HR/OD M&A Integration Plan

Transcription

1 The first 6 pages of this pdf document are free and unredacted. The complete, fully visible, 20-page document (in easy-to-customize Word format) is available to: PRITCHETT consulting clients or MergerIntegration.com subscribers or Merger Integration Certification Workshop Attendees HR/OD M&A Integration Plan Table of Contents Ref. Document 1. High-Level Plan a. Organization Comparative Analysis: What are the key similarities and differences between the 2 organizations? How do we operate currently? b. Future State Recommendation: How will we operate in the future? c. Items: What actions do we need to take at close? d. Risk Analysis: What are the risks associated with transition? e. Early Wins: Are there any immediate actions we can take to demonstrate benefits and success? f. Outstanding Issues & Decisions: What open issues still need to be resolved in order to realize transition? g. Communication Plan: What needs to be communicated (when & to whom) regarding the decisions that have been made? PRITCHETT, LP MergerIntegration.com Page 1 of 20

2 Notes This template is intended as a guide to help document current thinking on where the function, division, or area of the organization is headed. It is intended to focus more on the Future State, or how we will operate after integration rather than provide detail on the step-by-step transition approach. Documenting the transition approach and sequencing the work required to reach the Future State: occurs in the next phase of planning. PLEASE SAVE THIS DOCUMENT USING A FILENAME CONVENTION THAT INCLUDES YOUR TEAM NAME AND A VERSION DATE. FOR EAMPLE SALES HIGH-LEVEL INTEGRATION PLAN doc. This document is intended to facilitate team integration planning by providing a common format for teams to document and communicate directional recommendations for their areas. This material should be viewed as a guide. If additional data is needed to support recommendations, teams should add this information as appropriate. Sections Organization Comparative Analysis. Provides an opportunity to document the conversations that naturally occur between firms in any combination. Future State Recommendation. Teams should document their major recommendations. These recommendations answer the question What are the major changes that are being recommended to get to the desired future state? Items. Provides a place for teams to document those items that must be changed on (the first day after the transaction is closed) in their areas. items may include items related to legal entities (contracts, bank accounts, etc.), policy and HR-related changes (expense policies, payroll, benefits), marketing and brand changes, and customer-related changes (billing, payment routing, etc.) Risk Analysis. Provides an opportunity to document risks and mitigation plans associated with each recommendation. Early Wins. Asks teams to think through rapid moves that can be made to support the ultimate objectives of the integration. It is important to identify these early successes, as they will help build momentum for the overall effort. Outstanding Issues & Decisions. Allows teams to document those issues and decisions which are still open and either need further analysis or require a more global decision in order to clarify the path forward. Communication Plan. Teams determine who will be responsible for sending what messages to which audience and when. PRITCHETT, LP MergerIntegration.com Page 2 of 20

3 1.a. Organization Comparative Analysis PROCESS / TOPIC AREA* Company A Company B DEGREE OF ALIGNMENT NONE LOW MED HIGH 1. HR Department Organizational Design Organized by area of specialty which includes Compensation, Benefits, OD, Recruiting, Employee Relations, HRMS and Health Center Organized by area of specialty similar to Co. A with exception of Health Center. 2. Compensation & Titles Program has 3 main components: marketbased pay, short-term incentives, and longterm incentives (equity) Managing Directors, Directors, Associate Directors, and Managers are the top four titles. Short-term incentive targets and equity awards (for Directors and above) vary by title. Program has 2 main components: marketbased pay and short-term incentives Recently implemented long-term incentives to less than 30 employees Equity adjustments commonly made Titles are not tied to incentives (titles only) 3. Retirement Benefits Provides both a Cash Balance and a 401(k) Plan Provides both a traditional Defined Benefit and 401(k) Plan Offers retiree health, Medicare Part B supplement, and life insurance 4. Health & Welfare Benefits Standard benefits offered compared to market Standard benefits offered compared to market 5. Benefits Perquisites (officers only) Parking, special equipment, and club memberships Parking, special equipment, and club memberships. Provides medical supplemental benefits to key executives 6. Performance Management Utilize 10-point system, looks at goals and competencies, paper form only Utilize 3-point system, looks at goals only, electronic form 7. Employee and Labor Relations Union employees contract expires 2021 PRITCHETT, LP MergerIntegration.com Page 3 of 20

