The HR Perspective (After-all it's all about people)! HR has consistently been in the spotlight in relation to mergers and acquisitions (M&As). In fact, HR's contribution can be a make or break success factor. It also provides a high profile opportunity for HR practitioners to demonstrate themselves as a genuine strategic partner. Continuing this series from the previous issue..........

Payroll, Compensation, Performance, Benefits: "Job descriptions and compensation, bonuses, health benefits, vacations, disability and maternity leave, sick leave, Workers' Comp." Before I began writing this article, I was thinking back to the last M&A I was involved in. When I thought about due-diligence, the words that are in italics flowed to consciousness. It still amazes me how many variables there are underneath the basic layer of "Compensation" or payroll. If you come away with nothing else from this paper, then always note these often hidden costs and barriers to the dream of a marriage that is made in heaven.

The first thing that we can examine is compensation, individual as well as departmental. Now that comes under "Payroll," but I disagree to some extent because payroll, often handled by an outside company, is too compacted to shake out the necessary information. Time permitting - and don't rush the process - get as many job descriptions as possible, even if they're only a paragraph for each critical position. I won't harp on its importance, but you must match apples and apples insofar as possible if you are to determine the pay practices of the acquired company and how the acquired company has valued its employees. You also get the first inkling if there are some who have been overpaid or overvalued in comparison to your own employees. Of course, they're always overpaid while yours are undervalued if the acquired company pays more. Games often ensue, and I have seen HR go to its senior management and start politicking for higher salaries to match the acquired company's.

If anybody is still doing budgets which used to be standard for all departments, a look at compensation can start with who you can and who you can't afford. If the compensation differential is 20 percent or more, don't even make an offer to retain. That used to be the mantra. It should probably still be the mantra since 20 percent cuts in pay will definitely leave the employee unhappy.

Starting Over: sometimes the two companies have such contrasting systems that it's best to start from scratch, but that can only be accomplished if both companies are relatively young. It would be best if you can use the compensation system of either company, the one that makes for the smoothest transition and works best with the acquiring company's overall plan.

Benefits: Match health insurance benefits against yours. The cost of insurance, the contributions of employees, and what is charged for dependent coverage are extremely important considerations today. You could be looking at a difference of several hundred dollars per employee per month. Also note for reference that the two combined companies may have greater clout with the insurance carrier(s) than you have had in the past. You might want to check this out before the merger and report the costs as well as the potential savings if various plans are instituted or the separate plans now existing are combined.

Other Benefit Costs: Determine how many days (weeks, even months) employees of the acquired company have due. Estimate or determine the actual cost of those who may not make the final cut. For those who do not pay sick leave upon termination, devise a policy of how much sick leave can be used in the final three months of employment, or use payment of sick leave as part of a severance package. Note that while severance is not required except under plant closure laws, there are usually severance packages for all levels of employees.

"Secondary" Benefits Considerations: It's not what you initially were examining, but real challenges can be presented when you look at those who are on leaves of absence, especially Workers' Comp and maternity leave. These are people who cannot be terminated, well not easily. Here's where you need legal advice unless you familiar with the land mines in these areas.

Performance Evaluations: If you trust the evaluations found in personnel files - if there are any at all - an initial determination can be made regarding possible retention of employees. Be certain to look at patterns in evaluations. If you see the same comments over and over by the same supervisor, take the evaluation with a grain of salt or a whole lick. (And look at the supervisors' evaluations by their managers, and so on up the line.) I have found identical evaluations of four people in one department, identical from employee to employee and identical from year to year. (We didn't keep the supervisor.)

Interview the employees if there is time. Ask their perceptions of their own jobs, their department, supervisors, and even the merger. Most will be circumspect in their comments. Still, it will give you a better feel for who stays and who goes. On the other hand, remember that your own likes and dislikes will affect your judgment and evaluation.

Perhaps I'm getting ahead of myself. What about the redundancies?

Next issue: Redundancies, Policies and Practices and Some Final Advice.... 

Sabarigiri Varadha is a Serial Entrepreneur and VThree Consulting Pvt Ltd happens to be the part of his series. VThree Consulting Pvt Ltd provides MNCs' the most complicated technology in the world... the skilled human beings. Feedback can be mailed to sabarigv@ vthreeconsulting.com

Issue BG87 Jun 08

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