Organizational Behaviour Introduction Organizations are typically made of people and the work force is one of the most

critical factors in its survival and growth. Hence, the way the people or employees are treated and the way they behave in particular situations is very crucial. As a result many studies about this topic have been made over the years. Organizational behaviour (OB), as it is referred to in business studies, is a study of human behaviour; it is complex and has components from various fields like psychology, sociology, and anthropology. Organizational behaviour in an organization develops over the years of the existence of the organization and is closely linked to what is referred to as organizational culture. Managing OB is a relatively complex process in normal situations, especially if a major change occurs like mergers and acquisitions (M&A) or other important structural or managerial changes within an organization. This organizational change is quite often stressful to everyone concerned. There may be fears of loss of jobs, changes in duties and responsibilities, fears (or hopes) of change in the compensation structure, and the ever present attitude of resistance to change. This paper is a study of organizational behaviour, culture, and change in the context of an acquisition of two banks in the Republic of Cyprus. The study will be with reference to major theories, perceptions, books, journals, and that have been evolved over the years with regard to OB, culture and change. The Laiki Bank made an offer to Egnatia Bank, and the Marfin Financial Group in September 2006, and successfully acquired them a month later. The name of the organization (Laiki Bank) was changed to Marfin Popular Bank Public Company Ltd. The entity will be referred to Marfin Popular Bank in the rest of the paper. Brief review of the companies involved and the merger

At the time of the acquisition Laiki Bank was one of the largest and oldest banks in Cyprus. What is interesting is that the other two banks were also similar in size and were running profitably. The offer to acquire the other two banks was approved by the shareholders of Laiki Bank and the acquisition took place a month after the offer was made. The apparent motivation behind the merger was to create a strong financial group to facilitate expansion into the broader banking and financial market of the Balkan states and southeastern Europe (Morley & Ward, 2008, P. 22). The Laiki Bank was partly owned by HSBC, which gave up its twenty one percent stake after the acquisition. In that sense, the management and employees of the bank had the expertise and knowledge of the working of the multinational HSBC. But with regard to technology involved, all three banks were similarly placed. Laiki Bank, in its steps towards expansion had already acquired smaller financial institutions in the country, but it was the first time that banks that were similar in size were acquired in this case. Even though both Laiki Bank and the Marfin Financial group had international presence through acquisitions before the acquisition, the banks that were bought were quite small. The need was felt to acquire larger financial institutions so that the entity can operate successfully in a highly competitive market. Moreover the markets into which the entity was planning to enter were in the process of liberalization creating an atmosphere for high competition. In such a scenario, high growth was possible for banks with finance and power to acquire other large banks. Mergers and acquisitions: One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A (Mergers and Acquisitions: Definition). Other reasons for M&As include government deregulation,

technological change, total quality management (TQM), or reengineering movements, delayering, broader economic conditions, and corporate rationalization (Greenberg, 2003, p. 65). In this case, expansion and government deregulation were the main factors in the creation of the Marfin Popular Bank. The other reasons like broader economic conditions and rationalization are also valid in this instance. Organizational behaviour Culture in organizations can be defined as a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems (Schein 1997). The behaviour within the organization is a part of its culture also. Organizational change happens in Companies that are undergoing or that have undergone a transformation (Keywords & Definitions for IO). Organizational behaviour can be defined as the study of human behavior in organizational settings, the interface between human behavior and the organization, and the organization itself (Shajahan, 2004, p. 3). The book from which the above definition was taken states that there are several characteristics that govern this discipline. Study of OB is interdisciplinary in the sense that principles of psychology, anthropology, sociology, and other related fields have to be included. It is basically associated with the behavioural sciences and can be analyzed scientifically. It needs to be studied at three levels namely, the individual, the group, and the organization as a whole. Study of OB actually began (though not intentionally) when scientific management studies began to take place during the industrial revolution in both US and UK. OB then moved on to using social systems theories and contingency theories as a part of understanding workplace behaviour.

