Integrating staff packages using perks has become an art form for acquisition-hungry consumer goods firm Henkel, says Amanda Wilkinson.
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Acquisitions of new businesses and product development are part of life at Henkel, a global consumer goods business and the manufacturer of brands such as Schwarzkopf, UniBond, Loctite, Sellotape and Pritt.
Founded in Germany 130 years ago, the family of founder Fritz Henkel still has a majority stake. Notable deals include February’s purchase of Gillette’s Right Guard deodorant from Proctor & Gamble.
Despite its long history, here in Britain, Henkel only really established itself in the market in 1970, but its British presence has grown through purchasing sprees.
Bob Ferneyhough, director of human resources Henkel UK & Ireland, explains: “In the 11 years I have been with Henkel there have been over 14 acquisitions. So the big challenge for HR is how you manage and integrate employees with their terms and conditions, and benefits packages from those acquired companies.”
Henkel has managed to maintain common terms and conditions, and benefits for its 1,300 employees spread across its business units in the UK – cosmetics and toiletries, consumer adhesives, technologies, and laundry and homecare.
When Henkel is acquiring a company, HR gets involved at due diligence stage so any areas that may cause difficulties, such as pensions, can be spotted early on.
“Typically, we integrate the acquired companies over a period of 12-to-15 months. So part of that is doing an audit of all their terms and conditions and benefits, and a comparison with the Henkel offering. Then we develop a business case as to how we will integrate them and what it will cost to do so. Generally, we find that our package is usually very competitive either at or above the level of the acquired company,” explains Ferneyhough, who is based in Hatfield.
So far, Henkel has not had to resort to a flexible benefits scheme to help harmonise benefits across the organisation. Jon Bryant, head of flexible benefits at Jardine Lloyd Thompson, says: “Flex is being increasingly used by companies as a harmonisation approach to deal with any legacy or [Transfer of Undertakings (Protection of Employment)] Tupe issues and to provide a framework to move forward. It is a great method to utilise in the case of acquisitions.”
Under Tupe, the contractual rights of employees in the acquired company are protected. “We [at Henkel] take a reasonably pragmatic, generous approach to how we integrate newly-acquired employees because we want to have them very well motivated,” explains Ferneyhough.
However, he admits that sometimes Henkel has adapted its own terms and conditions after acquiring a company. When it bought Loctite, for example, Henkel incorporated the acquired company’s special holiday arrangement entitling staff with five years’ service to receive an extra ten days holiday to be taken over a five-year period.
The various pension schemes of acquired companies have been similarly absorbed.
“The other challenge that we have risen to with acquired companies is to put them under the umbrella trustee body. So, instead of having to have four different trustee meetings with different advisers, different actuaries and different legal advisers, over the last two-to-three years we have been working hard to integrate the structure and it has saved us a lot of money,” says Ferneyhough.
Henkel has worked with Buck Consultants to streamline the administration and management processes of the various schemes which include the main Henkel defined benefit (DB) scheme and a smaller DB scheme which are both closed to new members, and a new trustee-based defined contribution (DC) scheme set up in 2003.
“Our main driver at the moment has been towards a defined contribution scheme. That ties in with Henkel’s international approach where the same thing has been happening in North America and other countries where we used to have predominantly DB schemes,” he adds.
Like most DB schemes in the UK, Henkel’s DB schemes are not fully funded under the basis required for reporting purposes and the company plans to pay £2.6m over the next 10 years to eliminate the £19.58m shortfall, as at 1 January 2005. A few years ago, members were also asked to increase contributions to the main DB scheme from 4% to 6%.
When companies make the move from DB to DC, most opt for a group personal pension plan (GPP), explains Bryant.
But Ferneyhough explains that the trustee-based scheme fits with Henkel’s ethos. However he admits that it is “getting more complex” to offer trust-based schemes.
Of Henkel UK’s staff, 1,063 (81%) are pension scheme members with 528 in the residual DB schemes while the rest are members of the new trustee-based DC scheme which was designed to fit in with the Henkel Group pensions policy. It is open to all staff aged over 16 years and offers a choice of employee contribution levels from 2% to 5% with Henkel double matching them.
The scheme also provides death-in-service cover, a spouse’s pension and children’s pension, says Ferneyhough. “We enrol all employees when they join the company and they have the chance to opt out. This is something we decided we wanted to do because it’s an attractive benefit and we would rather people made an informed choice about coming out of it.”
With 50,000 employees worldwide, it would be easy for the workforce to view Henkel as a faceless corporation. But Ferneyhough says Henkel strives to preserve the tradition of “an open family company”, which is reflected in its approach to benefits and staff. However, he refuses to describe the company as paternalistic. “We have to survive in the modern world. We are very innovative and forward-looking. But what we haven’t done is throw the baby out with the bath water. We haven’t abandoned some of the things that companies used to do.”
For instance, the fact that there is a heavily-subsidised canteen at most sites stems back to the days when Henkel supported its factory-based workers by giving them a good square meal. Staff at Henkel UK also receive a traditional hamper as well as a hamper containing some of the company’s cosmetics products at Christmas, a £10 voucher on birthdays, marriage or the birth of a child, and Easter eggs.
Fitting with the corporate slogan “A brand like a friend”, employees can also apply for leave to take part in charitable or volunteering activities and for a donation for their chosen cause, such as a new roof for a Girl Guide hut.
Other initiatives which encourage employees to identify with the company include a staff suggestion programme for innovative ideas and an employee share programme under which staff are given one free share for every three bought. After three years they can cash them in. The scheme which had a 30% take-up rate for 2006 has just opened enrolment for next year.
Another perk that helps to motivate staff around business performance is the profit-related bonus scheme. “We are a great believer in performance-related pay and variable pay,” says Ferneyhough.
