Be Honest, Even If It Hurts

Church & Dwight is the largest producer of baking soda products in theworld, but to achieve its goal of being a leader in all packaged goods, thecompany had to add major product lines. When Carter-Wallace, a manufacturer ofpersonal-care and pharmaceutical products, came on the market, at first itdidn’t seem to fit their needs, says Steve Cugine, vice president of humanresources. “There was significant synergy between their personal-care productsand ours,” but Church & Dwight had no market for the rest of their lines.

    Eventually, after months of negotiating, Carter-Wallace agreed to split thebusiness, freeing Church & Dwight to buy the entire consumer-productsbusiness, which includes Trojan condoms, Arrid antiperspirants, Nairdepilatories, and First Response pregnancy-test kits, in a partnership with theprivate equity group Kelso & Company, for $739 million. It was a hugepurchase for the company, nearly doubling its staff size, and it immediatelybalanced the size of the company’s personal-care division with that of itshousehold goods division. The additional product lines and manufacturingcapabilities also enabled the firm to ramp up production in many of itsfacilities, get lower prices on shipping, and have greater leverage in themarketplace.

    It was a great strategic move, but culturally the companies were verydifferent, Cugine says. Even though Carter-Wallace was a public company, theoriginal family had a significant presence in the workplace. Their approach tocompensation was also different: Carter-Wallace paid high base and bonuses withfew long-term incentives and had a rich benefits package, whereas Church &Dwight’s compensation packages were average for the industry but above marketfor bonuses and incentives, and its benefits were less attractive.

    The other concern was that, after a year of being on the market,Carter-Wallace employees were frustrated and cynical about the future. “Thedeal had dragged on for so long, they were demoralized,” Cugine says. “Wewalked into a real challenge. It was a massive change for them and us.”

    Some of those changes would be quite painful, especially for theCarter-Wallace plant in Cranbury, New Jersey, which was one town over fromChurch & Dwight’s Princeton headquarters. Because it was so close,executives opted to shut down the plant, leaving most of those hourly workersunemployed. On the bright side, however, those who did keep their jobs didn’thave to relocate, Cugine says, which made the transition easier.

    To minimize resentment and shed light on the process, Cugine, who wasinvolved from the beginning in negotiations for the acquisition, went into theCranbury plant immediately after the deal was complete to manage theintegration. Within days he held group meetings to explain the situation toemployees, lay out the transition strategy, and share details about the newcompensation plans, which they agreed would be implemented over three years toease the impact of the change.

    He and his team also began interviewing employees one-on-one at all of thenewly acquired plants, to determine who would stay and who would go. In a matterof weeks, Cugine’s team hired 300 of the 590 salaried people and 600 of 900hourly people from Carter-Wallace. “As hard as this process was, we had tosettle the issues as soon as possible,” he says. “Not knowing whose job issecure is a real stumbling block to getting people on board.” For those whoweren’t offered jobs, Cugine’s team negotiated severance packages andjob-placement assistance.

    His team also made a point of working with division leaders and employees atthe Cranbury plant to evaluate their processes and procedures to see what theycould incorporate into Church & Dwight’s environment. “We have an intenselyentrepreneurial, hands-on culture,” Cugine says. He worked hard to communicatethose values to the new employees, encouraging them to share their ideas andparticipate in the growth of the company. “We showed them that they were animportant part of this deal and that in the end we were all focused on thesuccess of the company.”

    Cugine calls the merger “an absolute success” and believes the company hasachieved the business goals it set when the deal was made. But there are thingshe would have done differently. He wishes the companies could have had a moreopen dialogue earlier on with employees to assuage their fears.

    “It’s a matter of balance. Carter-Wallace was understandably reluctant togive us access to employees in case the deal fell through, but if I had it to doagain, I would have pushed harder to let them know what was going on.”

Workforce, February 2003, p. 62-63 — Subscribe Now!