Many companies and organizations, both large and small, are finding themselves pursuing mergers and acquisitions, often looking to combine the best parts of both entities to create greater value in the resulting enterprise. Often, the focus during this assimilation process centers on business practices and finances, with employee integration being an afterthought. However, many mergers have failed because of the merging entities’ failure to effectively combine workplace cultures. The costs associated with completing a merger are too great to allow for cultural incompatibility; therefore, merging entities need to make employee unification more of a priority during the integration process.
Some of the largest employee-related issues that merging entities will face arise from employee benefits. In addition to ensuring that employees receive similar benefits, such as health care, the resulting entity may also have to consider whether it needs to provide additional benefits, such as family leave under the Family and Medical Leave Act (FMLA), if the combined workforce is covered. Additionally, in certain circumstances, employers may be required under the FMLA to re-employ employees who were out on leave at the time of the transaction.
Merging employers must also consider federal laws, including the Employee Retirement Income Security Act (ERISA), as well as relevant provisions of the Internal Revenue Code (IRC). Further, in situations where mass layoffs or plant closings will occur, employers need to follow the notice requirements under the Worker Adjustment and Retraining Notification Act (WARN).
Some states may have their own versions of federal laws, such as New York’s mini-WARN Act, that come into play during a merger or acquisition transaction. Additionally, benefits that are not covered under federal laws, such as vacation pay, holiday pay, and sick leave, may be regulated by the states. This could lead to employers having to pay out remaining benefits to employees if benefits policies change, or employees are laid off.
Merging employers need to take account of all employee benefit plans and programs that are offered by each party to determine which aspects they will keep and which they will discard or modify. Informal practices, even if they are not written down, should also be taken into account. Additionally, employers should review employment documents, such as employee handbooks and personnel manuals, to ensure that all practices are noted.
Prudent employers will want to provide their employees of the same level or position with uniform benefits. For example, two administrative assistants, one from each employer, will receive the same health coverage options.
Once the merging entities have all the necessary information regarding employee benefits, and have decided which to implement in the future enterprise, these employers need to ensure that their new policies are in compliance with all federal, state, and local laws.
Mergers and acquisitions are pursued to create the most value by taking aspects from one or both entities and using them to the advantage of the resulting enterprise. Ensuring a secure and productive transition requires extensive planning. This can include using one workforce’s filing procedures, or even one entity’s computer software, over the other’s. Regardless of which side’s is chosen, the end result must still be uniformity. Without conformity, operations will be disorganized and progress will be hindered, lessening the new entity’s overall efficiency.
It may seem obvious that merging employers would want their new enterprise to have everyone on the same page; however, it is not always easy to integrate in a timely manner. Consolidating computer software or changing manuals takes time and money. However, the costs of changing operations is generally factored in when discussing the merger in the first place, so these expenditures should not come as a shock. What might be more difficult to manage is changing the employees’ views of the situation.
With a new corporate culture, management needs to ensure that performance expectations are met across the board. Some employees may be stubborn, and believe that their way of completing a task is the best way. This can cause problems for supervisors who need to push the employee to comply with the new policy, rather than permitting him or her to ignore it. Other employees might simply have difficulty understanding a different system, and need additional training before they feel comfortable with the new operations. Training needs to be used as a tool to educate staff about new systems, procedures, and expectations.
Each employee will need time to adjust to a new way of doing things. Even employees whose prior procedures were kept will have to prepare themselves to help others who might need assistance. Although it will take time, the best way to ensure that employees adapt to new systems is to have set, uniform policies in place, with supervisors who will enforce them, and provide training for new programs.
Ensuring that the workforce operations are uniform can prove to be essential in securing the success of a merger or acquisition transaction. When integrating two entities, employers must keep in mind that they are creating one team with one goal. Treating the employees of each entity differently creates a mindset of “Them vs. Us,” which causes a divide and prevents collaboration. Employees of both entities need to receive the same benefits and operate within the same parameters in order to truly be part of the same team.