The power of Human Capital in M&A with Timothy Tolino

Thomas Kohler:
Today’s guest, Tim Tolino, how do you internally pitch the value of employee benefits to the executive board to free up that budget.

Timothy Tolino:
You know, it’s funny, we had a training yesterday about problem solving, and they had a really good KPI tree. And it was, you know, kind of tailored to our organization. But obviously it starts with EBITDA and then goes down through various operational things, operational expenses, supply chain, what have you, all the way down at the end. The bottom of the KPI tree is wages and benefits, right? So for me, I found that personally very impactful because costs are going to be variant. It’s less about finding savings. We can ticky tack and find savings every year, right? But it’s more about maintenance of the plan. And then also, again, the employee experience for me, when I think about what I get to control, right, which is not the CEO, I’m not in charge of EBITDA. I’m in charge of employee benefits.

When I think about that and when I think about creating a program and what I get to impact, it impacts people’s health, well being, not only theirs, but their families as well. Right? So it affects everyone in such a different way, but it’s impactful in a different way. And I take that pretty seriously. So for me, when I go into those meetings, I say it’s a lot about employee health. It’s a lot about employee well being. Do we want to reduce absenteeism? Do we want to reduce turnover or people leaving to go get better things somewhere else? Right? Do we have the right benefits? Do we have the right conditions in whatever warehouse? What have you, do we have the right onsite benefits? Are we providing the right on site services to these individuals that they want to come to work and make the best damn window shades, blinds that the world has ever seen? Right? So a lot of it is. And it’s difficult to quantize because, you know, you look at something that has such quantized from a financial perspective, because you look at something that has such variance, number one. But also year over year, we’re dealing with 10% increase.

And that’s just the cost of doctors being providing services, right? So it’s unfortunately one of those things that’s going to go up on an annual basis. So again, it’s about planned maintenance or do we have the right programs in place for our employee base so that they are healthy and the claims remain as constant as possible? But then it’s all about, again, the employee experience. Do they like coming to work here? Do they feel taken care of? Do they feel like this is a place where they can grow and I get to have an impact on that. So I take that route. Sometimes it can be difficult for executives and CFO’s to look at it with anything other than dollars tied to it. But really, when you boil it down, again, it’s about making the most excellent employee experience that I can based on the parameters that have been provided to me by the organization, and again, driving retention for these individuals to again, work as best as they can to their ability and grow within the organization.

Thomas Kohler:
Cool. Do you have a model for that?

Timothy Tolino:
So most of it is based on external and internal benchmarking. Right. And a lot of internal surveys are, how are we doing? And then also external benchmarking is really kind of the biggest piece about it as well because costs are going to fluctuate. We know that that’s just a part of the industry and what I do. But are we doing the things that our competitors are doing or are we excelling or exceeding, excuse me, against, you know, what our competitors are offering to again, retain and hire the best talent. So a lot of it is, again, it seems anecdotal, but it is based in reality on what our competitors are doing.

Thomas Kohler:
We talked about M&A employee benefits. He’s currently taking care of 23,000 people across plus 100 countries and rolling out the benefits package concept model. And previously he was in an account executive role selling benefits plus benchmarking companies. So I really like the view of an external that is now taking on an internal director role for a global organization. High complexity to solve the global benefits problem. Listen into it.

Thomas Kohler:
Hi, Tim. Great. We spoke on LinkedIn, and I really like what you’re doing. And then I just reached out, we had a chat. Now we’re doing a podcast. Looking forward to it. Maybe we start with a short intro about yourself.

Timothy Tolino:
Yeah, absolutely. I’m happy to be here. I appreciate you reaching out. I’m glad that we connected. Tim Tallino. I am the global director of benefits mobility and wellness at Hunter Douglas. Just started that role, so I’m brand new. This marks my 10th day here, so still getting my feet under me there. But in my previous role, which is when you and I connected, I was running human capital m and a due diligence processes for buy side investors. So I mostly worked with private equity firms and completed buy side due diligence behalf of them for targets not only in the US but also globally as well.

Thomas Kohler:
Nice. How did you get into it?

