].

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In their research, they have characterized and identifiedvarious levels of performance, as shown in Figure 1 - TeamPerformance Curve, as adapted from [9 p84]. The higher theteam performance the higher level of synergy is found amongthe team members. A work group, which is a very commonstructure in large organizations as project teams are formedwith members from multiple matrix functional organizations.The primary characteristic that sets the work group apartfrom a real team or high performance team is that the workgroup's focus is on individual deliverables or contributions,where as a real team or high-performance team has acommon purpose, performance goal, and working approach,and a team members are accountable to one another.

High-PerformingLL l/ Team

0< | ~~~~~~~real

ffi 1 ~~~~Team

U-

wtY W,kihT

TEAM EFFECTIVENESS

Figure 1 - Team Performance Curve

Katzenbach and Smith have broken down teams intopseudo, potential, real, and high performance. A pseudo teamis the worst performer of all. A pseudo team is adysfunctional group of individuals who have calledthemselves a team with no common purpose or performancegoals. A potential team, on the other hand, tries to achieveperformance goals. However, it is weak in developing acommon working approach and it has not established a senseof accountability to each of the team members. A real teamhas established common working approach and isaccountable to each member on the team, in addition tohaving a common purpose and performance goals. A highperformance team goes one step further in that they deeplycommitted the personal growth and success of the each other.

III. CASE STUDY

A. MethodologyThe methodology consisted of researching and designing

an interview guide with questions that would probe team andgroup performance. The information from the interviewswas recorded for consistency and populated in a spreadsheetfor data analysis.

1) Research Questions and DesignThe purpose of this research was the exploration of the

impact of mergers on work groups and teams. Questions ofinterest included, but were not limited to the following: Howdo work groups and teams experience the change associatedwith a merger? How do the defining characteristics of a teamdescribed in the previous section evolve over time? How dothe merger and the subsequent changes affect employee'sability to function effectively as a team and create value? Dohigh-tech companies, on the team level, actively manage theprocess of acculturation after a merger?

For the exploratory first step of this research, a total ofthree case study companies were selected based on thefollowing criteria (1) high technology product that requiresexpert knowledge, (2) merger aims at the integration andfurther growth of value assets from both companies, (3) someexperience with M&A as a strategic choice. Criteria 2 and 3were chosen to exclude M&A activities that are planned toresult in the discontinuation of one company's value assetsand mergers that are "one-time-events," with no establishedmanagement practices.

Open-ended interviews were conducted in all three casestudy companies, capturing different team-membersperspectives on the merger. An interview guide was createdto ensure consistent and structured data gathering process forall interviewees. The interview portfolio was structured intofive areas of research: Purpose and Goals; WorkingApproach; Accountability; Commitment to Growth andSuccess, and External Impacts. External impacts looked atculture, policies, and retention of individuals. Each of theseareas was chosen because they probe and ascertain specificscharacteristics on organization team performance as well astask and human integration and its impact on the operationalsynergy [4].

The case study will be further discussed in the followingsections. To protect the privacy of the company, the names ofthe case study company and the people involved have beenaltered; however, the pertinent information remains true andall explanations of events and outcomes is factual.

2) Data CollectionThe case study company, FINCorp, is a leading fortune

company 500 listed on the NYSE. The company providesfinancial data processing services to more than 16,000 clientsworldwide, including banks, credit unions, financialplanners/investment advisers, insurance companies andagents, self-insured employers, lenders, and savingsinstitutions with over $3.4 billion in processing and servicesrevenues. FINCorp has 87 business units, which operate asseparate businesses. Many of these businesses were the resultof mergers and acquisitions.

FINTran, a business unit of FINCorp, is one of the fastest-growing financial data processing businesses withinFINCorp. In January of 2003, FINTran announced theacquisition of Financial Data Services (FDS), who is a

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competitor in same market. FINTran's revenue in 2003 wasover $68 million and FDS was over $140 in revenue. Asummary is provided in TABLE 1: A DESCRIPTION OF THECASE STUDY. In addition to processing financial transactionproduct line, FDS also operated a network that connectedacquirers and issuers of these financial transactions. Thebusiness objective for the acquisition thus was market shareand growth. At the time of acquisition, both organizationshad between 1,300 and 1,400 clients each. However, it wasthe TranX network that was growing rapidly and presented anew customer base to FINTran to fill the void in a maturemarket place.

