The integration of compensation programs between two companies is a unique situation. Usually, one company acquires the other and that company’s approach to designing and delivering pay programs is implemented for the second company.
Often, I’ve found myself liking the approach the acquired company has to a situation better than the organization that purchased them. So, then what?
M&A Compensation Integration Steps:
Step 1 – Discovery
Determine what pay programs are in place at each company. Crete a list that includes base pay, short-term incentives, bonuses, commissions, spot awards, recognition, long-term incentives, overtime, allowances, stipends, SPIFFs, etc. Include the number of employees impacted for each pay program and the Subject Matter Expert (SME) for each.
Step 2 – Documentation
Ensure you have the plan documents, policies, guidelines, process documents, etc. in one place for all of these pay programs. Capture the stories and examples the SME tells you as well. Many employers don’t have well documented pay programs so this may require that you use your private investigator skills to uncover what is going on. The goal is to ensure that you fully understand the design and delivery of the compensation programs.
Step 3 – Systems & Software
What systems and software are used to administer pay? Excel spreadsheets are prevalent in most organizations. But there are salary surveys, market pricing software, annual compensation planning, sales commission software, etc.
Step 4 – Exceptions
What are the employment agreements or special arrangements that are in place at both companies? Who was promised what and when? Why?
Step 5 – Analysis & Future Design
Compare the approaches used by both companies. What approach will be used going forward? Or design a new approach that neither company has in place today. What works well? What doesn't? What is aligned to business goals? What is an administrative burden?
Step 6 – Impact, Recommendations, & Approval
Determine the financial impact of the future approach. Summarize the alternatives and your recommendations. Include the anticipated impact on strategic business goals. Create a timeline so senior leaders know how employees will be impacted and what type of support you need. Once approved, you can focus on an implementation plan and the change management.
Integration of compensation is not simple. The employee experience is heavily influenced by pay related programs, performance management processes, job titles, reporting relationships, job design, and other rewards like benefits.
The steps above are a start. M&A success requires consistency, intention, and alignment.
It requires getting the right people, processes, performance metrics, and rewards in place to maximize revenue, profit, and impact.
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