Description
A 3@month longitudinal study of organizational ideology in two merging public accounting firms and one
control firm (not involved in a merger) was undertaken using qualitative and quantitative methods. The
study found support for a four-phase model of the merger process, initially invobing a period of shock
and retreat, but then followed by rapid adaptation and change. This was in contrast to the control firm,
which appeared to react to the prevailing economic environment. Results highlighted the need to take
account of human and cuhural factors in mergers, and for management to take a proactive approach to
reintegration following mergers
Pergamon Accounring, OrganiraNom and So&~, Vol. 20, No. 1, pp 19-34, 1995
Copyright 0 1994 Blsevier science Ltd
Printed in Great Britain. AU rights reserved
0361-36Ew95 59.50+0.00
03613682(%)00024-7
PERCEPTIONS OF ORGANIZATIONAL IDEOLOGY FOLLOWING MERGER:
A LONGITUDINAL STUDY OF MERGING ACCOUNTING FIRMS*
NEAL M. ASHKANASY
Department of Commerce, Uni versi ty of Queensl and
and
SCOTT HOLMES
SchooC of Accountancy, Queensl and Uni versi ty of Technol ogy
Abstract
A 3@month longitudinal study of organizational ideology in two merging public accounting firms and one
control firm (not involved in a merger) was undertaken using qualitative and quantitative methods. The
study found support for a four-phase model of the merger process, initially invobing a period of shock
and retreat, but then followed by rapid adaptation and change. This was in contrast to the control firm,
which appeared to react to the prevailing economic environment. Results highlighted the need to take
account of human and cuhural factors in mergers, and for management to take a proactive approach to
reintegration following mergers
Following similar moves by U.S. and European
affiliates, public accounting firms in Australia
began a period of intense merger activity dur-
ing the later 1980s. This period was character-
ized by a series of announcements, retractions,
and complicated negotiations conducted at a
rapid pace (see Neales et al ., 1989). Negotia-
tion included economic issues and the procliv-
ities of overseas affiliates, but organizational
culture compatibility became a major issue.
Dobbie & Boreham (1989) for example,
quoted one observer who stated that “the
two firms (Arthur Andersen and Price-Water-
house) with their strong cultures and names
meant it was always going to be a difficult
exercise” (p. 105). In another instance,
Touche Ross Australia decided against follow-
ing the lead of overseas affiliates (who emerged
with Deloitte Haskins and Sells) because of a
perceived clash of cultures, fmally merging
with KPMG Peat Marwick, which was seen to
have a compatible culture (see Chartac
Accounti ng Report, 1989). Eventually, three
mergers took place during this period, redu-
cing the original “Big Eight” to the “Big Six”
(see Table 1).
In this study, we tracked the perceptions of
employees in three of these firms over 2 years
following the merger period. Two of the firms
had merged, while the third remained intact.
The overall aim of the present research was
to test a model of the merger adaptation pro-
* This study was supported by a Special Projects Grant from the University of Queensland, Australia. The authors thank
research assistant Caroline Alford and the management and staff of the participating public accounting firms for their
contribution. We also thank Robert Heath, Pam Rent, Don Stokes, and two anonymous reviewers for their helpful
comments on earlier drafts.
19
20 N. M. ASHRANASY and S. HOLMES
TABLE 1. Merger activities in the period 1988-1990
“Big Six” tirm Merger activity Effective datea
Arthur Andersen
Coopers & Lybrand
DeBoite Ross Tomatsu
Ernst & Young
KPMG Peat Mat-wick
Price Waterhouse
Proposed merger with Price-Waterhouse did not proceed
Not involved in merger negotiations
Merger of DeBoite, Sells, & Haskins with overseas parent of
Touche Ross, following breakdown of negotiations with
Touche Ross Australia
New firm formed from merger of Ernst L Whinney and
Arthur Young
Merged with Touch Ross Australia, but name unchanged
Prooosed merger with Arthur Anderson did not oroceed
September 1989b
na
November 1989
10 October 1989
31 March 1990
Seotember 1989b
%e effective merger date is the date at which the formal arrangements for amalgamation became effective. These include
st~ctural, financial, and organizational factors, but not physical relocation.
bDate of the announcement that the merger of Price Waterhouse and Arthur Anderson would not proceed.
cess, where employee perceptions in the mer-
ging fums were expected to contrast with the
pattern of perceptions observed in the non-
merging firm. The present studies differ from
earlier research into mergers (e.g. Buono et al .,
1985; Malekzadeh & Nahavandi, 1990) in that it
focused on public accounting firms where the
majority of the employees involved are pro-
fessional staff (see Corcoran, 1989). Further,
by focusing on perceptions of accounting
staff in a merger situation, the present
research represents an extension of previous
work which has examined structural determi-
nants of accountant’s perceptions and beha-
viours (e.g. Bamber 81 Snowball, 1988;
Ferris & Dillard, 1988; Pratt & Beaulieu,
1992).
