November 13, 2017
Post-Merger Pay Programs: Better to Optimize Than Harmonize
– Broc Romanek
This Pearl Meyer blog offers “lessons learned” from integrating pay programs after a deal. While harmonizing programs sounds nice – it’s difficult to achieve without damaging the culture you’ve just paid to acquire. Here are some takeaways:
If you reframe the desired outcome of this process as compensation program optimization, which is a subtle, but important distinction, real value can be created. This may mean maintaining separate philosophies between the organizations for an indefinite period of time. Or it may mean that deliberate choosing of specific elements of one approach over the other. The key is to ensure each compensation program decision is guided by the overall business strategy of the combined entity.
In the short-term, this usually means fairly minor changes for each entity on factors such as performance metrics embedded in incentive plans, expanding and/or contracting eligibility for certain programs, and shifting the definition of “market” used to benchmark pay practices. In the long-term, this is best viewed as a process and not an event. The effort to optimize a compensation program for the new combined entity ideally will provide a template for ongoing evaluation and tailoring of programs for the next round of evolving business opportunities and challenges.