The 1969 book, Management of Organizational Behavior: Utilization Human Resources is considered to be a classic for mangers. The book states that managers need to be experts in three areas in order to understand and control OB (especially at the individual level). Managers need to have a firm understanding of an individuals past behavior in order to learn what is characteristic of the individual. The managers focus is on trying to discern what produces a particular behavioral pattern (Friday, 2003, p. 4). Once this is understood, they can try and predict how an individual will try to behave in the future. Both these apart, the manager should be able to channelize behaviour to be in tune with the organizational goals and vision. In this current instance, the OB of Laiki Bank would have been quite different when compared with the two acquired companies. As mentioned earlier, Laiki Bank would have to a certain extent been influenced by the truly professional and global approach of HSBC. The other two were not exposed to such a work culture. This aspect has to be understood by managers of the new entity namely, Marfin Popular Bank. They have to understand that the employees from the other two banks were not really exposed to banking policies and practices as followed by banks like HSBC. They then will have to predict how this behavioural diversity will lead in future. Unless the behaviour of employees of the acquired banks are directed or channelled to be in tune with what already exists within the Laiki (at the time of acquisition), problems will arise. Contingency theory and OB Contingency theories are generally those that explain a connection with a firms external and internal environments. According to the theory, the external environment faced by the firm has a strong bearing on its internal policies, structures, and other related factors (Contingency theories). According to a paper titled Scanning the Business Environment: some conceptual issues, this approach arrives at the conclusion that the external environment within which an

organization chooses to function, determines the internal structure (Kourteli, 2000, P. 407). The paper cautions managers to be extra vigilant in scanning and understanding the external environment mainly due to its dynamism and complexity. These factors directly affect the internal factors which require constant modifications and tunings so that it can match the external environment. Managers often fail to use information that is relevant even if they have it. In many cases, managers are unable or incapable of gathering relevant and useful information. This includes the inability to gather relevant information that is required to fix the long term goals of the organization. Marfin Popular Bank should take these factors into consideration because it is planning to operate in foreign markets which can be quite dynamic and complex. Acquisitions and organizational change Any structural change (which is inevitable in acquisition) requires changes in many areas of the organizational structure. This calls for what is referred to in management circles as planned change. This situation of no choice but to change has resulted in a new area of management practice called organizational change management (OCM). As Sturdy & Grey (2003) argue it is not so much that planned change is good, but that it is necessary in (i.e. determined by) the current period of unprecedented competition and market change. Yet the two arguments are not distinct, for if change is necessary then it is also considered good when compared with the alternative of no change (p. 654). The central premise of this argument is that organizational change is inevitable under todays competitive environment and hence companies should be ready with management of change for the purpose of staying competitive. But in managing change, companies tend to focus on what is known as managerialism. This is defined as operating the firm for the benefit of managers, persuing objectives attractive to the management team but which are not necessarily beneficial to the shareholders (Managerialism Definition).

This means that change is essentially managed from the top without the participation of other stakeholders resulting in improper and ineffective change management. Marfin Popular Bank management should be careful to include relevant stakeholders, especially the employees when undertaking the process of organizational change management. But certain issues may negate the benefits of change. One classic example of a merger/acquisition gone wrong was the one between Quaker Oats and Snapple Beverage in the United States. The acquisition by the former was done in the hope that the mix of products manufactured by both the companies would yield an ideal product mix in the market for food products. There was nothing wrong in the concept except for the fact that organizational culture was extremely diverse between the two companies. This is very well put by Thomas when he states the reason was a clash of cultures in which Quaker grossly underestimated the differences between its highly focused, mass-market operating style and the Snapples quirky, entrepreneurial and distributor oriented style (Thomas, 2000, p. 29). There is a chance that the former employees of Laiki now employed by Marfin Popular may have a condescending view of employees joining them from the other two banks. This is because they have had the experience of the corporate culture of HSBC, something not experienced by the employees of the other two banks. The culture map developed by Rob Goffee and Gareth Jones is a matrix that can identify the existence of difference in organizational culture between two organizations. The two main factors that are considered are solidarity (X axis) and sociability (Y axis). The level from high to low moves from left to right in the case of solidarity and moves from bottom to top in the case of sociability. Solidarity refers to the level of closeness or bonding with the employer while the sociability refers to the warmth (high or low) that exists among employees.