The present study was based on an organiza-
tional culture perspective, defined by Dent
(1991) as a system of beliefs and values which
underlie the structural and operational para-
meters of organizational life. This perspective
is appropriate because organizational culture
appears to be an instrumental part of the socia-
lization process in accounting organizations
(Chatman, 1991) and to be related to struc-
tural characteristics of these firms (Pratt &
Beaulieu, 1992). Researchers such as Chatter-
jee et al . (1992) Hall & Norbum (1989) and
Nahavandi & Malekzadeh (1988) have applied
the culture concept to studies of mergers, and
have generally established that successful out-
comes require cuhural compatibility. More
recently, Cartwright 81 Cooper (1992, 1993)
have suggested rules for culture compatibility,
based on four dimensions. These dimensions,
originally proposed by Harrison (1972) encom-
pass a focus on power, roles, task achievement,
and personal development. Cartwright and
Cooper suggest that the critical factor in the
success or otherwise of organizational mergers
is the degree of constraint that the major
partner in the merger places on members of
the minor partner; coupled with the degree
to which members of the minor partner are
prepared to accept the constraints imposed
on them. On this basis, they argue that success-
ful mergers require one of the following
combinations of Harrison’s (1972) cultural
dimensions: (1) a personal development ct.&
ture in the dominant partner; (2) a role culture
in the dominant partner together with either a
power or role culture in the minor partner; or
(3) a task culture in the dominant partner, and
not a personal development culture in the
minor partner.
Corwin et al . (1991) have argued that an
additional requirement for merger success is a
set of management strategies designed specifi-
cally to cope with stress and uncertainty. Evi-
dence from the wider merger literature (e.g.
Nahavandi & Malekzadeh, 1988; Robin0 &
DeMeuse, 1985; Schweiger & DeNisi, 1991;
Sinetar, 1981) indicates that merging firms go
through a process of stressful destabilization
that must be dealt with if the merger is to be
ACCOUNTING FIRM MERGER 21
successful. A more structured approach to this
process has been suggested by Gill & Foulder
(1978), and involves four phases. The first
phase, shock, occurs where members first
become aware of the threat to their existing
structures and career prospects, and the merg-
ing firm enters into a state of disorganization
and confusion. The second phase, retreat, is
characterized by resistance to change, as orga-
nizational members attempt to maintain the
existing structure (with which they feel confi-
dent and familiar). In the next stage, adapta-
tion, members begin to face the reality of the
situation, and the likely need to forego their
existing organizational structure. Finally, in
the fourth phase, change, organizational mem-
bers begin to address problems appropriate to
the new circumstances in which they find
themselves, and to seek workable solutions.
Buono et al. (1985) argued that subjective
impressions should be the primary focus in
studies of organizational culture in mergers,
because it is these impressions which ulti-
mately determine the success or failure of mer-
gers. They defined subjective culture as
members’ perceptions of the norms and belief
systems prevailing in the organization. Harrison
(1975) referred to this as organizational ideol-
ogy. In the present study, therefore, we used
qualitative and quantitative measures to study
members’ subjective impressions of organiza-
tional ideology in three of the original “Big
Eight” public accounting firms in Australia.
Two of the firms were involved in a merger
during this period. The merger was preceded
by public announcements that the firms were
merging because they had compatible cultures,
and senior partners and management staff in
both organizations worked closely following
the announcement to ensure a “smooth” tran-
sition. In this respect, the merger could be
categorized as “collaborative” (Napier, 1989).
The third firm, which has not been involved in
a major merger in the past decade, was
included to act as a control for the effect of
environmental factors. We expected to see a
pattern of changing perceptions in the merging
firms which corresponded to the four phases of
adaptation described by Gill & Foulder (1978)
and a contrasting pattern of perceptions in the
non-merging firm, as that firm attempted to deal
with the changes occurring in its environment.
METHOD
Participating firms
Those who participated in the study were
partners and professional staff of three Austra-
lian public accounting firms. Management of
the three lirms, referred to here as “Major”,
“Minor”, and “Control”, agreed to allow parti-
cipation on the proviso that the only informa-
tion which would be divulged about the Iirms
is that they were “Big Eight” firms, operating in
one Australian metropolitan location. At the
effective date of the merger, the tirms
employed 540, 320, and 460 people, respec-
tively, in the locations surveyed. Following
the merger, the merged firm, referred to here
as “Merged”, employed 890 people in the
office studied.
