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Dear Workforce How to Integrate Companies with Different Comp and Benefits

Study your competitors, focus on the new company (not the old), and don't cut pay.
December 13, 2000
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Related Topics: Mergers and Acquisitions, Compensation Design and Communication, Dear Workforce, Compensation
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Q

Dear Workforce:

For the first time, we have acquired a company and are now in the midst ofstaff integration. Here we are facing two different scenarios, namely:

1. Parent Company - Moderate base salary with superior benefits.

2. New Entity - Higher base salary with inferior benefits.

In terms of total package, the parent company's scheme is much superior thanthe new entity.

In our effort to absorb the new entity into the Parent Company, we reckonthat the disparity of base salary should be resolved first to facilitate theinternal equity. Please assist - what would be the best approachin implementing the above staff integration.

-- Jamal H, Malaysia

 

A Dear Jamal:

We suggest you develop a total rewards model that is appropriate for the newpost-acquisition company, taking into account the overall company's businessstrategy, organization dynamics, and employee needs and preferences.

It may turn out that neither the current parent company pay scenario nor thenew entity's pay scenario is optimal given current business needs andobjectives. This total rewards model should specify not only the mix betweenbase salary and benefits, but also whether or not incentive pay is appropriate,as well as the following important guidelines:

  • Who are the appropriate companies for purposes of comparing compensation, i.e., "moderate" relative to whom, or "higher" than whom? Is the comparator group the same for all business units -- for example, the same for the parent company and the acquired entity?
  • What is the appropriate competitive position for each salary, benefits, and incentive pay (if any)?
  • What are the appropriate performance factors to incorporate into the rewards program?

In the meantime, do not cut salaries! If necessary, freeze them or slow theirrate of increase. Cutting salaries as part of an integration effort, unlessrelated to a serious performance issue, is a demoralizer that can have a seriousnegative impact on the organization and creates unnecessary anxiety.

Good luck!

 

SOURCE: Claudia Poster, a principal in UnifiNetwork, a unit of PricewaterhouseCoopers.

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