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CE Back Office are introducing guest blogs! This months guest blogger is Rachel Urquhart…

I am Rachel Urquhart, I run RUHR a HR consultancy helping businesses join the dots between their goals and their people.  I love to work with companies that recognise the value in their people, and appreciate that they are the key to their ongoing success.

With over a decade of senior HR experience, I am able to advise on what works and what doesn’t.  This could be anything from getting the basics right (contracts and job descriptions), through to strategic input on changes that you want to make in your business (e.g. mergers, employee engagement or rethinking your company structure).

Having been Head of HR for a large organisation, my aim is to provide that level of knowledge and experience in a flexible way to small and medium sized companies.   At RUHR we take a personalised approach, getting to know each client and working with them as a true partner, we focus on results, providing relevant solutions when required and become a member of the team without you having to pay for a full time HR Director.

Pay and reward, how to hold on to key people following a merger or acquisition.

Pay and reward are important factors in retaining and engaging key staff following a merger or acquisition.  The most effective reward packages will be aligned with the business and staff needs and reflect the organisations purpose and performance.

Whilst the focus of this article is on mergers or acquisitions, for all businesses it is important to create and maintain a high-achieving organisation culture by delivering programmes that reward and recognise employee skills, behaviours, experience and performance, and ensure that reward systems are market-relevant, fair and cost-effective.  What works in the private sector might not be appropriate in the third or public sector, strategy needs to be tailored to the company.

Where to start?

The starting point is to review the job roles in both businesses, to see if they align in terms of what they do and what their remuneration package is (pay, bonus, pension, other benefits); also review against the market place to know how you are positioned.

If they are different, then there are some strategic decisions required early in the process about whether they need to be aligned as part of the transfer.  TUPE (Transfer of Undertakings Protection of Employment) means they transferring employees have rights to transfer their old employment terms, including pay, working hours and annual leave.   If you want to change those roles, that may mean you need to make the new roles more attractive when looking at pay and reward as employees will have to agree to any changes.

It is therefore important to consider and define the roles and structure that you want within the newly combined organisation for now and in the future.  You don’t have to do it all now, it can be an evolutionary process with initial reward priorities shaped around bringing the merged organisation together with clear direction for the future.  Flexible benefits can be used to reduce any difference between the two firms.

This initial review should also include a review of the pension offering of the target company.  If it is a defined benefit scheme, the latest funding position will need to be reviewed by your Finance Director as part of your due diligence.

Why you need to be clear and transparent

In a merger situation a lot of planning goes on before staff become aware of the changes they are facing, and it can come as a bit of shock and create uncertainty. Don’t forget they are human!

If they are incoming staff, they are likely thinking:

  • Why is this happening? – there was nothing wrong with the way we were or
  • What will it mean for my job? Will I have the same role, same office, same travelling, same pay, same benefits)
  • Will I have to work differently?
  • Will they be getting paid more than me?
  • When will I get paid by the new company? Will that effect my direct debits?
  • I can’t believe they are doing this to me

Existing staff might be thinking:

  • How is this going to affect my role?
  • Will I have to move desk?
  • Will they get paid more than me?

A key part of your retention strategy should be early communication.  Create plenty of opportunities to communicate with staff: explain what is happening and when; listen to them and any concerns they have; and answer their questions.  Share with them the values of the business they are coming into.  Help them to understand the reasons for the changes, the expected impact and what the benefits could be. There must be some otherwise you wouldn’t be making the change.  If you can get people to tap in to the benefits and understand where they fit in delivering those, they will help you to realise them.

Help them to see what is in it for them.  Mergers often present increased opportunities for training, career progression, development within role so from a reward perspective it can be so much more than just pay.  Think about creating a total rewards statement, so that they can compare before and after, including a summary of relevant opportunities for their role in the new organisation.

Be honest about any changes to terms that you are planning to make upfront. If they won’t get the opportunity for pay rises automatically each year – tell them.  It will save a lot of complaining when that time of year comes around!

Honesty and openness lead to trust and trust is vital in a positive and productive culture.  If your people trust you, they are more likely to get on board with any changes and forgive any mistakes you make along the way.

Don’t forget – people talk.  If you are giving different messages to different people or departments, then they will find out. This will undermine the trust and will mean people are less likely to trust you in the future.

Pay and reward for retention strategy

Prioritise your efforts, starting with the senior leadership team.  Why? So that they are not distracted by concerns about their own futures.  They will be critical to supporting the change and helping you achieve a successful merger.

Depending on the type of business you are acquiring, it is likely that there will be other key staff that you need to identify for potential lock in.  Think about how much it will cost to replace them or their relationships with clients.  For example, in research-based firms the value of retaining the lead researcher or scientist may be greater than that of an executive at that firm.  It is important to balance pay to stay with pay to perform to ensure a high-performance culture is created and maintained.

A cost/benefit analysis will therefore be required so that you can manage expectations within the business according to budget available.  If you can’t afford a lock in strategy, your culture will be key.  That’s a subject for another time.

 

If you would like to talk to someone who has experience of making mergers work, mitigating the risks faced and helping business to realise the potential from a merger then give me a call to see how I could help you.