Procedure
The study was carried out using “triangu-
lation” (Jick, 1979), relying on convergence of
qualitative and quantitative data collection stra-
tegies. Qualitative data were collected using
observation and a mixture of informal and for-
mal interviews. Quantitative data on members’
perceptions of organizational ideology were
measured using a modified version of Harri-
son’s (1975) Organizational Ideology Question-
naire.
The present research also includes elements
of action research, defined by Carr & Kemmis
(1986) as a cyclic process of observation and
intervention which provides, in addition to the-
oretical insights for the researcher, practical
benefits for the researched. In this respect,
the overall research program was designed
and executed with the active cooperation of
the management of the organizations being
researched. Whyte et al. (1991) have defined
this process more specifically as “participatory
action research”. They argue that this process
22 N. M. ASHKANASY and S. HOLMES
facilitates a better understanding of social pro-
cesses in organizations, and fulfils an ethical
responsibility to provide a return for research
participation. On the other hand, action
research can be viewed as compromising the
strict rules of scientific research because
experimental subjects are primed to act in con-
cert with the experimenters’ preconceptions
(see Cook & Campbell, 1979). This potential
shortcoming is acknowledged, but was mini-
mized in the present study because, although
regular feedback was given to senior partners,
these individuals did not notify staff members
of the details of the feedback. Instead, they
instituted firm-wide policies and initiatives to
address the issues brought to their attention.
Observation and informal interviews. In
keeping with the action research model
adopted for the present study, close liaison
was maintained with partners from participat-
ing firms prior to, and during the merger per-
iod. In 1989, when the decision was made that
Minor would merge with Major, it was gener-
ally acknowledged that this was because of a
perceived “cultural match” between the par-
ties. On this basis, we were given informal
access to report on staff perceptions of the
merger process (similar to the approach
adopted by Meyer, 1982), to conduct formal
interviews, and to distribute survey question-
naires.*Control subsequently agreed to partici-
pate in the study (as an example of a non-
merging Iirm).
Formal interviews. These were conducted
using Dick’s (1986) convergent interviewing
technique, which involves a tightly structured
interview process, leaving the interview con-
tent unstructured. The process requires two
interviewers who talk to different respon-
dents. Interviewers start by asking a broad
question, and then leave the respondent to
talk. Subsequent interviews are then progres-
sively refined to test emerging issues and to
seek explanations for divergent views. This
process is continued until common areas of
concern within the organization have been
identified and clarified. Dick (1986) maintains
that the process is efficient in that convergence
can normally be achieved in three rounds of
interviews. The interviews in the present
instance were carried out by interviewers
who had no other contacts with the organiza-
tions prior to, or during the study. Participants
were selected so as to provide a representative
sample across hierarchical levels and organiza-
tional divisions (described by Dick, 1986, as a
“diagonal slice”).
Organizational ideology survey. A modified
version of Harrison’s (1975) Organizational
Ideology Questionnaire was used in the pre-
sent study. This instrument is based on four
dimensions: power relationships, role defini-
tion, task accomplishment, and selfdevelop-
ment. In the original version of the scale,
respondents are asked to rank the importance
of the four dimensions in relation to 15 organi-
zational issues. Shortened versions of the scale
have been used successfully to describe organi-
zational culture by Cartwright & Cooper (1992,
1993) and Handy (1979).
The results of the initial convergent inter-
views provided a pattern of responses which
was consistent with the four dimensions pro-
posed by Harrison (1972) but suggested that
some modifications were needed to match the
environment of the present study. The adapted
scale included 12 issues (see Table 2). Respon-
dents were required to rank the four dimen-
sions for each of the 12 issues, and for three
scenarios: present, future, and ideal (a total of
144 scores). The Appendix shows an example
of one of the questionnaire items.’ Scores on
each dimension were calculated by adding
ranks on each of the 12 issues, and subtracting
the total from 48. The resulting scores thus
ranged from 0 (least importance: all items
ranked 4) to 36 (most importance: all items
ranked 1).
’ Full copies of questionnaire instruments used in this study may be obtained by writing to Dr N. M. Ashkanasy, Commerce
Department, University of Queensland, Brisbane, Queensland 4072, Australia.
ACCOUNTING FIRM MERGER 23
TABLE 2. Oraanizational Ideolostv Ouestionnaire: structure and items
Power The extent that power is exercised by management
Role ‘Ihe extent that roles are emphasized in the organization
Task The emphasis placed on the tasks that are done in the organization
Self The regard given to individuals at the work-face
Present
Future
I deal
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Dimensions
Scenarios
The ideology perceived to exist in the organization at present
The ideology respondents expected the organization to have in the future
Respondents’ preferred ideology
Questionnaire items
What are the characteristics of good bosses?
What are the characteristics of good subordinates?
What characterizes achievers in the organization?
How does the organization treat its employees?
How are employees controlled and influenced?
How are tasks assigned?
How is conflict handled in the organization?
