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How do you do the right thing in an HR transition, especially when you're dealing with some employees who have been with you 40 years?

That was the dilemma one of my client's faced when it outsourced its IT Infrastructure in 2004. The Everest Group was the advisor in this multi-hundred million dollar, seven-year deal.

Once the contract was signed, the vice president of the IT human resources (HR) department asked me to stay on to help transition the employees. The supplier offered employment to more than 50 percent of the effected employees. The remaining employees were released, left on their own, or found employment in other internal departments. As you can imagine, this was a difficult, heart-rending assignment.

Step 1: Set Up a Communications Plan

The two parties signed the contract at the end of October. We made the announcement the beginning of November. The supplier was scheduled to take over on the first part of January, 2005.

The first thing we did was set up a communications plan. We had to determine the message we wanted to get across. We had to decide who was going to deliver that message. We had to vet everything through the client's Communications Department and in some cases through its corporate counsel.

We informed all required outside groups. We posted a press release on both the client's Web site and the supplier's. We purposely didn't put out a local press release but we might as well have because the press started calling almost immediately.

We also notified the appropriate unemployment agency, complying with the Worker Adjustment and Retraining Notification Act (WARN). WARN offers protection to workers requiring employers to provide notice 60 days in advance of office/plant closings and mass layoffs. There are very specific qualifying events that determine if an employer is required to follow the WARN process. Although the client did not meet all qualifiers, we decided to error on the conservative side and give these employees 60 days notice.

Addressing Employee Issues

Naturally, all the impacted employees wanted to know if they were going to lose their jobs. Since the supplier was going to hire more than half of them, we required the supplier to interview all the affected employees. The client felt it was important that the employees feel everyone had a fair shot at a job with the new supplier. The supplier brought in a team of 20 people to conduct the interviews at the client's corporate headquarters. The supplier also conducted interviews throughout the county for those employees in remote locations. All interviews were completed in 10 days.

At the same time, the client was interviewing employees for its governance team. (We all know you don't get rid of all the employees when you outsource.) Employees who wanted a slot on this team really wanted to stay with the client.

It turned out both groups were competing for the top talent. My advice: if you know who you want on your governance team, tell the supplier up front. That makes it easier for them to build their teams. What happens is that the supplier thinks they have their team in place and then players start dropping out. We had one case where an employee accepted a position from the supplier but resigned the next day because an internal position came through.

Working with the Employees Who Were Leaving

After the supplier made its selection, the client had to decide who it needed and until when. This took almost two months to finalize because of the tie in to the services transition plan. The client set up four groups; each had a different termination date throughout a 7-month period. That gave some employees five months notice and others almost a year -- a VERY generous approach by today's standard.

Any employee who stayed around and worked on the transition team was eligible to participate in the client's severance program. At the same time, they scrambled to try to find another job externally or internally.

We met with each employee individually and told them their transition date. At that meeting we gave them specific information they needed, like how much was in their 401(k), what were there options to moving their 401(k), information on medical coverage (COBRA), etc.

The client went out of its way to help these employees. We brought in a career counseling service for them. We also worked with the state's Department of Labor. Both groups helped these employees put together resumes and hone their interview skills. Some haven't had to write a resume for four decades!

The employees truly believed they were entitled to something from the client. That was easy to understand since the average tenure of these employees was 15-20 years. Several employees had been with the company 40 years! That is an incredibly long time in today's working environment.

We heard a lot of concerns since many truly didn't want to leave. There was a lot of outward bitterness, as expected. My advice: show these people some love! They want to hear from you that you are going to do the best you can for them, but more importantly, follow through on your commitment.

We put a FAQ on the Web site that explained how the transition would affect their 401(K) and pension plans. A lot of people were not pleased to hear that the supplier didn't have a pension plan since they have been in one with for years.

Message boards on the Internet were full of information that was incorrect. Rumors just kept flying. We found the best way to manage this problem was to keep our FAQ page up-to-date.

How To Handle Employee Concerns

What do you do when you are about to terminate an employee who is just 14 days shy of being vested in the retirement plan? That meant they would lose a lot of money with relatively little time left in their working lives to make up the shortfall. Where do you draw the line? How do you help these people without breaking the rules? No matter what you do, someone is going to just miss a cutoff date. We wanted to be flexible, but really had no choice but to hold firm and enforce company policies.

In addition, several employees wanted to move up their transition dates so they could get on with their lives. They just wanted their severance and go out the door. Again, we had to hold firm to our policy and require these employees stick around throughout the transition period. It would not have been fair to those that did stick around if we began changing the rules for some and not all. As well, we had to make sure we still had enough employees around to complete the transitions.

Just be aware you will get special requests and unless you want mutiny on your hands, you MUST STICK TO POLICY!.

How To Help the Employees Going to the Supplier

The employees who went to the supplier started the first week of January. They were concerned about where to go and who to report to. What was their new email address? We told them to come back just like they still worked for the company on their first day.

On their first day as a supplier employee, no one showed up in the command center. GRRR.

We wondered how to handle the first few days in January when these employees were still on the client's books. They earned money, generated withholding, and now needed W2s at the end of the year. The client picked up this expense; it was very generous.

How To Deal with Attrition

About 20 people decided to leave, giving us about a 10 percent attrition rate. That impacted planning on both sides. In cases where we had only one person left in a department, it became crucial that we do what we could to retain that remaining individual as they became a key component to the transition. If that person left, the client would have been in a difficult spot.

Conclusion

It's not easy managing an "entitled workforce". We didn't anticipate any employee policy modifications but there were unexpected requests. My advice: be prepared for them.

My parting words: don't underestimate the time it takes to do this right. Because that's the only way to do it. Although it may not seem like it if you were on the receiving end, the client was very generous and fair. That's a good paradigm to follow.

Publish Date: April 2005

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Copyright © 2005 - Everest Partners, L.P.

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