4 8. Recruiting Utilize PeopleSoft applicant tracking system and promote internal posting system Utilize Excel and Access database for applicant tracking and promotes internal posting system 9. HRMS PeopleSoft. No self-service applications utilized PeopleSoft utilizes ebenefits, eprofile, epay, and ecompensation Manager. Desktops own other eapplications 10. International Employee Programs and Policies 15 employees located in UK, primarily sales and business development focused Benefits managed out of UK office 5 employees located in UK, primarily sales and business development focused Benefits managed out of UK office, with coordination from US team. Life insurance is solely managed out of US office. 11. Succession Management Formal program No program 12. Leadership Development Formal program No program 13. Retention programs Draft policy being reviewed Formal policy adopted in merger agreement and communicated to employees Severance programs 3 tiers based on non-exempt, exempt, or officer status 2 tiers based on officer or non-officer status Maximum benefit of 26 or 39 weeks Maximum benefit of 52 weeks 15. Employment policies No formal policy for telecommuting or alternative work schedules Provides formal policy on telecommuting and alternative work schedules 40-hour work week 37.5-hour work week 16. Training and Development Internal and external training provided No stated requirement for hours of training per year Internal, external, and web-based training provided Informal policy of 14 hours of training/year PRITCHETT, LP MergerIntegration.com Page 4 of 20

5 17. Promotions and Salary Increases Officer promotions take place once a year; Associate Director and manager promotions take place every six months. Other promotions resulting from people assuming vacated roles take place as needed during the year. Routine salary adjustments are made annually. Marketbased adjustments, or other adjustments for special situations, can be made at any time during the year. Promotions are made on an as-needed or ad hoc basis. Merit-based salary adjustments are made annually. Equity (or market based) adjustments are made during the year as needed. 18. Staffing and Selection It is our understanding that the primary responsibility for staffing and selection decisions will reside in IMO/SC with support from OD/HR. N/A 19. M&A Integration Training Consider defining training into sub-categories, such as New Hire Orientation, Benefit Enrollment, Management Training, PRITCHETT Methodology Training, PMP Training, Skills Training, etc., for pre-,, and post-. N/A 20. HR Metrics Develop a recommendation and plan of action for HR metrics in Newco. N/A *Can include operating model, strategies, policies/procedures, systems use, staffing model, payment structure, design methodology, etc. PRITCHETT, LP MergerIntegration.com Page 5 of 20

6 1.b. Future State Recommendation Ref # Recommendation Est d timing for implementation Please also see Exhibits A and B for compiled Benefits and HRMS recommendations on pages Guiding Principle - Integrate the two organizations under one consistent HR approach with the same unified policies, programs, and practices. We will select programs and practices that have the least disruption to the employee base, unless the change will significantly diminish value that could result in cultural misalignment, litigation, or serious employee relations issues. In which case, we will identify those areas and prepare a cost/benefit analysis on how to manage that area differently. Maintain current Total Compensation (for Co. A) and Total Rewards (for Co. B) strategy which is to be at market or slightly better than the market in terms of programs and plans (including but not limited to compensation and benefits) provided to employees. We will identify areas to save money without jeopardizing the above stated principle. 2.0 Newco will operate under a pay-for-performance philosophy and include three major components of cash compensation: Market-based pay Short-term incentives Long-term incentives (equity plans) 3.0 Newco will have one combined health, welfare, and retirement benefits plan which generally includes: Non-retirement insurance plans (i.e., medical, prescription, dental, vision, and life insurance, EAP, FSA, etc.) Both Co. B and Co. A employees will be merged into one plan during Open Enrollment Fall The following non-retirement plans will continue to operate, until the end of the calendar year only, with the same plan design and employee contribution rates that existed prior to the close of the pending merger for both Co. B and Co. A employees: medical, dental, vision, life (including optional, dependent, travel and AD&D), FSA, transit, and EAP Retirement plans (defined contribution): Co. B employees will merge into the Co. A retirement plan on Day 1. Co. B s 401(k) Plan (secondary 401(k) contributions) will cease on date of close. Retirement plans (defined benefit): Co. B s Pension Plan will be frozen as of 12/31/20 and merged into the Co. A s Cash Balance plan. Special provisions will need to be made for Co. B employees with protected benefits under the Pension Plan and to make sure certain employees near retirement age are not unduly impacted by the change in benefit formulas. 8/1/ /31/2020 PRITCHETT, LP MergerIntegration.com Page 6 of 20