There is a group-wide management incentive bonus scheme, which is dependent on the profitability of Henkel Group, team performance and individual performance. UK staff who are not in the management scheme or sales incentive scheme, are entitled to a bonus linked to the profitability of the business which tends to range between 3%-5%.
Being a global company there is much scope to swap learnings and best practice among countries. The HR and management process used for a recent restructuring project in the UK, which involved four sites being reduced to one with the relocation of 105 key technical staff, is now being followed in France. Team briefings, site visits, trial journeys and a green travel policy including a shared lift service, and cash incentives for those walking and cycling to work were all introduced. In addition, a disturbance allowance and excess travel payment for a period of 12 months were used to ease the relocation process.
Also finding a place in the group’s central knowledge management database is Henkel UK’s approach to driver training, implemented following a health and safety audit of its company car scheme.
“We realised that with over 400 company cars and with people doing more than 50,000 miles year, it was one of the most riskier activities we were involved in.”
Henkel UK operates three main car schemes. Drivers with a business need or who are of a certain grade can lease a company car or, if they want more choice, opt for the employee car ownership plan, which was introduced in 2003 and has 100 drivers or, if they do less than 10,000 miles a year, they can take a cash allowance.
Since 1999, drivers have undertaken a training programme once every three years and accident rates have fallen from 51% to 35%, producing savings of at least £100,000 a year and a reduction in insurance premiums saving a further £35,000 a year.
“When we introduced it, we were spending just over £17,000 a year on driver training so that gives you some idea of the cost benefits,” says Ferneyhough, who is now considering focusing the frequency of driver training around the mileage and risk profile of drivers. He has also introduced an accident management system, driver licence checking scheme, both administered by third parties, and is considering carrying out a green audit of the company’s car policy in a bid to cut down on CO2 emissions. But you can be sure it won’t long before he will be called upon to turn his attention to yet another acquisition
Bob Ferneyhough, (pictured above), HR director at Henkel UK and Ireland, is used to managing change. During the 11 years he has been at Henkel the company has made 14 acquisitions, and the size of the workforce he is responsible for has doubled to 1,300.
In the early 1990s, Ferneyhough was director of human resources at Unisys World Trade, where he was tasked with recruiting key staff and setting up HR systems for operations established in new markets in central and Eastern Europe.
But before making the move to HR generalist roles, Ferneyhough cut his teeth in specialist areas first as a training and development executive for Xerox and then as a compensation and benefits expert at Kodak. “I think in-depth [roles] have made it easier to progress into a [generalist] HR director role,” he says.
He believes that having worked for a number of companies in different industries has helped to develop his knowledge and skills – a route that he was advised to take when he did a business studies degree, specialising in industrial relations and labour law at Middlesex University.
“The contrast has been between either the American multinational companies and Henkel’s European-based company with family ownership and a longer-term perspective. It’s been very refreshing [here] as I’ve found you are not driven by quarterly performance in the same way the American-quoted companies are. The difference with Henkel is that there is a real, genuine interest and concern about people as individuals.”
What are the benefits?
Private medical insurance
All management circle staff, middle and lower management get family AXA PPP cover. Basic sales reps and supervisory level staff receive single cover but can enrol family at a beneficial rate.
There are two defined benefits schemes closed to new members. Henkel plans to pay £2.6m a year for the next ten years to clear the £19.58m deficit. There is also a trustee-based defined contributions of 2%-5%. Henkel double matches these.
Counselling support line available.
Self-insured income protection scheme for all Henkel employees.
Free eye tests for people in jobneeding roles or where required.
Employee share plan
Eligible staff are entitled to one share for every three bought, and to cash them after threee years.
Childcare vouchers through salary sacrifice. Flexible start and finish times at some sites.
25 days plus public holidays as standard. After five years’ service staff are entitled to a one-off two weeks incentive holiday.
Schemes run in conjunction with a number of co-opted firms such as Homebase.
Subsidised canteen or free food.
Christmas and own-product hampers. Vouchers worth £10 on birthday, marriage and childbirth. Easter eggs.
On a case-by case basis, time off for staff to do voluntary work for charity and possible financial support.
Case Study: Branded as an individual
Jon Green, UK sector controller, stationery, consumer adhesives at Henkel UK, is out on the road meeting with retailers so he values his car.Instead of driving a leased car, he has opted to participate in the employee car ownership scheme. “There was more choice and flexibility in terms of choice,” says Green who has an Audi A4 Sport and drives around 30,000 miles a year.
The 43-year-old has been at Henkel for more than six years and counts himself fortunate to be a member of the defined benefit pension scheme, which is now closed to new members.
“However, there are also smaller things that I enjoy such as the Christmas hamper, an Easter egg and a £10 birthday voucher. As a global business, it shows they still think about the individual,” he adds.
Henkel at a glance
Henkel was founded in 1876 by Fritz Henkel and is head-quartered in Dusseldorf, Germany. It operates four main businesses: laundry and homecare, cosmetics and toiletries, consumer adhesives and Henkel Technologies which concentrates on the industrial application of adhesives. In 1907, it launched Persil, the world’s first self-acting laundry detergent, granting rights to the brand in the UK to Unilever after WWII. In the 1920s, Henkel began producing adhesives, and later acquired hair colorant Polycolor in 1950, Schwarzkopf in 1995 and Loctite in 1997. It was not until 1970 that Henekel established a presence in the UK market, where it has nine sites. Although shares in the company are predominantly traded on the Frankfurt Stock Exchange, the Henkel family still has a majority stake. For 2005, Henkel reported a 13% increase in sales to £11.9bn and a 16.7% increase in operation profit of £1.16bn.