What motivates work?
What motivates people to cooperate?
What is the organizations’ attitude to training employees?
How are women treated?
What is an appropriate communication structure?
The questionnaires were distributed through
the personnel offices of the participating orga-
nizations. Questionnaires were sent to a ran-
dom sample of professional employees up to
the level of manager, accompanied by a cover-
ing memorandum from a senior partner urging
participation, and a pre-paid return envelope.
Complete confidentiality was maintained, and
neither of the researchers were in any way
aware of which individuals participated.
Timing of procedures
The research process began 3 months before
the formal merger announcement, and even-
tuahy spanned a 30-month period, including
five administrations of the modified Harrison
(1975) questionnaire, and two rounds of con-
vergent interviews (see Fig. 1). Informal and
formal contacts with the participating organiza-
tions were well established by the time merger
negotiations began, and close iiaison with aI
three organizations was maintained through-
out the negotiation period. The procedure
was accomplished in two phases. Phase 1
lasted 12 months, and included the first round
of convergent interviews (conducted 1 month
Phase 1
T
Merger negotlatlon Formal and informal
period contacts wth the
orgamzstions eslablashed
1 Month wor announcement --Convergent ,nterV,eWs
Merger announcement - -
2 Months after announcement - - 1 st Ideology survey
Merger effected --
5 Months after announcement -- 2nd ‘dwlogy Survey
Formal and informal
(’ contacts continued
PhyhuA relocatiin begun _ _
12 Months RfM ~II~~u~~ww~, _ _ 3rd ideology survey
Physical relocation complete _
Phase 2
Remadlal strategies begun to
reduce uncenainty. and to
I
Consulting adwce given
prormote ccmmun~catffn and
to organizations
integration
15 Months after announcement
17 Months after announcement
Remedial strategies conbnued
27 Months after a”no”“cemant
2nd convergent interviews
4th ldeofogy survey
Continued mon110ring Of
effectiveness of remedial
stratsgies
5th Ideology survey
Fig. 1. Process time-line.
24 N. M. ASHKANASY and S. HOLMES
prior to the merger announcement), and three
surveys, conducted 2, 6, and 12 months after
the merger announcement. Phase 2 began 15
months after the merger announcement, with a
second round of convergent interviews. These
were followed, 2 months later, by a fourth
ideology survey. FinaIIy, the filth survey was
issued 27 months after the merger announce-
ment. During Phase 1 most staff continued to
be located in the offices of their pre-merger
firms, while aII were relocated into new office
accommodation prior to the start of Phase 2.
Respondents in Phase 1 were asked to pro-
vide an identity code which would lx known
only to themselves. This was to aIIow for com-
parison of individual responses over time. The
initial response rate was encouraging (132
returned from 300 issued), but only 27 ques-
tionnaires were returned in the third survey.
It was therefore necessary to recruit new sam-
ples in Phase 2. Participants in Phase 2 were
selected, however, in order to include some of
those who participated in Phase 1. Comparison
of results obtained from this group and new
participants showed that there were no signifi-
cant differences in scores.’
Survey instrument reliabilfty
The measurement scale used in this study
was a modified version of Harrison’s (1975)
Organizational Ideology Questionnaire. This
version was shorter (12 items) than the origi-
naI (15 items), and included some revised
items. After each of the five surveys, Cronbach
alpha values were calculated for all the twelve
(4 dimensions X 3 scenarios) 12-item scales.
Results provided alpha values in the range
0.72-0.87. Given the disparity of subject mat-
ter covered in the 12 items, this is a sound
result, and suggests that the scales were tap
ping a unitary construct in aII cases.
RESULTS
Consistent with the triangulated approach
adopted for the present study, qualitative and
quantitative results are presented and discussed
in chronological sequence (see Meyer, 1982).
