Combining Cultures: When Two Compensation Philosophies Merge

Lately, we’ve seen a lot of discussion about the impact on business and employees alike when faced with a merger and acquisition. HR and Comp Managers are often tasked with finding a way to meet in the middle when comp strategies don’t exactly mesh. So, what does it take to bring compensation planning and methodology together when there are two very different cultures surrounding this? Blending Compensation Philosophies during Mergers and Acquisitions

It’s not uncommon for compensation pros to have opposite views about the way things should be managed. In fact, this is a number one concern for many who have gone through the administrative challenges of a company merger. Failing to address this and not having a plan in place can cause havoc—potentially even shut things down—damaging company-wide morale.

In a company acquisition, there are those who are equipped with tools for managing the operational and financial factors in closing the deal and making sure things go smoothly. But these are the more concrete aspects of a merger that take precedence over the softer factors like cultural differences and systems. When this happens, there may be no one who is accountable for making things fit together, leaving executives in the powerless position of watching problems rear their ugly heads.

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A better way to handle the mergers process is to have a plan in place and tools to address these cultural barriers. In this way, HR leaders can better manage the complexities of getting buy-in from both sides when a compensation strategy combines both sets of values.

The end game is that the company has a stronger and better compensation process as it heads into the new business venture. There are several steps to accomplish a culturally connected compensation plan:

#1 – Hold a cultural integration meeting. This takes a concerted effort on the behalf of all business entities, so assign a cultural integration team to carry this out. Compensation, payroll, and other members of the human resource team are the obvious choice.
#2 – Lay out all differences on the table. Be transparent and share any and all cultural differences in the way compensation is managed. For example, one business entity may desire in-house management of merit increases, closely tied to performance reviews; while the other entity may separate the performance evaluation and salary planning phases.
#3 – Present a case for the pros and cons of each cultural norm. Each side of the table needs to find the good and bad in every scenario while focusing on what meets the needs of the revised operational goals of the newly formed entity. This is where the real compromise and reshaping of cultural ideals comes into being.
#4 – Design a renewed compensation program out of this effort. While each philosophy has its own merits, the company can only move forward as one when there is a solid compensation plan put into writing and carried out. Establish this plan, have it reviewed by an independent legal source, then put it to good use.


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Interested in learning more about compensation planning and communications during company mergers? Watch our Ask a Comp Pro Video: A Tale of Two Comp Plans. Then, check out some of our other recent articles here:

How to Handle Mergers and Acquisitions with Sensitivityy

How to Manage Compensation Questions During Mergers or Acquisitions


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