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EARTH TECH Recycles Corporate Environment

March 1, 1995
Related Topics: Mergers and Acquisitions, Growth, Featured Article
Last January, Carole Collins and three other women climbed Mt. Kilimanjaro—Tanzania's extinct 19,340-foot volcano near the Kenya border. "I'm going to make it to the top," said Collins, a few days before her departure. As vice president of human resources at Long Beach, California-based EARTH TECH, an environmental consulting and engineering firm, Collins' mindset applies to work and play. In Tanzania, she says, one is able to view Kili's immense glaciers covering Uhuru Peak and also feast one's eyes on the flocks of zebras, antelopes and gnus grazing on the Serengeti Plain. It's a world far removed from the toxic landfills that her company deals with every day.

Likewise, when Diane C. Creel isn't running EARTH TECH as president and CEO, she'd rather fly 200 miles per hour in a Bonanza V-35, single-engine plane. "Flying is the most exhilarating thing I've ever done in my life. It keeps your adrenaline pumping," she says. Creel also loves to sail, but when the sea got a little too peaceful, she decided she needed to race. "I enjoy a little competition now and then," she says. Indeed, whether they're on land, in the air or on the sea, both women love to tackle big challenges. They're also ever mindful of the environment around them. Not only because they respect and honor Mother Earth, but because it's the nature of their jobs.

EARTH TECH's 1994 annual report aptly describes what that job is: "Successful companies, like healthy organisms, are in constant development. They adapt over time. From its genesis as a geotechnical firm [in 1970], EARTH TECH evolved into an environmental services company assessing, managing and remediating environmental problems for government and industry. Occasionally in the evolutionary cycle, the pace quickens, yielding dramatic change. A metamorphosis. So it was for EARTH TECH in 1994."

New corporate identity evolves after recent mergers.
Last May, Earth Technology Corporation merged with Canton, Ohio-based Summit Environmental Group, forming what is now known as EARTH TECH. Later, the company announced it also had signed an agreement in principle to acquire Richmond, Virginia-based HazWaste Industries, one of the nation's largest rapid-response, full-service remediation [cleanup] contractors. By acquiring Summit and HazWaste, the former company grew from a $62 million company with 500 employees to a $200 million company with 1,700 employees in 40 locations. The integration of Earth Technology with Summit was completed in six months—positioning it as one of the top 20 full-service environmental consulting and engineering firms in the United States. "The greatest pressure in a merger process comes on the HR department," says Creel, the country's first and only woman to run a publically-owned engineering firm. "HR has probably borne the brunt, but they evolved as the heroes. The merger worked, and we got it done in a very short amount of time."

Indeed, when a growing company such as EARTH TECH expands through mergers and acquisitions, human resources professionals play a key role in unifying the two different cultures. Because they manage people, they understand that employees may become particularly vulnerable or insecure about keeping their jobs. Most of EARTH TECH's employees are educated professionals with such job titles as geologist, asbestos specialist, hydrologist, structural engineer, toxicologist and geophysicist. "These are people who want longevity in the kind of work they're doing," says Collins. EARTH TECH's HR, therefore, performed several critical tasks. Among them: defining a new HR structure, centralizing policies, streamlining compensation and benefits, and propagating the new policies and corporate culture through as many creative venues as possible. Collins and her HR staff had to begin managing an employee base that more than tripled in size. Asked how she felt when she was told about the Summit merger, Collins recalls: "I looked this elephant in the eye and said, "You're mine. We're going to do this one step at a time."

In order to proceed with those steps, Creel made a decision to form an Integration Committee that would oversee all aspects of creating the new corporate identity: integration of management; technology transfer; compensation and benefits; work force coordination; and communication. The eight members included the four top executives from Earth Technology and Summit. (Summit Environmental Group Inc. was a holding company for environmental firms with established reputations in air quality, infrastructure development and management of water and waste water systems.) Because the committee relied on HR for its expertise on benefits and policies, and insights about the employees' needs, Collins worked closely with Creel and attended several meetings in which HR-related issues were discussed. "We put everything on the table. I think that was a very good move. It made everyone participate in what was going to be the new EARTH TECH," says Collins.

