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When a major national health services organization acquired a major group purchasing organization (GPO), there was no question that the more than 250 employees who were part of the reduction in force would receive outplacement.

the notice of layoffThe financial mavens raised their eyebrows, but that was the end of the debate.

The acquiring Chief Executive Officer had locked in on three important transaction principles related to how to handle the other company’s employees.  His focus did not involve indifference or a smug, conquering sneer as is the case in far too many deals.  No, this CEO knew these issues were vital to his future growth:

  1. Protect his company’s employment brand
  2. Promote goodwill among the departing employees
  3. Identify and nurture the boomerangs

Post-acquisition layoffs, a function of eliminating duplication and operating costs, are part and parcel of most deals.  The smart CEOs always evaluate talent during the acquisition process – selecting the best people for the key positions but with an overarching goal of protecting their company’s culture as well as the loyalty to, and passion for, the corporate mission.

This wise CEO also knew that money – severance pay – was no guarantee of goodwill.  Money alone almost never buys that valuable commodity.

Protect The Company’s Employment/Talent Brand

For those employees who were not offered jobs, dumping them into a crowded, competitive job market without transition/career support was not the employment brand image the CEO wanted to project.  He did not want to lose an outstanding future hire at any level because she/he was hesitant to work for a company with a bad reputation for managing their most important asset: their talent.

Promoting Goodwill Is A Cost Effective Investment

Departing employees, particularly senior executives, leave with a treasure trove of information, including proprietary data.  Disenfranchised employees, angry that they were not treated with respect, or given the tools to help them in transition, are more likely to use that information in a vindictive way – “selling it” to a competitor who could use it in an inappropriate way.  Outgoing employees who feel they got a fair deal are significantly less likely to misuse the information.

Boomerangs Represent Future Value

Boomerangs are people who leave a company for a variety of reasons – promotion, to pursue a broader range of experience not currently available at their employer and, most especially, layoffs/reductions in force.  When a smart company has to let a solid performer go because there was not room for them when the acquisition or merger was completed, or they leave on good terms for other reasons, they track their career moves.  They know that boomerangs, when they return with additional experience, can add great value to the enterprise when they return in a new role.

Outplacement does not have to cost the earth.  The old model, in which a typical transition contract cost the former employer from $15,000 to $25,000, is now virtually extinct except for some senior executives.  The new outplacement is on-line and is infinitely less costly.  

In the case of this GPO deal, it was less than one-half of one percent of the acquisition price.  That is some of the best money the acquiring company spent in the process.