Timothy Tolino:
So my background prior to getting into m and A was in us employee benefits consulting. So I worked for, you know, your Gallagher, Mercer, Aons of the world, and I consulted companies anywhere 500 to 5000 employee count on just their annual renewals, the day to day maintenance of the us employee benefits cycle. And then, gosh, this is back in 2021. I had someone from Aon reach out. I was living in London at the time, so I interviewed there, actually, which was pretty funny because of time difference. And yeah, you know, I had the recruiter reach out. He said, hey, have you ever thought about doing mergers and acquisitions work? And I said, I haven’t, but send me over the job description, I’ll take a look at it. I read the job description and I looked at the five kind of key pillars of it and I was like, I do one of those things very well and I have no exposure to things like retirement incentive compensation, purchase agreements and general HR practices.

And I reached back out to him and I said, hey, listen, I’m not sure that this is the right fit for me. I appreciate you reaching out, but I don’t think that I have the skillset to do this. And he was like, just hop on the phone with me. Give me ten minutes, we’ll talk through it. And that ten minute conversation turned into an hour. And then I went through the interview process with Aon and jumped on board shortly after.

Thomas Kohler:
Cool. And how would you describe the m and a job you’re doing and what are the attributes you see? How would you categorize it?

Timothy Tolino:
Yeah, so for me it’s, it’s really just project management and time management. I think you can say all that about a lot of jobs, but M and A in particular, and the m and a process with due diligence, it’s project management. But my focus happens to be employee benefits, retirement and the employee experience. So that’s what I’m really passionate about. It just happens to intersect really well with m and A. And I did that for three years and I’m really grateful for that. And, you know, within my new role, I’m going to have an impact on, you know, our overall global m and a strategy at Hunter Douglas as well. We just, I’ve been here ten days and I haven’t had the chance to make my impact there yet.

Thomas Kohler:
And what was your focus in terms of acquisitions? Did you focus on a certain category?

Timothy Tolino:
No, no, I didn’t, actually, which is something that I really liked about the job. It was, you know, industry agnostic. Right. So I got exposure to everything from a 20 person, you know, small mom and shop company, from, you know, the southern part of the United States to, you know, your large global carve out experiences of tech companies or moving from, you know, public to private and things of that nature, too. So I liked that. I basically got a new shiny toy every time, and I got to learn something new about a new industry, about how that company operates and also how they invest and treat their employees, which is, again, something I’m very passionate about.

Thomas Kohler:
And based on your role and job description, let’s say, what would be the value contribution to a deal? So what was the purpose of your job?

Timothy Tolino:
Basically ran through and provided assessments on the employee benefits package so that I’ll just speak from the United States. Right. Because that’s the, that’s where, you know, my bread and butter is personally. But also it’s probably the most volatile because we don’t have a lot of statutory benefits like a lot of other countries around the world. Right. So companies themselves are taking on and responsible for providing, you know, health insurance, life insurance, dental, and things of that nature. So it’s really twofold. It’s, what are the cost of those? Which is, you know, as a buyer, you’re like, all right, great, is this what I should be paying for this, or do I need to make some sort of adjustment to the valuation of this company? And then are the benefits market value? So based on the industry that my company is in, so say tech manufacturing, what have you, do they meet market value and are they competitive? Right.

So benefits within the United States in particular help attract and retain top talent they do around the world, but even more so in the US, just again, because we don’t have statutory benefits like a socialized healthcare system or statutory leave. So PTO plays a part of that parental leave. You’re starting to see a lot of movement there, and a lot of companies roll out much more generous parental leave policies. And then in certain states, you’re also starting to see mandatory medical leave, mandatory parental leave policies be rolled out as well. So we’re moving and inching in that direction, but it’s still, still really on the onus of the employer to provide those benefits. And it has been that way since, you know, the end of World War two.

Thomas Kohler:
Wow. And so in a big company, this then really has impact on the valuation, depending on what benefits companies offer.

Timothy Tolino:
Exactly. And then, you know, there’s also different types of funding variances as well. So I’ll speak from medical insurance. Right. There’s fully insured benefits, which is you’re paying a fixed premium every month, and the insurance company is paying out the claims that are coming in. Or if you get large enough, then it makes sense to financially move away from that model and for the company to self insure themselves. So they are paying the claims that the employees are incurring up to a certain level. Typically, you’ll have stop loss insurance that protects your company from catastrophic claims and things of that nature, but those types of fluctuations really do affect the bottom line on a month over month basis.