In other words, Creel offered her management team a new corporate landscape. She asked them to join her in pondering: Where have we been, what do we want to be doing, and where do we want to go?

Government regulations and public consciousness drive the industry.
As Creel explains it, the environmental services industry in the '90s is a mature industry. But only 30 years ago, the American people were just beginning to learn about the dangers of the pesticide DDT on the chain of life, when biologist Rachel Carson wrote Silent Spring in the early '60s. When the U.S. Environmental Protection Agency (EPA) was created in 1970-71 and the first sets of mandates such as the Clean Water Act and National Environmental Policy Act were issued, many businesses didn't even know those regulations existed. By the '80s, the environmental services industry was beginning to develop. The main challenge then was to find the right people to do the work, says Creel. Today, amid greater public awareness, more governmental regulations, market competition and company downsizings, organizations such as EARTH TECH are emerging as environmental service industry leaders. The field of competition, she says, has narrowed and matured. Where regional companies once divided the work, the jobs are now being done by national firms. And the market is oozing with opportunity. Here's just a few of the EPA's statistics:

  • Twenty years after the passage of the Clean Air Act, one in five Americans live in areas where the air does not meet federal air quality standards
  • Fourteen years after Love Canal, one in four Americans lives within four miles of a toxic waste dumpsite
  • Thirty years after Carson's book, the use of pesticides has doubled.

The costs to remediate and manage existing waste sites could reach $400 billion over the next three decades. Moreover, the Department of Energy and DOD are currently projecting expenditures of between $65 and $100 billion in just the next five to seven years. Their combined 1994 budgets were approximately $9 billion.

Within the context of the environmental services industry, Creel was responsible for expanding the company's market, geography and technology, and cultivating the organization's collaborative management team. Her leadership emerged when she became the company COO in 1987, the president in 1988, and the CEO and chairwoman in 1993. Today, mid-size firms like EARTH TECH are hoping to increase their Fortune 500 portfolio and grab a bigger chunk of the Pentagon's post-Cold War base closure contracts. "Years ago, when we sited nuclear power stations and missile sites for the Air Force, we used to say that the greatest threat to our strategic plan was peace. Now, with our involvement in the environmental aspects of base closures, the greatest threat to our strategic plan is war."

According to the White House Office of Science and Technology Policy, the environmental services industry reaped $134 billion last year in four categories: pollution prevention; pollution control; monitoring; and remediation. EARTH TECH intends to cash in on the growing market, but to do so, the company had to expand its services and geographical presence. Since the Summit merger and HazWaste acquisition, EARTH TECH's client base now comprises 44% federal government, 38% private industry and 18% municipal government. Among its key government clients are the U.S. Air Force Center for Environmental Excellence, the EPA, U.S. Army Corps of Engineers and the U.S. Coast Guard. Some commercial clients include 3M, Chevron, Dow Chemical USA, Occidental Chemical and General Motors Corporation. To meet this growing market, EARTH TECH had to be created as a new corporate identity.

The Integration Committee seeks buy-in.
When former Earth Technology and Summit consummated its merger last May, Creel knew that she couldn't proceed without input from her executives and top managers. "Clearly, we could have made in three months at our corporate office decisions that the committee made in six months. But I was looking for buy-in," says Creel, who began her career at Earth Technology as vice president of marketing in 1984. She understands the importance of having consensus. Her own climb up the corporate ladder, she says, wasn't easy. She had three strikes against her: "I wasn't an engineer; I was a female; and I came out of marketing." (Creel also received bachelor's and master's degrees in journalism from the University of South Carolina.) So when company founder Jack J. Schoustra wanted her to serve as COO and president in 1988, Creel insisted upon receiving a vote of confidence from the board of directors. Likewise in 1993, when Schoustra was asked to step down as CEO after a series of money-losing acquisitions and a struggle to replace him, she did not accept the top position without the board of directors' endorsement. "I wanted it on record that the entire board backed the decision. I wanted to make sure that I had their support before I took the job," she says.