7 Non-insurance plans (i.e., tuition reimbursement, severance policy, etc.): Will become effective for Co. B/Co. A on date of close other than where noted differently in our recommendations Standardized severance policy: After special arrangements due to pending merger for Co. A/Co. B employees (per retention and severance policies) cease. Paid Time Off: Employees of Co. A will be converted to a Paid Time Off (PTO) plan for vacation, sick, and personal days. Note: The amount of PTO days is still under review 4.0 Newco will have common training and development programs Co. A s current succession planning and leadership development programs will be adopted in new company 1/1/2021 Training vendors between Co. B/Co. A will be consolidated to reduce costs 5.0 Co. B retiree benefits (i.e., medical and life insurance) will be terminated in the new company, except for a limited group Retirees currently receiving benefits and future retirees eligible for benefits will continue to receive these benefits under the same terms and conditions of the current Co. B plans 6.0 Co. B medical supplemental plan will be terminated in the new company at the end of the calendar year in which the pending merger is finalized 7.0 Newco will leverage technology for more efficient and effective delivery of high-quality services. This will include but not be limited to operating on a single HRMS platform and using PeopleSoft s selfservice applications in order to appropriately shift transactional activities to employees and managers. 12/31/2021 Phased (see Exhibit A) Other non-peoplesoft databases will also be consolidated into a single platform (i.e., one training database, one recruiting database, etc.) to reduce costs 8.0 Newco will have one performance management program Co. B/Co. A employees will be converted to one system on as a transitional system to complete the remainder of the current performance cycle At the beginning of the new performance cycle Newco anticipates (more detailed analysis still required) using an automated Performance Management System (Success Factors) to make the performance management process easier, faster, and more effective 9.0 Newco will have transitional retention and severance programs in place for one year following the close. 1/1/2021 Severance will be paid in lump sum fashion for transition and ongoing operations PRITCHETT, LP MergerIntegration.com Page 7 of 20

8 1.c. Items Ref # Actions Owner Comments 1.0 Newco will have one common payroll platform Accounting Employee data must be loaded and tested prior to close to accomplish this Standard work-week hours communicated to employees of new company IT/Acct/HR/OD HR/OD 2.0 Newco will have one common HRMS platform HR/IT See Exhibit A for details on functionality and timing 3.0 Newco will have one set of employment policies and procedures HR Receipt of new handbook materials 4.0 Understanding of staffing/selection decisions for post-close, as well as detailed process for notifications Comms/HR HR/IMO/SC PRITCHETT, LP MergerIntegration.com Page 8 of 20

9 1.d. Risk Analysis Recommendation Reference Description of Risk Mitigation Strategy Owner Due Date 6.0 Potential litigation from officers (current and retired) with employment contracts 9.0 Potential litigation risks from employees involuntarily separated at dates after, but close to, the cutoff date for triggering payment of severance benefits Assess risk with outside legal counsel and review approach with in-house legal and SC Assess risk with legal counsel and adopt a separation policy (with respect to timing) that minimizes this risk HR/OD 1/31/2021 HR/OD 1/31/ Potential disruption of HR service delivery due to delays in support system development (e.g., PeopleSoft, payroll processing, etc.) Effective project planning and management HR/OD/IT Effective immediately Possible reduction in work efficiencies if self-service technology is not deployed PRITCHETT, LP MergerIntegration.com Page 9 of 20