So one of the things that you talked about was talking about some potential stories and why due diligence is important. One of the largest projects that I worked on over at Aon, we really struggled getting data, and this was a pretty large self insured company, and they went through and basically did the financials without any data from a benefits perspective. So I didn’t have any sort of claims data. I didn’t know how many people were enrolled. I just basically said, for a company of this size, in this industry, this is about what it should cost. They use a lot of internal benchmarking data from a pricing perspective, and based on the benefits that they have as well, I worked with our actuarial team to say, what around? What should these cost? Well, we got down that, and it turns out that they have some high claimants. Right. You know, two of the individuals on the plan or a few of the individuals on the plan ended up costing the plan another $2 million that we didn’t account for because we didn’t have the data.

So it really does have an impact. And that’s why due diligence specifically around employee benefits in the United States is very important. And the data gathering is very important because, you know, shit in, shit out. It’s true, right? I’ve heard that many times on this podcast, but it’s completely true within my industry as well. And, you know, if you don’t get visibility into that type, those types of things, then as a buyer, you really are taking on a variance of risk.

Thomas Kohler:
Definitely. And do you also know, or can maybe model in a certain way of what the impact in terms of valuations? Let’s say an example, manufacturing company you is bought by, let’s say, 400 million, and then good benefits versus bad benefits. What would be the impact on the price?

Timothy Tolino:
Well, mostly it really depends on what the buyer is trying to do. It probably won’t have that large of an impact. Like no deal is going to explode because of employee benefits, right? Ideally, unless they’re doing something illegal. So that’s really kind of on the back end as far as what they do. But I mean, it could be very realistic that the seller or the buyer says, hey, you’re not offering the benefits that you should, or they’re not in market class, or we’re looking to roll them into another port company. If we’re doing an add on, then that could be a valuation thing as well, just because, okay, great, we’re moving you to say better or vice versa. Worse benefits. This is going to have an impact on the overall purchase price.

And then the other thing that we used to take a look at as well would be things like changing control agreements, the acceleration of those, those have an impact, who’s going to pay for them? That’s all part of the negotiation point.

Thomas Kohler:
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And when you look at companies to just do due diligences, do you see a difference in terms of the US versus Europe or other countries or areas?

Timothy Tolino:
Yeah, you do. And a lot of it has to do with data privacy as well. You know, within certain countries outside of the United States, we’re not able to get as much data when it comes down to personal information where people, people are and then assessing, you know, the human capital risk. But again, because those benefits are statutory and the company isn’t taking on the risk, it doesn’t become as crucial as it say it would United States. I’m just speaking as far as like medical insurance goes. And then as far as a lot of the focus, there is more so on the supplemental benefits that are provided. So say in the UK, if you have a separate defined contribution plan on top of the statutory defined benefit plan, right. So it’s pricing that out and understanding how much that’s going to cost and the risk to the company on a financial basis, on annual, when you annualize it.

And then on top of that, what are other competitors doing to attract and retain talent? Because everyone has to offer the same statutory benefits. How are you going to differentiate yourself? Right. It’s are those companies doing the best that they can to differentiate themselves to hire and attract and then also retain the top talent that they have to be a top employer.

Thomas Kohler:
It’s important that this is also considered in a due diligence because I think a lot of, I saw some transactions being maybe failed or not doing so efficiently, where because the human side was not considered enough, then maybe on a commercial side, it really makes sense. You. Maybe you’re on the way to 100 million revenue. You make 50, you buy a company that is doing ten, the company that has already 50 million in revenue has a higher multiple than the 10 million. So you generate money or value. Right. So that makes sense from a commercial side. But what does it mean from an integration side? Do they operate separately? Is it just you have one p and L or maybe one revenue number that you can get the multiple on, or do you fully integrate and even make one out of one, three. Right. Which is always or often the idea. And I think that when you integrate and start integrating, I think the whole human side and the most obvious or maybe even non obvious things, because they’re so simple and straightforward, are the make or break attributes. Do you see certain. Do you have a story where it went maybe well and not so well and why?

Timothy Tolino:
Yeah, I think just well, like, generally speaking, it’s something that a lot of organizations are now starting to talk about during the diligence or acquisition process. It’s, okay, great. From a company culture standpoint or when we come together, what do we want to be as a company? How do we want to treat our employees? How do we want to go about attracting and retaining talent, and what do we want to be as this new organization? Or are you going to, you know, run separately? And that’s just how things are going to be. Everyone’s going to have their separate p and ls. You can have separate benefits, you can have separate retirement programs, what have you. But a lot of those questions are starting to be asked upfront now because we have seen a lot of failed mergers and acquisitions, particularly out of the gold rush of 2020, 2021, low interest rate environment, and everyone was buying something that was making them money. And the diligence process was sped up and accelerated because companies were hot then, and it was easy to borrow money because interest rates were zero or near zero. And so everyone, it was just basically a giant bidding war.