High Networked Communal

Sociability

Fragmented

Mercenary

Low Low Source: (Thomas, 2000, p. 31) The bottom left hand grid (fragmented) presents the worst scenario for any company. The employees concern with regard to each other and for the company is low. The top left hand grid (networked) is a situation where employees have a good relationship among each other, but concern for the company is low. The bottom right hand grid (mercenary) presents a goal oriented and highly competitive environment. Employees can be selfish with regard to colleagues and winning at any cost for achieving company goals (and achieving personal targets) is the norm. The top right hand grid (communal) is the ideal situation where concern for the company and colleagues is high. The company will be competitive and efficient and the working atmosphere will be good. In the case of this acquisition, the situation at the initial stage would be the fragmented grid. Employees belonging to each individual company that formed the new one will be close to each

Solidarity

High

other, but may be suspicious of others. For example, former employees of Laiki Bank may form a group among themselves while those belonging to Egnatia may follow suit. Their behaviour will reflect this feeling. Managers should expect this from analyzing the past behaviour. The managers of the new entity should try and bring the culture to a networked or even mercenary one and later try and convert it to a communal culture. This could be a patient and long drawn out procedure. They could try to go directly from fragmented to mercenary for achieving quick financial results for the bank. Kurt Lewins three step model Any organization that has impending large scale changes with regard to organizational culture, structure, and behaviour should follow a three step process for smooth transformation from old to new. This is often cited as Lewins key contribution to organizational change (Burke, Lake & Paine, 2008, p. 233). The relatively simple concept (in principle) needs an unfreezing, moving or transition, and refreezing of attitudes as behaviours. Employees are attuned to the working atmosphere of their former employers and hence need an unfreezing of attitudes so that they are receptive to change. The next step is to move or transform the employees to the new behaviour and culture that is required in the present situation. Once this is achieved, the next logical step is to freeze the newly learnt factors into their minds. In this case, employees of Egnatia and Marfin Financial Group will be required to unfreeze their mindset of the working atmosphere that existed before the acquisition. Then they need to be taught the new structure and culture which will subsequently have to be re-freezed. In all probability, the new culture and behaviour planned will be more in tune with what has been practiced in Laiki Bank since they are the acquirers and also because they have the knowledge and wisdom gained from their association with HSBC. Planned and unplanned organizational changes

The following table illustrates the difference between planned and unplanned organizational change.

Order of change Planned change First Second Source: Burke, 2002, p. 131. Developmental Transformational

Unplanned change Evolutionary Revolutionary

In this case, the change was a planned one for the sake of being competitive, and also for expansion into international markets. The first stage involves the development of the new company namely Marfin Popular Bank. The second stage is the transformation of organizational structure, culture, and behaviour that is needed for the growth and success of the new bank. Resistance to change Resistance to change has been documented by literature over the years in almost every sphere of human involvement. If we were to believe the textbooks, organizational change is the creation of great leaders or the result of tumultuous technological or economic fluctuations. One of the central tasks in any heroic change effort is dealing with resistance to change (Spicer 2006). The resistance is not toward change, but towards the unknown and the uncertain factors that confront people. If these factors are made clear to the employees as to what aspects are needed to be changed, the resistance factor can be reduced or reduced to a large extent. Apply this line of thought to the current situation and resistance from employees of the three banks can be handled effectively. There are other accepted practices of change management and they include education and commitment, participation and involvement, support, facilitation, and negotiation, manipulation, and even use of coercion (Linstead, Fulop, & Lilley, 2004). In this instance education can be done through seminars for managers of the main branches and commitment

from them can be obtained. Active participation and involvement by such personnel also have to be ensured. A compliant committee was established for facilitation and support. Any problems and issues were dealt by the said committee. There is a supportive trade union for the banks. Proper negotiations were made with them and the necessary agreements were signed. It should be noted that they were very cooperative with the management with regard to the whole process. So in this instance manipulation and coercion was not at all necessary. Single and double-looped learning Organizational learning can take both the above forms depending on the circumstances and the policies adopted by the management. The former is an instance where organizational polices are implemented and any shortfall in learning is corrected accordingly. In double-looped learning, the policy itself may be changed if seen necessary for implementing organizational change. The former is more practical in case of incremental change while double-looped learning is more practical for radical change (Easterby-Smith, Arujo, & Burgoyne, 1999, p. 3). In this case, the more practical method to be followed by Marfin Popular Bank is the single-loop method since there is no radical change in the type of business is involved. Unexpected consequences of organizational change This factor was studied in detail by Harris and Ogbonna of the Cardiff University. They have observed several factors or problem areas where such unexpected outcomes may occur. The study involved corporations belonging to the banking/financial sectors, food/hotel sectors, general retailers, and clothing sectors. The study was done by in depth interviews with mostly with middle level and lower level managers, presumably because they bear the brunt of the consequences of change.