10 1.e. Early Wins Action Win/Benefit When Win Will be Realized 1. Combination and rightsizing of OD/HR functions Salary/benefits savings from staffing synergies 2. Leveraging technology to improve HR service delivery Less time/effort (ergo improved productivity) in both line functions and the HR/OD function Less rework due to online editing and information processing Reduction in direct materials expenses Increased data integrity Increase speed of work processing Likely in two waves close to day 1, and approximately one year following day 1 Through the end of Reduction in professional fees (e.g., consulting services, training vendors, recruiting costs, etc.) due to duplication associated with both OD/HR functions Reduced operating expenses Immediately after close PRITCHETT, LP MergerIntegration.com Page 10 of 20

11 1.f. Outstanding Decisions and Issues Ref Decision/Issue Dependencies Required Actions Due Date 1. Performance Management Program Further discussion needed to determine how to convert employees to same system in /28/ Co. A Severance Plan Need to finalize draft policy 12/31/ International Benefits UK Need to know staffing decisions for UK office Recommend benefit approach 12/31/ Work week Determine standard work week 12/31/ Alternative work schedules and telecommuting policies Determine approach for Newco 2/28/ Integration of job titling schemes and rationalization of officer positions 7. Vesting schedule for Newco s 401(k) Plan to be reviewed to consider reducing the time from 5 years to 3 years 8. Determine legal implications to existing wage garnishments due to change in employer status 9. Research change in control language/provisions in Co. B s 401(k) Plan document 10. Analyze cost impact of retiree treatment recommendations and determine eligibility for grandfathered group 11. Develop a strategy for integrating compensation plans between Co. B/Co. A SC to confirm scope and objectives and accountability Analysis and development of alternative and recommended titling scheme and any required mapping of current titles into the new or preferred scheme Analysis to determine financial implications with reduced vesting schedule TBD from SC 12/31/2020 Discuss issue with Legal 2/28/2021 Discuss with Legal 12/31/2020 Work with Consultant (Co. B s actuary) to determine cost 1/31/2021 Meeting week of 12/11 to map out approach 12/31/ Determine benefit vendors for Newco Meeting week of 12/11 to map out approach 6/30/ Confirm Co. B s 401(k) Plan contributions may cease on Discuss with Legal 12/31/ Determine appropriate PTO schedules/banks for Newco Benchmark program and conduct financial analysis 2/28/2021 PRITCHETT, LP MergerIntegration.com Page 11 of 20

12 15. High-level timing and degree of impact for reductions in force post-close 16. New company orientation program for policies, procedures, HR programs, etc. Discuss with Synergies team 3/1/2021 Work with Communications team 1/31/2021 PRITCHETT, LP MergerIntegration.com Page 12 of 20

13 1.g. Communication Plan AUDIENCE MESSAGE (What?) VEHICLE (How?) TIMING (When?) COST Est. RESPONSIBLE PARTY Participants in the Executive Program The plan will be discontinued. Combination of faceto-face and written communications. Soon after Minimal TBD Employees who will lose jobs as a result of the merger Business reasons dictate that you will not have an on-going role with Newco Combination of faceto-face and written communications. Soon after Minimal TBD Employees who will remain with Newco on a transitional (or short term basis) While your current role remains very important to shareholders and customers, business reasons dictate that this role will continue only for a specified period of time. After that time (details to follow) Combination of faceto-face and written communications. Soon after Minimal TBD Employees who are expected to remain with Newco for the indefinite future Here are the HR/OD programs, policies and procedures for Newco, and here is what you need to know and do in order to most effectively participate in these programs Combination of faceto-face and written communications, plus incorporation of all this info into the Newco Website Soon after This cost could be extensive, into the 000 s. TBD Co. B retirees and active employees eligible for retirement Explanation of the Co. B s retirement benefits (medical and life insurance) program and how they will be handled in the new company Letter Soon after Minimal TBD PRITCHETT, LP MergerIntegration.com Page 13 of 20

