Best practices when harmonising benefits after a merger
A company merger or acquisition (M&A) offers organisations the opportunity to evaluate the effectiveness of current processes and practices, nudging them towards the adoption of a more efficient and harmonised approach to business.
This fresh approach can be applied to all areas, including a company’s benefits strategy.
As businesses navigate this period of great change and decide the direction of the merged company’s future, ensuring that the integration of benefits strategies is as frictionless as possible, and leveraging the benefits offering, should be key aims.
Planning for success
Willis Towers Watson research, conducted in collaboration with Cass Business School, identified the key ingredients to successful M&A deals, with the two most consequential contributors found to be the deployment of an experienced deal team and effective, early, planning.
Businesses may have the relevant experience, but lack resourcing capacity – or they may have the capacity but lack the necessary expertise.
Whatever the case may be, appropriate external support can prove to be one of the most critical factors to deal success.
From a planning perspective, it is important that all relevant information, such as design and financing, is acquired on the benefits of target companies at the outset. This ensures that decision-makers have a full picture of the programmes and liabilities they will be inheriting.
Everything, from the portfolio offered to different levels of employees (if there are different eligibility criterion), to vendors and cost sharing elements (if not fully funded by the employer), should be taken into account.
Bringing HR partners to the table during the due diligence process is essential to help identify the key harmonisation, employee integration and retention risks at an early stage, as planning is key to success.
Integration strategy
The benefits integration strategy that is ultimately adopted will depend upon a range of factors, including budget, acquired rights and agreements in the sale and purchase agreement.
It is often the case that organisations want to achieve their benefits integration goals on a cost neutral basis. However, this is not always possible once the benefits benchmarking, possible salary and pay scale restructuring, cultural considerations, and the wider corporate objectives of the consolidated benefits programme, are taken into consideration.
One of the goals of integration is clearly reducing the administrative burden of dealing with multiple suppliers, as well as achieving some economies of scale by bringing the groups together and pooling costs.
Increasingly, companies are looking for ways to add flexibility into their reward programmes, focusing on the employee value proposition and offering a range of benefits that addresses the differing needs of multi-generational and diverse workforces.
More and more companies are adding wellbeing programmes to their benefit umbrella and are looking to offer more work-life balance elements in addition to their core retirement, risk and medical plans. In doing so, this can mean phasing out legacy programmes that have failed to meet employee needs, have failed to engage the workforce and that have failed to deliver value investment or return on investment.
Communication is key
Clear and careful, two-way, communication during the obligatory consultation process is imperative. It is doubtful that a one-size-fits-all approach will be appropriate, and instead companies should look to create tailored messaging, which address the changes and challenges affecting specific personnel.
The opportunity should be then afforded to employees, or their representatives, to ask questions or feedback their concerns.
How changes are implemented also needs careful consideration.
Changes made in the wake of this consultation should take place in an incremental, step-change fashion, supported by clear communication. This will give employees an idea of what to expect before the deal, after the finalisation of sale and in the future.
It is a legal requirement for an announcement of a firm intention to make an offer to include the “the offeror’s intention with regard to the business, employees and pension scheme(s) of the offeree company”.
A look to the future
In addition to opening the window to a benefits programme overhaul, a corporate transaction can also present an opportunity to review ongoing strategic management.
For example, a company may have inherited a workforce in a new country that isn’t directly supported by a locally-based HR function. To minimise the administrative burden and enable improved data-driven decision-making, management information systems should be in place that offer visibility and dynamic reporting on benefits provision across all areas of the organisation.
A best practice approach to benefits transition that takes account of such considerations – before, during and after the event – will ultimately help pave the way to a successful and productive business future.
The author is Jana Mercereau, head of human capital M&A at Willis Towers Watson.
This article is provided by Willis Towers Watson.
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