Source: (Harris, & Ogbonna, 2002, p.38) The columns represent the factors where problems may occur. It can be seen that these problems are very common in the large financial-services retailer category in which Marfin Popular Bank falls. Reutilization of change: The findings indicate that culture change cannot realistically be conceptualized dichotomously. In contrast, it appears that, as a result of the unexpected consequences of planned interventions, culture change is best conceived as a continuum wherein the extent of planned change is gauged in different shades rather than in definitive terms (Harris, & Ogbonna, 2002, p. 45). According to the views of the regional manager of a large financial services company, change is something that will not happen just through the will of the management. It is continuous, and incremental. The planned change for one year may lie in one area, and in the next year may touch other areas. The change in organization behaviour hence will only be developed through a long term perspective and cannot be planned in minute detail. It has to be planned in such a way by observing where changes are required and then taking action in those areas. The management of Marfin Popular Bank should bring in the required behavioural change in this fashion. For example, the attitude of employees of the Laiki Bank can be the focus of change at one time, and then the change in attitude of former employees of the

other banks. It has to be continuously monitored to see whether the changes are effective. The management should also not expect a 100 % planned change since it is difficult for human behaviour to comply with such demands. Hijacked processes: Policies brought into effect by the management may be intended for the whole organization. But the study shows that some of these policies or processes may be hijacked by individual departments or mangers for their own benefit thereby causing problems for other departments. An example of this hijacking is given in the study and it involved a large food retailer. The planned change was to enable departments to take bold initiatives and decisions on their own for increased flexibility within the organization. The financial control department hijacked the policy and used it as an excuse for mass cost cutting by axing over 4,000 branch managers. Marfin Popular Bank may face similar situations. If such a policy of independent decision making is implemented, the management should closely monitor it to see that it is not misused for narrow departmental objectives. Cultural erosion: Another commonly seen factor is erosion of the planned culture. The example of a financial retailer will illustrate the point clearly. The management wanted to bring about employee motivation through non-monetary ways like praise, and encouragement. But other pressures soon led to the erosion of this culture. Such motivation which was very effective soon stopped because of other pressures. Marfin popular bank should not let up the pressure on staff to continue with planned changes in behaviour. Once it is seen as being implemented, the management should see to it that it is maintained and not eroded as seen in the above example. Cultural reinvention: In this instance cultural reinvention is used to denote instances when a culture change effort results in the espousal of attitudes and behaviours which, whilst appearing new, merely camouflage the continued adherence to the old culture (Harris, & Ogbonna,

2002, p. 41). The possibility that former employees of all three banks may revert back to their old culture and behaviours exists here resulting in a culture clash. The management should monitor this factor and see to it that it does not happen here. Ivory tower culture change: The management should be in touch with ground reality when bringing about changes in culture and behaviour. This is very crucial since the Bank is planning to expand internationally in a large way. One manager of a large financial retailer (in the study) complains that the policies brought about by the management were extremely unfeasible under the circumstances. Inattention to symbolism: According to some perceptions, symbols have a strong influence of organizational and social cultures. Dandridge, Mitroff, and Joyce were likely the first to apply Geertzs thinking on symbols to the organization. Their definition of organizational symbolism refers to those aspects of an organization that its members use to reveal or make comprehendible the unconscious feelings, images, and values that are inherent in that organization (Bailey). Symbols can be verbal, actions, or material. Any ritual that is connected to an organization or the company logo can be cited as examples of symbols. Any leftover symbolism from the merged banks which is not in tune with expected organizational changes should be discarded in the case of Marfin Popular Bank. Uncontrolled and uncoordinated efforts: Unless cultural change is coordinated and controlled, the whole process may get unmanageable and ineffective. A manger from the finance retail sector feels that the change process was too heavy and not coordinated. This is especially true for a bank like Marfin if the process is left uncontrolled or not coordinated. Behavioural compliance: In many instances, the outcome or compliance of behaviour was different from what was expected. This sometimes happens when too much detail on behaviour

is attempted. One manager complains that behavioural norms for greeting, talking and even smiling resulted in non-compliance due to too much focus on detail. Conclusion: From whatever literature is seen about the acquisition of the two banks and the subsequent formation of Marin Popular Bank has been a smooth affair. Employees, shareholders, and trade unions did not create many issues and the whole affair was completed within a month. But the new entity faces a challenging future in bringing about desired behavioural and cultural changes due to the above mentioned factors. Suggestions for possible problems have been mentioned at the appropriate places. If the Bank is resourceful in implementing them and takes precautions for deviations and unexpected results, growth in all markets can be assured. Coupled with prudent financial and marketing policies, Marfin Popular Bank can become a large multinational bank in the future.

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