COMPANY INTEGRATION – MOVE INTO BUYER´S FACILITY

 

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The company was investing heavily in expansion. They had bought 3 local companies and now were asked by the Headquarters to use some “spare space” in a production unit to further integrate the production areas.

 

The whole acquisition process was based on an earn-out contract that would last 3 years. During that period of time, the previous owner would remain as General Manager for the unit and had a serious say in how the money would be spent.

 

Family owned businesses are very interesting. They work as a family with what I will call “patriarchal hierarchy”, where the owner acts as a father. For good and bad.

 

Most parents have issues when it´s time to let their offspring “go”.  This was no exception. Moving into the buyer’s facility was like a child telling a father that it was moving out of his parent’s house.

 

He is a very clever business man, and made use of all arguments he had to fight against it: “We don´t have money for that. I don´t have to approve expenses that will affect my payment by end of this contract”

 

He was right.

 

The fact is that Stark HR LOVES a good challenge and this was the perfect opportunity to make lemonade out of the lemons that we had.

 

The first step was to identify the known, existing issues. That was easy:

 

  • Location
  • Compensation structure
  • Benefits

 

We could not forget what kind of impact the move within the buyer’s facility would cause to people´s morale, the risk that employees would not work as efficiently or reliably as hoped, due to a lack of motivation

 

Stark HR needed to dig deeper into it to find out the real issues and what would be an opportunity to bring motivation to the team.

 

Canteen was a given, the buyer had more employees, so the rate per employee was lower, to our advantage. 

 

Health plan was not a real problem; both companies had the same supplier, but slightly lower costs. The issue here was the buyers big “Health Program” that included yearly check-ups, addiction treatments and some medications that were sponsored by the company.

 

They also had a “baby shower set” for blue collars that included free powdered milk for the first 12 months after birth and some prescription drugs were offered to employees at no cost, in certain cases.

 

The union that represented the workers was the same, but each company had a different collective bargaining agreement (and compensation structure) which represented a huge risk when it came to put everybody under the same roof. People talk…even about things they shouldn´t…and that would be no exception.

 

So, what we did was analyze the gap between the current situation and the future outlook. We also created a sheet with high/medium/low risk for employees considering 3 main topics: distance, compensation and knowledge.

 

Once we had that study done, it was clear to us who we needed to take a closer look at, who we knew with a high certainty would leave and who we needed to keep at all costs. That was vital to define the next step:

 

Transportation

 

The buyers company offered a private bus transportation to all employees. The contract they had was based on vehicle/distance and not per person. This made it possible to “cover” the financial gap by subsiding the transportation for the remaining of the year.

 

Of course it was not that easy. Management asked for a solid reasoning for that proposal and the rational was simple. If people decided not to come to the new facility, we would risk our whole production delivery time, because HR would not be able to provide trained people in time for that, impacting the company´s revenue and year-end results, whereas the costs of transportation was already budgeted, representing no additional negative impact in results.

 

Not to mention that the company would be able to save the money they were using to pay public transportation for those employees…

 

Now, we had “savings” from canteen and transportation. How about the additional benefits?

 

Health Care Program

 

Stark HR called the health care provider for a meeting about the possibility of replicating the health care program for the acquired company at no costs. 

 

Here again comes the financial thinking in action and Stark HR made an analysis on disease prevention costs vs. treatment. It is cheaper to spend money on medication to quit smoking than on lung cancer treatment or in diabetes prevention, than on illness related problems.

 

The provider agreed to finance the program until year end and if any positive outcome was seen, it was willing to renegotiate for the next term.

 

 

Private Pension Plan

 

That was not as easy as the previous items, due its high cost and regardless of the legal implications of NOT offering it to new employees.  To make it worse, the previous owner had convinced the management team that is represented a “small” risk, since most of the blue collars would not be willing to participate on that.

 

Our consultant picked up from that and finished the rational: “And that is the reason why we should do it. If we offer and people don´t buy it, at least we are covered legally and we will avoid a fine for not offering it to all employees…”

 

“Yes, but what if all employees accept it?” replied the man.

 

“Well, considering our figures, the acceptance rate for blue collars lies in 50%, that means that as much as I´d like to, the chances of a 100% adherence is close to zero. Many of the blue collars have little money left by end of the month, after paying the basics, and do not look long term when it comes to money matters. By offering this benefit, we are showing them that we think long-term when it comes to relationships with the employee (SAFETY is the second “grade” in Maslow´s Hierarchy of needs). Even if they do not join the pension plan, the message will still be heard by them and you can be sure that it will raise motivation. If you like, we can make an analysis on how low productivity will impact our revenue, and make the comparison to a full adherence to the pension plan. I believe it will still be beneficial to the company”

 

It took Stark HR a little bit more of financial digging, but private pension was approved and as stated earlier, only 20% of the workforce decided to be part of it.

 

 

Final Outcome

 

A new benefit structure was implemented at no cost, since there were savings to cover other plans, and transportation was made available to employees. This made it possible for the integration to move forward smoothly and for all employees to remain on board, and employed with access to full plans, without sacrificing budget or the quality of the work.