Merger and Demerger ofOrganizations:

Effect on Employees due to theChange

 Introduction
● Merger
● Demerger
● Case Study for Demerger
● Analysis
● Conclusion
 Merger & Demerger
Corporate
Restructure

Merger &
Demerger
Acquisitions

Spin Off Split Equity Carve Out

 Reasons attributable to Merger
● Increased market share
● Diversification of product offerings
● Economizing Cost
● Synergy
● Eliminating competition & greater penetration
● Increase of scale of investment in Research & Development
 Reasons attributable to Demerger

● Focus on Core business

● Separation of loss making business segment
● Concentrating efforts on high growth sector
● Creation of additional value
● Avoiding conflict of interest
 : Post Merger :
Issues likely to be faced by Employees
 Culture Disparities, Cultural shock.
 Detrimental Effect on Employee Morale.
 Employees fear from Job loss after Merger.
 Conflict among the employees due to Fear of loss of Jobs.
 Wage Disparities among employees doing the same work within
Merging Organisations.
 : Post – Demerger :
Issues likely to be faced by Employees.

 Uncertainty on Benefits and Service

Conditions.
 Separation Anxiety.
 Lost Synergy.
 Non-utilization of resources.
 Change in Social Groups.
 Apprehension on Recognition and Growth.
 Objective
Problem Statement
 IMPACT OF MERGER/DE-MERGERS ON EMPLOYEE MORALE &
ORGANISATIONAL CULTURE
 MEASURES TO BE TAKEN BY ORGANISATIONS TO ENSURE
EMPLOYEE MORALE & STABILITY FOR SUCCESSFUL
TRANSITION

A demerger of Indian PSU has been analysed to find solutions to

the above problem statement
 Demerger of POSOCO
 POSOCO got demerged in the year 2016.
 Review of Management actions during
demerger.
 Survey conducted among POSOCO
employees.

All research data taken from secondary sources

(Internet) and primary research through survey.
 REVIEW OF MANAGEMENT ACTION
HONEST ADVOCACY
EMPLOYEE COUNSELLING
OPTION TO MOVE TO PARENT COMPANY
LISTEN & LEARN
CO-OPERATION
 SURVEY QUESTAINNAIRE
DEMERGER IMPACT ON
EMPLOYEES & PERCEPTION

 Closed ended survey condcuted

among POSOCO employees

 Rationale behind survey was to

understand impact of demerger on
employees and their perception
about management actions

 Survey was conducted randomly

chosen employees
 Survey Results
● Transparency: 63% of employees feel demerger process was transparent

● Neutrality: However, only 38% of the employees feel that all employees were given equal chances to opt to stay
in POWERGRID or POSOCO.

● Satisfaction: More than 3/4th of employees are satisfied with the promises made by the management before the
demerger of POSOCO from POWERGRID.

● Conflicts: Only around 15%-18% of employees feel that the demerger led to increase in conflicts, decrease in
team cohesion and negative performance of employees post the demerger process.

● Culture: More than 90% of the employees feel that the culture of POSOCO has been as per their expectations
while more than 80% believe that it is a tough situation for management to deal with employee issues at times of
demergers.

● Most Interesting, 100% of the employees surveyed submitted that they would choose POSOCO over
POWERGRID if given a chance again today.
 Conclusion
Kotter’s Eight Step Plan
❖ Creation of Urgency Further Actions:
❖ Form a Coalition ● Stress Management
❖ Creating a new vision ● Work Culture
❖ Communication of Vision ● Understanding employees
❖ Empower employees ● Motivation
❖ Rewarding of short term
“wins”
❖ Reassess changes
❖ Reinforce the changes
 References
[1] https://hbr.org/1996/05/why-do-employees-resist-change [Accessed on 20th October, 2021]
[2] https://www.business.com/articles/communicating-during-mergers/ [Accessed on 20th October, 2021]
[3] https://managementstudyguide.com/what-is-demergers.htm [Accessed on 20th October, 2021]
[4] https://managementstudyguide.com/what-is-demergers.htm [Accessed on 20th October, 2021]
[5] https://www.globsyn.edu.in/wp-content/uploads/2020/04/GMJ_VIII_2014.pdf#page=7 [Accessed on 20th October, 2021]
[6] https://hbr.org/2017/03/surviving-ma [Accessed on 20th October, 2021]
[7] P Vyas, B V Pathak, D Saraf, 2015, Impact of Demerger Announcement on Shareholder Value: Evidences from India, Journal of
Management & Public Policy, Vol. 7, No. 1, December 2015, Pp. 13-26
[8] https://www.researchgate.net/publication/353631812_Employee_struggle_during_merger_and_acquisition [Accessed on 20th
October, 2021]
[9] http://smallbusiness.chron.com/effects-merger-acquisition-employee-morale-3196.html [Accessed on 20th October, 2021]
[10] https://www.americanexpress.com/en-ca/business/trends-and-insights/articles/the-effects-of-mergers-and-acquisition-on-employees/
[Accessed on 20th October, 2021]
[11] Power System Operation Corporation Limited, Jan 2021, Evolution of System Operation and Emergence of POSOCO as an
Independent Institution in India, P-204
[12] Stephen P. Robbins, Timothy A. Judge, Neharika Vohra, Organizational Behaviour, 18 th Edition, P-740, Pearson
Thank you