Data analysis for aII five surveys was performed
using a 2-way MANOVA for each of the three
scenarios (present, future, and ideal). Indepen-
dent variables were firm (Major, Minor, Con-
trol) and division (audit, non-audit), while
dependent variables were scores on the four
dimensions. Summary statistics (multivariate
F-ratios) for Iirm main effects are presented in
Table 3.3 Mean and standard deviations for
scores on the four dimensions of the Harrison
(1975) scale (power, role, task, and seIf) are
given, where appropriate, in tables for each
scenario. The tables are accompanied by notes
giving results of post hoc (Tukey) evaluation of
TABLE 3. Multivariate Ratios for firm main effects
Scenario
SUtVCV d.f. Present Future Ideal
1 8,252 3.17” 5.20” 0.87
2 8,114 4.46” 3.68” 1.92
3 8,42 2.23’ 3.69” 0.32
4 4,106 0.45 0.32 0.50
5 4,91 0.34 0.67 0.76
l p c 0.05, ” p
A 3@month longitudinal study of organizational ideology in two merging public accounting firms and one
control firm (not involved in a merger) was undertaken using qualitative and quantitative methods. The
study found support for a four-phase model of the merger process, initially invobing a period of shock
and retreat, but then followed by rapid adaptation and change. This was in contrast to the control firm,
which appeared to react to the prevailing economic environment. Results highlighted the need to take
account of human and cuhural factors in mergers, and for management to take a proactive approach to
reintegration following mergers
Pergamon Accounring, OrganiraNom and So&~, Vol. 20, No. 1, pp 19-34, 1995
Copyright 0 1994 Blsevier science Ltd
Printed in Great Britain. AU rights reserved
0361-36Ew95 59.50+0.00
03613682(%)00024-7
PERCEPTIONS OF ORGANIZATIONAL IDEOLOGY FOLLOWING MERGER:
A LONGITUDINAL STUDY OF MERGING ACCOUNTING FIRMS*
NEAL M. ASHKANASY
Department of Commerce, Uni versi ty of Queensl and
and
SCOTT HOLMES
SchooC of Accountancy, Queensl and Uni versi ty of Technol ogy
Abstract
A 3@month longitudinal study of organizational ideology in two merging public accounting firms and one
control firm (not involved in a merger) was undertaken using qualitative and quantitative methods. The
study found support for a four-phase model of the merger process, initially invobing a period of shock
and retreat, but then followed by rapid adaptation and change. This was in contrast to the control firm,
which appeared to react to the prevailing economic environment. Results highlighted the need to take
account of human and cuhural factors in mergers, and for management to take a proactive approach to
reintegration following mergers
Following similar moves by U.S. and European
affiliates, public accounting firms in Australia
began a period of intense merger activity dur-
ing the later 1980s. This period was character-
ized by a series of announcements, retractions,
and complicated negotiations conducted at a
rapid pace (see Neales et al ., 1989). Negotia-
tion included economic issues and the procliv-
ities of overseas affiliates, but organizational
culture compatibility became a major issue.
Dobbie & Boreham (1989) for example,
quoted one observer who stated that “the
two firms (Arthur Andersen and Price-Water-
house) with their strong cultures and names
meant it was always going to be a difficult
exercise” (p. 105). In another instance,
Touche Ross Australia decided against follow-
ing the lead of overseas affiliates (who emerged
with Deloitte Haskins and Sells) because of a
perceived clash of cultures, fmally merging
with KPMG Peat Marwick, which was seen to
have a compatible culture (see Chartac
Accounti ng Report, 1989). Eventually, three
mergers took place during this period, redu-
cing the original “Big Eight” to the “Big Six”
(see Table 1).
In this study, we tracked the perceptions of
employees in three of these firms over 2 years
following the merger period. Two of the firms
had merged, while the third remained intact.
The overall aim of the present research was
to test a model of the merger adaptation pro-
* This study was supported by a Special Projects Grant from the University of Queensland, Australia. The authors thank
research assistant Caroline Alford and the management and staff of the participating public accounting firms for their
contribution. We also thank Robert Heath, Pam Rent, Don Stokes, and two anonymous reviewers for their helpful
comments on earlier drafts.
19
20 N. M. ASHRANASY and S. HOLMES
TABLE 1. Merger activities in the period 1988-1990
“Big Six” tirm Merger activity Effective datea
Arthur Andersen
Coopers & Lybrand
DeBoite Ross Tomatsu
Ernst & Young
KPMG Peat Mat-wick
Price Waterhouse
Proposed merger with Price-Waterhouse did not proceed
Not involved in merger negotiations
Merger of DeBoite, Sells, & Haskins with overseas parent of
Touche Ross, following breakdown of negotiations with
Touche Ross Australia
New firm formed from merger of Ernst L Whinney and
Arthur Young
Merged with Touch Ross Australia, but name unchanged
Prooosed merger with Arthur Anderson did not oroceed
September 1989b
na
November 1989
10 October 1989
31 March 1990
Seotember 1989b
%e effective merger date is the date at which the formal arrangements for amalgamation became effective. These include
st~ctural, financial, and organizational factors, but not physical relocation.
bDate of the announcement that the merger of Price Waterhouse and Arthur Anderson would not proceed.
cess, where employee perceptions in the mer-
ging fums were expected to contrast with the
pattern of perceptions observed in the non-
merging firm. The present studies differ from
earlier research into mergers (e.g. Buono et al .,
1985; Malekzadeh & Nahavandi, 1990) in that it
focused on public accounting firms where the
majority of the employees involved are pro-
fessional staff (see Corcoran, 1989). Further,
by focusing on perceptions of accounting
staff in a merger situation, the present
research represents an extension of previous
work which has examined structural determi-
nants of accountant’s perceptions and beha-
viours (e.g. Bamber 81 Snowball, 1988;
Ferris & Dillard, 1988; Pratt & Beaulieu,
1992).