As Creel established the Integration Committee, she kept those lessons in mind. She made it clear that she not only wanted it to be a well-endorsed unit, but a fast-tracked vehicle toward change. Why? "I believe people are inherently afraid of change," she says. At first, she received some resistance from the Summit executives. Some felt the integration would be too disruptive to employees, and that the transition should evolve more slowly. Creel disagreed, won them over and believes that those same managers would now say, "Thank God, it's over." Her reasoning was that the quicker the integration, the lower the fear factor.

One of the first actions the Integration Committee took was to approve the new HR structure that would manage the new employee base. As CEO, Creel announced that Collins would remain as director of the human resources department and invited her to attend several Integration Committee meetings. Collins, who came to Earth Technology in 1980, had built the department from the ground up and had proven her HR management skills during the last 15 years. "There was no HR department when I first arrived," she says. She remembers hopping from department to department, taking burdensome tasks away from other managers so that personnel files, benefits and payroll information would be organized and stored in one place. "As you start building on this, people started using me more. They were very glad to give me some of their tasks. That's how HR started." Then in 1986, Collins began to feel the crunch of government regulations. It was the year that COBRA (Consolidated Omnibus Budget Reconciliation Act) was passed. From then on, the government regulations started piling up one after another. If it wasn't the Immigration and Reform Act, it was the Americans with Disabilities Act or the Drug Free Workplace Act. "What's become the biggest issue in my mind is complying with these regulations and then being able to still add value to the company," she says. "It takes time away from developing programs that are more valuable to management and employees."

Today, government regulations still burden the HR department. But Collins' first task after the merger was to restructure her department. Before the merger, there were only five people in the HR department: Collins, Mark Coulombe (benefits manager), an HR coordinator, an employment specialist and a secretary. They operated out of the corporate office in Long Beach. After the merger, the Integration Committee recognized the challenge of managing larger numbers of employees nationwide, including those in the Midwest and Northeast regions gained from Summit. Collins, Coulombe and two HR employees still operate out of the corporate office. But the employment specialist's functions were given to three HR managers overseeing the West, Midwest and Northeast regions. The regional HR managers' main assignment, she says, is to implement company policies and corporate procedures in recruitment and employee relations. Each of the regional offices in turn employ three to four HR staffers. After Collins and the Integration Committee met many times, members approved a set of recommendations regarding HR's structure, management approach and proposals for centralized policies, benefit package and an incentive compensation program for executives, she says. They primarily relied on Collins to provide insight about how the merger would impact employees, financial information about benefits and ways to remain competitive in the marketplace. Did she receive some resistance from the acquired company's HR managers? Not surprisingly, she did. But in any merger, she says, employees of the acquired company are more likely to be resistant to change. "For the HR [managers] that were interested in our proposed structure, they stayed on. For those that felt it wasn't something that they wanted to participate in, they left," she says. Once the new HR structure was established, however, Collins was then able to focus on centralizing EARTH TECH's benefits and policies.

HR designs new corporate policies and benefits.
One of HR's most daunting tasks was consolidating the policies and benefits of the merging companies. Again, the Integration Committee and the HR staff approached these tasks with the same general philosophy that Creel had applied to all other areas impacted by the merger. "What we tried to do was start with a clean slate," says Coulombe, who says that after the merger, his reponsibilities primarily changed in scope. He and Collins focused on planning and implementing the new policies, benefits and executive incentive compensation package. "When you start new programs, it takes a lot more creativity to get the information out that will help people take it in," he says.

Instead of nitpicking each company's policies and benefits, HR proceeded by asking the question, "What do we want in this new organization?" After some cursory comparisons, Coulombe began researching the policies and benefits of other companies in the same market. Most of the policies that were finalized covered many of the basic areas of any employee policy handbook. The process allowed EARTH TECH to consolidate or formulate policies that the merging companies were either enforcing or lacking. For example, Earth Technology employees didn't have floating holidays, but Summit did. The new policy established them for all employees. At Summit, bereavement and sick days were separate. After the merger, they were combined. HR also came up with a combined policy for jury duty. Previously, Summit paid its employees for serving jury duty. Earth Technology didn't. "That's important because if someone wants to serve jury duty and one company pays, and the other doesn't, that's not good. These are the things we had to throw on the table," says Collins. The same process applied to reviews, evaluations and classifications of employees. For example, HR and the Integration Committee had to decide who's a part-time employee. At what point do individuals receive benefits? After 30 hours or 32? "We had to come up with an agreement that was going to affect some new employees who would have to accept the new policies. But existing employees of Earth Technology had to be informed that they weren't going to receive benefits unless they worked at least a 32-hour week," she says.