Unlike acquisitions where the acquiring organizationswallows up a smaller organization, it was the opposite inthis case: FINTran serviced their clients with 235 employees,while FDS had 647, at the time of the acquisition. FINCorpchose not let FDS run as one of its 87 separate business unit,but rather chose to absorb FDS into FINTran. The integrationof the two companies resulted in an executive managementteam with key executive management personnel from bothcompanies. The FINTran CEO remained as CEO, while theCEO of FDS became the COO. Strategic planning, financialreporting, and budgetary requirements were conducted underthe umbrella of the FINCorp.

Revenue &O6 million $ 14U millionClient Base 1300-1400 1300-1400Employees 235 647

PCI: Transaction NOAC:Product Line Processing Transaction

Services Services

TranX: TheNetwork

EVP HR QAManager 2 QA AnalystsInterviews 2 QA Analysts 3rd Party Observer

3rd Party Observer

The merger has met and partially exceeded management'sbusiness objective by turning FINTran into a market leaderwith operations expanding world wide with revenuesexceeding $230 million in 2006. It did, however, not meet thefinancial operational and budgetary objectives and timelinesto merge and integrate workforces. After 3 years it is was stillriddled with organizational issues that were particularlyevident in the Quality Assurance (QA) department, whichwas the focus of the case study. The QA department waschosen because it was the first functional organization thatattempted to merge operations from both companies into asingle organization. The interviews consisted of eightindividuals. One of the interviewee's was the QA manager.The QA manager was an employee of FINTran, the acquiring

company, and was responsible for merging both QAdepartments into one organization. Two interviewees' wereQA analysts from FDS, the acquired company. Another twointerviewees' were QA analysts who were employees ofFINTran the acquiring company. Two additionalinterviewees' were outside consultants who acted as third-party observers, as they had no allegiance to eitherorganization. The last interviewee was with the ExecutiveVice President (EVP) of Human Resources who was heavilyinvolved defining the integration process and employeepolices, which included benefits and layoffs. In addition, theEVP was a member of the integration team.

Several of the interviewees had been involved with othermergers and acquisitions which provided additional insightinto the findings. Of particular interest was one interviewee,currently working at FINTran, who actually work for FDSwhen their company was acquired by FDS, but left due to theintegration issues.

Each interview took approximately 1 to 2 hours in lengthwith additional follow-up questions and observations onwork processes themselves. The raw interview informationwas captured on a voice recording machine and placed into aspreadsheet. The voice recorder allowed playback of theinterview to accurately reflect the interviewees' comments.The spreadsheet facilitated data analysis by sorting anddissection of acts or events.

B. Description ofFindingsThe data analysis was broken down by those disciplines

that differentiated the level of performance and synergy ofteam performance as identified by Katzenbach and Smith.The results of the findings are presented in the following sub-sections.

1) Common Purpose and GoalsThe executive team was a combination of both FINTran

and FDS key management personnel. The dynamics betweenthe CEO and COO in combination with separate productlines created a mixed environment. It was unclear as to whowas in control, FINTran or FDS. In fact, the employeesreferred to each side of the organization in terms of thetransaction processing product line, PCI (FINTran) andNOAC (FDS). This created a division, or in some cases acivil war amongst employees.

In the initial 2 years, the FINTran and FDS QAorganizations were managed separately. The reason givenwas because the skills were different to support the PCI andNOAC product lines and this contributed to them notunderstanding the company's vision. They attributed this toboth products were being offered and sold by separately. Asa result, they were unsure about the company's purpose andgoals. One of the interviewees mentioned that in the initialstages of the integration process the executive managementindicated the NOAC is the product line of choice; however,

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both product lines remain today with no clear vision for thefuture. This has led to more questions and uncertainty.

Everyone knew integration between the products was nosmall task. Additionally, the company was focused on addingnew products to compete in the market space. These newproducts were duplicated on both product lines; therebyincreasing the cost of ownership. The lack of product visioncontinues to fuel the "us" vs. "them."

Both QA organizations indicated at the functionalorganizational level, their purpose and goals were understoodas they remained the same; being committed to assuring thecode base is defect free. Each organization conducted theirQA testing independently with no overlap. This wasprimarily due the different skills sets and knowledge requiredfor testing. FINTran's PCI product line is comprised of third-party vendor software with minimal customization, where asthe FDS NOAC product line is heavily custom software.