The present study was based on an organiza-
tional culture perspective, defined by Dent
(1991) as a system of beliefs and values which
underlie the structural and operational para-
meters of organizational life. This perspective
is appropriate because organizational culture
appears to be an instrumental part of the socia-
lization process in accounting organizations
(Chatman, 1991) and to be related to struc-
tural characteristics of these firms (Pratt &
Beaulieu, 1992). Researchers such as Chatter-
jee et al . (1992) Hall & Norbum (1989) and
Nahavandi & Malekzadeh (1988) have applied
the culture concept to studies of mergers, and
have generally established that successful out-
comes require cuhural compatibility. More
recently, Cartwright 81 Cooper (1992, 1993)
have suggested rules for culture compatibility,
based on four dimensions. These dimensions,
originally proposed by Harrison (1972) encom-
pass a focus on power, roles, task achievement,
and personal development. Cartwright and
Cooper suggest that the critical factor in the
success or otherwise of organizational mergers
is the degree of constraint that the major
partner in the merger places on members of
the minor partner; coupled with the degree
to which members of the minor partner are
prepared to accept the constraints imposed
on them. On this basis, they argue that success-
ful mergers require one of the following
combinations of Harrison’s (1972) cultural
dimensions: (1) a personal development ct.&
ture in the dominant partner; (2) a role culture
in the dominant partner together with either a
power or role culture in the minor partner; or
(3) a task culture in the dominant partner, and
not a personal development culture in the
minor partner.
Corwin et al . (1991) have argued that an
additional requirement for merger success is a
set of management strategies designed specifi-
cally to cope with stress and uncertainty. Evi-
dence from the wider merger literature (e.g.
Nahavandi & Malekzadeh, 1988; Robin0 &
DeMeuse, 1985; Schweiger & DeNisi, 1991;
Sinetar, 1981) indicates that merging firms go
through a process of stressful destabilization
that must be dealt with if the merger is to be
ACCOUNTING FIRM MERGER 21
successful. A more structured approach to this
process has been suggested by Gill & Foulder
(1978), and involves four phases. The first
phase, shock, occurs where members first
become aware of the threat to their existing
structures and career prospects, and the merg-
ing firm enters into a state of disorganization
and confusion. The second phase, retreat, is
characterized by resistance to change, as orga-
nizational members attempt to maintain the
existing structure (with which they feel confi-
dent and familiar). In the next stage, adapta-
tion, members begin to face the reality of the
situation, and the likely need to forego their
existing organizational structure. Finally, in
the fourth phase, change, organizational mem-
bers begin to address problems appropriate to
the new circumstances in which they find
themselves, and to seek workable solutions.
Buono et al. (1985) argued that subjective
impressions should be the primary focus in
studies of organizational culture in mergers,
because it is these impressions which ulti-
mately determine the success or failure of mer-
gers. They defined subjective culture as
members’ perceptions of the norms and belief
systems prevailing in the organization. Harrison
(1975) referred to this as organizational ideol-
ogy. In the present study, therefore, we used
qualitative and quantitative measures to study
members’ subjective impressions of organiza-
tional ideology in three of the original “Big
Eight” public accounting firms in Australia.
Two of the firms were involved in a merger
during this period. The merger was preceded
by public announcements that the firms were
merging because they had compatible cultures,
and senior partners and management staff in
both organizations worked closely following
the announcement to ensure a “smooth” tran-
sition. In this respect, the merger could be
categorized as “collaborative” (Napier, 1989).
The third firm, which has not been involved in
a major merger in the past decade, was
included to act as a control for the effect of
environmental factors. We expected to see a
pattern of changing perceptions in the merging
firms which corresponded to the four phases of
adaptation described by Gill & Foulder (1978)
and a contrasting pattern of perceptions in the
non-merging firm, as that firm attempted to deal
with the changes occurring in its environment.
METHOD
Participating firms
Those who participated in the study were
partners and professional staff of three Austra-
lian public accounting firms. Management of
the three lirms, referred to here as “Major”,
“Minor”, and “Control”, agreed to allow parti-
cipation on the proviso that the only informa-
tion which would be divulged about the Iirms
is that they were “Big Eight” firms, operating in
one Australian metropolitan location. At the
effective date of the merger, the tirms
employed 540, 320, and 460 people, respec-
tively, in the locations surveyed. Following
the merger, the merged firm, referred to here
as “Merged”, employed 890 people in the
office studied.