14 Notes Ref Notes 1. TBD PRITCHETT, LP MergerIntegration.com Page 14 of 20

15 Exhibit A HRMS Recommendations for Newco PeopleSoft version: Company B Current through bundle Company A Current "Live" on 12.9 since: 11/7/ /5/2020 PeopleTools version: Database Platform: Oracle Oracle Application Description System Company B Licensed Company A Licensed Co. B Currently Live Co. A Currently Live Newco Recommendations Implementation HR Core HR system. Maintains personal and job information. PeopleSoft Supports current core Co. A & Co. B HR business processes which are expected to continue with Newco Base Benefits Core Benefit system used for manually tracking benefit enrollments. PeopleSoft Supports current core Co. A & Co. B benefit business processes which are expected to continue with Newco Benefits Administration Used in conjunction with Base Benefits and ebenefits to automate benefit processing and simplify open enrollment and life event maintenance. Automatically enrolls or terminates participants through automated eligibility processing and plan design. PeopleSoft Supports automation tailored to Co. A Group benefit administration processes and ebenefits. Needed to cost-effectively manage multiple benefit programs. PRITCHETT, LP MergerIntegration.com Page 15 of 20

16 HRMS Recommendations for Newco (Continued) Time and Labor Allows employees to enter time online. Automates the processing of payable time and is integrated with PeopleSoft Payroll. PeopleSoft Needed to effectively support time reporting requirements of the organization to automate the processing of payable time. eprofile Allows employees to maintain their own demographic data, such as name, address, phone, and emergency contact information. PeopleSoft Supports an employee self-service model for Newco to reduce manual administrative efforts and cost, and increase data integrity. ebenefits Provides online employee self-service benefit transactions, including new hire & open enrollment elections, dependent and family status plan changes. PeopleSoft Delivers comprehensive online employee benefit self-service for annual open enrollment and all benefit related life events. Reduces costs by automating administrative benefit tasks. Talent Acquisition Manager (erecruit Manager Desktop) Applicant tracking system to maintain and search applicant pool for qualified candidates. Able to record interview results and contact notes. PeopleSoft Provides recruiting solution for the organization to search applicant database to identify and hire qualified talent quickly. Directory Interface Integrates with lightweight directory access protocol (LDAP) to authenticate and update user profiles. LDAP is then used to update other company systems with employee data. PeopleSoft Enables integration to authenticate directory users and share data that already exists and is maintained in PeopleSoft with other company systems. Payroll for North America Payroll system that calculates gross to net earnings, deductions, and related taxes. Fully integrated with PeopleSoft HR, Time and Labor and General Ledger. PeopleSoft Calculates gross to net earnings, deductions and taxes. Integrated with PeopleSoft HR, Benefits, Time and Labor, General Ledger, Recruiting, and Compensation applications to ensure payroll is accurate, on time, and processed efficiently. need to consult with Accounting PRITCHETT, LP MergerIntegration.com Page 16 of 20

17 HRMS Recommendations for Newco (Continued) Payroll Interface for ADP Provides employee data changes to Payroll for upload into ADP. PeopleSoft Increases data accuracy and cuts payroll processing costs by eliminating the need to re-key PeopleSoft Human Resources data into the ADP payroll software. need to consult with Accounting epay (PeopleSoft) or ipay (ADP) Gives employees online access to their payroll information. Employees are able to update their withholding, deductions, and direct deposit information. PeopleSoft Supports current Co. A & Co. B payroll process to provide employees immediate online access to their payroll information. based on payroll process decision ecompensation Manager Desktop Allows managers to make fast, informed compensation decisions online. Managers can quickly view the historical salary progression for their employees and request base salary changes, which are automatically routed for approval. Managers can check on the status of the change requests they have submitted at any time. PeopleSoft Recommended solution for efficiently administering ad hoc salary changes. Provides the organization with a valuable retention tool as managers are able to provide compensation reporting to their employees. Day 2 Candidate Gateway (erecruit) Provides self-service transactions for the application process. Candidates can search for employment, apply for positions, and track their progress through the recruitment process. PeopleSoft Enables Newco to efficiently find and build relationships with top candidates. Day 2 edevelopment Self-service solution that supports personal and professional development of employees. Tracks skills, competencies, education, awards, licenses, and accomplishments. PeopleSoft Will support Newco to effectively manage the internal talent pool, drive career planning, and create a succession roadmap for key positions. Day 2 PRITCHETT, LP MergerIntegration.com Page 17 of 20