In the summer of 2005, the COO left the organization torun another business unit in FINCorp. Within weeks of theannouncement major changes were made at the executivemanagement level as well their direct reports. This sent aclear message to all employees that FINTran was onecompany and will be led by one CEO. As result, both QAorganizations were merged under leadership of the FINTran'sQA manager. The manager reaffirmed that the merged QAorganization still had one common goal, which was defect-free code. This was reassuring to all. It was alsocommunicated to both QA organizations that no changeswould be made right away. The manager visited all QAemployees at their location to listen and gain insight into theissues still at hand, and learn more about the operations andworking approach.

2) Common WorkingApproachBefore and during initial years of the acquisition, both QA

organizations had completely different approaches to testing.The FINTran organization conducted their testing in a semi-structured environment. They were handed code fromresearch and development (R&D) ready to test. They usedthe high-level design that was created by R&D to create testscripts. Once testing was completed, they handed the codeback to R&D, who was then responsible for managing theinstallation in cooperation with the data center and networkoperations.

On the other hand, FDS had a very structured formalproject management process based on CMM best practices.Their approach to testing included formal test plans and testscripts, which were based on approved businessrequirements, business design (user interface and reportlayouts), and technical design specifications. The processalso required design specifications and requirements to beapproved by Sales, Development, QA, Operations, andImplementation at each step in the project lifecycle.

In the last quarter of 2004, the more formal FDS projectmanagement processes were introduced throughout the

enterprise. This signaled that FDS has won the battle and ledto resistance of the working approach as well as uncertaintywithin the FINTran organization. Although the FINTranrecognized the need for these more formal processes, theFINTran analysts commented the process and documentationwas overwhelming for them. One such comment was "ittakes 4 hours to document a 5 minute task."

The formal project management process required QAanalysts be active members in the development project, fromrequirements definition through installation, and providesupport in diagnosing production issues. This resulted in theFINTran QA analysts becoming more involved in each stepof the project and even began to manage the release intoproduction; thereby extending their responsibility andauthority.

In the first quarter of 2005, management approved aninitiative that required the integration between the PCI andNOAC product lines, thereby forcing a "limited" cooperationamong both QA groups. For the most part, product linetesting still remains as separate activities and the issue ofcontrol still exist.

By 2006, the growth of the company has resulted inapproximately 600 new clients, with 105 active projects withaggressive client commitments, and another 90+ projects tobe started. Both sides now believe areas of the projectmanagement process is breaking down as QA is seeingcontention for the same code base, thereby creatingdependencies among projects and creating delays to acquirethe code base to test.

3) Mutual Accountability and Commitment to SuccessDespite the "us vs. them" mentality that exists, the QA

analysts are committed to their profession so the acquisitiondid not change that commitment or their accountability toeach other. Their professional motivation was to ensuredefect-free code. The two organizations just had differentapproaches and methods. The FINTran organization alwaysperformed integration and system testing before releasingcode to production. This forced accountability among theFINTran QA analysts to ensure defect-free code and that onecomponent did not affect another. On the other hand, theNOAC product line was heavily customized with manycomponents. FDS QA Analysts had specific componentknowledge and their testing tasks were aligned by systemcomponent. It was typical on the NOAC product line to moveindividual components into production at different times.

As mentioned above, the cross-product line projectrequired the PCI QA environment to include NOAC platformfunctionality. In the beginning, it was made perfectly clearthat the building of the NOAC functionality in PCI QAenvironment would be done by a FDS QA analyst to ensurethe NOAC functionality was properly built. This decisionsignaled a lack of trust and commitment amongst theFINTran QA analysts. Due to time constraints, a FINTranQA analyst had to build the environment with consultative

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support from the FDS QA analyst. At the completion, theFINTran and FDS QA analysts saw this as a galvanizingevent that broke down a wall between the two organizationsand set the tone for joint commitment to success andaccountability in getting the job done without organizationalties.

IV. INTERPRETATION OF FINDINGS

The analysis of the case described above shows threereoccurring themes that seemed to have played a role for theproductivity of a merged project team: the lack of a strongvision, deficiencies in communication, and the absence ofoperational synergy. They will be further discussed in thefollowing sections.

A. VisionKotter indicates a clear vision is required any time

changes are made in a team, especially during integrationafter a company acquisition [10]. Kotter identifies that avision has three primary outcomes:1) Sets the direction for change2) Motivates people to help them overcome resistance3) Coordinates the actions of the individuals.

Kotter also emphasizes creating a vision requiresparticipation from the managers who have a stake in the newteam. Once the vision is defined, those managers must berole-models of that vision for the rest of the team.