Procedure
The study was carried out using “triangu-
lation” (Jick, 1979), relying on convergence of
qualitative and quantitative data collection stra-
tegies. Qualitative data were collected using
observation and a mixture of informal and for-
mal interviews. Quantitative data on members’
perceptions of organizational ideology were
measured using a modified version of Harri-
son’s (1975) Organizational Ideology Question-
naire.
The present research also includes elements
of action research, defined by Carr & Kemmis
(1986) as a cyclic process of observation and
intervention which provides, in addition to the-
oretical insights for the researcher, practical
benefits for the researched. In this respect,
the overall research program was designed
and executed with the active cooperation of
the management of the organizations being
researched. Whyte et al. (1991) have defined
this process more specifically as “participatory
action research”. They argue that this process
22 N. M. ASHKANASY and S. HOLMES
facilitates a better understanding of social pro-
cesses in organizations, and fulfils an ethical
responsibility to provide a return for research
participation. On the other hand, action
research can be viewed as compromising the
strict rules of scientific research because
experimental subjects are primed to act in con-
cert with the experimenters’ preconceptions
(see Cook & Campbell, 1979). This potential
shortcoming is acknowledged, but was mini-
mized in the present study because, although
regular feedback was given to senior partners,
these individuals did not notify staff members
of the details of the feedback. Instead, they
instituted firm-wide policies and initiatives to
address the issues brought to their attention.
Observation and informal interviews. In
keeping with the action research model
adopted for the present study, close liaison
was maintained with partners from participat-
ing firms prior to, and during the merger per-
iod. In 1989, when the decision was made that
Minor would merge with Major, it was gener-
ally acknowledged that this was because of a
perceived “cultural match” between the par-
ties. On this basis, we were given informal
access to report on staff perceptions of the
merger process (similar to the approach
adopted by Meyer, 1982), to conduct formal
interviews, and to distribute survey question-
naires.*Control subsequently agreed to partici-
pate in the study (as an example of a non-
merging Iirm).
Formal interviews. These were conducted
using Dick’s (1986) convergent interviewing
technique, which involves a tightly structured
interview process, leaving the interview con-
tent unstructured. The process requires two
interviewers who talk to different respon-
dents. Interviewers start by asking a broad
question, and then leave the respondent to
talk. Subsequent interviews are then progres-
sively refined to test emerging issues and to
seek explanations for divergent views. This
process is continued until common areas of
concern within the organization have been
identified and clarified. Dick (1986) maintains
that the process is efficient in that convergence
can normally be achieved in three rounds of
interviews. The interviews in the present
instance were carried out by interviewers
who had no other contacts with the organiza-
tions prior to, or during the study. Participants
were selected so as to provide a representative
sample across hierarchical levels and organiza-
tional divisions (described by Dick, 1986, as a
“diagonal slice”).
Organizational ideology survey. A modified
version of Harrison’s (1975) Organizational
Ideology Questionnaire was used in the pre-
sent study. This instrument is based on four
dimensions: power relationships, role defini-
tion, task accomplishment, and selfdevelop-
ment. In the original version of the scale,
respondents are asked to rank the importance
of the four dimensions in relation to 15 organi-
zational issues. Shortened versions of the scale
have been used successfully to describe organi-
zational culture by Cartwright & Cooper (1992,
1993) and Handy (1979).
The results of the initial convergent inter-
views provided a pattern of responses which
was consistent with the four dimensions pro-
posed by Harrison (1972) but suggested that
some modifications were needed to match the
environment of the present study. The adapted
scale included 12 issues (see Table 2). Respon-
dents were required to rank the four dimen-
sions for each of the 12 issues, and for three
scenarios: present, future, and ideal (a total of
144 scores). The Appendix shows an example
of one of the questionnaire items.’ Scores on
each dimension were calculated by adding
ranks on each of the 12 issues, and subtracting
the total from 48. The resulting scores thus
ranged from 0 (least importance: all items
ranked 4) to 36 (most importance: all items
ranked 1).
’ Full copies of questionnaire instruments used in this study may be obtained by writing to Dr N. M. Ashkanasy, Commerce
Department, University of Queensland, Brisbane, Queensland 4072, Australia.
ACCOUNTING FIRM MERGER 23
TABLE 2. Oraanizational Ideolostv Ouestionnaire: structure and items
Power The extent that power is exercised by management
Role ‘Ihe extent that roles are emphasized in the organization
Task The emphasis placed on the tasks that are done in the organization
Self The regard given to individuals at the work-face
Present
Future
I deal
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Dimensions
Scenarios
The ideology perceived to exist in the organization at present
The ideology respondents expected the organization to have in the future
Respondents’ preferred ideology
Questionnaire items
What are the characteristics of good bosses?
What are the characteristics of good subordinates?
What characterizes achievers in the organization?
How does the organization treat its employees?
How are employees controlled and influenced?
How are tasks assigned?
How is conflict handled in the organization?
