‘How can we optimise our impact for the benefit of the people we serve’?
One of the primary motivations for pursuing growth/expansion is the pursuit of economies of scale. In the NFP / For Purpose sector, mergers have often been considered as a ‘last resort’ solution by Boards and usually when facing financial stress.
Growth as a strategic objective is imperative and all avenues towards that growth must be explored for due diligence.
In recent and more turbulent times, organisations are becoming more proactive. Boards and CEOs now increasingly recognise that mergers can provide a positive opportunity for them to ensure sustainability and success in achieving their fundamental purpose.
By combining resources in the backend, the new organisation can operate more efficiently. This offers a more secure basis to expand the organisation’s reach in terms of clients and/or members, fundraising, and philanthropy and/or donors. Scale can be, and is, an important and fundamental consideration.
Compensation Practices are a Key Component through Mergers
Compensation strategies and practices are a critical component of successful mergers and expansion strategies. From our work in Remuneration consulting and advisory services over the last 20 years, too many organisations ignore a proper review and addressing of the often quite distinctive and inconsistent approaches to remuneration matters.
From the individual employment agreements, including reward arrangements, and the banding across the new organisation, to development and career opportunities, these critical elements are identified too late in the expansion process.
In the case of a merger, the main stages include feasibility, due diligence, integration and implementation. While it may be flagged to be addressed, too often the pace of implementation squeezes the time available to review and resolve the new organisations’ compensation policies and practices.
Yet these are critical functions to review and assess that will require an alignment to ensure the new organisation is successful in delivering validation of its original decision. To be successful the following ought to be considered:
- Reviewing both organisations’ compensation policies in order to assess if there’s a cultural fit,
- Identifying if there are key elements that may be ‘show-stoppers’,
- Reporting to the merger team of key risks, costs and remedial actions that can resolve those matters, and
- Mapping relevant and appropriate job descriptions for the newly merged organisation.
Compensation Policy Alignment or Misalignment
In reviewing two organisations’ compensation policies, including:
- Executive and general salary structures,
- Job titles,
- Performance evaluations, and
- Incentive measures,
you will often get a sense of the sheer magnitude of differences and/or similarities of how the two organisations operate. For example, one organisation may use a team approach to rewards & incentives, while the other is using an individual approach. How this is addressed will have a huge impact on the productivity and success of the new entity.
It not only requires mapping of all employees across the new salary structure, but also addressing the nuances that are raised with possible differences in the number of pay grades.
Starting afresh sounds both logical and sensible. However, it is not always the right solution to implement a brand-new compensation system.
Possible risks and knowing the costs
Finally, let’s remember the sheer administrative complexities when undertaking the introduction and implementation of a brand-new compensation program, or pursuing the combining of two programs and/or systems. It is not only an enormous task, but it cannot be rushed – an appropriate allocation of time is essential to its success.
From our experience, you should not underestimate how long it takes and how complex it can be, factoring all the potential delays. All these things come at a cost.
What we often don’t realise in a merger arrangement is the myriad of items that are touched by compensation matters. Being aware and addressing them upfront diminishes your stress levels as well as those of your staff.
Rewards & Incentives Have Broader Implications
Rewards and incentives can assist in reinforcing your desired culture and values.
Reward and incentivise desired behaviours to reinforce the culture you want by determining what behaviours should be recognised, rewarded, and celebrated.
It’s critical to balance both intrinsic and extrinsic motivators to ensure staff engagement is optimised.
All facets of compensation communicate value to staff. When there is a lack of alignment, there can be confusion about what the organisation values and why. Done well, this can support staff motivation and reinforce the organisation’s culture and values.
With over 20 years’ experience working with NFP and For Purpose organisations, Enterprise Care has assisted with all elements of remuneration.
- Self-service benchmarking through an interactive online portal,
- Bespoke consulting, and
- Advisory services.