It was observed the new executive management team didnot take the time to create a clear vision. As mentioned,management hinted that NOAC was the product line ofchoice, but clearly this was not the case as the two productscontinue to exist in the same market space. Skipping thevision setting, results in organizations that are not motivatedtoward any direction and are therefore in constant conflict[10]. In addition, the lack of a clear vision fostereduncertainty as to who was in control: The FINTranemployees believed they were in control since they acquiredFDS. On the other hand FDS thought they were in controlbecause the FDS project management process was beingimplemented enterprise wide, in addition to rumor thatNOAC was the product of choice. This ended up with a lackof manger buy-in and ultimately an unsuccessful integrationthat created an "us" vs. "them" attitude.

When the shared vision is finally defined andcommunicated, each person committed to fulfilling thatvision will be able to picture what life will be like when thevision is complete [10]: Having a common vision thateveryone understands and works toward reduces unnecessarywork, duplication of effort, and conflict amongst the teammembers from the acquired and acquiring companies.

B. CommunicationOrganizational communication to employees is possibly

one of the most important and yet commonly overlookedinstrument for engendering identification [20]. Stakeholdercommunication is important in every type of project as itbuilds a strong team and often delays in project and evenfailures can be attributed to poor communication [1]. Whencommunication is strong there is no confusion - goals areknown and clear [10]. The type of communication variesdepending on the phase of integration between twocompanies - pre-merger or planning, initial integration, orfull-swing post-integration as employees needs change due touncertainty and insecurity [8]. Communication becomes morecritical during the integration as employees experience theaffects of the M&A; therefore, it is important to continuallycommunicate the value of the M&A and how the employeeswill fit into the organization [19].

Although, this case study did not directly deal with thepre-merger announcement, literature suggests when anorganization first learns of the merger or acquisition theemployees natural reaction is ask how this will impact them.The main goal of communication is to diminish uncertaintyas found Schweiger's and Denisi's study of two plants(controlled and experimental) [18]. In their study theyobserved there is a negative impact due to uncertainty.Specifically, as uncertainty increases so does stress. Inaddition, satisfaction decreases along with the interaction andcommitment to remain with the organization. They furtherindicate that realistic communication in the form of themerger preview in the planning stage helps employeesthrough this process.

Therefore, it is better to be upfront than to not sayanything. Messmer indicates, "even if you don't have all thefacts yet, discuss all of what you are allowed to reveal,including issues that are under consideration and the timelinefor decisions [ 16]." Messmer also states "Earlycommunication is critical in any merger or acquisitionsituation. If employees receive the initial word of changewithout immediate follow-up information, the rumor mill willundoubtedly start turning." He goes on and furtherrecommends getting your staff involved by soliciting theirfeedback and ideas. The manager should communicate asopenly as possible to maintain the team trust and toencourage the team to communicate openly with him or her.If the manager is too secretive, then the team is left to makehis or her own assumptions, which are generally morepessimistic than reality [2] [5].

Once the integration phase begins, this period oftransition is critical to maintain communication for building astrong organization. It should be very clear who is in control.Just as the FINTran case shows, when people were unclearwho was in charge they tend to retreat to their comfort zonesand rely on old procedures [2]. Immediately following theacquisition, higher-level management and the direct managerneeds to reinforce and communicate the value of the M&A

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and its impact on both the acquired and acquiring employees.As Messmer indicated, the manager does not need to have anintegration plan. To minimize impact and feel value, peopleneed to continue doing what they were doing prior to theacquisition until the new strategy is developed. By solicitingfeedback and making people feel have a purpose the managercan help to restore their sense of worth and maintain theirproductivity [15] [19].

There is no prescribed set time for how long theintegration will take. It does vary by the type of innovation orvalue expected from the project team [7]. For full integrationof radical innovation, the period will take longer than if onlypartial integration and incremental innovation are expected[7]. Initial integration needs to allow for sufficient analysisand understanding but should not drag on unnecessarily.During this time, project team members are waiting to seehow they will fit into the new team. This is where a managerwith clear and strong leadership must be present. During thistime, no major changes will occur, but extensive time will bespent in a period of analysis. The manager should be buildingcommunication channels, which should start from the verybeginning and be ongoing [ 1]. Established clear andeffective channels of communication will aid the manager inunderstanding the core competencies of each team and theindividual strengths and weaknesses of project teammembers, as well as hearing and addressing their needs andconcerns [11].