Most of the employees, Coulombe recalls, wanted to know more about their benefits. "People had a lot of concerns. They get very specific about my medical plan, my doctor... the things very personal to me," he says. HR's challenge was to offer the best benefits the company could buy for the dollars it had and to streamline them because of the merger. Because medical benefits usually cost the most, the company underwent a bidding process among different insurance carriers. The goal: To find a national carrier that could service all the company's geographical areas and offer some type of consistent managed-care program. "There was going to be gives and takes on both sides," says Coulombe.

After several discussions between HR and the Integration Committee, these are some of the new benefits that were designed for EARTH TECH:

Before the merger:
There was a variety of medical insurance carriers, including HMOs, PPO, EPO [Exclusive Provider Organization] and indemnity plans.

After the merger:
The company signed with one national carrier who provided a point-of-service medical program and a high network match throughout the company. Employees now enjoy low copayments, prescription benefits and out-of-area coverage for non-networked areas. This supported HR's goal of having one national carrier providing a managed care program for the majority of employees.

Before the merger:
The mental health coverage for most employees was included in the medical plan. There were stand-alone employee-assistance programs (EAPs).

After the merger:
Mental health and substance abuse were carved out of the medical plan and placed with a specialty carrier. EAP benefits were included for all employees with additional mental health coverage for employees enrolled in the medical plan.

This supported HR's goal of providing an EAP for all employees and providing a separate mental health carrier.

Before the merger:
Earth Technology had a choice of indemnity or EPO dental. Summit had no dental plan.

After the merger:
The company signed with one national carrier to provide dental coverage for all non-operation services employees and freedom to choose between indemnity and managed-care coverage. Here the goal was to select an experienced dental carrier for all employees.

Before the merger:
There was a variety of life insurance carriers, and the coverage was from two to three times the annual salary with different maximums. After the merger: Again, EARTH TECH used one national carrier with coverage up to three times the annual salary and a maximum of $500,000.

Before the merger:
There was no travel medical assistance program.

After the merger:
A program was included with AD&D coverage. It helps employees in the event of medical or other emergencies while traveling away from home, especially in foreign countries.

In addition to establishing the companywide benefits, Collins was the main architect of EARTH TECH's revised executive incentive compensation plan. One of the reasons the plan had to be revised is that Summit didn't have one in place. Earth Technology did. "We had to consider how to make it fair and equitable," says Collins. About 15% of EARTH TECH's 1,700 employees are eligible to participate in the program. Targeted for top-level managers, the program includes senior-level managers all the way up to the company executive vice president.

EARTH TECH's program, she explains, has seven levels of eligibility, depending upon the employee's fiscal year performance at a specific level of responsibility within the company. The incentive plan is composed of two components. One component is based on the company's overall profit as a percent of net revenue. The other is based on individual objectives established between each individual participant and senior management. This second component includes quantitative objectives for the individual profit and losses for a region or department, and includes profit as a percent of net revenue, accounts receivable goals, booking goals and utilization goals. Marketing personnel, however, will have individual revenue goals apart from the program. Although Earth Technology managers took a major cut in their maximum bonus levels, the main goal of HR was to "bring everyone into the larger corporation and come up with something that was quantifiable and perceived as fair," she says.

Stop rumors, eliminate fear, offer multiple forms of communication.
Throughout the first six months of the integration, EARTH TECH executives and managers were true to the open process advocated by Creel. She and Denise Pierangeli, director of public relations, issued a periodic newsletter called Synergy. Creel says she picked the name because that's exactly what she was trying to achieve between the two companies. Employees from both companies received the newsletter soon after the committee had met. It provided updates on everything from the new organizational chart to health and safety issues to changes in policies and benefits to the new company logo. "Diane made an all-out effort to communicate," says Collins. Through Synergy, employees kept abreast of the agendas, management decisions and timetables. Then Coulombe would follow up with a more specific benefits newsletter. Because there were 1,700 employees nationwide, the Integration Committee also installed an E-mail system so the employees could be networked online. "It was our policy to respond within 24 hours," says Creel. "We put [E-mail] in place prior to closing the merger."