18 eprofile Manager Desktop FSA Administration Job Description Database Succession Planning Database Employee Relations Database Base Pay Adjustment and AIP Tool Enables managers to manage employee transactions such as fulltime or part-time status changes, reporting & location changes, promotions, terminations, incorporating workflow functionality. Allows for full administration of Flexible Spending Account Plans. Allows managers, the HR team, and the Compensation team to view, update, create and/or print job descriptions for non-officer jobs or all jobs based on various security. Allows the Professional Development team to track critical positions at Co. A and identified successors for each of those positions. Allows the Employee Relations team to track various employee issues with case detail. Allows the Management team to review performance rating scores, pay, title/comp ratio, etc. for their employees. This data is extracted from PeopleSoft and loaded into this tool. Based on this, they make decisions on base-pay adjustments, promotions, and bonuses for the annual February cycle and update this tool with that information. Compensation reviews and processes appropriately. PeopleSoft HRMS Recommendations for Newco (Continued) Supports automation to reduced administrative costs of managing employees: promotions, transfers, terminations, and other status changes. PeopleSoft - N/A Co. A Custom PeopleSoft n/a n/a Co. A Access n/a n/a Co. A Access n/a n/a Co. A Access & PeopleSoft n/a n/a Day 2 PRITCHETT, LP MergerIntegration.com Page 18 of 20

19 Organizational Chart Online Employment Application Applicant Tracking Exit Interview Creates an organizational chart based on data provided from PeopleSoft. The reporting relationship structure is based on position management. The chart is published on Co. A's intranet. Allows those interested in employment at Co. A to apply online at The applications and attached resumes are loaded into the PeopleSoft TAM module. Maintains applicant data and resumes for searching candidates. Tracks reasons employees provide during exit interviews for leaving the organization. Used for analysis. HRMS Recommendations for Newco (Continued) Co. A Org Publisher, Internet Explorer & PeopleSoft Co. A Internet Explorer & PeopleSoft n/a n/a n/a n/a Co. B Access n/a n/a Co. B Excel n/a n/a Performance Management Electronic system used to document and track performance goals and results throughout the year. Co. B Current system: Oracle DB Contract with SuccessFactors to implement new Performance Management system. n/a n/a Training System Manages online employee training course registrations. Allows employees to enter external training courses and view full training history. Co. B Oracle Database n/a n/a PRITCHETT, LP MergerIntegration.com Page 19 of 20

20 Exhibit B Benefits Recommendations BENEFIT Retiree Insurance Benefits Pay Cycles RECOMMENDATION Retiree insurance benefits (e.g., medical and life insurance) will be terminated in Newco except for a limited grandfathered group. Newco will have two pay cycles based on union cycles. Non-union employees will be paid semi-monthly and union employees will be paid weekly. Defined Benefits Newco will offer a Cash Balance plan to all employees. The Co. B Pension Plan will be frozen on 12/31/2021. Executive Care Program Severance and Retention Tuition Reimbursement Club Memberships Salary and Promotion cycles Non-retirement insurance plans Cash Balance and 401(k) retirement plans PTO versus Vacation/Personal Compensation strategy Plan will be terminated in new company at end of calendar year of close. Newco will adopt a transitional severance and retention policy specific to this merger. Newco will adopt the current Co. A program effective for all employees on day of close. Newco will adopt the current Co. A program effective for all eligible employees on day of close. Newco will adopt the current Co. A program cycle for promotions and salary adjustments. Newco will be merged into one benefits plan during Open Enrollment in Fall The following will continue to operate until end of 2021 with same plan design and employee contribution rates: medical, dental, vision, life, FSA, transit, EAP, and Exec-U-Care Co. B employees will merge to Co. A s defined contribution retirement plan on. Co. B employees will merge into Co. A s defined benefit plan after 12/31/2021. Special provisions will be made for Co. B employees with protected benefits under Pension Plan and to protect employees near retirement so that they are not unduly impacted by a change in benefits formulas. Co. B s FIRST Plan will cease on date of close. Newco employees will be converted to PTO for vacation, sick, and personal time. Maintain current Total Compensation and Total Rewards Programs strategy to be at market or slightly better than market. PRITCHETT, LP MergerIntegration.com Page 20 of 20