Knowledge

Growth, transformation and continued private equity investment in financial services continues to drive deal activity in the Channel Islands.  With value creation and a return on investment being a priority, it pays to focus on, and invest in, an organisation's most valuable asset – its people.

What do we mean by strategic employment advice?

Strategic employment advice aligns your organisation's strategy and goals with your business objective and combines corporate legal advice with operational HR guidance to deliver tangible results from which you can measure success. 

In the context of an acquisition or merger, strategic employment advice will assist the board:

• to bridge the gap between the merging organisations or businesses;
• to maintain focus on the metrics being used to measure success; and
• to have clarity in decision making (planning, due diligence, restructuring and contractual challenges) and soft skills (communication and engagement) to drive the merged business forward.

How to leverage it within your organisation

Engage experts early: Your local team may not have the knowledge, experience or capacity to plan and execute the transaction efficiently.  An expert can draw on prior experience and knowledge to avoid common pitfalls and will put forward a different perspective or approach when developing strategy.

Do your due diligence: Start with the basics and ensure you have sufficient information to identify all employees working for the business (including 'hidden' employees, e.g. those working remotely and those on zero hour or 'consultancy' contracts – as they could still be in scope).  To understand financial liability and operational risk you will need to know the key contractual terms of employment for each employee.  Don’t forget about benefits, particularly those that are 'discretionary' and remember to assess the quality of the HR record keeping when considering HR files, e.g. absence records and disciplinary issues.  Conducting a gap analysis is a useful way of assessing where terms differ and will allow you to make decisions on next steps and assist you to formulate your plan of action.

Put a plan in place: As a minimum, 90 days before to 90 days post-acquisition, you should have a comprehensive plan in place.  Work backwards, setting out key milestones and longstop dates.  Consider approvals that will be required: local board, group companies, regulatory, finance and government approvals and ensure these are in place, with suitable contingency plans for slippage.  Consider if there are conditions that should be attached to the merger relating to employees. 

Think about the employee experience, engagement and communication: Communication is key, but you may not be able to communicate everything if certain matters are confidential.  It is therefore important to find a balance between engaging with employees in an open and transparent manner while at the same time safeguarding commercially sensitive information.  Think about your use of language, tone and method of communication, ensuring efficient top down, bottom up and peer to peer comms.  Consultation is key and may be mandated if you are planning changes to team structures, reporting lines or individual duties. 

Ensure proper integration: Post acquisition, there are likely to be changes to the operating model and/or job roles.  This could lead to redeployment and there may be a reduction in headcount if duplicate positions are redundant.  Systems and processes may be different and there may be an increased workload in the short term.  Following integration, the terms and conditions of employment for some employees may change permanently as you seek to harmonise these across the new organisation.

Can you afford to ignore it?

A failed integration is a risk to your business and typically leads to low levels of employee engagement and retention, which ultimately impacts the bottom line through:

• lower productivity leading to lost revenue because of change, uncertainty, low morale and job insecurity;
• attrition impacting client service and continuity and revenue (through loss of knowledge and skills); and/or
• damage to reputation which impacts prospective client relationships, future recruitment and, potentially, your relationship with the regulator.

By acknowledging the risk, you can formulate a strategy to minimise disruption and focus on the retention of key people post-acquisition.

Conclusion

In our experience, effective use of strategic employment advice is a win-win as typically it benefits employees, increases revenue, adds value and provides a return on investment for shareholders as well as a competitive advantage for the merged entity.