What motivates work?
What motivates people to cooperate?
What is the organizations’ attitude to training employees?
How are women treated?
What is an appropriate communication structure?
The questionnaires were distributed through
the personnel offices of the participating orga-
nizations. Questionnaires were sent to a ran-
dom sample of professional employees up to
the level of manager, accompanied by a cover-
ing memorandum from a senior partner urging
participation, and a pre-paid return envelope.
Complete confidentiality was maintained, and
neither of the researchers were in any way
aware of which individuals participated.
Timing of procedures
The research process began 3 months before
the formal merger announcement, and even-
tuahy spanned a 30-month period, including
five administrations of the modified Harrison
(1975) questionnaire, and two rounds of con-
vergent interviews (see Fig. 1). Informal and
formal contacts with the participating organiza-
tions were well established by the time merger
negotiations began, and close iiaison with aI
three organizations was maintained through-
out the negotiation period. The procedure
was accomplished in two phases. Phase 1
lasted 12 months, and included the first round
of convergent interviews (conducted 1 month
Phase 1
T
Merger negotlatlon Formal and informal
period contacts wth the
orgamzstions eslablashed
1 Month wor announcement --Convergent ,nterV,eWs
Merger announcement - -
2 Months after announcement - - 1 st Ideology survey
Merger effected --
5 Months after announcement -- 2nd ‘dwlogy Survey
Formal and informal
(’ contacts continued
PhyhuA relocatiin begun _ _
12 Months RfM ~II~~u~~ww~, _ _ 3rd ideology survey
Physical relocation complete _
Phase 2
Remadlal strategies begun to
reduce uncenainty. and to
I
Consulting adwce given
prormote ccmmun~catffn and
to organizations
integration
15 Months after announcement
17 Months after announcement
Remedial strategies conbnued
27 Months after a”no”“cemant
2nd convergent interviews
4th ldeofogy survey
Continued mon110ring Of
effectiveness of remedial
stratsgies
5th Ideology survey
Fig. 1. Process time-line.
24 N. M. ASHKANASY and S. HOLMES
prior to the merger announcement), and three
surveys, conducted 2, 6, and 12 months after
the merger announcement. Phase 2 began 15
months after the merger announcement, with a
second round of convergent interviews. These
were followed, 2 months later, by a fourth
ideology survey. FinaIIy, the filth survey was
issued 27 months after the merger announce-
ment. During Phase 1 most staff continued to
be located in the offices of their pre-merger
firms, while aII were relocated into new office
accommodation prior to the start of Phase 2.
Respondents in Phase 1 were asked to pro-
vide an identity code which would lx known
only to themselves. This was to aIIow for com-
parison of individual responses over time. The
initial response rate was encouraging (132
returned from 300 issued), but only 27 ques-
tionnaires were returned in the third survey.
It was therefore necessary to recruit new sam-
ples in Phase 2. Participants in Phase 2 were
selected, however, in order to include some of
those who participated in Phase 1. Comparison
of results obtained from this group and new
participants showed that there were no signifi-
cant differences in scores.’
Survey instrument reliabilfty
The measurement scale used in this study
was a modified version of Harrison’s (1975)
Organizational Ideology Questionnaire. This
version was shorter (12 items) than the origi-
naI (15 items), and included some revised
items. After each of the five surveys, Cronbach
alpha values were calculated for all the twelve
(4 dimensions X 3 scenarios) 12-item scales.
Results provided alpha values in the range
0.72-0.87. Given the disparity of subject mat-
ter covered in the 12 items, this is a sound
result, and suggests that the scales were tap
ping a unitary construct in aII cases.
RESULTS
Consistent with the triangulated approach
adopted for the present study, qualitative and
quantitative results are presented and discussed
in chronological sequence (see Meyer, 1982).
Data analysis for aII five surveys was performed
using a 2-way MANOVA for each of the three
scenarios (present, future, and ideal). Indepen-
dent variables were firm (Major, Minor, Con-
trol) and division (audit, non-audit), while
dependent variables were scores on the four
dimensions. Summary statistics (multivariate
F-ratios) for Iirm main effects are presented in
Table 3.3 Mean and standard deviations for
scores on the four dimensions of the Harrison
(1975) scale (power, role, task, and seIf) are
given, where appropriate, in tables for each
scenario. The tables are accompanied by notes
giving results of post hoc (Tukey) evaluation of
TABLE 3. Multivariate Ratios for firm main effects
Scenario
SUtVCV d.f. Present Future Ideal
1 8,252 3.17” 5.20” 0.87
2 8,114 4.46” 3.68” 1.92
3 8,42 2.23’ 3.69” 0.32
4 4,106 0.45 0.32 0.50
5 4,91 0.34 0.67 0.76
l p c 0.05, ” p