Total Rewards in M&A: Don’t Confuse ‘Integration’ with ‘Harmonization’
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Total Rewards in M&A: Don’t Confuse ‘Integration’ with ‘Harmonization’
How do you define integration? Don’t think about it in the context of your last acquisition; think about the definition itself. My favorite is from Merriam-Webster: “the act or process of uniting different things.” This is very different from the definition of harmonization: “to bring into consonance or accord.”
These definitions bring out the difference between the concepts. Harmonization can imply that everyone will have the same thing when the work is completed. On the other hand, integration acknowledges that we are uniting different things to achieve a common goal without predefining the outcome.
Now let’s turn to this distinction in mergers and acquisitions. Over time, as organizations grew faster and got larger and more complex, executing integrations started looking like muscle memory. Integration became synonymous with “assimilating acquired companies into our way.” As a result, innovative companies acquired on the premise of bringing new ideas and vitality failed to meet their stated objectives. And acquisitions designed to expand into new business lines were saddled with the bureaucracy of mature existing business lines.
As discussed in our article on flexible integration, the HR professional is at the forefront of asking, “How do we bring an acquired organization into our structure without burying it under our processes?” We’re going to discuss a specific area that is often central to employee disruption and loss of productivity: Total Rewards. Reward programs are immediate, personal, and impact people and their families directly. Get it right and you can maintain a strong foundation throughout your business.
Let’s start at the beginning with the first statement: We want to buy this company. This is followed by the question: What is the value to be created from this acquisition? All integration plans should grow from the reason we want to buy this company and the value goals. The Total Rewards HR integration process needs the same starting point.
Executive sponsorship in the deal strategy and due diligence phases is crucial to formulating the early views on integration strategy. These early deal life cycle phases are focused on learning everything you can about the acquired company and creating the vision of how they will become part of the combined organization in a manner that will allow you to reach the deal goals. Too often the importance of the preliminary integration strategy (especially at a specific functional level) is downplayed in these early phases. This is the first mistake that leads to focusing on harmonization when the real goal is integration.
Formulating the integration strategy later in the deal life cycle, or worse, starting integration without a strategy, disassociates the integration from the deal goals.
Common integration strategy models include a holding-company approach, dominant-player absorption, and mutual, best-of-both. But while these models may be the first reference points considered, they are simply points on a spectrum of integration strategies.
Flexible integration involves asking a series of questions to refine the integration strategy into practical actions that reflect deal goals. In our next blog, we’ll explore how this can specifically play out for Total Rewards.
