Outsourcing, restructuring, corporate acquisition and consolidation usually
spell dislocation for the workforce. This presents HR professionals with a
great challenge. Sara Bean reports on how one of Europe’s largest computer
service companies copes with constant change
The legal and practical considerations of organisational change often
present the greatest challenge to an HR professional. How do you ensure a
smooth transition while managing both corporate needs and those of the
individuals affected by the change, and negotiating numerous legal hurdles
including Tupe, information and consultation laws and contractual matters?
HR specialists at EDS grapple with the question every day. The US-based
global company pioneered the IT services industry back in the 1960s, and now
supplies e-business and information technology services to client organisations
in 46 countries. But when EDS takes over the running of the IT department of a
blue-chip client, it also assumes responsibility for the people who work there.
Although the company has a high graduate intake (over 600 graduates in the UK
alone in 2000 and 2001), just over 40 per cent of its 38,000 employees in
Europe joined the company by transferring from a client organisation.
Managing the needs not only of the client, but of EDS and the transferring
employees is a daunting brief. The company’s rate of growth is way ahead of the
market rate – since 1984 it has made around 400 outsourcing deals throughout
"It’s a massive challenge," says Graeme Simms, EDS HR director for
Europe. "There may be a lot of technology around supporting change, but
seamless transition is a difficult goal. In fact, I spend 90 per cent of my
time managing the change drivers needed to integrate thousands of new people
into the organisation."
And, explains Simms, "When you get a global organisation wanting to
outsource in more than one country, you cannot isolate those countries in the
way you treat the workforce."
Because many of the organisations that enter an outsourcing relationship
operate internationally, EDS often has to navigate its way through the legal,
political and socio-economic mores of a number of countries simultaneously. For
example, in 2001, the company signed a contract with the Swedish-based engineering
firm SKF, which entailed the transfer of some 700 people across 39 countries.
Not surprisingly, the company relies heavily on the services of its solicitors,
Allen & Overy, who not only advise on the legal aspects of a transition,
but also work in close partnership to satisfy the business requirements of many
Dr Neil Bentley, employee relations specialist for EDS Europe, says the
company’s mantra is always to stay legally compliant when people transfer. The
firm aims to offer the same terms and conditions overall as the outgoing
employer, including pensions rights. This is more generous than the current
Tupe position, which does not require the pensions of transferring employees to
be protected – although that may change under the Government’s review of the
regulations. However, explains Bentley, it is just as important to minimise the
apprehension of incoming employees who find they are now working for an
entirely different organisation from the one they chose to join.
EDS places emphasis on good communications throughout a transition programme
which, because it can take around 18 months to complete, can be a time of
anxiety for those involved in the move. Says Bentley, "People are our
focus, and that sort of change can be traumatic. Few people like change. We try
and alleviate that stress and address those fears. We aim to be the employer of
choice, offering all our staff the best opportunities."
The company has found that the legal requirement for works councils in many
European countries is a useful reference point when dealing with, and
reassuring, nervous transferees. The firm’s European Works Council, with
representatives from 17 countries, and the domestic works councils in 12
countries, are closely involved with transition projects; many of the current
representatives are able to offer experience of moving from one company to
another with new recruits.
Their motivation, says Bentley, is that the employee representatives see
themselves as having a positive role to play in company development. "They
understand the need to be able to cope with the business changes. There is a
trust between management and works council representatives which works both
ways. For that reason, the works councils are there to tell the truth, to give
their honest opinion on their experiences of working for EDS."
A typical transition programme operates in three phases. During the
pre-transition period, EDS and the outgoing company will discuss the employee benefits,
terms and conditions, and cultural and organisational details involved in the
move. The two companies will also enter into consultation with the employees
themselves, either with an employee representative group set up especially for
the transition, an incumbent works council or a trades union.
This process also applies to the UK, where there have been 120 outsourcing
deals since the company was established in 1984, 102 of which have taken place
since 1994. In fact, over the last five years the firm’s UK base has doubled in
size, its ranks swelled by new recruits such as the Inland Revenue, the London
Borough of Brent, Rolls Royce, the DVLA, the Royal Bank of Scotland and Xerox.
In the UK, explains Lance Williams, HR director, the union is often very
much part of the transition process. "Of the 120 transfers into EDS in the
UK, a third of them have involved trade unions. The UK does not currently have
a mature works council infrastructure, so much of our work has been with trade
unions. We find that moving people from the public to the private sector
usually involves a union."
And although Williams agrees that the eventual introduction of the European
directive on informing and consulting employees in the UK will invariably mean
that more become involved in outsourcing programmes, he says, "I think
that the trade unions will continue to make a significant contribution in the
overall employee relations arena."
During the pre-transition period EDS will also develop a transition and
acclimation plan for all the new employees, and give them the opportunity to
meet with EDS representatives to discuss the implications of the move.
The second phase of the transition process is the transfer itself, the
effects of which, explains Williams, the firm likes to keep to a minimum.
"Our main aim is to ensure that day one in EDS is just like the previous
day in the old organisation so that we are able to take the employees with us
Importance of communication
By the time the transfer takes place, a full communication programme will be
underway with details of all new personnel set up in the administration system.
Company managers will be on site to answer queries. New recruits are gradually
assimilated into the company. According to Williams, labour attrition rates are
low, with an average turnover of only around four per cent among people who
have transferred, compared with an industry average of 15 per cent. The company
avoids relocating staff where possible, preferring to keep employees at the original
site through development of the existing business.
The company is a plural society because of this, explains Williams. It
harbours a common set of values and practice overlaid with a culturally
sensitive approach to each client and market place, he says.
For example, the staff at the DVLA, embedded into EDS seven years ago, will
be more integrated than those who came in via the ITSA deal with the Department
of Social Security last year (see case study).
But ultimately, says Williams "we’re committed to growing each account
and usually increase opportunities, not deplete them".
"We’re careful not to eliminate the best practice that comes across,
but build upon it with our additional expertise and knowledge, while adding a
greater opportunity for training and development."
Case study – ITSA
In a major deal with the Department
of Social Security (now the Department for Work and Pensions) last August, EDS
took over the management of the department’s IT operations.
The agreement involved the transfer of 1,550 staff from the
DSS’ Information Technology Services Agency (ITSA) to EDS. The company
established a three-way consultation process between the Public and Commercial
Services union (which had a collective agreement covering the entire workforce),
the outgoing employer and EDS to discuss all aspects of the transfer from Tupe
to pay and conditions. Because the collective agreement between the existing
employer and union still applied at that point, the company got in as early as
possible to address concerns and inform the trade union of any operational
Once the administrative changes had been agreed, the company
issued a "measures statement" that outlined processes that might
change for employees as part of their transfer from a public to a private
company. This dialogue was conducted as a three way process all the way through
to the point of transfer.