And it’s who could do this the quickest. Right. So they didn’t go through the actual culture of diligence. They didn’t go through. They didn’t go through the consideration of great, this company has these benefits, but actually they’re going to be losing a lot by us buying them and potentially trying to integrate. And there were a lot of companies that potentially forced integration where they should have been a bit more methodical about it. I haven’t had a whole lot of exposure to that through my integration work. A lot of it has been more methodical, especially as the approach to employee benefits goes.

Just because we were taking two or three different companies and then creating a new benefit plan. Right. You have to have those conversations in this point. It’s okay, great. As a new leadership or ownership group, where do we want to be? And then it’s our job to figure out how to get us there in the most cost effective manner.

Thomas Kohler:
And now, what is your new job about? What’s the purpose of it?

Timothy Tolino:
Yeah, so in my new job, I’m the global director of benefits, mobility and wellness at Hunter Douglas. So not only the US in all the 100 and couple countries that we’re in, I’m responsible for our employee benefits programs, the maintenance of them, and then the mobility piece is tied to immigration and mobility. So we will be moving people around and around as business requires it. So that’s going to be a piece of it. And then overall wellness, I think, fits in with just the benefits philosophy as well. So we’re just going through our us renewal right now. So it’s peak season for that. I was thinking about taking some time off in between the last job and this one, but then I realized what time of year it was and I knew that that would be coming out right now, so I figured it’d be a good time to get to work.

Thomas Kohler:
What does that mean, the peak season for you?

Timothy Tolino:
What is happening? Yeah. So the us employee benefits renewal cycle, we are expecting to do all of our annual planning for 2025 this time of year. So that happens generally from like June until the end of August. We have to get all the information, set the budget, talk with finance, get everything approved from an executive level down, and then the implementation for that enrollment period will start sometime in September. We’ll have open enrollment in end of October, early November, and then the plan year starts January first. So it is really, this is really the busy time to get stuff done within, within the industry.

Thomas Kohler:
I remember back then when we scaled some people in HR teams that at some point you hire a director of rewards and then maybe the whole benefits piece go under them. And then once it’s going multi country, it’s getting chaos. And then depending on how many people headcount which units and what’s the purpose of a certain region or country, it depends on what benefits you need to offer. And then I think there is a set of global benefits that are just true on a holistic level. And these are company wide and then there are some regional benefits which are determined by a company’s legal entity, and the legal entity is derived from the country the company is operating in. Right. Because in the country you have certain legal frameworks. And then additionally, there is also another framework you need to consider in terms of the job group, right, versus an engineer or a seller. So how do you deal with 100 countries from a benefit site?

Timothy Tolino:
Yeah, so I’m figuring that out right now. So it is really just getting introduced to everyone as well and understanding what is the current state and where they want to go as well. And do we currently have any, you know, glaring retention issues? Are people leaving because there are more attractive, say, time off policies or maybe this other manufacturing plant has something on site that we don’t. So it really just dials down to me getting up to speed and meeting all of those key folks who are on the ground from an HR perspective and understanding, doing my best job to understand their business unit right now and some of the challenges that they’re dealing with from a people factor aspect.

Thomas Kohler:
What’s the global headcount?

Timothy Tolino:
Global head count is 23,000. So, yeah, it’s sizable. Yeah. This role was built out of necessity. So my boss sits in total rewards, so she’s the global head of total rewards. And her and her team were doing this, and it was exactly what you said. It got to, you know, place where they’re like, wow, we need someone who does this. And so, you know, that was part of the interview process as well. And, yeah, so, you know, it’s been, it’s been really good. I definitely feel very welcomed, but it is kind of like chasing down, and it is doing a lot of, a lot of just anecdotal. Tell me, tell me what’s going on in your location right now.

Thomas Kohler:
In case you have any feedback or anything you want to share with me, please send me an email on thomas@pplwise.com or hit me up on LinkedIn. And in case you really enjoy the show, please subscribe. I would really appreciate it.

And in parallel, I have your LinkedIn open. And I think it totally makes sense from an executive recruiting angle to hire somebody like you in that role, because you have been in very different internal and external roles, and I think you have a few that not a lot of people have and an in depth view and expert view, but also an understanding of what does work in certain environments. And now you need to find a solution or a strategy or a plan for exactly that situation. And if you’re not a specialized generalist, then I think you’re maybe not able to solve that.

