Adp Inc. and Cdk Global

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Shareholders: As a public listed company, ADP has to take care of its shareholder who have claim on the residual asset of the company. The confidence of shareholder in the company is reflected through its share price. Management of ADP decided to transfer the Asset and liabilities associated with its Dealer service division to CDK through a series of transactions. In the distribution, ADP will distribute to its shareholder 100% of shares of the CDK global. Management of ADP decided that for every 3 shares of ADP, shareholder will receive 1 share of CDK. Further management expect that spin off will be tax free for the shareholder. To get the shares of CDK, Shareholders are not required to take any actions. Management decided to inform the decision of spin off to shareholder through public letter.

Employees: The employees of the dealer services arm were to move to CDK Global and the transition were to be completed within a year. The incentives of the employees remain unchanged. Among the benefits, the employees in CDK Global were not offered the retirement benefit scheme which was offered to ADP employees. However, the retirement scheme was replaced with a savings benefit scheme. In the work side, the management of dealer services were retained in CDK Global and there were no KPI changes among the employees.

There was no culture change in the organization and all the best practices of ADP was incorporated in CDK. ADP is known to be one of the best places to work with key features of policies as -

- Women friendly

- Cab facility for Pregnant women

- Creche subsidy

- First 3 wedding anniversary celebration

- Dinner for couple at select 5-star hotel along with Cab pickup/drop

- Birthday coupon of Rs. 500/- given to employee on his birthday

- Each team is given a fund equivalent of Rs. 4,500/- per employee every year – Team Bonding fund for them to spend on various team bonding activities/celebrations

- On completion of 3 years, one additional PL given, maximum of 5 additional PLs given

- CL (12 in nos) split as 9 public holidays and 3 as optional holidays enabling employees to choose any day

- Work from Home option based on Personal/business needs

- Family Day every year enabling employees along with their immediate family members to meet and enjoy various events along with a sumptuous dinner. Employee family picked up and dropped for the event

- Company day held every year where project teams showcase their achievements – various awards instituted to appreciate Teams achievements on several fronts.

- Open door policy of the Senior leadership – any employee can freely approach any senior leader and discuss any issue.

Top management Employees were ensured no major change in their incentives and work environment after spin off as CDK Global retained these practices after spin off.

- Spin off strategy fit? (Analysis)

Right time and purpose

ADP’s business consisted mainly of human capital management and dealer services. The human capital management market is large and fast growing and the separation of the dealer services created a portfolio clarity and enhanced management focus for ADP. Also, the dealer services market was favorable for growth. This sector was also uniquely positioned to take on the global opportunities as no other competitor offered similar global depth and breadth of solutions. Thus, the separation was appropriately timed from market point of view and ensured greater management focus on each business. The separation also allowed CDK Global (erstwhile dealer services arm of ADP) more autonomy in deciding business strategies and allocating their resources appropriately.

The division of assets and liabilities between the two companies was as per the allocation between the dealer services sector and other businesses of ADP. This ensured CDK Global was financially ready to start off on its own without any initial hiccups for want of resources.

Employee fear and insecurity management

Usually, a massive change in the organizations leads to a fall in employee productivity, lack of trust, insecurity, lack of motivation among the employees. ADP ensured adequate support to the employees- who were tackling with the uncertainty of the company’s future. Through effective communication of the change to their employees, they addressed their insecurities and possible doubts. Hence, the denial and resistance phase among the employees was shortened. This process was further facilitated by the increase in the number of projects in both the companies post spin-offs. The growth in the business was tangible and it reassured the employees of the credibility of the companies as separate entities. This ensured the quickening of the exploration phase which is still going on in the organization. Further, the core of both the organizations remained similar- no drastic change in culture and vision, KPIs of the employees remained same, incentives of the employees remained similar, top management of CDK Global was same as the top management in the dealer services which was spun off. The attrition rate of ADP and CDK-Global was stable pre and post the spin offs. In ADP and CDK, the executives are not bound by agreements and they can leave the company whenever they want. Hence, the stable attrition rate is further testament to the fact that there was minimal impact of the spin offs on the employees. Further, there are a sharp increase in the number of employees which is opposite to what usually occurs in the resistance phase among the employees.

Establishing Control Processes

We will start by discussing how the organisation establishes control and processes in an autonomous way, which includes precisely documenting the policies and carefully laying out KPI’s. The process can be effectively explained in the flow below

Drafting Policy Policy Training Policy Enforcement

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Employee Empowerment

ADP had employed Ideation Portals to spot and capture opportunities, not only with top management or specific functions, but from all the employees. Rewards and incentives at ADP are closely associated to idea generation