As in the case of with the two QA organizations, theFINTran QA manager decided to listen before making anydecisions and restated the existing QA purpose and goals. Itwas also observed, waiting too long can lead to a feeling ofalienation in the project teams and also encourage an "us-vs.-them" attitude. Once these team divisions start to strengthen,the barriers can be very difficult to break down.

The initial integration phase should complete with astrong enough understanding of the big picture and thedetails that the manager can develop a strategy for mergingthe projects and building an effective team. Once sufficientanalysis and understanding is taken, it is time to move towardfull integration and the building of cooperative processes thatminimizes weaknesses while leveraging strengths. Thestrategy must support the goals and objectives as defined bythe vision of the larger organization, and those financial andvalue creation goals that were intended to be attained throughthe acquisition. Clearly, the lack of vision by FINTran madethis difficult.

According to Jemison and Haspeslagh, communicationchallenges to be addressed throughout integration include thefollowing points [7]:1. Establishing interface management2. Putting operations on an even keel3. Instilling a new sense of purpose4. Taking stock and establishing control.5. Strengthening the acquired organization6. Developing mutual understanding

7. Building credibility up and down.

C. Operational SynergyOperational synergy is based on organizations' culture

and common working approach.1) Culture

Acculturation requires two companies coming togetherand creating cooperative processes-based beliefs,assumptions, and values [13]. Larson and Lubatkin point outthat although it may be popular to blame M&A failures oncultural difference, their studies have found acculturationdepends on the "social controls" or the amount ofcoordination efforts expanded by the buying firm. Twocompanies don't simply clash because of their culturaldifferences. It is when the acquiring company imposes formalintegrating controls on its acquired firm's culture that it isless likely acculturation will be achieved. Conversely, themore informal social controls or shared experiences used, themore likely acculturation is achieved. They also foundremoving autonomy is not always an impediment toachieving acculturation as long as it is coupled with a highlevel of informal control and it was non-authoritarian.Birkinshaw et al found long-term success is achieved throughprocess management, communication, and sensitivity to theconcerns and expectations of the employees on both sides ofthe M&A [4]. Therefore, informal social controls, such assuch as training programs, site visits, and celebration orsocialization rituals are needed to support processmanagement, communication, and concerns and expectationsof the joint work forces.

It is interesting to note, from the outset FINCorp decidedto integrate the two companies and that key FDS executiveswould join the FINTran executive management team.Because FDS was not left to be it is own business unit andthere was the formation ofjoint executive management team,FINCorp was signaling to FDS it had to maintain and complywith the FINTran strategic planning, financial reporting, andbudgetary requirements. This implied a level of restriction toFDS or removal of autonomy [13]. In 2005, when the COOleft, the changes in management in combination with mergingthe organizations, FINTran further signaled to FDS thatautonomy was not longer tolerated and FINTran managementwas in charge.

Synergy between the work forces is required to ensure asuccessful working relationship and environment. The "us-vs.-them" attitude suggested a clash between FINTran andFDS cultures. However, despite this tension and "us-vs.-them" attitude, FINTran did achieve its objective of marketand growth. This may be part in due to FINTran and FDSbeing in the same industry. Trompenaars and Prud'Hommestate there are four types of organizational culture:competitive, formal, individualistic, and democratic [21]. Allcompanies have a culture dominant in one of these areas withsmall elements of the others. The change in two mergingcultures happens gradually over time and cannot be forced.

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This also suggests that at the lower levels, such as QAanalysts, they were able to get past the tension and jointlyunify forces to create joint or mutual accountability usinginformal social controls, thereby supporting Larson andLubatkin concept of informal social controls. The level ofsuccess from the galvanizing event with the building of theNOAC components within the PCI environment, signaled areal team can come together when there is mutualaccountability [9] [13].

2) Working ApproachThe working approach is one of interest. An effective

team is one that understands and has developed a commonapproach to working with one another to accomplish theirvision [9]. In the initial years, the two QA organizations wereleft to operate autonomously in physically remote locations.Skill-based strategic capabilities are often difficult to transferprimarily due to the knowledge, procedures, and culture thatare imbedded within the team [6] [7]. Haspeslagh andJemison further indicate the more complex the capabilitiesare, the longer it will take for the acquiring individual orteam to learn those skills, as was proved true in FINTran casestudy. This decision to keep the two QA groups autonomousand maintain a decentralized environment as not looseknowledgeable resources resulted in operational synergies,which was never achieved.