But even with the speed of technology, EARTH TECH executives still valued the importance of human contact. "The more you communicate, the more people will understand the direction of the company and feel a part of it," says Coulombe. With that awareness, HR launched a communications campaign by announcing that meetings would be held throughout the country to address benefits. Prior to the meeting, each employee received a newsletter with a benefits overview, a letter from Creel and a special benefits enrollment guide. Then HR formed six teams that included an HR manager—Collins and Coulombe also participated—insurance company representatives and brokers. "We conducted 35 employee meetings within one week," he says. Spouses also were invited to attend. Because the employees had already received written information, most meetings lasted about two hours. "In most cases, the spouses had more questions." Clearly, by allowing the employees to raise all of their concerns, they became active participants of the new corporation.

CEO's corporate vision includes HR as strategic partner.
One thing Collins is certain about is that Creel doesn't just pay lip service to HR's role in a company. Her commitment was first proven in 1988 when Creel became Earth Technology's president, in addition to her position as COO. The company held brainstorming sessions with non-management employees to receive their input about benefits and other HR issues. They were asked what attracted them to other companies, and what they liked about Earth Technology. "The process let us know what the value system of the employees was," says Creel. As a result of these sessions, the company's programs and policies were streamlined for the first time. It was a major change, one that Collins attributes to Creel. "The company was made up of separate entities then, and people liked doing things their own way. A lot of mentoring and support came from Diane. She came on the scene and developed the HR department," says Collins.

Now that the HR functions have been even more systematized since the merger and integration, Collins has set her eyes on positioning HR as a more visible strategic partner. What that means, she says, is showing how HR adds to the bottom line. "As part of HR's annual goals, we'll start quantifying the processes we do," she says. Are they reducing the number of days to bring in a new hire? How long are they taking to fill a request? Are they improving the process and how? For example, if it takes 45 days to find a geologist, what can they do to find one in less time? What kind of recruiting techniques have been most successful, and how much is the company spending on benefits per hire? The tougher issues to evaluate, she says, are employee relations. "It's hard to know how long it will take to solve a problem with a supervisor. It could take one conversation or several months."

As EARTH TECH's HR department tackles these issues, Creel will be thinking more about the company's direction as a whole. Each year, EARTH TECH establishes a three-year strategic plan. But due to the nature of the industry, which fluctuates according to the economy, government regulations and public sentiment, management adjusts the plan accordingly. "One has to be flexible and responsive to the client. If the client needs missiles, you site missiles. If the client needs base clean up, you clean up the base." Part of EARTH TECH's future strategy, she says, includes laying the foundation to absorb the global market, particularly in the Pacific Rim. For example, if EARTH TECH had been operating in Kobe, Japan during last January's earthquake, the company might have been charged with responsibility for the repair and rebuilding of water and waste-water treatment systems. Likewise, other Asian countries, she adds, appear more willing to pay for cleaning up contaminated water and waste water in that region.

But until the global opportunities become more concrete, Creel plans to continue overseeing the integration of the Summit merger and HazWaste acquisition. Last year, she traveled 233,000 air miles. This year, she expects to continue at the same rate. She believes that her accessibility will demonstrate her commitment to open communication between EARTH TECH's executives and the new employees. But if she's learned any lesson from the Summit merger, it was this: Don't neglect the employees of the original company. "With Summit, I was so concerned about reaching out to the new employees, I didn't give as much attention as I should have to the [others]. The original employees need the same amount of time and attention. Through the second merger [HazWaste], I'll be more sensitive to that." That's good news for Collins, who says that working on the same floor and being involved in the transition helped her to keep pace with Diane's direction. Now, was that by air, land or sea?

Personnel Journal, March 1995, Vol. 74, No. 3, pp. 34-41.

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