The Berger Law Firm, P.C. |
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The New American Dream: a series of well-orchestrated mergers and acquisitions increases your company's market share and revenue enough to go public. You cash out your employee stock options, move to Aspen, and start another company. Unfortunately, the M&A road to riches is not always that smooth. It is often littered with obstacles created by inattention to workforce and organizational integration issues. A landmark $1.5 million discrimination settlement last year by Core States Financial Corporation is a case in point. Core States, a federal contractor, grew rapidly through eleven acquisitions over seven years. Its many new operations had disparate salary structures. Following an affirmative action plan audit by the Office of Federal Contract Compliance Programs ("OFCCP"), Core States was accused of pay discrimination against 142 female and minority employees who were paid less than their white male counterparts. Besides $1.2 million in back pay, Core States had to pay $334,115 in wage adjustments. It was also forced to analyze all male/female and minority/non- minority salary grades and achieve OFCCP compliance by correcting discrepancies. The recent flurry of M&A activity in the high tech and government services marketplace is being fueled by the desire to gain market leverage through consolidation. Once the deal is done, however, management must face the daunting task of mating previously distinct, or even competing, organizations with different structures and cultures. How successful the resulting entity will be in achieving anticipated efficiencies and promised synergies often depends on aligning workforce integration with the purpose of the transaction. For example, in approaching compensation and benefit issues, the employer must look to the underlying vision that drove the deal. If the acquired business is viewed as a strategic fit with the existing organization, swift integration of pay and benefit systems should likely follow. On the other hand, if the acquired business will be operated independently as a short term investment, the need for such integration to meet employment law and compliance audits requirements may be limited. Nonetheless, the more interaction there is among employees in similar jobs who are treated differently for such things as overtime or pension eligibility, the greater likelihood of lower morale, higher turnover, and employer liability. Where retention of employees is a component of value in an M&A deal, management must systematically address the disruption and uncertainty experienced by employees. Even with the best efforts at keeping plans secret, it is difficult to quell the pre-merger rumor mill once the "suits" - lawyers, accountants, and investment bankers - descend to conduct due diligence. While employee uncertainty after the merger can open opportunity for positive change, it is fertile ground for misunderstandings, defections, and employment law claims, especially where layoff rumors become reality. Thus, the new employer must be ready to hit the ground running with an effective program and management team to communicate its plans and vision to the acquired workforce. New employees will want to know about such things as compensation, benefits, sales plans, policies and procedures, and management structure. Although a transition period is to be expected, how it is handled will be employees' first and often lasting impression of management. Communication, based upon the goals of the acquisition and the culture of the acquired workforce is critical to transform management's vision for the new company into reality. © 1999 Jeffrey Berger REPRINTED FROM: |
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