At the end of 2005, FINTran QA had to adopt the FDSproject management processes. The project managementprocesses instilled formal and structured social controls.Although the FINTran QA determined a need for a morestructured approach, there was not a sense of commitment tothis new approach and as a result, productivity decreased.Reasoning suggests that moving to a single set of processeswithout a clear understanding of how it supports theorganization's purpose and performance goals led toconfusion and tension within the FINTran QA organization.As indicated previously, Larsson and Lubatkin contend thatformal hierarchical controls threaten the social controls andthat coordination efforts require social controls that are non-authoritarian and informal, and show characteristics of strongcooperation, informal communication and teamwork [13].

Productivity is gained when the information is sharedwhen helping each member cross areas of responsibility. Thisis a common characteristic of mutual accountability and areal team working together [9]. The informal social controlspresented by the QA analysts worked effectively to breakdown walls, as signified by the galvanizing event in thebuilding the NOAC functionality within the PCI QAenvironment. It also signaled that employee or team memberempowerment will eliminate barriers [10]. As a result,operational synergy was created between the twoorganizations.

Jemison and Haspeslagh have outlined the followingconsiderations that should be taken before integrating teams,

which have been executing with separate workingapproaches include [7]:1. When value creation is deemed a strategic objective to

be been gained from an organization's culture it is bestto understand the culture and its capabilities first, beforethe transformation to the other culture. This applies toboth organizations transferred to another culture. Firsteach firm must learn about the other, and then all mustlearn about the capability to be transferred.

2. Enabling the willingness of people on both sides to worktogether. This requires eliminating the feeling that jobsecurity, and control over resources and direction is lostwhen one side or the other feels they have "won" thebattle.

3. It is necessary to identify and not assume the capabilitiesof the acquired organization before the transformation.

4. A clear alignment of project (team) goals to corporategoals is necessary to give a clear understanding of howthey impact the overall strategy. By understanding theirpurpose and goal, the expected results from their tasks isunderstood as well as its importance.

V. CONCLUSIONS AND RECOMMENDATIONS FORFURTHER RESEARCH

FINTran was successful in achieving its businessobjective of market share and growth, but failed in meetingits financial operational and budgetary objectives forintegrating work forces. It stands to reason that FINTran'smarket share and growth increased by having two productlines and a combined customer base. Conversely, the cost ofownership of maintaining staff to support two product linesin the same market space exceeds the costs and ownership ofone integrated product line. Furthermore financial,operational and budgetary integration was not achieved asfast and as completely as planned. This case study offeredinsight into the integration process and its problem areas:

Alhough FINTran's CEO was in charge and the formerFDS executives had to share responsibilities with otherFINTran executives as an attempt to remove autonomy, itwas not clear. Maintaining and selling of two product linesfostered two separate organizations with different skills setsat different locations. This made it very difficult to removeautonomy from the formerly independent FDS. Poorcommunication and lack of a clear vision by executivemanagement led to confusion as did the lack of a commonpurpose, thereby fostering an "us-vs.-them" attitude. Whenthe COO left, who originated from FDS, the currentmanagement team sent a clear signal that integration was amandate and FDS's autonomy will be removed.

The division of skills and product lines furthermore didnothing to instill a common working approach. When acommon project management process was implemented, itwas filled with formal controls that were met with resistance.The QA manager took the time and effort to listen, analyze,

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and build communication channels, while reassuringdepartment purpose and goals; however, little was done tobuild operational synergy between work forces. Although thelack of a vision made it difficult, operational synergy couldhave been accomplished by bridging of skills and knowledgeacross the two product lines. This is evident by the limitedproject that not only bridged skills and knowledge, but it alsocreated mutual accountability and commitment to success asresult of combined product effort.

This case study identified several barriers 1) lack of aclear vision and understanding of purpose 2) separation ofskills and ownership, and 3) no common working approachthat was understood. The current body of research oncommunication, vision setting, and performance goals isquite extensive, but leaves questions unanswered. How cantwo merged organization create and communicate a clearvision when all pieces of the M&A may not be understood atthe time of integration? In addition, what levels of socialcontrols are needed for integration of workforces and culturesand at what level of autonomy is required? While theseproblem areas are explored in this paper, the answersprovided are limited in scope. With further empirical researchinto these questions and issues, the functional manager orteam leader will have a greater understanding andimplementing operational strategies and will not bepowerless; as all of these factors can be managed throughoutthe acquisition process.

ACKNOWLEDGMENT

We would like to acknowledge Andrea Fox and TomLitterer for their contribution to this research.

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