Mergers & Acquisitions (M&A) – How Can Reward Make a Difference?

While the current economic conditions may not seem the perfect time to buy a business, there is some evidence to suggest it could be. According to the findings of a study by Cass Business School and Towers Perrin, deals done in the year after the peak of any M&A cycle can typically create the most shareholder value. Since many experts and leaders in this field think that 2007 was the peak of the current M&A cycle, then 2008 may be the year - providing that there's enough cash available.

While timing contributes to achieving the right outcome Towers Perrin identifies 7 factors that differentiate good M&A deals from the rest. Good leadership and cultural alignment are high on the list and, as you may expect, salary alignment and the ongoing delivery of HR services.  

If you would like to see more on the topic of Reward and Mergers & Acquistions look at Just Rewards newsletter in February this year. We will also post the M&A presentation by Paul Bissell of Nationwide Building Society from this week's CIPD Reward Special Interest Group event on our website. Check out the news page early next week for the free download.

Take a look at the Tips section below for the Do's and Don'ts of M&A integration.

Tips: What are the Do's and Don'ts of M&A Integration?

DO

• Start the process as early as practicable
• Establish team with right skills and expertise
• Set scope and impact from the start
• Ensure all M&A stakeholders understand and stick to the decision making process 
• Set objective criteria and process to evaluate pre M&A rewards
• Communicate early, regularly and keep it 'on message' at all times
• Evaluate and ensure the lessons learnt are captured

DON'T

• Avoid difficult issues which can jeopardise the planned outcomes
• Ignore the 'business as usual' issues
• Underestimate the time and complexity to resolve some issues
• Aim for the perfect solution where an 80/20 approach is actually required

Website of the Month – The Competition Commission

This month we focus on the Competition Commission (CC)  the independent public body tasked to ensure that competition exists between companies in the UK. Mergers form a major part of the CC work due to their potential impact to lessen competition in one or more markets in the UK.

Why look at the site? – It goes beneath the headlines such as the recent investigation into the UK groceries market; it evaluates acquisitions such as Games Station Limited and outlines the consultation for new merger ‘remedy' guidelines including divestiture, prohibition and behavioural measures!

What works well? – Accessing the information is quick and straightforward.

What could be improved? – It is ‘word heavy' and not a site you are likely to just ‘stumble upon'.

Question of the Month

The Question of the month for July comes from an HR Business Partner in a private sector service business asking “We plan to implement performance based pay for our support staff. What factors will help us ensure that it actually supports our customer service ethos and values?”

A. One of the key challenges on performance based pay systems is making clear decisions on what performance gets measured and how to ensure that behaviours used to achieve the performance goals are appropriate. Achieving the right balance between the ‘what' and the ‘how' is essential to achieve realistic and sustainable goals that align to the organisation's values. When used effectively, performance pay has the opportunity to reinforce culture and values, while making it clear what the performance expectations are. However, it can equally work against a company's values when inconsistent decisions are made by senior managers, say where individuals perform at a similar level are treated differently.

Since line managers are crucial to the success of performance pay, involve them in the design process where practicable. This will support consistency of individual and team performance assessments that impact reward outcomes. While general performance assessment or more formalised systems can be applied, the priority is to achieve a robust and ‘felt fair' approach.

Do

• Design a scheme that is aligned to the organisational values and goals
• Establish effective performance management processes and goal setting
• Involve line managers and other key stakeholders in the implementation
• Ensure consistency exists between managers rating performance and rewards
• Communicate regularly

Don't

• Make it more complex than it needs to be
• Focus on short term objectives to the detriment of long term goals
• Allow inconsistency to creep into performance assessment and pay decisions
• Forget that managers make or break performance pay so ensure they are equipped for the job

Taking these factors into account can help ensure that performance pay goals align to your customer service ethos and values.

If you have a question for the July issue, let us know by clicking here to e-mail or look at the Just Rewards Blog.

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