Over the years we have helped clients across several market sectors combine their base pay systems after a merger, acquisition, business consolidation or restructuring. Working with technology and life sciences sector companies in the 1990s and early 2000s, it seemed that every client assignment at least in part involved combining pay systems from two or more legacy organizations. Hospitals and healthcare organizations continue to merge or acquire other systems and these transactions are (or should be) closely followed by a merging or consolidation of their employee pay systems. While each assignment has had its unique challenges, we have found, and this Advisor describes, five major keys to successfully integrating compensations in almost any situation:
- Clearly Define Project Purpose and Scope
- Secure Top Management Sponsorship/Buy-In
- Start at the Top
- Involve the Organization
- Look for Objective Common Ground
1. Clearly Define Project Purpose and Scope
During an integration, there are a lot of moving parts and many areas for negative opinion and confusion so it is very easy to get off track. It is critical to define why the systems are being merged and the benefits expected—just how big of a bite to plan to take? why and what do you intend to accomplish?
An essential component of defining the project purpose is to also define the scope of the integration—will job titles change? what about bonus eligibility? —in the context of the end benefits or results desired. Only include those elements that can be justified by having a specific and desired end result.
Your defined purpose and scope may include prerequisites or process deliverables for specific end results. It is helpful and suggested that you collect issue specific questions and commit to incorporating into a future enhancement project, but the define scope commitment will allow you to stay on track.
2. Secure Top Management Sponsorship/Buy-In
There are very few human resource-driven engagements where securing top management sponsorship and buy-in is not needed, but few are more critical than compensation system integration. At the highest level, the compensation system is an important means for top management to define and manage organizational performance, so their involvement is assumed. More specifically though, change can be difficult and sometimes managers and leaders need a push to accept new systems and remain committed during their implementation. Along with directing the organization to stay on course, top management also help the compensation system integration remain a “business investment” rather than an HR initiative. It helps management understand that the end results will benefit all and that there is something in for them.
3. Start at the Top
This can certainly be considered a means to help secure top management buy-in, but that is not the intent in our context. Change in top management roles and responsibilities are a natural and unavoidable part of any merger event. Before you tackle integrating the pay system for broad-based staff, work toward bring top management changes to a reasonable conclusion and develop or integrate their pay systems first.
4. Involve the Organization
It is helpful to remember that over time organizations establish workflows and practices as a result of the compensation system. The longer the system has been around, the more practices are engrained in how people do their jobs. Embarking on a compensation system integration is an opportunity to improve a key reward system, but it will also require people adjust their routine practices. By creating a team of HR representatives, and potentially line managers, you can develop a system that best meets the organization’s needs and aligns with administrative practices.
5. Look For Objective Common Ground
The compensation system is personal. The compensation team take ownership in its development. Managers take ownership in knowing how it works. Employees take ownership in their job titles and promotional opportunities. It is a big deal to simply move one organization’s system into another organization’s system. For this reason, we have found it generally better to develop a new compensation system that integrates both organizations. The “objective” new system then can serve as the basis for common job titles, pay structures, job grading, and increase plans. The new system will be “ours” not “theirs”.
About RSC Advisory Group
RSC Advisory Group, LLC is a management advisory and consulting firm specializing in pay and performance. The RSC team is comprised of long-time senior advisors and technical specialists who work with clients across the United States. We employ a client-centric approach to help clients in several compensation areas:
- Board & Executive Total Compensation
- Employee Pay & Total Rewards
- Sales Compensation
- Global Remuneration
- Compensation Surveys & Research
Contact us today to see how we can help you and your organization.