Timothy Tolino:
Yeah, no, I appreciate you saying that. Thank you very much. Yeah, I think that they got to the point where, again, they realized that they needed to bring a subject matter expert in house. We have a great broker partner, but that only goes so far. And also, you know, they stop. Right. You know, the job of myself, and one of the things that, one of the reasons why I wanted to move in house is from my consulting side. You know, I got to do the work.

I got to talk about it. It was really meaningful, but I never got to, like, truly implement or, like, see the employee impact. Right. And at this point in my career and at this point in my life, I started thinking about it earlier this year, and I went, wow, you know, that sounds really fulfilling to me. And so I started to kind of explore those conversations and then went through the interview process here, and I went, wow, that’s definitely gonna be a challenge for sure, but it’s definitely going to be something that I find fulfilling, and I already have. For me, it really is about the relationships and the people factor. Obviously, I can crunch numbers in excel, right. And I think that everyone who’s our age can do that. Right?

We’re all good with computers and technology, and people at our level, at the organization can certainly do that. But for me, it really does come down to the relationships and the human experience. Right. And I’m really passionate about making the best one possible for our employees.

Thomas Kohler:
And you know what I like maybe most is that you have been an account executive for employee benefits quite for some time, because I think then you really understand how to build a case why employee benefits matter and why it matters to take some money and invest it into it. Right? So maybe can you talk us as a final question to your framework on how you internally pitch the value of employee benefits to the executive board to free up that budget?

Timothy Tolino:
You know, it’s funny, we had a training yesterday about problem solving, and they had a really good KPI tree, and it was kind of tailored to our organization. But obviously it starts with EBITDA and then goes down through various operational things, operational expenses, supply chain, what have you, all the way down at the end. The bottom of the KPI tree is wages and benefits. Right? So for me, I found that personally very impactful because costs are going to be variant. It’s less about finding savings. We can ticky tack and find savings every year, right. But it’s more about maintenance of the plan. And then also, again, the employee experience for me, when I think about what I get to control, right? Which is, you know, not the CEO. I’m not in charge of EBITDA. I’m in charge of employee benefits.

When I think about that and when I think about creating a program, what I get to impact, it impacts people’s health, well being, not only theirs, but their families as well. Right? So it affects everyone in such a different way, but it’s impactful in a different way. And I take that, you know, pretty seriously. So for me, when I go into those meetings, I say it’s a lot about employee health. It’s a lot about employee well being. Do we want to reduce absenteeism? Do we want to reduce turnover or people leaving to go get better things somewhere else? Right.

Do we have the right benefits? Do we have the right conditions in whatever warehouse, what have you? Do we have the right on site benefits? Are we providing the right on site services to these individuals that they want to come to work and make the best damn window shades, blinds that the world’s ever seen? Right? So a lot of it is, and it’s difficult to quantize because, you know, you look at something that has such quantized from a financial perspective, because you look at something that has such variance, number one. But also year over year, we’re dealing with 10% increase. And that’s just the cost of doctors being, you know, providing services. Right. So it’s unfortunately one of those things that’s going to go up on an annual basis. So again, it’s about planned maintenance or do we have the right programs in place for our employee base so that they are healthy and the claims remain as constant as possible? But then, you know, it’s all about, again, the employee experience. Do they like coming to work here? Do they feel taken care of? Do they feel like this is a place where they can grow? And I have an, I get to have an impact on that. So I take that route.

Sometimes it can be difficult for executives and CFO’s to look at it with anything other than dollars tied to it. But really, when you boil it down, it’s, again, it’s about making the most excellent employee experience that I can based on the parameters that have been provided to me by the organization and again, driving retention for these individuals to, again, work as best as they can to their ability and grow within the organization.

Thomas Kohler:
Cool. Do you have a model for that?

Timothy Tolino:
So most of it is based on external and internal benchmarking. And a lot of internal surveys are, how are we doing? And then also external benchmarking is really kind of the biggest piece about it as well because costs are going to fluctuate. We know that that’s just a part of the industry and what I do. But are we doing the things that our competitors are doing, or are we excelling or exceeding, excuse me, against, you know, what, our competitors are offering to, again, retain and hire the best talent. So a lot of it is, again, it seems anecdotal, but it is based in reality on what our competitors are doing.

Thomas Kohler:
Nice. Thanks, Timothy. I really enjoyed the conversation. Thank you so much for your time and enjoy your weekend.

Timothy Tolino:
Thanks so much for having me. Take care.